UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
September 30, 2017    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[  ]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)
Delaware37-0911756
(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,offices) (Zip Code)
Registrant’s telephone number, including Zip Code)area code: 217-789-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock, $0.001 par valueHMNNew York Stock Exchange
Registrant’s Telephone Number, Including Area Code: 217-789-2500

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   X  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes   X  No

Indicate by check mark whether the registrant’sregistrant is a large accelerated filer, status, as such terms are definedan 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  XAccelerated filer
Non-accelerated filerSmaller 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.  

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

As of October 31, 2017,April 30, 2023, the registrant had 40,667,21140,843,579 common shares, of Common Stock,$0.001 par value, $0.001 per share, outstanding.








HORACE MANN EDUCATORS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERQUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2023
INDEXTABLE OF CONTENTS

Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1A.
Item 2.
Item 5.
Item 6.







PART I: FINANCIAL INFORMATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ITEM 1.IConsolidated Financial Statements
TheReport of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors and Shareholders
Horace Mann Educators Corporation:

Results of Review of Interim Financial Information
We have reviewed the consolidated balance sheet of Horace Mann Educators Corporation and subsidiaries (the Company) as of September 30, 2017,March 31, 2023, the related consolidated statements of operations, and comprehensive income (loss), and changes in shareholders' equity for the three and nine-monththree-month periods ended September 30, 2017March 31, 2023 and 2016, and2022, the related consolidated statements of changes in shareholders��� equity, and cash flows for the nine-monththree-month periods ended September 30, 2017March 31, 2023 and 2016. These2022, and the related notes (collectively, the consolidated interim financial statementsinformation). Based on our reviews, we are not aware of any material modifications that should be made to the responsibility of the Company’s management.consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 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 28, 2023, we expressed an unqualified opinion on those consolidated financial statements. As described in Note 1 to the Company's consolidated interim financial information, 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 December 31, 2022 consolidated balance sheet. We have not audited and reported on the revised December 31, 2022 consolidated balance sheet reflecting the adoption of 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 Public Company Accounting Oversight Board (United States),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.
 
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them 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), the consolidated balance sheet of Horace Mann Educators Corporation and subsidiaries as of December 31, 2016, 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 March 1, 2017, we expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
KPMG LLP
  
Chicago, Illinois 
November 8, 2017May 10, 2023 
Horace Mann Educators Corporation1First Quarter 2023 Form 10-Q




HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($ in thousands,millions, except per share data)
March 31, 2023December 31, 2022
Assets
Investments
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 value98.8 99.6 
Limited partnership interests1,045.4 983.7 
Short-term and other investments291.1 319.3 
Total investments6,785.3 6,587.6 
Cash27.4 42.8 
Deferred policy acquisition costs331.6 330.6 
Reinsurance balances receivable467.6 468.0 
Deposit asset on reinsurance2,518.0 2,516.6 
Intangible assets181.5 185.2 
Goodwill54.3 54.3 
Other assets333.5 328.7 
Separate Account variable annuity assets2,954.7 2,792.3 
Total assets$13,653.9 $13,306.1 
Liabilities and Shareholders' Equity
Policy liabilities
Future policy benefit reserves$1,772.4 $1,718.0 
Policyholders' account balances5,234.6 5,260.6 
Unpaid claims and claim expenses574.8 564.0 
Unearned premiums263.3 266.1 
Total policy liabilities7,845.1 7,808.7 
Other policyholder funds887.1 809.3 
Other liabilities329.8 299.5 
Short-term debt249.0 249.0 
Long-term debt249.0 249.0 
Separate Account variable annuity liabilities2,954.7 2,792.3 
Total liabilities12,514.7 12,207.8 
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, 2023, 66,710,189; 2022, 66,618,465
0.1 0.1 
Additional paid-in capital503.1 502.6 
Retained earnings1,505.2 1,512.4 
Accumulated other comprehensive income (loss), net of tax: 
Net unrealized investment losses on fixed maturity securities(356.4)(449.6)
Net reserve remeasurements attributable to discount rates17.8 59.0 
Net funded status of benefit plans(8.8)(8.8)
Treasury stock, at cost, 2023, 25,842,693 shares;
2022, 25,714,153 shares
(521.8)(517.4)
Total shareholders’ equity1,139.2 1,098.3 
Total liabilities and shareholders’ equity$13,653.9 $13,306.1 
  September 30, 2017 December 31, 2016
  (Unaudited)  
ASSETS
Investments    
Fixed maturity securities, available for sale, at fair value
(amortized cost 2017, $7,194,397; 2016, $7,152,127)
 $7,630,634
 $7,456,708
Equity securities, available for sale, at fair value
(cost 2017, $140,200; 2016, $134,013)
 159,275
 141,649
Short-term and other investments 547,227
 401,015
Total investments 8,337,136
 7,999,372
Cash 6,692
 16,670
Deferred policy acquisition costs 257,214
 267,580
Goodwill 47,396
 47,396
Other assets 344,443
 321,874
Separate Account (variable annuity) assets 2,051,467
 1,923,932
Total assets $11,044,348
 $10,576,824
     
LIABILITIES AND SHAREHOLDERS’ EQUITY
Policy liabilities    
Investment contract and life policy reserves $5,540,045
 $5,447,969
Unpaid claims and claim expenses 341,784
 329,888
Unearned premiums 262,029
 246,274
Total policy liabilities 6,143,858
 6,024,131
Other policyholder funds 717,369
 708,950
Other liabilities 493,810
 378,620
Long-term debt 247,403
 247,209
Separate Account (variable annuity) liabilities 2,051,467
 1,923,932
Total liabilities 9,653,907
 9,282,842
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, 2017, 65,382,877; 2016, 64,917,683
 65
 65
Additional paid-in capital 462,068
 453,479
Retained earnings 1,165,282
 1,155,732
Accumulated other comprehensive income (loss), net of taxes:    
Net unrealized investment gains on fixed maturity
and equity securities
 255,718
 175,738
Net funded status of benefit plans (11,817) (11,817)
Treasury stock, at cost, 2017, 24,721,372 shares;
2016, 24,672,932 shares
 (480,875) (479,215)
Total shareholders’ equity 1,390,441
 1,293,982
Total liabilities and shareholders’ equity $11,044,348
 $10,576,824






See



The accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation2First Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
($ in thousands,millions, except per share data)
Three Months Ended
March 31,
 20232022
Statements of Operations
Revenues
Net premiums and contract charges earned$255.9 $255.8 
Net investment income100.4 97.9 
Net investment losses(3.9)(15.5)
Other income1.5 8.5 
Total revenues353.9 346.7 
Benefits, losses and expenses
Benefits, claims and settlement expenses183.2 175.2 
Interest credited48.7 39.7 
Operating expenses79.8 76.7 
DAC amortization expense23.7 22.0 
Intangible asset amortization expense3.7 4.2 
Interest expense6.7 3.9 
Total benefits, losses and expenses345.8 321.7 
Income before income taxes8.1 25.0 
Income tax expense1.5 4.7 
Net income$6.6 $20.3 
Net income per share
Basic$0.16 $0.48 
Diluted$0.16 $0.48 
Weighted average number of shares and equivalent shares
Basic41.3 41.9 
Diluted41.4 42.1 
Statements of Comprehensive Income (Loss)
Net income$6.6 $20.3 
Other comprehensive income (loss), net of tax:
Change in net unrealized investment losses on fixed maturity securities93.2 (334.1)
Change in net reserve remeasurements attributable to discount rates(41.2)181.5 
Change in net funded status of benefit plans— — 
Other comprehensive income (loss)52.0 (152.6)
Comprehensive income (loss)$58.6 $(132.3)

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
         
Revenues  
  
    
Insurance premiums and contract charges earned $198,935
 $191,050
 $590,375
 $564,860
Net investment income 92,320
 94,847
 275,025
 270,685
Net realized investment gains (losses) (3,486) 3,985
 (1,656) 6,911
Other income 2,048
 1,294
 4,813
 3,581
         
Total revenues 289,817
 291,176
 868,557
 846,037
         
Benefits, losses and expenses     

 

Benefits, claims and settlement expenses 134,895
 135,710
 444,870
 403,631
Interest credited 50,078
 48,658
 148,200
 142,924
Policy acquisition expenses amortized 24,210
 24,474
 73,904
 73,113
Operating expenses 44,172
 44,337
 139,156
 130,478
Interest expense 2,978
 2,975
 8,879
 8,858
         
Total benefits, losses and expenses 256,333
 256,154
 815,009
 759,004
         
Income before income taxes 33,484
 35,022
 53,548
 87,033
Income tax expense 6,933
 8,099
 9,418
 23,091
         
Net income $26,551
 $26,923
 $44,130
 $63,942
         
Net income per share     

 

Basic $0.64
 $0.66
 $1.07
 $1.55
Diluted $0.64
 $0.65
 $1.06
 $1.55
         
Weighted average number of common and
common equivalent shares (in thousands)
        
Basic 41,433
 41,092
 41,337
 41,155
Diluted 41,575
 41,347
 41,467
 41,386
         
Net realized investment gains (losses)        
Total other-than-temporary impairment losses
on securities
 $(6,091) $(160) $(12,452) $(7,686)
Portion of losses recognized in other
comprehensive income
 
 
 
 (290)
Net other-than-temporary impairment losses
on securities recognized in earnings
 (6,091) (160) (12,452) (7,396)
Realized investment gains, net 2,605
 4,145
 10,796
 14,307
Total $(3,486) $3,985
 $(1,656) $6,911





See

The accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation3First Quarter 2023 Form 10-Q


HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
($ in thousands)


  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Comprehensive income  
  
    
Net income $26,551
 $26,923
 $44,130
 $63,942
Other comprehensive income, net of taxes:  
  
    
Change in net unrealized investment gains
on fixed maturity and equity securities
 12,208
 7,638
 79,980
 162,124
Change in net funded status of benefit plans 
 
 
 
Other comprehensive income 12,208
 7,638
 79,980
 162,124
Total $38,759
 $34,561
 $124,110
 $226,066







































See Notes to Consolidated Financial Statements.


HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
($ in thousands,millions, except per share data)
Three Months Ended
March 31,
20232022
Common stock, $0.001 par value
Beginning balance$0.1 $0.1 
Options exercised— — 
Conversion of common stock units— — 
Conversion of restricted stock units— — 
Ending balance0.1 0.1 
Additional paid-in capital
Beginning balance502.6 495.3 
Options exercised and conversion of common and
   restricted stock units
(1.4)(0.6)
Share-based compensation expense1.9 1.9 
Ending balance503.1 496.6 
Retained earnings
Beginning balance1,512.4 1,547.0 
Net income6.6 20.3 
Dividends, 2023, $0.33 per share; 2022, $0.32 per share(13.8)(13.5)
Effect of adopting ASU 2018-12(1)
— (0.8)
Ending balance1,505.2 1,553.0 
Accumulated other comprehensive income (loss), net of tax:
Beginning balance(399.4)(50.0)
Change in net unrealized investment losses
on fixed maturity securities
93.2 (334.1)
Change in net reserve remeasurements attributable to discount rates(41.2)181.5 
Change in net funded status of benefit plans— — 
Ending balance(347.4)(202.6)
Treasury stock, at cost
Beginning balance(517.4)(493.4)
Treasury stock acquired - share repurchase authorization(4.4)(2.2)
Ending balance(521.8)(495.6)
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.
  Nine Months Ended September 30,
  2017 2016
     
Common stock, $0.001 par value    
Beginning balance $65
 $65
Options exercised, 2017, 156,211 shares; 2016, 114,507 shares 
 
Conversion of common stock units, 2017, 15,981 shares;
2016, 15,629 shares
 
 
Conversion of restricted stock units, 2017, 293,002 shares;
2016, 188,207 shares
 
 
Ending balance 65
 65
     
Additional paid-in capital    
Beginning balance 453,479
 442,648
Options exercised and conversion of common stock
units and restricted stock units
 2,773
 2,045
Share-based compensation expense 5,816
 6,066
Ending balance 462,068
 450,759
     
Retained earnings    
Beginning balance 1,155,732
 1,116,277
Net income 44,130
 63,942
Cash dividends, 2017, $0.825 per share;
2016, $0.795 per share
 (34,580) (33,241)
Ending balance 1,165,282
 1,146,978
     
Accumulated other comprehensive income, net of taxes    
Beginning balance 163,921
 163,373
Change in net unrealized investment gains on
fixed maturity and equity securities
 79,980
 162,124
Change in net funded status of benefit plans 
 
Ending balance 243,901
 325,497
     
Treasury stock, at cost    
Beginning balance, 2017, 24,672,932 shares;
2016, 23,971,522 shares
 (479,215) (457,702)
Acquisition of shares, 2017, 48,440 shares;
2016, 701,410 shares
 (1,660) (21,513)
Ending balance, 2017, 24,721,372 shares;
2016, 24,672,932 shares
 (480,875) (479,215)
     
Shareholders’ equity at end of period $1,390,441
 $1,444,084







See






The accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation4First Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ in thousands)millions)
Three Months Ended
March 31,
20232022
Cash flows - operating activities
Net income$6.6 $20.3 
Adjustments to reconcile net income to net cash provided by operating activities:
     Net investment losses3.9 15.5 
     Depreciation and intangible asset amortization6.6 3.8 
     Share-based compensation expense2.0 2.1 
     Loss from equity method investments, net of dividends or distributions
10.0 1.6 
     Changes in:
      Insurance liabilities55.8 367.7 
      Amounts due under reinsurance agreements0.3 (333.0)
      Income tax liabilities(9.9)54.5 
      Other operating assets and liabilities5.4 (40.1)
      Other, net5.7 3.3 
Net cash provided by operating activities86.4 95.7 
Cash flows - investing activities  
Fixed maturity securities  
Purchases(185.5)(397.4)
Sales62.7 168.3 
Maturities, paydowns, calls and redemptions73.7 234.4 
Equity securities
Purchases(1.1)(1.1)
Sales and repayments— 6.8 
Limited partnership interests
Purchases(75.1)(111.0)
Sales3.4 20.5 
Change in short-term and other investments, net26.6 26.2 
Acquisition of business, net of cash acquired— (164.4)
Net cash used in investing activities(95.3)(217.7)
Cash flows - financing activities  
Dividends paid to shareholders(13.5)(13.2)
Treasury stock acquired(4.4)(2.2)
Withholding tax payments on RSUs tendered(1.7)(0.9)
Annuity contracts: variable, fixed and FHLB funding agreements:  
Deposits including advances from FHLB funding agreements278.7 182.8 
Benefits, withdrawals and net transfers to
   Separate Account variable annuity assets
(152.2)(117.9)
  Repayment of FHLB funding agreements(85.0)— 
Life policy accounts: 
Deposits3.4 2.2 
Withdrawals and surrenders(1.1)(0.8)
Change in deposit asset on reinsurance(24.0)(14.2)
Change in book overdrafts(6.7)1.6 
Net cash provided by (used in) financing activities(6.5)37.4 
Net decrease in cash(15.4)(84.6)
Cash at beginning of period42.8 133.7 
Cash at end of period$27.4 $49.1 

  Nine Months Ended September 30,
  2017 2016
Cash flows - operating activities    
Premiums collected $598,882
 $557,816
Policyholder benefits paid (410,241) (422,184)
Policy acquisition and other operating expenses paid (208,248) (207,825)
Federal income taxes paid (10,061) (18,156)
Investment income collected 271,717
 259,373
Interest expense paid (5,821) (6,072)
Other 976
 1,884
     
Net cash provided by operating activities 237,204
 164,836
     
Cash flows - investing activities  
  
Fixed maturity securities  
  
Purchases (1,041,744) (1,097,880)
Sales 315,531
 351,739
Maturities, paydowns, calls and redemptions 691,169
 634,686
Purchase of other invested assets (98,109) (42,578)
Net cash used in equity securities, short-term
and other investments
 (54,281) (75,665)
     
Net cash used in investing activities (187,434) (229,698)
     
Cash flows - financing activities  
  
Dividends paid to shareholders (34,580) (33,241)
Acquisition of treasury stock (1,661) (21,513)
Proceeds from exercise of stock options 3,815
 2,361
Withholding tax payments on RSUs tendered (2,745) (3,321)
Annuity contracts: variable, fixed and FHLB funding agreements  
  
Deposits 348,900
 391,944
Benefits, withdrawals and net transfers to
Separate Account (variable annuity) assets
 (295,064) (240,489)
Transfer of Company 401(k) assets to a third-party provider (77,898) 
Life policy accounts    
Deposits 3,357
 2,957
Withdrawals and surrenders (3,340) (3,151)
Change in bank overdrafts (532) 7,422
     
Net cash (used in) provided by financing activities (59,748) 102,969
     
Net (decrease) increase in cash (9,978) 38,107
     
Cash at beginning of period 16,670
 15,509
     
Cash at end of period $6,692
 $53,616



See
The accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation5First Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2017 and 2016
($ in thousands, except per share data)

NoteNOTE 1 - Basis of Presentation and Significant Accounting Policies

Business
The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation (“HMEC”;is a holding company for insurance subsidiaries that market and together withunderwrite 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), 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).
The Company conducts and manages its subsidiaries, the “Company” or “Horace Mann”)business in four reporting segments: (1) Property & Casualty, (2) Life & Retirement, (3) Supplemental & Group Benefits and (4) Corporate & Other.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States (“U.S.”) generally accepted accounting principles (“GAAP”)of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (“SEC”), specifically Regulation S-X and the instructions to Form 10-Q.(SEC). Certain information and disclosures normally included in annual financial statements prepared in accordanceconformity 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, 2022. The Company believes that these consolidated financial statements containresults of operations for the three months ended 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 (consisting(generally consisting only of normal recurring accruals) which are, in the opinion of management, necessary to present fairlyfor the Company’sfair presentation of the consolidated financial position, as of September 30, 2017, the consolidated results of operations and comprehensive income for the three and nine month periods ended September 30, 2017 and 2016, and the consolidated changes in shareholders’ equity and cash flows for the nine month periodsinterim 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 September 30, 2017December 31, 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 2016. balances between HMEC and its subsidiaries and affiliates have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the reporting date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from thosethese estimates.
The subsidiariesmost significant critical accounting estimates include valuation of HMEC markethard-to-value fixed maturity securities, evaluation of credit loss impairments for fixed maturity securities, evaluation of goodwill and underwrite personal linesintangible assets for impairment, valuation of annuity and life deferred policy acquisition costs, valuation of liabilities for property and casualty (primarily personal linesunpaid claims and claim expense reserves, valuation of automobileliabilities for group benefits unpaid claims and homeowners)claim expense reserves, valuation of future policy benefit reserves and policyholders' account balances and valuation of long-duration insurance retirement annuities (primarily tax-qualified products) and life insurance, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC’s principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds.contracts under the new accounting guidance in ASU 2018-12.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
The results of operations for the three and nine month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year.
The Company reclassified the presentation of certain prior period information to conform to the 2017 presentation. See “Adopted Accounting Standards”.

Investment Contract and Life Policy Reserves
This table summarizes the Company’s investment contract and life policy reserves.
($ in thousands) September 30, 2017 December 31, 2016
     
Investment contract reserves $4,428,989
 $4,360,456
Life policy reserves 1,111,056
 1,087,513
Total $5,540,045
 $5,447,969

Note
Horace Mann Educators Corporation6First Quarter 2023 Form 10-Q



NOTE 1 - Basis of Presentation (Continued)

and Significant Accounting Policies (continued)

Adoption of New Accounting Standards
Accumulated Other Comprehensive Income (Loss)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 the Company for interim and annual periods beginning after December 15, 2022.
The Company 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 historical economic environment, actual performance of the business, and relevant industry information.
The following table summarizes the balance of and changes in LFPB on January 1, 2021 due to adoption of ASU 2018-12. The impact of shifts between deferred profit liabilities (DPL) and LFPB for limited-payment products are presented as offsetting line items in the effect of net premiums exceeding gross premiums and the effect of decrease/increase of DPL.
($ in millions)
Whole LifeTerm LifeExperience LifeLimited 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 assumptions111.5 27.3 433.0 18.2 23.0 20.6 
Change in cash flow assumptions, effect of net premiums exceeding gross premiums0.4 — — — — — 
Adjusted balance, beginning of year January 1, 2021330.6 120.5 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 
Accumulated(1)     As of January 1, 2021, the net LFPB for Supplemental Health was $163.5 million for cancer, $31.2 million for accident, $32.0 million for disability and $188.8 million for other comprehensive income (loss) representssupplemental health policies.











Horace Mann Educators Corporation7First Quarter 2023 Form 10-Q



NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
The following table summarizes the accumulated changebalance of and changes in shareholders’DAC on January 1, 2021 due to adoption of ASU 2018-12:
($ in millions)
Whole LifeTerm LifeExperience LifeLimited-Pay Whole LifeIndexed Universal LifeSupplemental HealthTotal 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 risk6.8 
Adjustment for cumulative effect of changes in the instrument-specific credit risk at issuance1.7 
Total adjustment for the difference between carrying amount and fair value8.5 
Balance, beginning of year January 1, 20218.6 
Less: Reinsurance recoverable— 
Balance, beginning of year January 1, 2021, net of reinsurance$8.6 
The following table presents the effect of the after-tax transition adjustments on consolidated shareholders' equity from transactionsdue to adoption of ASU 2018:
($ in millions)January 1, 2021
AOCIRetained Earnings
Liability for future policy benefits$(496.3)$(0.2)
Deferred policy acquisition costs71.1 — 
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 other events and circumstances from non-shareholder sources.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) includes(i.e., AOCI) for the after tax change inimpact of net unrealized investment gains and losses on fixed maturity and equity securities and the after tax change in net funded status of benefit plans for the period as shown(losses) that were included in the Consolidated Statementpre-ASU 2018-12 expected gross profits amortization calculation as of Changesthe transition date.
For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in Shareholders’ Equity.the instrument-specific credit risk between contract issue date and transition date. The following tables reconcile these components.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.
($ in thousands) Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2) Benefit Plans (1) Total (1)
       
Beginning balance, July 1, 2017 $243,510
 $(11,817) $231,693
Other comprehensive income (loss)
before reclassifications
 9,786
 
 9,786
Amounts reclassified from accumulated
other comprehensive income (loss)
 2,422
 
 2,422
Net current period other
comprehensive income
 12,208
 
 12,208
Ending balance, September 30, 2017 $255,718
 $(11,817) $243,901
       
Beginning balance, January 1, 2017 $175,738
 $(11,817) $163,921
Other comprehensive income (loss)
before reclassifications
 78,419
 
 78,419
Amounts reclassified from accumulated
other comprehensive income (loss)
 1,561
 
 1,561
Net current period other
comprehensive income
 79,980
 
 79,980
Ending balance, September 30, 2017 $255,718
 $(11,817) $243,901

(1)Horace Mann Educators CorporationAll amounts are net of tax.8First Quarter 2023 Form 10-Q
(2)The pretax amounts reclassified from accumulated other comprehensive income (loss), $(3,726) thousand and $(2,401) thousand, are included in net realized investment gains and losses and the related income tax expense, $(1,304) thousand and $(840) thousand, are included in income tax expense in the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2017, respectively.


Note
NOTE 1 - Basis of Presentation (Continued)

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).
($ in thousands) Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2) Benefit Plans (1) Total (1)
       
Beginning balance, July 1, 2016 $329,653
 $(11,794) $317,859
Other comprehensive income (loss)
before reclassifications
 9,912
 
 9,912
Amounts reclassified from accumulated
other comprehensive income (loss)
 (2,274) 
 (2,274)
Net current period other
comprehensive income
 7,638
 
 7,638
Ending balance, September 30, 2016 $337,291
 $(11,794) $325,497
       
Beginning balance, January 1, 2016 $175,167
 $(11,794) $163,373
Other comprehensive income (loss)
before reclassifications
 167,692
 
 167,692
Amounts reclassified from accumulated
other comprehensive income (loss)
 (5,568) 
 (5,568)
Net current period other
comprehensive income
 162,124
 
 162,124
Ending balance, September 30, 2016 $337,291
 $(11,794) $325,497
(1)Horace Mann Educators CorporationAll amounts are net of tax.9First Quarter 2023 Form 10-Q
(2)The pretax amounts reclassified from accumulated other comprehensive income (loss), $3,499 thousand and $8,566 thousand, are included in net realized investment gains and losses and the related income tax expense, $1,225 thousand and $2,998 thousand, are included in income tax expense in the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2016, respectively.

Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is located in “Note 2 -- Investments -- Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities”.


Adopted Accounting Standards
Employee Share-based Payment Accounting
Effective January 1, 2017, the Company adopted new accounting guidance for employee share-based payments which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The recognition and classification of the excess tax benefit provisions were applied prospectively in the results of operations. This adoption resulted in additional excess tax benefits of $2,864 thousand which reduced the current provision for income taxes in the results of operations. The statutory tax withholding classification, which are cash payments made to taxing authorities for withheld taxes funded through tendered shares, were applied retrospectively and the Company reclassified the statutory tax withholding requirements in the statement of cash flows from Other in operating activities to Withholding tax payments on RSUs tendered in financing activities. This statutory withholding reclassification resulted in $2,745 thousand and $3,321 thousand being included in financing activities for the nine month periods ended September 30, 2017 and 2016, respectively. There were no cumulative effect adjustments upon adoption of the new accounting guidance.
NoteNOTE 1 - Basis of Presentation (Continued)

and Significant Accounting Policies (continued)

Pending Accounting Standards
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to provideDPL is recognized as a single comprehensive model in accounting for revenue arising from contracts with customers. The guidance applies to all contracts with customers; however, insurance contracts are specifically excluded from this updated guidance. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016. The Company plans to adopt the guidance as of January 1, 2018. Insurance contract revenue continues to fall under the scope of ASC 944, Financial Services - Insurance, and ASC 605, Revenue Recognition. The Company performed an evaluationcomponent of the non-insuranceInvestment contract revenueand future policy benefit reserves presented in the Consolidated Balance Sheets.
Market Risk Benefits

MRBs are contracts or contract features that would be subject to ASC 606, Revenue from Contracts with Customers, and concluded that there is not a material impactboth provide protection to the consolidated financial statements upon adoptioncontract 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 January 1, 2018.

Recognition and Measurement of Financial Assets and Liabilities
In January 2016, the FASB issued accounting guidance to improve certain aspects of the recognition, measurement, presentation and disclosure of financial instruments.  Among other things, the guidance revises the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilitiesvariable annuity products. MRBs are measured at fair value. The Company’s results of operations will be impacted as changesvalue 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 equity securities will be reportedMRBs are recognized as a component of Benefits, claims and settlement expenses presented in net income insteadthe Consolidated Statements of reportedOperations 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. The effective date
MRBs are recognized as a component of the guidance is for interim and annual reporting periods beginning after December 15, 2017. The guidance has not yet been adopted. Had the Company adopted the guidance on September 30, 2017, $15,718 thousand of after-tax unrealized gains on equity securities would have been reclassified from accumulated other comprehensive income to retained earnings. The actual amount reclassified upon adoption will vary depending on the future changes in fair value of the Company's equity portfolio.

Statement of Cash Flows -- Classification
In August 2016, the FASB issued guidance to reduce diversity in practicePolicyholders' account balances reserves presented in the statement of cash flows between operating, investingConsolidated Balance Sheets.
Deferred Policy Acquisition Costs and financing activitiesDeferred Sales Inducements

DAC are costs that are incremental and directly related to the classificationsuccessful acquisition of cash receiptsnew 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 cash paymentspayroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing, and processing policies for eight specific issues. The FASB acknowledgedcontracts that current GAAP eitherhave 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 unclear or does not include specific guidanceamortized on these eight cash flow classification issues: (1) debt prepayment or extinguishment costs; (2) settlementa constant level basis for the grouped contracts over the expected term of zero-coupon bonds (pertainsthe related contracts to issuers); (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims (pertains to claimants); (5) proceeds from the settlement of corporate-ownedapproximate straight-line amortization. For all life insurance policies; (6) distributions received from equity method investees; (7) beneficial interestsproducts, the constant level basis used is face amount in securitization transactions (pertainsforce. 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 transferors)mortality and (8) separately identifiable cash flows and applicationlapse experience higher than expected, are recognized in the current period as a reduction of the predominance principle. For public business entities, the guidancecapitalized balances.
Amortization of DAC is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years, using a retrospective approach. The guidance allows prospective adoption for individual issues if it is impracticable to apply the amendments retrospectively for those issues. Early application is permitted. Management believes the adoption of this accounting guidance will not have a material effect on the classificationsrecognized as DAC amortization expense presented in the Company’s consolidated statementConsolidated Statements of cash flows.Operations and Comprehensive Income (Loss). The adoptionDAC balance is reduced for actual experience in excess of this accounting guidance will not have any effectexpected 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 results of operations or financial position ofamounts are higher than the Company.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.







Note 1
Horace Mann Educators Corporation10First Quarter 2023 Form 10-Q



NOTE 2 - BasisInvestments
Net Investment Income
The components of Presentation (Continued)


Accounting for Leases
In February 2016, the FASB issued accounting and disclosure guidance to improve financial reporting and comparability among organizations about leasing transactions. Under the new guidance, for leases with lease terms of more than 12 months, a lessee will be required to recognize assets and liabilities on the balance sheetnet investment income for the rights and obligations created by those leases. Consistent with current accounting guidance,following periods were as follows:
($ in millions)Three Months Ended
March 31,
20232022
Fixed maturity securities$67.7 $58.6 
Equity securities2.7 1.3 
Limited partnership interests4.4 13.0 
Short-term and other investments3.5 2.7 
Investment expenses(3.6)(2.6)
Net investment income - investment portfolio74.7 73.0 
Investment income - deposit asset on reinsurance25.7 24.9 
Total net investment income$100.4 $97.9 
Net Investment Losses
Net investment gains (losses) for the recognition, measurement and presentation of expenses and cash flows arisingfollowing periods were as follows:
($ in millions)Three Months Ended
March 31,
20232022
Fixed maturity securities$(2.4)$(2.3)
Equity securities(1.0)(15.5)
Short-term investments and other(0.5)2.3 
Net investment losses$(3.9)$(15.5)

The Company, from a lease by a lessee primarily will depend on its classification as a finance or an operating lease. However, while current guidance requires only capital leasestime to be recognized on the balance sheet, the new guidance will require both operating and capital leasestime, sells fixed maturity securities subsequent to be recognized on the balance sheet. In transition to the new guidance, companies are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those years. Early application is permitted. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued guidance to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments, including reinsurance receivables, held by companies. The new guidance replaces the incurred loss impairment methodology and requires an organization to measure and recognize all current expected credit losses (“CECL”) for financial assets held at the reporting date basedthat 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 breakdown of net investment gains (losses) by transaction type for the following periods were as follows:
($ in millions)Three Months Ended
March 31,
20232022
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 Corporation11Quarterly Report on Form 10-Q



NOTE 2 - Investments (continued)
Allowance for Credit Loss Impairments on historical experience, current conditions, and reasonable and supportable forecasts. Companies will need to utilize forward-looking information to better inform theirFixed Maturity Securities
The following table presents changes in the allowance for credit loss estimates. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Credit losses related toimpairments on fixed maturity securities classified as available for sale debtfor the category of other asset-backed securities -- which represent over 90%(no other categories of Horace Mann’s total investment portfolio -- will be recorded throughfixed maturity securities have an allowance for credit losses with this allowance having a limit equal to the amount by which fair value is below amortized cost. The guidance also requires enhanced qualitative and quantitative disclosures to provide additional information about the amounts recorded in the financial statements. For public business entities that are SEC filers, the guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, using a modified-retrospective approach. Early application is permitted for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company.loss impairments):

 Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill for reporting units with zero or negative carrying amounts. Public business entities should adopt the guidance prospectively for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early application is permitted. Management believes the adoption of this accounting guidance will not have a material effect on how it tests goodwill for impairment.

Note 2 - Investments

The Company’s investment portfolio includes free-standing derivative financial instruments (currently over the counter (“OTC”) index call option contracts) to economically hedge risk associated with its fixed indexed annuity (“FIA”) and indexed universal life (“IUL”) products’ contingent liabilities. The Company’s FIA and IUL products include embedded derivative features that are discussed in “Note 1 -- Summary of Significant Accounting Policies -- Investment Contract and Life Policy Reserves -- Reserves for Fixed Indexed Annuities and Indexed Universal Life Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Company’s investment portfolio included no other free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics), and there were no other embedded derivative features related to the Company’s investment or insurance products during the nine month periods ended September 30, 2017 and 2016.
Note 2 - Investments (Continued)


($ in millions)Three Months Ended
March 31,
20232022
Beginning balance$1.2 $7.7 
Credit losses on fixed maturity securities for which credit losses were not previously reported— — 
Net increase related to credit losses previously reported— 0.9 
Reduction of credit allowances related to sales— — 
Write-offs— (0.3)
Ending balance$1.2 $8.3 
Fixed Maturity and Equity Securities
The Company’sCompany's investment portfolio is comprised primarily of fixed maturity securities and also includes equity securities. The amortizedAmortized cost, or cost,net, gross unrealized investment gains (losses) and losses, fair values and other-than-temporary impairment (“OTTI”) included in accumulated other comprehensive income (“AOCI”) of all fixed maturity and equity securities in the portfolio were as follows:
($ in millions)Amortized
Cost, net
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
March 31, 2023
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:(1)
Mortgage-backed securities$637.6 $2.0 $55.6 $584.0 
Other, including U.S. Treasury securities424.4 1.2 60.6 365.0 
Municipal bonds1,363.0 26.3 98.5 1,290.8 
Foreign government bonds34.1 — 1.5 32.6 
Corporate bonds2,155.4 17.2 229.1 1,943.5 
Other asset-backed securities1,188.8 2.9 57.6 1,134.1 
Totals$5,803.3 $49.6 $502.9 $5,350.0 
December 31, 2022
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:(1)
Mortgage-backed securities$638.2 $1.3 $69.1 $570.4 
Other, including U.S. Treasury securities410.0 0.5 67.8 342.7 
Municipal bonds1,380.9 16.9 128.1 1,269.7 
Foreign government bonds35.1 — 1.6 33.5 
Corporate bonds2,161.2 12.7 272.2 1,901.7 
Other asset-backed securities1,131.5 3.6 68.1 1,067.0 
Totals$5,756.9 $35.0 $606.9 $5,185.0 
(1)    Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $341.3 million and $330.8 million; Federal Home Loan Mortgage Corporation (FHLMC) of $279.3 million and $273.3 million; and Government National Mortgage Association (GNMA) of $86.8 million and $86.2 million as of March 31, 2023 and December 31, 2022, respectively.
($ in thousands) 
Amortized
Cost or Cost
 
Unrealized
Investment
Gains
 
Unrealized
Investment
Losses
 
Fair
Value
 
OTTI in
AOCI (1)
September 30, 2017          
Fixed maturity securities          
U.S. Government and federally
sponsored agency obligations (2):
          
Mortgage-backed securities $613,761
 $34,712
 $3,071
 $645,402
 $
Other, including U.S. Treasury securities 653,237
 24,705
 6,922
 671,020
 
Municipal bonds 1,669,273
 177,359
 4,428
 1,842,204
 
Foreign government bonds 93,761
 6,416
 
 100,177
 
Corporate bonds 2,635,313
 190,548
 4,158
 2,821,703
 
Other mortgage-backed securities 1,529,052
 26,879
 5,803
 1,550,128
 1,335
Totals $7,194,397
 $460,619
 $24,382
 $7,630,634
 $1,335
           
Equity securities (3) $140,200
 $20,483
 $1,408
 $159,275
 $
           
December 31, 2016          
Fixed maturity securities          
U.S. Government and federally
sponsored agency obligations (2):
          
Mortgage-backed securities $587,355
 $34,256
 $6,720
 $614,891
 $
Other, including U.S. Treasury securities 458,745
 18,518
 10,120
 467,143
 
Municipal bonds 1,648,252
 143,733
 22,588
 1,769,397
 
Foreign government bonds 93,864
 5,102
 297
 98,669
 
Corporate bonds 2,672,818
 152,229
 14,826
 2,810,221
 
Other mortgage-backed securities 1,691,093
 21,153
 15,859
 1,696,387
 1,618
Totals $7,152,127
 $374,991
 $70,410
 $7,456,708
 $1,618
           
Equity securities (3) $134,013
 $13,210
 $5,574
 $141,649
 $
(1)Horace Mann Educators CorporationRelated to securities for which an unrealized loss was bifurcated to distinguish the credit-related portion and the portion driven by other market factors. Represents the amount of OTTI losses in AOCI which was not included in earnings; amounts also include net unrealized investment gains and losses on such impaired securities relating to changes in the fair value of those securities subsequent to the impairment measurement date.12First Quarter 2023 Form 10-Q
(2)Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $332,057 thousand and $272,668 thousand; Federal Home Loan Mortgage Corporation (“FHLMC”) of $373,676 thousand and $378,683 thousand; and Government National Mortgage Association (“GNMA”) of $109,873 thousand and $115,627 thousand as of September 30, 2017 and December 31, 2016, respectively.
(3)Includes nonredeemable perpetual preferred stocks, common stocks and closed-end funds.



NoteNOTE 2 - Investments (Continued)(continued)


The following table presents the fair value and gross unrealized losses offor fixed maturity and equity securities in an unrealized loss position at September 30, 2017as of March 31, 2023 and December 31, 2016,2022, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses at September 30, 2017 --as of March 31, 2023 — which was driven largely by changes inincreasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition -- as temporary. For fixed maturity securities, management doesAs of March 31, 2023, the Company has not havemade the intentdecision to sell the securities and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before thean anticipated recovery in value. There has been a significant increase in interest rates since January 1, 2022 driven mostly by increases in U.S. Treasury rates, though credit spreads also widened. As of March 31, 2023, the amortized cost bases,10-year U.S. Treasury yield increased 196 basis points since January 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 management expectshigh yield wider by 46 and 172 basis points, respectively. These upward movements in rates caused market yields in the Company's investment portfolios to recoverrise 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 entire amortized cost basesBloomberg 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. 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. For equity securities presented in the Company has the ability and intent to hold the securities for the recoverytable below were not indicative of cost and recoveryany credit loss impairments as of cost is expected within a reasonable period of time.March 31, 2023.
($ in millions)12 Months or LessMore than 12 MonthsTotal
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
March 31, 2023
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities$305.4 $22.1 $202.0 $33.5 $507.4 $55.6 
Other167.9 12.2 137.3 48.4 305.2 60.6 
Municipal bonds509.6 28.9 363.3 69.6 872.9 98.5 
Foreign government bonds31.2 1.4 0.4 0.1 31.6 1.5 
Corporate bonds684.9 51.4 781.6 177.7 1,466.5 229.1 
Other asset-backed securities339.3 14.1 663.0 43.5 1,002.3 57.6 
Total$2,038.3 $130.1 $2,147.6 $372.8 $4,185.9 $502.9 
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
38.1 %40.1 %78.2 %
December 31, 2022
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities$458.3 $54.4 $52.6 $14.7 $510.9 $69.1 
Other242.7 34.1 65.8 33.7 308.5 67.8 
Municipal bonds911.6 113.7 42.2 14.4 953.8 128.1 
Foreign government bonds32.7 1.4 0.4 0.2 33.1 1.6 
Corporate bonds1,345.0 221.1 148.9 51.1 1,493.9 272.2 
Other asset-backed securities543.4 37.1 424.3 31.0 967.7 68.1 
Total$3,533.7 $461.8 $734.2 $145.1 $4,267.9 $606.9 
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
68.2 %14.2 %82.4 %



($ in thousands) 12 Months or Less More than 12 Months Total
  Fair Value 
Gross
Unrealized
Losses
 Fair Value 
Gross
Unrealized
Losses
 Fair Value 
Gross
Unrealized
Losses
September 30, 2017            
Fixed maturity securities            
U.S. Government and federally sponsored agency obligations:            
Mortgage-backed securities $111,456
 $2,213
 $12,879
 $858
 $124,335
 $3,071
Other 275,332
 5,901
 16,979
 1,021
 292,311
 6,922
Municipal bonds 118,881
 2,731
 32,710
 1,697
 151,591
 4,428
Foreign government bonds 
 
 
 
 
 
Corporate bonds 138,207
 2,287
 49,931
 1,871
 188,138
 4,158
Other mortgage-backed securities 349,600
 3,985
 126,297
 1,818
 475,897
 5,803
Total fixed maturity securities 993,476
 17,117
 238,796
 7,265
 1,232,272
 24,382
Equity securities (1) 10,547
 692
 2,192
 716
 12,739
 1,408
Combined totals $1,004,023
 $17,809
 $240,988
 $7,981
 $1,245,011
 $25,790
             
Number of positions with a
gross unrealized loss
 393
   77
   470
  
Fair value as a percentage of
total fixed maturity and
equity securities fair value
 12.9%   3.1%   16.0%  
             
December 31, 2016            
Fixed maturity securities            
U.S. Government and federally sponsored agency obligations:            
Mortgage-backed securities $186,439
 $6,176
 $3,235
 $544
 $189,674
 $6,720
Other 219,372
 10,120
 
 
 219,372
 10,120
Municipal bonds 408,163
 19,006
 9,928
 3,582
 418,091
 22,588
Foreign government bonds 24,182
 297
 
 
 24,182
 297
Corporate bonds 459,402
 11,056
 57,261
 3,770
 516,663
 14,826
Other mortgage-backed securities 640,691
 10,470
 229,106
 5,389
 869,797
 15,859
Total fixed maturity securities 1,938,249
 57,125
 299,530
 13,285
 2,237,779
 70,410
Equity securities (1) 56,676
 4,567
 7,956
 1,007
 64,632
 5,574
Combined totals $1,994,925
 $61,692
 $307,486
 $14,292
 $2,302,411
 $75,984
             
Number of positions with a
gross unrealized loss
 629
   102
   731
  
Fair value as a percentage of
total fixed maturity and
equity securities fair value
 26.3%   4.0%   30.3%  

(1)Horace Mann Educators CorporationIncludes nonredeemable perpetual preferred stocks, common stocks and closed-end funds.13First Quarter 2023 Form 10-Q



NoteNOTE 2 - Investments (Continued)

(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, 2023December 31, 2022
Credit Rating
AAA173 67 
AA591 217 
A283 94 
BBB327 93 
BB145 68 
B62 31 
CCC or lower
Not rated41 15 
Totals:1,626 587 
Fixed maturity and equity securities with an investment grade rating represented 92%96.3% of the gross unrealized losses as of September 30, 2017.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.
Credit Losses
The following table summarizes the cumulative amounts related to the Company’s credit loss component of OTTI losses on fixed maturity securities held as of September 30, 2017 and 2016 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of OTTI losses were recognized in other comprehensive income:
($ in thousands) Nine Months Ended September 30,
  2017 2016
Cumulative credit loss (1)    
Beginning of period $13,703
 $7,844
New credit losses 
 300
Increases to previously recognized credit losses 1,994
 2,480
Gains related to securities sold or paid down during the period (2) 
End of period $15,695
 $10,624
(1)The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.

Expected MaturityMaturities 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’borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in millions)Percent of Total Fair ValueMarch 31, 2023
March 31, 2023December 31, 2022Fair
Value
Amortized
Cost, net
Estimated expected maturity:
Due in 1 year or less4.7 %4.4 %$249.5 $256.3 
Due after 1 year through 5 years26.0 26.3 1,392.5 1,441.9 
Due after 5 years through 10 years28.1 27.9 1,501.0 1,581.4 
Due after 10 years through 20 years25.0 25.0 1,342.2 1,482.3 
Due after 20 years16.2 16.4 864.8 1,041.4 
Total100.0 %100.0 %$5,350.0 $5,803.3 
Average option-adjusted duration, in years6.36.4
($ in thousands) Percent of Total Fair Value September 30, 2017
  September 30, 2017 December 31, 2016 
Fair
Value
 
Amortized
Cost
Estimated expected maturity:        
Due in 1 year or less 3.4% 3.9% $256,527
 $250,803
Due after 1 year through 5 years 27.5
 28.7
 2,097,243
 1,998,498
Due after 5 years through 10 years 33.3
 35.2
 2,540,303
 2,431,895
Due after 10 years through 20 years 23.3
 19.5
 1,780,760
 1,654,259
Due after 20 years 12.5
 12.7
 955,801
 858,942
Total 100.0% 100.0% $7,630,634
 $7,194,397
         
Average option-adjusted duration, in years 6.0
 5.9
    










Note
Horace Mann Educators Corporation14First Quarter 2023 Form 10-Q



NOTE
2 - Investments (Continued)(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:were as follows:
($ in millions)Three Months Ended
March 31,
20232022
Fixed maturity securities
Proceeds received$62.7 $168.3 
Gross gains realized0.3 2.4 
Gross losses realized(2.7)(2.9)
Equity securities
Proceeds received$— $5.8 
Gross gains realized— 1.7 
Gross losses realized— (0.1)
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Fixed maturity securities        
Proceeds received $85,841
 $94,706
 $315,531
 $351,739
Gross gains realized 2,293
 2,966
 8,862
 13,824
Gross losses realized (181) (102) (1,558) (1,542)
         
Equity securities        
Proceeds received $3,514
 $4,479
 $20,510
 $17,101
Gross gains realized 477
 790
 3,227
 1,960
Gross losses realized (293) (21) (721) (862)


Net Unrealized Investment Gains and Losses(Losses) on Fixed Maturity and Equity Securities
Net unrealized investment gains and losses are computed as the difference between fair value and amortized cost for fixed maturity securities or cost for equity securities. The following table reconciles the net unrealized investment gains and losses,(losses) on fixed maturity securities, net of tax, included in accumulatedAOCI:
($ in millions)Three Months Ended
March 31,
20232022
Net unrealized investment gains (losses)
   on fixed maturity securities, net of tax
Beginning of period$(449.6)$347.1 
Change in net unrealized investment gains
   (losses) on fixed maturity securities
91.3 (335.9)
Reclassification of net investment losses
   on fixed maturity securities to net income
1.9 1.8 
End of period$(356.4)$13.0 
Limited Partnership Interests
Investments in limited partnership interests are accounted for using the equity method of accounting (EMA) and include interests in commercial mortgage loan funds, private equity funds, infrastructure equity funds, real estate equity funds, infrastructure debt funds and other comprehensive income (loss), beforefunds. Principal factors influencing carrying amount appreciation or depreciation include operating performance, comparable public company earnings multiples, capitalization rates and the impact on deferred policy acquisition costs:economic environment. The Company recognizes an impairment loss for EMA limited partnership interests when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. The carrying amounts of EMA limited partnership interests were as follows:
($ in millions)
March 31, 2023December 31, 2022
Commercial mortgage loan funds$623.7 $593.6 
Private equity funds77.7 76.3 
Infrastructure equity funds73.2 72.0 
Real estate equity funds87.7 71.3 
Infrastructure debt funds62.6 60.0 
Other funds(1)
120.5 110.5 
Total$1,045.4 $983.7 
(1)Other funds consist primarily of limited partnership interests in corporate mezzanine, venture capital and private credit funds.
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Net unrealized investment gains and losses
on fixed maturity securities, net of tax
        
Beginning of period $270,834
 $371,456
 $197,978
 $198,714
Change in net unrealized investment
gains and losses
 10,133
 20,827
 83,547
 188,912
Reclassification of net realized
investment (gains) losses to net income
 2,587
 (11,072) 2,029
 (6,415)
End of period $283,554
 $381,211
 $283,554
 $381,211
         
Net unrealized investment gains and losses
on equity securities, net of tax
        
Beginning of period $10,631
 $8,183
 $4,963
 $2,649
Change in net unrealized investment
gains and losses
 1,933
 (2,052) 7,905
 4,846
Reclassification of net realized
investment (gains) losses to net income
 (165) 2,211
 (469) 847
End of period $12,399
 $8,342
 $12,399
 $8,342
Horace Mann Educators Corporation15First Quarter 2023 Form 10-Q


Note
NOTE
2 - Investments (Continued)(continued)


Offsetting of Assets and Liabilities
The Company’s derivative instruments (call options)Company's derivatives are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement provideprovides that the Company will receive or pledge financial collateral in the event minimum thresholds have been reached. The Company’s reverse repurchase agreements are reached.
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, 2022. The following table presents the 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 $0.9 
($ in thousands)   
Gross
Amounts
Offset in the
 
Net Amounts
of Assets/
Liabilities
Presented
in the
 
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
  
  
Gross
Amounts
 
Consolidated
Balance
Sheets
 
Consolidated
Balance
Sheets
 
Financial
Instruments
 
Cash
Collateral
Received
 
Net
Amount
September 30, 2017            
Asset derivatives:            
Free-standing derivatives $10,431
 $
 $10,431
 $
 $10,954
 $(523)
             
December 31, 2016            
Asset derivatives:            
Free-standing derivatives $8,694
 $
 $8,694
 $
 $8,824
 $(130)

Reverse Repurchase Agreements

Deposits
At September 30, 2017In 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 was $74.7 million 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, 2016,2022.
Deposits
As of March 31, 2023 and December 31, 2022, fixed maturity securities with a fair value of $18,133 thousand$29.0 million and $18,119 thousand,$28.6 million, respectively, were on deposit with governmental agencies as required by law in various states infor which the insurance subsidiaries of HMEC conduct business. In addition, at September 30, 2017as of March 31, 2023 and December 31, 2016,2022, fixed maturity securities with a fair value of $620,558 thousand$948.1 million and $620,489 thousand,$860.4 million, respectively, were on deposit with the Federal Home Loan Bank of Chicago (“FHLB”)(FHLB) as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $575,000 thousand at both$869.5 million as of the respective dates.March 31, 2023 and $792.5 million as of December 31, 2022. The deposited securities are included inreported as Fixed maturity securities on the Company’s Consolidated Balance Sheets.
NoteNOTE 3 - Fair Value of Financial Instruments

The Company is required under GAAP 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 theappropriate 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 a pointeach reporting date is included in time is includedPart II - Item 8, Note 4 of the
Horace Mann Educators Corporation16First Quarter 2023 Form 10-Q


NOTE 3 - 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, 2016, specifically in “Note 3 -- Fair Value of Financial Instruments”.

Note 3 - Fair Value of Financial Instruments (Continued)


2022.
Financial Instruments Measured and Carried at Fair Value
on a Recurring Basis
The following table presents the Company’sCompany's fair value hierarchy for thosefinancial assets and financial liabilities measured and carried at fair value on a recurring basis. At September 30, 2017,During the three months ended March 31, 2023 and 2022, there were no transfers between Level 1 and Level 2. As of March 31, 2023, Level 3 invested assets comprised 3.3%8.0% of the Company’s total investment portfolio at fair value.
($ in millions)Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
 Level 1Level 2Level 3
March 31, 2023
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
   sponsored agency obligations:
Mortgage-backed securities$584.0 $584.0 $— $581.4 $2.6 
Other, including U.S. Treasury securities364.8 364.8 38.5 326.3 — 
Municipal bonds1,290.9 1,290.9 — 1,235.5 55.4 
Foreign government bonds32.6 32.6 — 32.6 — 
Corporate bonds1,943.5 1,943.5 13.2 1,646.3 284.0 
Other asset-backed securities1,134.2 1,134.2 — 1,032.2 102.0 
Total fixed maturity securities5,350.0 5,350.0 51.7 4,854.3 444.0 
Equity securities98.8 98.8 24.3 72.5 2.0 
Short-term investments75.0 75.0 75.0 — — 
Other investments41.8 41.8 — 41.8 — 
Totals$5,565.6 $5,565.6 $151.0 $4,968.6 $446.0 
Separate Account variable annuity assets(1)
$2,954.7 $2,954.7 $2,954.7 $— $— 
Financial Liabilities
Investment contract and future policy benefit reserves, embedded derivatives$1.7 $1.7 $— $1.7 $— 
Other policyholder funds, embedded derivatives$89.9 $89.9 $— $— $89.9 
December 31, 2022
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
   sponsored agency obligations:
Mortgage-backed securities$570.4 $570.4 $— $567.8 $2.6 
Other, including U.S. Treasury securities342.6 342.6 24.6 318.0 — 
Municipal bonds1,269.7 1,269.7 — 1,215.3 54.4 
Foreign government bonds33.6 33.6 — 33.6 — 
Corporate bonds1,901.7 1,901.7 12.2 1,628.2 261.3 
Other asset-backed securities1,067.0 1,067.0 — 962.0 105.0 
Total fixed maturity securities5,185.0 5,185.0 36.8 4,724.9 423.3 
Equity securities99.6 99.6 23.3 74.3 2.0 
Short-term investments109.4 109.4 109.4 — — 
Other investments38.6 38.6 — 38.6 — 
Totals$5,432.6 $5,432.6 $169.5 $4,837.8 $425.3 
Separate Account (variable annuity) assets(1)
$2,792.3 $2,792.3 $2,792.3 $— $— 
Financial Liabilities     
Investment contract and future policy benefit reserves, embedded derivatives$1.2 $1.2 $— $1.2 $— 
Other policyholder funds, embedded derivatives$91.0 $91.0 $— $— $91.0 
($ in thousands)   Fair Value Measurements at
  Carrying Fair Reporting Date Using
  Amount Value Level 1 Level 2 Level 3
September 30, 2017          
Financial Assets          
Investments          
Fixed maturity securities          
U.S. Government and federally
sponsored agency obligations:
          
Mortgage-backed securities $645,402
 $645,402
 $
 $642,110
 $3,292
Other, including U.S. Treasury securities 671,020
 671,020
 13,484
 657,536
 
Municipal bonds 1,842,204
 1,842,204
 
 1,792,992
 49,212
Foreign government bonds 100,177
 100,177
 
 100,177
 
Corporate bonds 2,821,703
 2,821,703
 14,798
 2,712,660
 94,245
Other mortgage-backed securities 1,550,128
 1,550,128
 
 1,431,802
 118,326
Total fixed maturity securities 7,630,634
 7,630,634
 28,282
 7,337,277
 265,075
Equity securities 159,275
 159,275
 103,552
 55,717
 6
Short-term investments 111,488
 111,488
 111,488
 
 
Other investments 21,944
 21,944
 
 21,944
 
Totals $7,923,341
 $7,923,341
 $243,322
 $7,414,938
 $265,081
Financial Liabilities          
Investment contract and life policy
reserves, embedded derivatives
 $390
 $390
 $
 $390
 $
Other policyholder funds,
embedded derivatives
 72,986
 72,986
 
 
 72,986
           
December 31, 2016          
Financial Assets          
Investments          
Fixed maturity securities          
U.S. Government and federally
sponsored agency obligations:
          
Mortgage-backed securities $614,891
 $614,891
 $
 $611,476
 $3,415
Other, including U.S. Treasury securities 467,143
 467,143
 13,631
 453,512
 
Municipal bonds 1,769,397
 1,769,397
 
 1,722,900
 46,497
Foreign government bonds 98,669
 98,669
 
 98,669
 
Corporate bonds 2,810,221
 2,810,221
 13,532
 2,736,498
 60,191
Other mortgage-backed securities 1,696,387
 1,696,387
 
 1,595,143
 101,244
Total fixed maturity securities 7,456,708
 7,456,708
 27,163
 7,218,198
 211,347
Equity securities 141,649
 141,649
 98,632
 43,011
 6
Short-term investments 44,918
 44,918
 44,167
 
 751
Other investments 20,194
 20,194
 
 20,194
 
Totals $7,663,469
 $7,663,469
 $169,962
 $7,281,403
 $212,104
Financial Liabilities  
  
  
  
  
Investment contract and life policy
reserves, embedded derivatives
 $158
 $158
 $
 $158
 $
Other policyholder funds,
embedded derivatives
 59,393
 59,393
 
 
 59,393
(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 Corporation17First Quarter 2023 Form 10-Q


NoteNOTE 3 - Fair Value of Financial Instruments (Continued)

(continued)

Changes in Level 3 Fair Value Measurements
During the nine month period ended September 30, 2017, an equity security was transferred into Level 1 from Level 2 as a result of increased liquidity in the market and a sustained increase in the market activity for this asset. The following table presents reconciliations for the periods indicatedreconciliation for all Level 3financial assets and financial liabilities measured at fair value on a recurring basis.basis using significant unobservable inputs (Level 3) were as follows:
($ 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, January 1, 2023$54.4 $261.3 $107.6 $423.3 $2.0 $425.3 $91.0 
Transfers into Level 3(3)
— 5.9 0.4 6.3 — 6.3 — 
Transfers out of Level 3(3)
— — — — — — — 
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 liabilities
— — — — — — 0.2 
Net unrealized investment gains
 (losses) included in OCI
1.2 0.9 (0.4)1.7 — 1.7 — 
Purchases— 19.0 0.2 19.2 — 19.2 — 
Issuances— — — — — — 2.1 
Sales— (2.6)— (2.6)— (2.6)— 
Settlements— — — — — — — 
Paydowns, maturities and distributions(0.2)(0.5)(3.2)(3.9)— (3.9)(3.4)
Ending balance, March 31, 2023$55.4 $284.0 $104.6 $444.0 $2.0 $446.0 $89.9 
Beginning balance, January 1, 2022$60.8 $210.3 $98.9 $370.0 $1.4 $371.4 $106.6 
Transfers into Level 3(3)
— 67.5 4.7 72.2 — 72.2 — 
Transfers out of Level 3(3)
(3.2)— (4.8)(8.0)— (8.0)— 
Total gains or losses
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
— — — — — — (5.2)
Net unrealized investment gains
 (losses) included in OCI
(3.4)(6.4)(4.1)(13.9)— (13.9)— 
Purchases— — — — — — — 
Issuances— — — — — — 0.9 
Sales— — — — — — — 
Settlements— — — — — — — 
Paydowns, maturities and distributions(0.1)(45.4)(4.0)(49.5)— (49.5)(3.2)
Ending balance, March 31, 2022$54.1 $226.0 $89.8 $369.9 $1.3 $371.2 $99.1 
(1)Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.
($ in thousands) Financial Assets 
Financial
Liabilities(1)
  
Municipal
Bonds
 
Corporate
Bonds
 
Mortgage-
Backed
Securities (2)
 
Total
Fixed
Maturity
Securities
 
Equity
Securities
 
Short-term
Investments
 Total  
Beginning balance, July 1, 2017 $49,123
 $77,052
 $120,324
 $246,499
 $6
 $
 $246,505
 $67,995
Transfers into Level 3 (3) 
 23,501
 11,961
 35,462
 
 
 35,462
 
Transfers out of Level 3 (3) 
 1
 (881) (880) 
 
 (880) 
Total gains or losses 

 

 

 

 

 

 

  
Net realized investment gains (losses) included in net
income related to financial assets
 
 (1) (160) (161) 
 
 (161) 
Net realized (gains) losses
included in net income
related to financial liabilities
 
 
 
 
 
 
 
 2,587
Net unrealized investment
gains (losses) included in other comprehensive income
 382
 (192) (377) (187) 
 
 (187) 
Purchases 
 
 
 
 
 
 
 
Issuances 
 
 
 
 
 
 
 3,752
Sales 
 (1,999) 
 (1,999) 
 
 (1,999) 
Settlements 
 
 
 
 
 
 
 
Paydowns, maturities
and distributions
 (293) (4,117) (9,249) (13,659) 
 
 (13,659) (1,348)
Ending balance, September 30, 2017 $49,212
 $94,245
 $121,618
 $265,075
 $6
 $
 $265,081
 $72,986
                 
Beginning balance, January 1, 2017 $46,497
 $60,191
 $104,659
 $211,347
 $6
 $751
 $212,104
 $59,393
Transfers into Level 3 (3) 5,214
 55,420
 36,482
 97,116
 
 
 97,116
 
Transfers out of Level 3 (3) (5,557) (11,962) (881) (18,400) 
 (751) (19,151) 
Total gains or losses                
Net realized investment gains (losses) included in net income related to financial assets 
 (1) (1,874) (1,875) 
 
 (1,875) 
Net realized (gains) losses
included in net income
related to financial liabilities
 
 
 
 
 
 
 
 6,133
Net unrealized investment
gains (losses) included in other comprehensive income
 3,540
 263
 1,945
 5,748
 
 
 5,748
 
Purchases 
 
 
 
 
 
 
 
Issuances 
 
 
 
 
 
 
 10,538
Sales 
 (1,999) 
 (1,999) 
 
 (1,999) 
Settlements 
 
 
 
 
 
 
 
Paydowns, maturities
and distributions
 (482) (7,667) (18,713) (26,862) 
 
 (26,862) (3,078)
Ending balance, September 30, 2017 $49,212
 $94,245
 $121,618
 $265,075
 $6
 $
 $265,081
 $72,986
(2)Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.

(1)Represents embedded derivatives, all related to the Company’s FIA 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 mortgage-backed securities.
(3)(3)Transfers into and out of Level 3 during the three and nine month periods ended September 30, 2017 were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. The Company’s policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
Note 3 - Fair Valueduring the three months ended March 31, 2023 and 2022 were related to changes in the primary pricing source and changes in observability of Financial Instruments (Continued)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.


($ in thousands) Financial Assets 
Financial
Liabilities(1)
  
Municipal
Bonds
 
Corporate
Bonds
 
Mortgage-
Backed
Securities (2)
 
Total
Fixed
Maturity
Securities
 
Equity
Securities
 
Short-term
Investments
 Total  
Beginning balance, July 1, 2016 $47,647
 $73,408
 $96,581
 $217,636
 $6
 $
 $217,642
 $47,706
Transfers into Level 3 (3) 
 10,375
 7,655
 18,030
 
 
 18,030
 
Transfers out of Level 3 (3) 
 (5,967) (788) (6,755) 
 
 (6,755) 
Total gains or losses                
Net realized investment gains (losses) included in net
income related to financial assets
 
 1
 (56) (55) 
 
 (55) 
Net realized (gains) losses
included in net income
related to financial liabilities
 
 
 
 
 
 
 
 68
Net unrealized investment gains
(losses) included in other
comprehensive income
 (2,361) 1,292
 3,951
 2,882
 
 
 2,882
 
Purchases 
 
 
 
 
 
 
 
Issuances 
 
 
 
 
 
 
 6,710
Sales 
 
 
 
 
 
 
 
Settlements 
 
 
 
 
 
 
 
Paydowns, maturities
and distributions
 (120) (1,488) (5,194) (6,802) 
 
 (6,802) 695
Ending balance, September 30, 2016 $45,166
 $77,621
 $102,149
 $224,936
 $6
 $
 $224,942
 $55,179
                 
Beginning balance, January 1, 2016 $30,379
 $67,575
 $75,466
 $173,420
 $6
 $
 $173,426
 $39,021
Transfers into Level 3 (3) 14,751
 21,451
 32,281
 68,483
 
 
 68,483
 
Transfers out of Level 3 (3) 
 (5,967) (788) (6,755) 
 
 (6,755) 
Total gains or losses                
Net realized investment gains
(losses) included in net
income related to
financial assets
 
 (656) (56) (712) 
 
 (712) 
Net realized (gains) losses
included in net income
related to financial liabilities
 
 
 
 
 
 
 
 2,066
Net unrealized investment gains
(losses) included in other
comprehensive income
 420
 3,073
 4,173
 7,666
 
 
 7,666
 
Purchases 
 
 
 
 
 
 
 
Issuances 
 
 
 
 
 
 
 15,194
Sales 
 
 
 
 
 
 
 
Settlements 
 
 
 
 
 
 
 
Paydowns, maturities
and distributions
 (384) (7,855) (8,927) (17,166) 
 
 (17,166) (1,102)
Ending balance, September 30, 2016 $45,166
 $77,621
 $102,149
 $224,936
 $6
 $
 $224,942
 $55,179

(1)Represents embedded derivatives, all related to the Company’s FIA 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 mortgage-backed securities.
(3)Transfers into and out of Level 3 during the three and nine month periods ended September 30, 2016 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 transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

At September 30, 2017,For the three months ended March 31, 2023, the Company impaired twohad no net investment losses and $1.0 million of 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 securities for a $1,874 thousand realized loss. At September 30, 2016, there were nofinancial assets. For the three months ended March 31, 2023, the Company had net realizedinvestment losses of $0.2 million and $5.2 million of net investment gains or lossesfor the three months ended March 31, 2022, that were included in earnings thatnet income and were attributable to changes in the fair value of Level 3 assets still held. For the three and nine month periods ended September 30, 2017, net realized losses of $2,587 thousand and $6,133 thousand, respectively, were included in earnings that were attributable to the changes in the fair value of Level 3 liabilities (embedded derivatives) still held; for the three and nine month periods ended September 30, 2016, the respective loss amounts were $68 thousand and $2,066 thousand.
financial liabilities.
Note
Horace Mann Educators Corporation18First Quarter 2023 Form 10-Q


NOTE 3 - Fair Value of Financial Instruments (Continued)

(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 as of
March 31, 2023
Valuation Technique(s)Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate(1)
Municipal bonds$55.4 discounted cash flowoption adjusted spread308 bps
Corporate bonds284.0 discounted cash flowyield6.1%
vendor pricedvendor priced79.64
discounted cash flowyield11.0%
market comparableEV / Fwd EBITDA (x)5.92x
discounted cash flowdiscount rate6.2% - 10.7%
discounted cash flowexit cap6.2%
discounted cash flowoption adjusted spread241 bps
Mortgage-backed and other asset-backed securities104.6 vendor pricehaircut0.01% -0.3%
discounted cash flowdiscount margin39.5%
discounted cash flowdiscount rate16.0% - 21.0%
discounted cash flowmedian comparable yield20.7% - 43.2%
discounted cash flowyield6.4% - 6.5%
discounted cash flowLIBOR2.3%
discounted cash flowPDI spread5.5%
discounted cash flowSBL spread4.5%
discounted cash flowweighting17.0% - 83.0%
discounted cash flowCPR20.0%
discounted cash flowdefault rate annual4.0%
discounted cash flowrecovery65.0%
discounted cash flowI spread175 bps
discounted cash flowN spread463 bps
discounted cash flowT Spread226 bps
market comparablemedian price81.34
Equity securities2.0black-scholesvolatilitylow 28.0% - high 44.0%
black-scholestime to exit2.67 bps
market comparableprice/book ExAOCI1.06x
($ in millions)
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 flowlapse rate5.4%
mortality multiplier(4)
67.8%
      option budget 0.9% - 3.5%
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 Corporation19First Quarter 2023 Form 10-Q


NOTE 3 - 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 “Note 3 -- Fair Value of Financial Instruments -- Investments”Part II - Item 8, Note 4 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022. 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 generally relate to interest rate spreads, illiquidity premiumsinclude: benchmark yield, liquidity premium, estimated cash flows, prepayment and default rates.speeds, spreads, weighted average life and credit rating. Significant spread widening in isolation will adversely impact the overall valuation, while significant spread 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; Disclosure Required
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, 2022. The following table presents the carrying value,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 1Level 2Level 3
March 31, 2023
Financial Assets
Other investments$174.3 $177.8 $— $— $177.8 
Deposit asset on reinsurance2,517.9 2,270.6 — — 2,270.6 
Financial Liabilities
Investment contract and future policy benefit reserves, fixed annuity contracts4,954.6 4,854.3 — — 4,854.3 
Investment contract and future policy benefit reserves, account values on life contracts113.3 109.3 — — 109.3 
Other policyholder funds938.4 938.4 — 888.1 50.3 
Reverse repurchase agreements70.2 74.7 — 74.7 — 
Short-term debt249.0 249.0 — — 249.0 
Long-term debt249.0 239.7 — 239.7 — 
December 31, 2022
Financial Assets
Other investments$167.4 $170.9 $— $— $170.9 
Deposit asset on reinsurance2,516.6 2,207.2 — — 2,207.2 
Financial Liabilities     
Investment contract and future policy benefit reserves, fixed annuity contracts4,988.5 4,901.3 — — 4,901.3 
Investment contract and future policy benefit reserves, account values on life contracts111.9 107.7 — — 107.7 
Other policyholder funds863.0 863.0 — 810.7 52.3 
Reverse repurchase agreements70.2 73.3 — 73.3 — 
Short-term debt249.0 249.0 — — 249.0 
Long-term debt249.0 240.5 — 240.5 — 
($ in thousands)   Fair Value Measurements at
  Carrying Fair Reporting Date Using
  Amount Value Level 1 Level 2 Level 3
September 30, 2017          
Financial Assets          
Investments          
Other investments $154,630
 $159,253
 $
 $
 $159,253
Financial Liabilities          
Investment contract reserves 4,428,989
 4,338,318
 
 
 4,338,318
Life policy reserves, account values on life contracts 81,520
 86,906
 
 
 86,906
Other policyholder funds 644,383
 644,383
 
 575,579
 68,804
Long-term debt 247,403
 264,781
 264,781
 
 
           
December 31, 2016          
Financial Assets          
Investments          
Other investments $151,965
 $156,536
 $
 $
 $156,536
Financial Liabilities  
  
  
  
  
Investment contract reserves 4,360,456
 4,280,528
 
 
 4,280,528
Life policy reserves, account values on life contracts 79,591
 85,066
 
 
 85,066
Other policyholder funds 649,557
 649,557
 
 575,253
 74,304
Long-term debt 247,209
 248,191
 248,191
 
 

Note 4 - Derivative Instruments


The Company offers FIA products, which are deferred fixed annuities that guarantee the return of principal to the contractholder and credit interest based on a percentage of the gain in a specified market index, and IUL products, which also credit interest based on a percentage of the gain in a specified market index. When deposits are received for FIA and IUL contracts, a portion is used to purchase derivatives consisting of OTC call options on the applicable market indices to fund the index credits due to FIA and IUL policyholders. For the Company, substantially all of such call options are one-year options purchased to match the funding requirements of the underlying contracts. The call options are carried at fair value with changes in fair value included in Net realized investment gains and losses, a component of Revenues, in the Consolidated Statements of Operations.
The change in fair value of the derivatives includes the gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open positions. Call options are not purchased to fund the index liabilities which may arise after the next deposit anniversary date. On the respective anniversary dates of the indexed deposits, the index used to compute the annual index credit is reset and new one-year call options are purchased to fund the next annual index credit. The cost of these purchases is managed through the terms of the FIA and IUL contracts, which permit changes to index return caps, participation rates and/or asset fees, subject to guaranteed minimums on each contract’s anniversary date. By adjusting the index return caps, participation rates or asset fees, crediting rates generally can be managed except in cases where the contractual features would prevent further modifications.
The future annual index credits on FIA contracts are treated as a “series of embedded derivatives” over the expected life of the applicable contract with a corresponding reserve recorded. For the IUL contracts, the embedded derivative represents a single year liability for the index return.
The Company carries all derivative instruments as assets or liabilities in the Consolidated Balance Sheets at fair value. The Company elected to not use hedge accounting for derivative transactions related to the FIA and IUL products. As a result, the Company records the purchased call options and the embedded derivatives related to the provision of a contingent return at fair value, with changes in the fair value of the derivatives recognized immediately as Net realized investment gains (losses) in the Consolidated Statements of Operations. The fair values of derivative instruments, including derivative instruments embedded in FIA and IUL contracts, presented in the Consolidated Balance Sheets were as follows:
($ in thousands) September 30, 2017 December 31, 2016
Assets  
  
Derivative instruments, included in Short-term and other investments $10,431
 $8,694
     
Liabilities  
  
FIA - embedded derivatives, included in Other policyholder funds $72,986
 $59,393
IUL - embedded derivatives,
included in Investment contract and life policy reserves
 390
 158


Note 4 - Derivative Instruments (Continued)


In general, the change in the fair value of the embedded derivatives related to FIA contracts will not correspond to the change in fair value of the purchased call options because the purchased call options are one-year options while the options valued in those embedded derivatives represent the rights of the policyholder to receive index credits over the entire period the FIA contracts are expected to be in force, which typically exceeds 10 years. The changes in fair value of derivatives included in the Consolidated Statements of Operations were as follows:
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Change in fair value of derivatives (1):        
Revenues        
Net realized investment gains $2,943
 $562
 $7,109
 $422
         
Change in fair value of embedded derivatives:        
Revenues        
Net realized investment losses $(2,702) $(76) $(6,363) $(2,077)
(1)Horace Mann Educators CorporationIncludes the gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open options.20First Quarter 2023 Form 10-Q

The Company’s strategy attempts to mitigate potential risk of loss under these agreements through a regular monitoring process, which evaluates the program’s effectiveness. The Company is exposed to risk of loss in the event of nonperformance by the counterparties and, accordingly, option contracts are purchased from multiple counterparties, which are evaluated for creditworthiness prior to purchase of the contracts. All of these options have been purchased from nationally recognized financial institutions with a Standard and Poor’s Financial Services LLC ("S&P") long-term credit rating of “BBB+” or higher at the time of purchase and the maximum credit exposure to any single counterparty is subject to concentration limits. The Company also obtains credit support agreements that allow it to request the counterparty to provide collateral when the fair value of the exposure to the counterparty exceeds specified amounts.
The notional amount and fair value of call options by counterparty and each counterparty’s long-term credit ratings were as follows:
($ in thousands) September 30, 2017 December 31, 2016
  Credit Rating Notional Fair Notional Fair
Counterparty S&P Amount Value Amount Value
           
Bank of America, N.A. A+ $74,400
 $2,466
 $38,500
 $1,934
Barclays Bank PLC A 68,900
 3,017
 66,800
 1,543
Citigroup Inc. BBB+ 
 
 
 
Credit Suisse International A 29,100
 2,041
 65,200
 4,281
Societe Generale A 68,900
 2,907
 15,600
 936
           
Total   $241,300
 $10,431
 $186,100
 $8,694

As of September 30, 2017 and December 31, 2016, the Company held $10,954 thousand and $8,824 thousand, respectively, of cash received from counterparties for derivative collateral, which is included in Other liabilities in the Consolidated Balance Sheets. This derivative collateral limits the Company’s maximum amount of economic loss due to credit risk that would be incurred if parties to the call options failed completely to perform according to the terms of the contracts to $250 thousand per counterparty.

NOTE 4 - Short-Duration Insurance Contracts
Note 5 - Property and& Casualty Unpaid Claims and Claim Expenses


Expense Reserves
The following table is a summary reconciliation of the beginning and ending Property and& Casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after reinsurance) bases.basis. The total net Property and& 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 reservereserves (before reinsurance)reinsurance balances and the reinsurance recoverable balancesbalances) are reflected on a gross basis in the Consolidated Balance Sheets.
($ in millions)Three Months Ended
March 31,
20232022
Property & Casualty
Beginning gross reserves$388.7 $362.4 
Less: reinsurance recoverables100.8 110.3 
Net reserves, beginning of period(1)
287.9 252.1 
Incurred claims and claim expenses:
Claims occurring in the current period128.8 108.3 
Increase (decrease) in estimated reserves for claims occurring in prior periods(2)
— — 
Total claims and claim expenses incurred128.8 108.3 
Claims and claim expense payments
for claims occurring during:
Current period40.6 33.8 
Prior periods79.6 78.4 
Total claims and claim expense payments120.2 112.2 
Net reserves, end of period(1)
296.5 248.2 
Plus: reinsurance recoverables101.3 108.0 
Ending gross reserves$397.8 $356.2 
(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 known as prior years' reserve development.

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 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.

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Property and Casualty segment  
  
    
Beginning Gross reserves (1) $329,831
 $320,961
 $307,757
 $301,569
Less: reinsurance recoverables 58,897
 60,499
 61,199
 50,332
Net reserves, beginning of period (2) 270,934
 260,462
 246,558
 251,237
Incurred claims and claim expenses:  
  
    
Claims occurring in the current period 115,393
 116,709
 386,945
 351,270
Decrease in estimated reserves for
claims occurring in prior periods (3)
 (500) (700) (2,100) (4,300)
Total claims and claim expenses incurred (4) 114,893
 116,009
 384,845
 346,970
Claims and claim expense payments
for claims occurring during:
  
  
    
Current period 97,188
 99,832
 245,213
 228,462
Prior periods 28,054
 27,976
 125,605
 121,082
Total claims and claim expense payments 125,242
 127,808
 370,818
 349,544
Net reserves, end of period (2) 260,585
 248,663
 260,585
 248,663
Plus: reinsurance recoverables 57,302
 61,893
 57,302
 61,893
Ending Gross reserves (1) $317,887
 $310,556
 $317,887
 $310,556
(1)Horace Mann Educators CorporationUnpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for the Life and Retirement segments of $23,897 thousand and $22,231 thousand as of September 30, 2017 and 2016, respectively, in addition to Property and Casualty segment reserves.21First Quarter 2023 Form 10-Q
(2)Reserves net of anticipated reinsurance recoverables.
(3)Shows the amounts by which the Company decreased


NOTE 4 - Short-Duration Insurance Contracts (continued)
($ in millions)Three Months Ended
March 31,
20232022
Group Benefits
Beginning gross reserves$121.6 $125.4 
Less: reinsurance recoverables27.9 28.6 
Net reserves, beginning of period(1)
93.7 96.8 
Incurred claims and claim expenses:
Claims occurring in the current period20.2 28.8 
Increase (decrease) in estimated reserves for claims occurring
in prior periods(2)
(4.9)(1.9)
Total claims and claim expenses incurred15.3 26.9 
Claims and claim expense payments
for claims occurring during:
Current period4.2 4.4 
Prior periods12.4 15.9 
Total claims and claim expense payments16.7 20.3 
Net reserves, end of period(1)
92.3 103.4 
Plus: reinsurance recoverables28.0 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.
(4)Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for the Life and Retirement segments of $20,002 thousand and $60,025 thousand for the three and nine month periods ended September 30, 2017, respectively, in addition to the Property and Casualty segment amounts. Benefits, claims and settlement expenses for the Life and Retirement segments for the three and nine month periods ended September 30, 2016 were $19,701 thousand and $56,661 thousand, respectively.

Net favorable development of total reserves for Property and Casualty claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs - also known as prior yearsyears' reserve development.

Favorable prior years' reserve development for Group Benefits was $2,100 thousand$4.9 million and $4,300 thousand$1.9 million for the nine month periodsthree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. The favorable development for both of the nine month periodsthree months ended September 30, 2017 and 2016March 31, 2023 was predominantlyprimarily the result of favorable severityloss trends in homeownersspecialty health and group for loss emergence. Thisyears 2022 and prior. The favorable development for the three months ended March 31, 2022 was primarily the result of favorable loss trends in specialty health for loss years 2021 and prior.
Reconciliation of Property & Casualty and Group Benefits Unpaid Claims and Claim Expense Reserves to the Consolidated Balance Sheets
($ in millions)As of March 31, 2023As of December 31, 2022
Ending gross reserves
Property & Casualty$397.8 $388.7 
Group Benefits120.3 121.6 
Total short-duration insurance contracts518.1 510.3 
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 other certain group benefit reserves.
Note 5 - Long-Duration Insurance Contracts
Liability for Future Policy Benefits

As of and for the three months ended 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.


Horace Mann Educators Corporation22First Quarter 2023 Form 10-Q




NOTE 5 - Long-Duration Insurance Contracts (continued)
The balances of and changes in LFPB as of and for the three months ended March 31, 2023 were as follows:
($ in millions)
Whole LifeTerm 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 rate245.9 265.4 65.5 32.4 205.1 — 
Effect of:
Change in cash flow assumptions— — — — — — 
Actual variances from expected experience0.8 (1.5)0.2 0.5 (1.4)— 
Adjusted balance at January 1, 2023246.7 263.9 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 rate246.6 266.0 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, 2023222.2 243.8 69.8 31.2 172.5 — 
Present value of expected future policy benefits:
Balance at January 1, 2023493.6 347.0 867.5 79.4 431.7 103.3 
January 1, 2023 balance at original discount rate581.9 401.0 805.2 98.6 537.1 113.4 
Effect of:
Changes in cash flow assumptions— — — — — — 
Actual variances from expected experience0.8 (1.5)0.4 0.6 (1.7)(0.5)
Adjusted balance at January 1, 2023582.7 399.5 805.6 99.2 535.4 112.9 
Issuances2.9 6.6 — 1.0 5.3 2.4 
Interest accruals4.7 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 rate585.4 405.2 801.5 100.3 530.6 113.3 
Effect of changes in discount rate assumptions(70.3)(40.2)91.0 (15.9)(92.9)(7.4)
Balance at March 31, 2023515.1 365.0 892.5 84.4 437.7 105.9 
Net liability for future policy benefits292.8 121.2 822.8 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 recoverable227.8 104.6 822.0 53.2 261.6 102.4 
Impact of flooring on net liability for future policy benefits0.3 — — — — — 
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 term elements.
(2) As of March 31, 2023, the net LFPB for Supplemental Health was $101.7 million for cancer, $22.2 million for accident, years 2015$23.7 million for disability and prior$114.0 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the nine monthoriginal 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 ended September 30, 2017net premium ratio and accident years 2014the 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 prior for the nine month period ended September 30, 2016.maturity payments based on revised expected assumptions.
Note 6 - Debt


Indebtedness outstanding was as follows:
($ in thousands) September 30, 2017 December 31, 2016
Short-term debt:  
  
Bank Credit Facility, expires July 30, 2019 $
 $
     
Long-term debt:  
  
4.50% Senior Notes, due December 1, 2025. Aggregate principal amount of $250,000 thousand less unaccrued discount of $561 thousand and $603 thousand (4.5% imputed rate) and unamortized debt issuance costs of $2,036 thousand and $2,188 thousand 247,403
 247,209


Horace Mann Educators Corporation23First Quarter 2023 Form 10-Q




NOTE 5 - Long-Duration Insurance Contracts (continued)

The Credit Agreement with certain financial institutions (“Bank Credit Facility”)balances of and 4.50% Senior Notes due 2025 (“Senior Notes due 2025”) are describedchanges in “Notes to Consolidated Financial Statements -- Note 7 -- Debt”LFPB as of the Company’s Annual Report on Form 10-Kand for the year ended December 31, 2016.2022 were as follows:
($ in millions)
Whole LifeTerm 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 assumptions5.2 18.7 9.1 2.0 12.2 — 
Actual variances from expected experience7.2 (4.2)3.0 1.6 (25.3)— 
Adjusted balance at January 1, 2022251.7 249.9 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 rate245.9 265.4 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, 2022215.1 234.7 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 assumptions5.2 21.5 11.0 2.0 13.8 — 
Actual variances from expected experience7.7 (4.7)3.6 1.4 (30.0)0.4 
Adjusted balance at January 1, 2022579.0 376.8 817.2 90.0 568.0 116.1 
Issuances12.4 28.3 — 6.4 12.0 5.3 
Interest accruals18.0 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 rate581.9 401.0 805.2 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, 2022493.6 347.0 867.5 79.4 431.7 103.3 
Net liability for future policy benefits278.4 112.2 799.3 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 recoverable215.3 96.9 798.5 49.6 261.0 100.1 
Impact of flooring on net liability for future policy benefits1.1 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.
(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.
(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 Corporation24First 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 LifeTerm 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 rate143.5 200.8 55.2 22.0 218.2 — 
Effect of:
Change in cash flow assumptions2.4 (4.5)(3.3)— (1.8)— 
Actual variances from expected experience8.8 6.9 6.3 1.0 6.3 — 
Adjusted balance at January 1, 2021154.7 203.2 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 rate157.6 221.1 55.8 27.2 217.5 — 
Effect of changes in discount rate assumptions25.4 32.0 18.8 2.5 4.0 — 
Balance at December 31, 2021183.0 253.1 74.6 29.7 221.5 — 
Present Value of Expected Future Policy benefits
Balance at January 1, 2021507.1 364.7 1,269.3 95.0 626.9 136.5 
January 1, 2021 balance at original discount rate362.5 294.0 813.5 73.4 589.1 115.9 
Effect of:
Changes in cash flow assumptions2.8 (4.8)(3.6)— (3.0)— 
Actual variances from expected experience8.7 7.2 6.6 1.1 6.2 (0.4)
Adjusted balance at January 1, 2021374.0 296.4 816.5 74.5 592.3 115.5 
Issuances13.3 29.8 — 10.2 13.0 3.7 
Interest accruals17.1 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 rate386.3 319.5 802.5 86.6 572.6 111.6 
Effect of changes in discount rate assumptions114.4 51.1 370.2 16.3 8.0 13.1 
Balance at December 31, 2021500.7 370.6 1,172.7 102.9 580.6 124.7 
Net liability for future policy benefits317.7 117.6 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.
(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 Corporation25First 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, 2023December 31, 2022
Whole life$293.1 $279.5 
Term life121.2 112.4 
Experience life822.8 799.3
Limited-pay whole life53.3 49.6 
Supplemental health265.3 264.4 
SPIA (life contingent)105.9 103.3 
Limited-pay whole life DPL3.3 3.2 
SPIA (life contingent) DPL1.0 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 assessmentsInterest expense
Three Months Ended March 31,Three Months Ended March 31,
2023202220232022
Whole life$6.6 $6.1 $2.9 $2.7 
Term life10.8 9.9 1.2 1.1 
Experience life8.2 8.5 11.0 11.1 
Limited-pay whole life1.6 1.8 0.6 0.6 
Supplemental health29.7 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, 2023Three Months Ended March 31, 2022
UndiscountedDiscountedUndiscountedDiscounted
Whole life
Expected future gross premiums$471.6 $322.5 $448.0 $308.9 
Expected future benefits and expenses1,128.1 585.4 1,080.6 568.1 
Term life
Expected future gross premiums744.6 465.3 720.9 447.0 
Expected future benefits and expenses687.8 405.2 597.0 355.8 
Experience Life
Expected future gross premiums559.0 310.2 598.4 329.4 
Expected future benefits and expenses1,740.3 801.5 1,774.5 799.5 
Limited-pay whole life
Expected future gross premiums61.9 47.3 51.3 39.7 
Expected future benefits and expenses230.7 100.3 196.9 88.8 
Supplemental health
Expected future gross premiums1,644.2 1,215.1 1,633.3 127.3 
Expected future benefits and expenses724.6 530.6 776.3 577.4 
SPIA (life contingent)
Expected future gross premiums— — — — 
Expected future benefits and expenses158.2 113.3 161.6 116.2 
Horace Mann Educators Corporation26First 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 LifeTerm LifeExperience LifeLimited-Pay Whole LifeSPIA (life contingent)
Mortality
Actual experience0.7 %0.1% - 0.3%1.9 %— %N.M.
Expected experience0.7 %0.1% - 0.6%1.6 %0.2 %N.M.
Lapses
Actual experience3.6 %5.6% - 8.3%3.4 %3.6 %N.M.
Expected experience4.6 %2.8% - 5.6%3.0 %5.1 %N.M.
March 31, 2022
Whole LifeTerm LifeExperience LifeLimited-Pay Whole LifeSPIA (life contingent)
Mortality
Actual experience0.8 %0.1% - 0.1%1.8 %0.4 %N.M.
Expected experience0.7 %0.1% - 0.3%1.4 %0.2 %N.M.
Lapses
Actual experience3.0 %5.2% - 76.1%3.1 %2.9 %N.M.
Expected experience5.7 %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,
20232022
Whole life1818
Term life1716
Experience life1111
Limited-pay whole life2321
Supplemental health10.29.8
SPIA (life contingent)88










Horace Mann Educators Corporation27First 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,
20232022
Whole life
Interest accretion rate1.7% - 4.9%1.7% - 5.0%
Current discount rate4.7% - 5.0%3.2% - 3.7%
Term life
Interest accretion rate4.1% - 4.3%4.1% - 4.4%
Current discount rate4.9% - 5.0%3.6% - 3.6%
Experience life
Interest accretion rate6.1 %6.1 %
Current discount rate5.0 %3.7 %
Limited-pay whole life
Interest accretion rate3.9 %3.9 %
Current discount rate5.0 %3.7 %
Supplemental health
Interest accretion rate1.7% - 2.7%1.7% - 2.7%
Current discount rate5.0% - 5.2%3.5% - 4.0%
SPIA (life contingent)
Interest accretion rate 1.7% - 4.1%1.7% - 4.0%
Current discount rate4.9% - 5.0%3.5% - 3.5%

































Horace Mann Educators Corporation28First 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 LifeExperience LifeFixed Account AnnuitiesFixed Indexed Account AnnuitiesSPIA (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 rate0.1 %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 LifeExperience LifeFixed Account AnnuitiesFixed Indexed Account AnnuitiesSPIA (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 rate5.4 %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 Corporation29First 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, 2023December 31, 2022
Indexed universal life$49.9 $47.6 
Experience Life63.5 64.3 
Fixed account annuities4,577.4 4,591.1 
Fixed indexed account annuities498.4 510.3 
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 Minimum1-50 Basis Points Above51-150 Basis Points AboveGreater 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 higher90.9 — — — 90.9 
Total$3,778.3 $430.7 $337.2 $128.1 $4,674.3 
($ in millions)December 31, 2022
At Guaranteed Minimum1-50 Basis Points Above51-150 Basis Points AboveGreater 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 higher91.7 — — — 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 Corporation30First Quarter 2023 Form 10-Q




NOTE 5 - Long-Duration Insurance Contracts (continued)
Note 7to 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, 2023December 31, 2022
Balance, beginning of year$2,792.3 $3,441.0 
Deposits57.3 240.3 
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, 2023March 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 risk0.4 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 holders6362
(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, 2023As of December 31, 2022
AssetLiabilityNet LiabilityAssetLiabilityNet Liability
Deferred variable annuities$4.2 $5.5 $1.3 $4.4 $4.7 $0.3 









Horace Mann Educators Corporation31First 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 LifeTerm LifeExperience LifeLimited-Pay Whole LifeIndexed Universal LifeSupplemental HealthTotal Annuities
Balance, beginning of period$20.9 $30.0 $5.8 $6.7 $15.4 $6.2 $221.1 
Capitalizations0.6 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 LifeTerm LifeExperience LifeLimited-Pay Whole LifeIndexed Universal LifeSupplemental HealthTotal Annuities
Balance, beginning of year$19.1 $27.5 $6.0 $5.6 $13.7 $4.9 $223.3 
Capitalizations3.0 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 LifeTerm LifeExperience LifeLimited-Pay Whole LifeIndexed Universal LifeSupplemental HealthTotal 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 
Capitalizations2.4 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 Corporation32First 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, 2023December 31, 2022
Whole life$21.2 $20.9 
Term life30.7 30.0 
Experience life5.8 5.8 
Limited pay whole life6.8 6.7 
Indexed universal life15.7 15.4 
Supplemental health6.7 6.2 
Total annuities219.7 221.1 
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, 2023December 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 Corporation33First Quarter 2023 Form 10-Q


NOTE 6 - 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)Direct
Amount
Ceded to
Other
Companies(1)
Assumed
from Other
Companies
Net
Amount
Three months ended March 31, 2023
Net premiums written and contract deposits(2)
$367.8 $16.6 $10.4 $361.6 
Net premiums and contract charges earned264.0 18.5 10.4 255.9 
Benefits, claims and settlement expenses192.9 12.7 3.0 183.2 
Three months ended March 31, 2022
Net premiums written and contract deposits(2)
$360.8 $14.8 $12.4 $358.4 
Net premiums and contract charges earned260.4 17.2 12.6 255.8 
Benefits, claims and settlement expenses181.6 7.2 0.8 175.2 
(1)    Excludes the annuity reinsurance transaction accounted for using the deposit method.
(2)    This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as Exhibit 99.1 in the Company's reports filed with the SEC.
($ in thousands) 
Gross
Amount
 
Ceded to
Other
Companies
 
Assumed
from Other
Companies
 
Net
Amount
Three months ended September 30, 2017  
  
  
  
Premiums written and contract deposits $322,428
 $5,189
 $1,116
 $318,355
Premiums and contract charges earned 202,988
 5,216
 1,163
 198,935
Benefits, claims and settlement expenses 135,508
 1,831
 1,218
 134,895
         
Three months ended September 30, 2016  
  
  
  
Premiums written and contract deposits $356,155
 $5,555
 $934
 $351,534
Premiums and contract charges earned 195,654
 5,584
 980
 191,050
Benefits, claims and settlement expenses 139,114
 4,642
 1,238
 135,710
         
Nine months ended September 30, 2017        
Premiums written and contract deposits $940,063
 $16,342
 $2,980
 $926,701
Premiums and contract charges earned 603,794
 16,415
 2,996
 590,375
Benefits, claims and settlement expenses 450,997
 8,899
 2,772
 444,870
         
Nine months ended September 30, 2016        
Premiums written and contract deposits $960,945
 $17,244
 $2,881
 $946,582
Premiums and contract charges earned 579,283
 17,305
 2,882
 564,860
Benefits, claims and settlement expenses 422,352
 21,748
 3,027
 403,631
Horace Mann Educators Corporation34First Quarter 2023 Form 10-Q


Note 8 - Commitments

Investment Commitments
From time to time, the Company has outstanding commitments to purchase investments and/or commitments to lend funds under bridge loans. Unfunded commitments to purchase investments were $111,265 thousand and $135,054 thousand at September 30, 2017 and December 31, 2016, respectively.
Note 9NOTE 7 - Segment Information


The Company conducts and manages its business throughin four reporting segments. The three operating segments, representing the major lines of business, are: (1) Property and& Casualty primarily(primarily personal lines automobileof auto and homeownersproperty insurance products;products), (2) Life & Retirement primarily(primarily tax-qualified fixed and variable annuities;annuities as well as life insurance products), and Life,(3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life insurance.coverages). The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management’smanagement's evaluation of the results of those segments, but classifies those items in the fourth reporting segment, Corporate and& Other. In addition to ongoing transactions such as corporate debt service, net realized investment gains and losses(losses) and certain public company expenses, such items in Corporate & Other have also have included corporate debt retirement costs/gains,costs, when applicable.
Summarized financial information for these segments is as follows:
($ in millions)Three Months Ended
March 31,
20232022
Net premiums and contract charges earned
Property & Casualty$152.4 $150.2 
Life & Retirement37.7 35.8 
Supplemental & Group Benefits65.8 69.8 
Total$255.9 $255.8 
Net investment income
Property & Casualty$4.0 $7.2 
Life & Retirement87.9 84.2 
Supplemental & Group Benefits9.1 7.1 
Corporate & Other— — 
Intersegment eliminations(0.6)(0.6)
Total$100.4 $97.9 
Net income (loss)
Property & Casualty$(11.6)$8.5 
Life & Retirement14.0 15.6 
Supplemental & Group Benefits14.0 13.2 
Corporate & Other(9.8)(17.0)
Total$6.6 $20.3 
($ in millions)March 31, 2023December 31, 2022
Assets
Property & Casualty$1,077.0 $1,083.8 
Life & Retirement11,085.1 10,754.5 
Supplemental & Group Benefits1,377.1 1,359.3 
Corporate & Other169.0 173.4 
Intersegment eliminations(54.3)(64.9)
Total$13,653.9 $13,306.1 
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Insurance premiums and contract charges earned        
Property and Casualty $163,209
 $155,727
 $481,987
 $461,520
Retirement 7,393
 6,448
 20,753
 18,614
Life 28,333
 28,875
 87,635
 84,726
Total $198,935
 $191,050
 $590,375
 $564,860
         
Net investment income        
Property and Casualty $9,167
 $10,018
 $26,457
 $28,997
Retirement 64,340
 66,174
 192,921
 186,950
Life 18,999
 18,852
 56,215
 55,338
Corporate and Other 17
 15
 47
 44
Intersegment eliminations (203) (212) (615) (644)
Total $92,320
 $94,847
 $275,025
 $270,685
         
Net income (loss)        
Property and Casualty $13,407
 $6,715
 $2,186
 $16,047
Retirement 13,603
 15,732
 36,933
 39,348
Life 4,788
 4,583
 14,283
 13,072
Corporate and Other (5,247) (107) (9,272) (4,525)
Total $26,551
 $26,923
 $44,130
 $63,942

($ in thousands) September 30, 2017 December 31, 2016
Assets    
Property and Casualty $1,156,959
 $1,110,958
Retirement 7,793,727
 7,449,777
Life 1,988,767
 1,912,771
Corporate and Other 135,876
 140,104
Intersegment eliminations (30,981) (36,786)
Total $11,044,348
 $10,576,824


Horace Mann Educators Corporation35First Quarter 2023 Form 10-Q


NOTE 8 - 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 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 reclassifications91.3 (41.2)— 50.1 
Amounts reclassified from AOCI(2)
1.9 — — 1.9 
Net current period other comprehensive loss93.2 (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, $(2.4) million and $(2.3) million, are included in Net investment gains losses and the related income tax benefits, $(0.5) million and $(0.5) million, are included in income tax expense in the Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022, 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 2.








Horace Mann Educators Corporation36First Quarter 2023 Form 10-Q



NOTE 9 - Supplemental Consolidated Cash and Cash Flow Information
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
($ in millions)
March 31, 2023December 31, 2022
Cash$26.6 $42.2 
Restricted cash0.8 0.6 
Total cash and restricted cash reported in the Consolidated Balance Sheets$27.4 $42.8 
FINANCIAL CONDITION AND RESULTS
($ in millions)Three Months Ended
March 31,
20232022
Cash paid (recovered) for:
Interest$1.2 $0.6 
Income taxes0.1 (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 months ended March 31, 2023 and 2022, respectively.
NOTE 10 - Contingencies and 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 Corporation37First 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, 2022Effect of the Adoption of ASU 2018-12
Reclassifications(1)
December 31, 2022
As ReportedAs Adjusted
Assets
Total investments$6,587.6 $— $— $6,587.6 
Cash42.8 — $— 42.8 
Deferred policy acquisition costs433.1 (102.5)$— 330.6 
Reinsurance balances receivable506.2 (38.2)— 468.0 
Deposit asset on reinsurance2,516.6 — — 2,516.6 
Intangible assets185.2 — — 185.2 
Goodwill54.3 — — 54.3 
Other assets328.7 — — 328.7 
Separate Account variable annuity assets2,792.3 — — 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 reserves1,718.0 1,718.0 
Policyholders' account balances5,260.6 5,260.6 
Unpaid claims and claim expenses585.1 (2.9)(18.2)564.0 
Unearned premiums264.2 1.9 — 266.1 
Total policy liabilities7,817.3 (152.9)144.3 7,808.7 
Other policyholder funds954.0 (0.4)(144.3)809.3 
Other liabilities297.0 2.5 — 299.5 
Short-term debt249.0 — — 249.0 
Long-term debt249.0 — — 249.0 
Separate Account variable annuity liabilities2,792.3 — — 2,792.3 
Total liabilities12,358.6 (150.8)— 12,207.8 
Preferred stock— — — — 
Common stock0.1 — — 0.1 
Additional paid-in capital502.6 — — 502.6 
Retained earnings1,468.6 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’ equity1,088.2 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 Corporation38First Quarter 2023 Form 10-Q

Note 11 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (“MD&A”)AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Dollars$ in millions, except per share data)
Three Months EndedEffect of the Adoption of ASU 2018-12Three Months Ended
March 31, 2022March 31, 2022
As ReportedAs Adjusted
Statement of Operations
Revenues
Net premiums and contract charges earned$255.9 $(0.1)$255.8 
Net investment income97.9 — 97.9 
Net investment losses(15.5)— (15.5)
Other income8.5 — 8.5 
Total revenues346.8 (0.1)346.7 
Benefits, losses and expenses
Benefits, claims and settlement expenses177.0 (1.8)175.2 
Interest credited40.8 (1.1)39.7 
Operating expenses76.8 (0.1)76.7 
DAC amortization expense26.4 (4.4)22.0 
Intangible asset amortization expense4.2 — 4.2 
Interest expense3.9 — 3.9 
Total benefits, losses and expenses329.1 (7.4)321.7 
Income before income taxes17.7 7.3 25.0 
Income tax expense3.2 1.5 4.7 
Net income14.5 5.8 20.3 
Net income per share
Basic0.35 0.13 0.48 
Diluted0.35 0.13 0.48 
Weighted average number of shares and equivalent shares
Basic41.9 — 41.9 
Diluted42.1 — 42.1 
Statement of Comprehensive Income (Loss)
Net income14.5 5.8 20.3 
Other comprehensive income (loss), net of tax:
Change in net unrealized investment losses on fixed maturity securities(270.7)(63.4)(334.1)
Change in net reserve remeasurements attributable to discount rates— 181.5 181.5 
Change in net funded status of benefit plans— — — 
Other comprehensive loss(270.7)118.1 (152.6)
Comprehensive income (loss)$(256.2)$123.9 $(132.3)



Horace Mann Educators Corporation39First 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 EndedEffect of the Adoption of ASU 2018-12Three Months Ended
March 31, 2022March 31, 2022
As ReportedAs Adjusted
Common stock, $0.001 par value
Ending balance$0.1 $— $0.1 
Additional paid-in capital
Ending balance496.6 — 496.6 
Retained earnings
Beginning balance1,524.9 22.1 1,547.0 
Net income14.5 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 balance1,525.9 27.1 1,553.0 
Accumulated other comprehensive income (loss), net of tax:
Beginning balance280.5 (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 balance9.8 (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 Corporation40First 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 EndedEffect of the Adoption of ASU 2018-12Three Months Ended
March 31, 2022March 31, 2022
As ReportedAs 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 losses15.5 — 15.5 
     Depreciation and intangible asset amortization3.8 — 3.8 
     Share-based compensation expense2.1 — 2.1 
     Loss from EMA investments, net of dividends or distributions1.6 — 1.6 
     Changes in:
      Insurance liabilities450.5 (82.8)367.7 
      Amounts due under reinsurance agreements(357.7)24.7 (333.0)
      Income tax liabilities3.4 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 activities95.7 — 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 activities37.4 — 37.4 
Net decrease in cash(84.6)— (84.6)
Cash at beginning of period133.7 — 133.7 
Cash at end of period$49.1 $— $49.1 
ITEM 2.IManagement's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
Measures within this MD&A that are not based on accounting principles generally accepted in the United States (“non-GAAP”)of America (non-GAAP) are marked bywith 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 an exhibitExhibit 99.1 to this Quarterly Report on Form 10-Q.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 First Quarter 2023 Investor Supplement.

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

Horace Mann Educators Corporation41First Quarter 2023 Form 10-Q


Forward-looking Information
Statements made in the following discussionthis 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 ("HMEC"; and together with its subsidiaries,(referred to in this Quarterly Report on Form 10-Q as "we", "our", "us", the "Company", "Horace Mann" or "Horace Mann""HMEC") is an insurance holding company. Horace Mann isWe are not under any obligation to (and expressly disclaimsdisclaim 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 the Company’sour actual results could differ materially from those projected in forward-looking statements due to a number of risks and uncertainties inherent in the Company’sour business. For additional information regarding risksAlso, see Part I - Items 1 and uncertainties, see “Item 1A. Risk Factors”1A in this Quarterly Report on Form 10-Q and in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2016. That discussion includes factors such as:2022 for additional information regarding risks and uncertainties.

This MD&A covers the following:
Page
Introduction
The impact that a prolonged economic recession may havepurpose 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 Quarterly Report on Form 10-Q.
HMEC is an insurance holding company focused on helping America’s educators and others who serve the Company’s investment portfolio; volume of new business for automobile, homeowners, retirementcommunity achieve lifelong financial success. Through our subsidiaries, we market and life products; policy renewal rates;underwrite individual and additional annuity contract deposit receipts.
Fluctuations ingroup insurance and financial solutions tailored to the fair value of securities in the Company’s investment portfolio and the related after tax effect on the Company’s shareholders’ equity and total capital through either realized or unrealized investment losses.
Prevailing low interest rate levels, including the impact of interest rates on (1) the Company’s ability to maintain appropriate interest rate spreads over minimum fixed rates guaranteed in the Company’s annuity and life products, (2) the book yieldneeds of the Company’s investment portfolio, (3) unrealized gains and losses in the Company’s investment portfolio and the related after tax effect on the Company’s shareholders’ equity and total capital, (4) amortization of deferred policy acquisition costs and (5) capital levels of the Company’s life insurance subsidiaries.educational community including:
The frequency and severity of events such as hurricanes, storms, earthquakes and wildfires, and the ability of the Company to provide accurate estimates of ultimate claim costs in its consolidated financial statements.
The Company’s risk exposure to catastrophe-prone areas. Based on full year 2016 Property and Casualty direct earned premiums, the Company’s ten largest states represented 57% of the segment total. Included in this top ten group are certain states which are considered more prone to catastrophe occurrences: California, North Carolina, Texas, South Carolina, Florida and Louisiana.
The ability of the Company to maintain a favorable catastrophe reinsurance program considering both availability and cost; and the collectibility of reinsurance receivables.
Adverse changes in market appreciation, interest spreads, business persistency and policyholder mortality and morbidity rates and the resulting impact on both estimated reserves and the amortization of deferred policy acquisition costs.
The Company’s ability to refinance outstanding indebtedness or repurchase shares of the Company’s common stock.
The Company’s ability to (1) develop and expand its marketing operations, including agents and other points of distribution, (2) maintain and secure access to educators, school administrators, principals and school business officials; and (3) profitably expand its Property and Casualty business in highly competitive environments.
The effects of economic forces and other issues affecting the educator market including, but not limited to, federal, state and local budget deficits and cut-backs and adverse changes in state and local tax revenues. The effects of these forces can include, among others, teacher layoffs and early retirements, as well as individual concerns regarding employment and economic uncertainty.


Changes in federal and state laws and regulations, which affect the relative tax and other advantages of the Company’s life and annuity products to customers, including, but not limited to, changes in IRS regulations governing Section 403(b) plans.
Changes in public employee retirement programs as a result of federal and/or state level pension reform initiatives.
Changes in federal and state laws and regulations, which affect the relative tax advantage of certain investments or which affect the ability of debt issuers to declare bankruptcy or restructure debt.
The Company’s ability to effectively implement new or enhanced information technology systems and applications.
Changes in Cybersecurity regulations as a result of state level requirements.

Executive Summary
Through its subsidiaries, HMEC markets and underwrites personal lines of property and casualty insurance, annuitiesprimarily auto and property coverages
retirement products, primarily tax-qualified fixed and variable annuities
life insurance, in the U.S. The Company markets itsprimarily traditional term and whole life insurance products
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.
We conduct and manage our business in four reporting segments. The three reporting segments representing our 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
Horace Mann Educators Corporation42First Quarter 2023 Form 10-Q


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). We do not allocate the impact of corporate-level transactions to these reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify 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 also have included corporate debt retirement costs, when applicable. See Part I - Item 1, Note 7 of the Consolidated Financial Statements in this 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
($ in millions)Three Months Ended
March 31,
2023-2022
20232022% Change
Total revenues$353.9 $346.7 2.1 %
Net income6.6 20.3 -67.5 %
Per diluted share:
Net income0.16 0.48 -66.7 %
Net investment losses, after tax(0.07)(0.29)N.M.
Book value per share$27.87 $32.66 -14.7 %
Net income return on equity - last twelve months0.5 %9.8 %
Net income return on equity - annualized2.4 %5.7 %

For the three month periodmonths ended September 30, 2017, the Company’sMarch 31, 2023, net income of $26.5decreased $13.7 million, decreased $0.4 million compared to the prior year period including an increase in Property and Casualty net income of $6.7 million offset by a $4.9 million reduction in net realized investment gains.

For the three month periodended September 30, 2017, Property and Casualty net income increased to $13.4 million compared to $6.7 million in the prior year period. The Property and Casualty combined ratio of 95.8% improved 5.7 points compared to the prior year period. These improvements were primarily due to an improvedhigher catastrophe losses and elevated underlying auto loss ratio*, reflecting the impact of rate actions and continued profitability initiatives, as well as a strong underlying property loss ratio and lower expenses. Prior years' reserves continue to develop favorably; however, the favorable development in the third quarter of $0.5 million pretax was $0.2 million pretax lower than the amount a year ago. Catastrophe activity in the third quarter of 2017 totaled $8.6 million pretax compared to $8.4 million pretax in the prior year period. Losses related to Hurricane Harvey were $5.0 million pretax and losses related to Hurricane Irma were $2.5 million pretax. The remainder, $1.2 million pretax, of catastrophe losses related to four additional events.

On an underlying basis, the third quarter 2017 auto combined ratio* of 103.4% improved 4.9 points and the property combined ratio of 79.9% improved 7.8 points as compared to the prior year period. These improvements were driven by both lower loss ratios and improved expense ratios. The underlying auto loss ratio of 74.5% improved 3.2 points compared to the prior year period as a result of an increase in earned premium due to rate actions combined with continued stabilization in auto loss trends. The underlying property loss ratio of 46.3% improved 6.6 points compared to the prior year period primarily as a result of lower non-catastrophe weather-related losses in the current quarter.

Total Property and& Casualty written premiums* of $177.2 million increased 4.4% compared to the prior year period. The growth was driven primarilysegment partially offset by rate actions which resulted in an increasefavorable benefits experience in the average premium per policy for both autoSupplemental & Group Benefits segment and property. Policy retention continues to be strong with autolower net investment losses.
Horace Mann Educators Corporation43First Quarter 2023 Form 10-Q



Consolidated Results of Operations
($ in millions)Three Months Ended
March 31,
2023-2022
20232022% Change
Net premiums and contract charges earned$255.9 $255.8 — %
Net investment income100.4 97.9 2.6 %
Net investment losses(3.9)(15.5)N.M.
Other income1.5 8.5 -82.4 %
Total revenues353.9 346.7 2.1 %
Benefits, claims and settlement expenses183.2 175.2 4.6 %
Interest credited48.7 39.7 22.7 %
Operating expenses79.8 76.7 4.0 %
DAC amortization expense23.7 22.0 7.7 %
Intangible asset amortization expense3.7 4.2 -11.9 %
Interest expense6.7 3.9 71.8 %
Total benefits, losses and expenses345.8 321.7 7.5 %
Income before income taxes8.1 25.0 -67.6 %
Income tax expense1.5 4.7 -68.1 %
Net income$6.6 $20.3 -67.5 %

Net Premiums and property policy retention rates of 83.0% and 87.6%, respectively.

Contract Charges Earned
For the three month periodmonths ended September 30, 2017, RetirementMarch 31, 2023, net income of $13.6 million decreased $2.1 million or 13.4% compared to the prior year period which is primarily due to a $3.4 million pretax decrease in net interest margin and a $1.0 million pretax increase in operating expenses offset by a $1.1 million pretax increase in contract charges.

For the three month period ended September 30, 2017, Life net income of $4.8 million increased $0.2 million compared to the prior year period primarily due to lower operating expenses. Life insurance premiums and contract deposits* of $26.4 million decreased 2.9% comparedcharges earned were comparable to the prior year period.



For the nine month period ended September 30, 2017, the Company's net income of $44.1 million decreased $19.8 million compared to a year ago reflecting a record level of catastrophe losses, as well as elevated non-catastrophe weather-related losses that occurred in the first half of the year.

For the nine month period ended September 30, 2017, Property and Casualty net income decreased to $2.2 million compared to net income of $16.0 million in the prior year period as a result of elevated catastrophe losses and non-catastrophe weather-related losses that occurred in the first half of the year. The Property and Casualty combined ratio of 106.5% increased 4.1 points compared to a year ago. Pretax catastrophe losses were $9.8 million higher than the prior year period; favorable prior years' reserve development was $2.2 million pretax less than the prior year period.

On an underlying basis, the nine month 2017 auto loss ratio of 77.0% increased 0.5 points compared to the prior year period. For property, the underlying nine month loss ratio of 49.7% increased 6.1 points compared to the prior year period and was largely related to the impact of higher non-catastrophe weather-related losses that occurred in the first half of the year. The expense ratio for Property and Casualty of 26.7% was slightly below the prior year period.

Total Property and Casualty written premiums of $498.0 million increased 4.6% compared to the prior year period. The growth was driven primarily by rate actions which resulted in an increase in the average premium per policy for both auto and property.

For the nine month period ended September 30, 2017, Retirement net income of $36.9 million decreased $2.4 million compared to the prior year period which is primarily due to a $6.8 million pretax increase in operating expenses including costs related to the Company's continued infrastructure and strategic investments, offset by a $2.2 million pretax increase in contract charges earned and a $0.9 million pretax increase in net interest margin. The nine month 2017 annualized net interest spread on fixed annuity assets was 188 basis points, a decrease of 7 basis points compared to a year ago. Total Retirement annuity assets under management of $6.6 billion increased 4.9% compared to a year ago, and total cash value persistency remained strong at 89.7% for variable annuities and 92.6% for fixed annuities. Annuity deposits* of $348.9 million decreased 11.0% compared to the prior year period. The decline in annuity deposits was related to lower sales of single premium annuity products in the current year.

For the nine month period ended September 30, 2017, Life net income of $14.3 million increased $1.2 million compared to the prior year period. Life insurance premiums and contract deposits increased 1.8%, to $79.8 million compared to the prior year period. Life persistency of 95.3% was comparable to 12 months earlier.

The Company’s book value per share was $34.20 at September 30, 2017, an increase of 6.4% compared to December 31, 2016 and a decrease of 4.8% compared to a year ago.

Critical Accounting Policies
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company's management 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 the Company's consolidated assets, liabilities, shareholders' equity, net income and cash flows. Certain accounting estimates are particularly sensitive because of their significance to the Company's 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.
Management has discussed with the Audit Committee the quality, not just the acceptability, of the Company's accounting principles as applied in its financial reporting. The discussions generally included such matters as the consistency of the Company's accounting policies and their application, and the clarity and completeness of the Company's consolidated financial statements, which include related disclosures. For the Company, areas most subject to significant management judgments include: fair value measurements, other-than-temporary impairment of


investments, goodwill, deferred policy acquisition costs for investment contracts and life insurance products with account values, liabilities for property and casualty claims and claim expenses, liabilities for future policy benefits, deferred taxes and valuation of assets and liabilities related to the defined benefit pension plan.
Compared to December 31, 2016, at September 30, 2017, there were no material changes to accounting policies for areas most subject to significant management judgments identified above. In addition to disclosures in “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, discussion of accounting policies, including certain sensitivity information, was presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Critical Accounting Policies” in that Form 10-K.

Results of Operations
Insurance Premiums and Contract Charges
($ in millions) Three Months Ended September 30, 
Change From
Prior Year
 Nine Months Ended September 30, Change From
Prior Year
  2017 2016 Percent Amount 2017 2016 Percent Amount
Insurance premiums written and contract deposits
(includes annuity and life contract deposits)
                
Property and Casualty $177.2
 $169.8
 4.4 % $7.4
 $498.0
 $476.3
 4.6 % $21.7
Retirement (annuity) 114.8
 154.6
 -25.7 % (39.8) 348.9
 391.9
 -11.0 % (43.0)
Life 26.4
 27.2
 -2.9 % (0.8) 79.8
 78.4
 1.8 % 1.4
Total $318.4
 $351.6
 -9.4 % $(33.2) $926.7
 $946.6
 (2.1)% $(19.9)
                 
Insurance premiums and contract charges earned
(excludes annuity and life contract deposits)
                
Property and Casualty $163.2
 $155.7
 4.8 % $7.5
 $482.0
 $461.5
 4.4 % $20.5
Retirement (annuity) 7.5
 6.4
 17.2 % 1.1
 20.8
 18.6
 11.8 % 2.2
Life 28.3
 29.0
 -2.4 % (0.7) 87.6
 84.8
 3.3 % 2.8
Total $199.0
 $191.1
 4.1 % $7.9
 $590.4
 $564.9
 4.5 % $25.5
Number of Policies and Contracts in Force
(actual counts)
  September 30, 2017 December 31, 2016 September 30, 2016
Property and Casualty      
Automobile 482,035 484,915 486,229
Property 217,377 220,137 221,094
Total 699,412 705,052 707,323
Retirement 221,309 219,105 215,445
Life 196,978 197,937 197,792
Net Investment Income
For the three month periodmonths ended September 30, 2017, the Company’s premiums written and contract deposits of $318.4March 31, 2023, total net investment income increased $2.5 million, decreased $33.2 million, or 9.4%, primarily as a result of a decline in annuity deposits due to lower sales of single premium annuity products. The Company’s premiums and contract charges earned increased $7.9 million, or 4.1%, compared to the prior year period, primarily due to increases in average premium per policy for both homeowners and automobile.

Total Property and Casualty premiums written increased 4.6%, or $21.7 million, in the first nine months of 2017, compared to the prior year period, primarily due to increases in average written premium per policy for both homeowners and automobile. For 2017, the Company’s full year rate plan anticipates low-double digit average rate increases for automobile and mid-single digit average rate increases for homeowners (including states with no rate actions for both automobile and homeowners); average approved rate changes during the first nine months of 2017 were 8.7% for automobile and 4.3% for homeowners.


Basedhigher returns on policies in force, the current year automobile 12 month retention rate for new and renewal policies was 83.0% compared to 83.5% at September 30, 2016, with the decrease due to recent rate and underwriting actions. The current year homeowner 12 month retention rate for new and renewal policies was 87.6% at September 30, 2017 compared to 87.8% at September 30, 2016 with the decrease due to recent rate and underwriting actions.

Automobile premiums written increased 5.9%, or $18.8 million, compared to the first nine months of 2016. In the first nine months of 2017, the average written premium per policy and average earned premium per policy increased approximately 6.3% and 5.5%, respectively, compared to the prior year period. The number of educator policies represented approximately 85% of the automobile policies in force at September 30, 2017, December 31, 2016 and September 30, 2016.
Homeowners premiums written increased 1.7%, or $2.7 million, compared to the first nine months of 2016. While the number of homeowners policies in force has declined, the average written premium per policy and average earned premium per policy increased approximately 2.0% and 3.2%, respectively, in the first nine months of 2017 compared to the prior year period. The number of educator policies represented approximately 82% of the homeowners policies in force at September 30, 2017, December 31, 2016 and September 30, 2016. The number of educator policies and total policies has been, and may continue to be, impacted by the Company’s risk mitigation programs, including actions in catastrophe-prone coastal areas, involving policies of both educators and non-educators.
The Company continues to evaluate and implement actions to further mitigate its risk exposure in hurricane-prone areas, as well as other areas of the country. Such actions could include, but are not limited to, non-renewal of homeowners policies, restricted agent geographic placement, limitations on agent new business sales, further tightening of underwriting standards and increased utilization of third-party vendor products.
For the nine month period ended September 30, 2017, total annuity deposits received by Retirement decreased 11.0%, or $43.0 million, compared to the prior year period. For the first nine months of 2017, the decrease reflected a 1.1% increase in recurring deposit receipts and a 18.8% decrease in single premium and rollover deposit receipts.
For the nine month period ended September 30, 2017, new deposits to fixed accounts of $221.2 million decreased 19.4%, or $53.1 million, and new deposits to variable accounts of $127.7 million increased 8.6%, or $10.1 million, compared to the prior year period.
Total annuity accumulated value on deposit of $6.6 billion at September 30, 2017 increased 4.9% compared to a year earlier, reflecting the increase from new deposits received, market appreciation as well as favorable retention. Accumulated value retention for the variable annuity option was 89.7% and 94.6% for the 12 month periods ended September 30, 2017 and 2016, respectively; fixed annuity retention was 92.6% and 94.6% for the respective periods. The accumulated value retention for both variable and fixed annuities was impacted by the transfer of the Company's 401(k) assets to a third-party provider that occurred during the first half of 2017.
Variable annuity accumulated balances of $2.1 billion at September 30, 2017 increased 9.5% compared to September 30, 2016, as positive impacts of deposits and favorable financial market performance offset withdrawals and net transfers to the guaranteed interestfloating rate fixed account option. Compared tomaturity securities including commercial mortgage loan funds partially offset by negative returns on limited partnership interests in private equity funds. The annualized investment yield on the nine month period ended September 30, 2016, Retirement contract charges earned increased 11.8%, or $2.2 million.portfolio excluding limited partnership interests* was as follows:
Three Months Ended
March 31,
20232022
Investment yield, excluding limited partnership interests,
pretax - annualized*
4.7%4.3%
Investment yield, excluding limited partnership interests,
after tax - annualized*
3.7%3.4%
Life premiums and contract deposits for the nine month period ended September 30, 2017 increased 1.8%, or $1.4 million, compared to the prior year period. The ordinary life insurance in force lapse ratio was 4.7% for the 12 months ended September 30, 2017 compared to 4.1% for the 12 month period ended September 30, 2016.


Sales*

For the first nine months of 2017, Property and Casualty new annualized sales premiums increased 6.6% compared to the first nine months of 2016, as 6.9%, or $4.6 million, growth in new automobile sales was accompanied by growth in homeowners sales of 5.2%, or $0.7 million, compared to the prior year period.
During the second quarter of 2017, the Company introduced Department of Labor compliant annuity products featuring a level commissions structure and flexibility to move between products without surrender charges. The Company continues to focus on agent training and marketing programs which emphasize retirement planning. Annuity sales by Horace Mann’s Exclusive Distributors decreased 9.2% compared to the first nine months of 2016. Sales from the Independent Agent distribution channel, which represent approximately 7.3% of total annuity sales in the first nine months of 2017, which are largely single premium and rollover annuity deposits, decreased approximately 29.0% compared to a year earlier. As a result, total Horace Mann annuity sales from the combined distribution channels decreased 11.0%, or $43.0 million, compared to the first nine months of 2016. It should be noted that historically, reported annuity sales for HM products were determined based on annualized new recurring deposits as well as single deposits/rollovers. Effective January 1, 2017, reported annuity sales are now determined based on total recurring deposits as well as single deposits/rollovers. All historical annuity sales information presented has been revised to conform to the new reporting methodology.
The Company’s introduction of new educator-focused portfolios of term and whole life products in recent years, including a single premium whole life product, as well as the Company’s Indexed Universal Life (“IUL”) product, have contributed to an increase in sales of proprietary life products. For the first nine months of 2017, sales of Horace Mann’s proprietary life insurance products totaled $11.6 million, representing an increase of 8.4%, or $0.9 million, compared to the prior year period, including an increase of $1.4 million for single premium sales.
Distribution
At September 30, 2017, there was a combined total of 694 Exclusive Distributors, compared to 683 at December 31, 2016 and 681 at September 30, 2016. The Company continues to expect higher quality standards for Exclusive Distributors to focus on improving both customer experience and agent productivity in their respective territories. The dedicated sales force is supported by the Company’s customer contact center which provides a means for educators to begin their experience directly with the Company, if that is their preference. The customer contact center is also able to assist educators in territories which are not currently served by Exclusive Distributors.
As mentioned above, the Company also utilizes a nationwide network of Independent Agents who comprise an additional distribution channel for the Company’s 403(b) tax-qualified annuity products. The Independent Agent distribution channel included 274 authorized agents at September 30, 2017. During the nine month period ended September 30, 2017, this channel generated $25.5 million in annuity sales for the Company compared to $35.9 million for the prior year period, with the new business primarily comprised of single and rollover deposit business in both periods.
Net Investment Income
For the three and nine month periods ended September 30, 2017, net investment income of $92.3 million and $275.0 million decreased 2.7% and increased 1.6% respectively, compared to the prior year periods, reflecting higher asset balances in the Retirement segment offset by the impact of the current low interest rate environment. Average invested assets increased 4.8% over the 12 months ended September 30, 2017. The average pretax yield on the total investment portfolio for the nine month period ended September 30, 2017 of 5.1% (3.4% after tax) was comparable to the prior year period. During the nine month period ended September 30, 2017, managementMarch 31, 2023, we continued to identify and purchase investments including a modest level of alternative 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 Company’s overall conservative investment guidelines.


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 while maintaining balance to principal protection and risk.
Net Realized Investment Gains and Losses (Pretax)
For the three month periodmonths ended September 30, 2017,March 31, 2023, net realized investment losses were $3.5decreased $11.6 million, primarily due to a reduction in losses from changes in fair values of equity securities and impairments compared to net realized investment gains of $4.0 million in the prior year period. The net realized investment losses for the three month period ended September 30, 2017 included $5.7 millionbreakdown of gross realized gains on disposal of securities offset by $3.1 million of gross realized losses primarily on disposal of securities and expiration of call options during the period and $6.1 million of charges for other-than-temporary impairment (“OTTI”) recorded primarily on fixed maturity securities in the construction sector.
For the nine month period ended September 30, 2017, net realized investment losses of $1.7 million included $18.6 million of gross realized gains on disposal of securities offset by $7.8 million of gross losses realized primarily on disposal of securities and expiration of call options during the period and $12.5 million of OTTI charges recorded on certain equity and fixed maturity securities.
For the nine month period ended September 30, 2016, net realized investment gains of $6.9 million included $19.2 million of gross realized gains on disposal of securities partially offset(losses) by $4.9 million of gross losses realized primarily on disposal of securities during the period and $7.4 million of OTTI charges recorded largely on Puerto Rico and energy sector fixed maturity securities,transaction type were as well as some equity securities.follows:
Horace Mann Educators Corporation44First Quarter 2023 Form 10-Q
The Company, from


($ in millions)Three Months Ended
March 31,
20232022
Credit loss and intent-to-sell impairments$— $(1.8)
Sales and other, net(2.4)1.1 
Change in fair value - equity securities(1.0)(17.1)
Change in fair value and losses realized on settlements - derivatives(0.5)2.3 
Net investment losses$(3.9)$(15.5)

From time to time, sellswe may sell fixed maturity securities subsequent to the balance sheetreporting date that were considered temporarily impaired at the balance sheetsuch reporting date. Such sales are due to issuer specificissuer-specific events occurring subsequent to the balance sheetreporting date that result in a change in the Company’sour intent to sell an invested asset.


Fixed Maturity and Equity Securities Portfolios
The table below presents the Company’sa fixed maturity and equity securities portfolios by major asset class, includingsecurity.
Other Income
For the ten largest sectors of the Company’s corporate bond holdings (based on fair value). Compared to Decemberthree months ended March 31, 2016, credit spreads were tighter across most asset classes and U.S. Treasury rates declined, which resulted in higher net unrealized investment gains2023, other income decreased $7.0 million in the fixed maturity securities portfolio at September 30, 2017.

($ in millions) September 30, 2017
  
Number of
Issuers
 
Fair
Value
 
Amortized
Cost or
Cost
 
Pretax Net
Unrealized
Investment
Gain (Loss)
Fixed maturity securities  
  
  
  
Corporate bonds  
  
  
  
Banking & Finance 119
 $704.4
 $661.9
 $42.5
Insurance 56
 284.5
 255.4
 29.1
Energy (1) 58
 232.7
 217.8
 14.9
Real Estate 42
 184.6
 175.8
 8.8
Technology 34
 180.6
 172.0
 8.6
HealthCare, Pharmacy 51
 163.1
 152.3
 10.8
Utilities 42
 153.8
 134.5
 19.3
Transportation 37
 150.2
 142.8
 7.4
Telecommunications 26
 110.9
 102.6
 8.3
Food and Beverage 23
 91.1
 87.2
 3.9
All other corporates (2) 215
 565.8
 533.0
 32.8
Total corporate bonds 703
 2,821.7
 2,635.3
 186.4
Mortgage-backed securities  
  
  
  
U.S. Government and federally sponsored agencies 229
 420.4
 391.4
 29.0
Commercial (3) 125
 535.1
 531.4
 3.7
Other 28
 70.1
 69.0
 1.1
Municipal bonds (4) 378
 1,842.2
 1,669.3
 172.9
Government bonds        
U.S. 38
 671.0
 653.2
 17.8
Foreign 15
 100.2
 93.8
 6.4
Collateralized debt obligations (5) 87
 522.4
 517.4
 5.0
Asset-backed securities 101
 647.5
 633.6
 13.9
Total fixed maturity securities 1,704
 $7,630.6
 $7,194.4
 $436.2
         
Equity securities  
  
  
  
Non-redeemable preferred stocks 14
 $64.0
 $61.5
 $2.5
Common stocks 198
 74.7
 58.7
 16.0
Closed-end fund 1
 20.6
 20.0
 0.6
Total equity securities 213
 $159.3
 $140.2
 $19.1
         
Total 1,917
 $7,789.9
 $7,334.6
 $455.3
(1)At September 30, 2017, the fair value amount included $14.0 million of securities which were non-investment grade.
(2)The All other corporates category contains 18 additional industry sectors. Natural gas, broadcasting and media, consumer products, gaming, lodging and dining, retail and metal and mining represented $408.7 million of fair value at September 30, 2017, with the remaining 12 sectors each representing less than $32.7 million.
(3)At September 30, 2017, 100% were investment grade, with an overall credit rating of AA, and the positions were well diversified by property type, geography and sponsor.
(4)Holdings are geographically diversified, approximately 39% are tax-exempt and 78% 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, 2017.
(5)Based on fair value, 96% of the collateralized debt obligation securities were rated investment grade by Standard and Poor’s Corporation (“S&P”) and/or Moody’s Investors Service, Inc. (“Moody’s”) at September 30, 2017.



At September 30, 2017, the Company’s diversified fixed maturity securities portfolio consisted of 2,627 investment positions, issued by 1,704 entities, and totaled approximately $7.6 billion in fair value. This portfolio was 96.0% investment grade, based on fair value, with an average quality rating of A+. The Company’s investment guidelines target single corporate issuer concentrations to 0.5% of invested assets for “AA” or “AAA” rated securities, 0.35% of invested assets for “A” or “BBB” rated securities, and 0.2% of invested assets for non-investment grade securities.
The following table presents the composition and fair value of the Company’s fixed maturity and equity securities portfolios by rating category. At September 30, 2017, 95.0% of these combined portfolios were investment grade, based on fair value, with an overall average quality rating of A+. The Company has classified the entire fixed maturity and equity securities portfolios as available for sale, which are carried at fair value.
Rating of Fixed Maturity and Equity Securities (1)

($ in millions) Percent of Portfolio    
  Fair Value September 30, 2017
  December 31, 2016 September 30, 2017 
Fair
Value
 
Amortized
Cost or Cost
Fixed maturity securities  
  
  
  
AAA 8.3% 7.4% $563.1
 $544.6
AA (2) 35.5
 37.3
 2,843.3
 2,690.2
A 23.6
 24.2
 1,845.0
 1,714.8
BBB 28.4
 27.1
 2,071.9
 1,951.0
BB 2.4
 2.4
 187.0
 181.5
B 1.0
 0.8
 64.3
 63.1
CCC or lower 0.2
 0.1
 4.9
 4.9
Not rated (3) 0.6
 0.7
 51.1
 44.3
Total fixed maturity securities 100.0% 100.0% $7,630.6
 $7,194.4
Equity securities  
  
  
  
AAA 
 
 
 
AA 
 
 
 
A 
 
 
 
BBB 35.3% 40.2% $64.0
 $61.5
BB 
 
 
 
B 
 
 
 
CCC or lower 
 
 
 
Not rated 64.7
 59.8
 95.3
 78.7
Total equity securities 100.0% 100.0% $159.3
 $140.2
         
Total  
  
 $7,789.9
 $7,334.6

(1)Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody’s. 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, 2017, the AA rated fair value amount included $671.0 million of U.S. Government and federally sponsored agency securities and $551.4 million of mortgage- and 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 either S&P or Moody’s.

At September 30, 2017, the fixed maturity and equity securities portfolios had a combined $25.8 million pretax of gross unrealized investment losses on $1,245.0 million of fair value related to 470 positions. Of the investment positions (fixed maturity and equity securities) with gross unrealized investment losses, 3 were trading below 80% of the carrying value at September 30, 2017 and were not considered other-than-temporarily impaired. These positions had fair value of $1.5 million, representing less than 0.1% of the Company’s total investment portfolio at fair value, and had a gross unrealized investment loss of $0.7 million.
The Company views the gross unrealized investment losses of all of the securities at September 30, 2017 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of OTTI.



employer-sponsored business.
Benefits, Claims and Settlement Expenses
($ in millions) Three Months Ended September 30, 
Change From
Prior Year
 Nine Months Ended September 30, 
Change From
Prior Year
  2017 2016 Percent Amount 2017 2016 Percent Amount
Property and Casualty $114.9
 $116.0
 -0.9 % $(1.1) $384.9
 $347.0
 10.9% $37.9
Retirement 1.6
 1.4
 14.3 % 0.2
 4.0
 3.1
 29.0% 0.9
Life 18.4
 18.3
 0.5 % 0.1
 56.0
 53.5
 4.7% 2.5
Total $134.9
 $135.7
 -0.6 % $(0.8) $444.9
 $403.6
 10.2% $41.3
                 
Property and Casualty catastrophe losses,
included above
 $8.6
 $8.4
 2.4 % $0.2
 $58.2
 $48.4
 20.2% $9.8

Property and Casualty Claims and Claim Expenses (“losses”)

($ in millions) Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Incurred claims and claim expenses:  
  
    
Claims occurring in the current year $115.4
 $116.7
 $387.0
 $351.3
Decrease in estimated reserves for claims
occurring in prior years (2)
 (0.5) (0.7) (2.1) (4.3)
Total claims and claim expenses incurred $114.9
 $116.0
 $384.9
 $347.0
         
Property and Casualty loss ratio:  
  
    
Total 70.4 % 74.5 % 79.8 % 75.2 %
Effect of catastrophe costs, included above (1) 5.3 % 5.3 % 12.0 % 10.5 %
Effect of prior years’ reserve development, included above (2) -0.3 % -0.4 % -0.4 % -0.9 %

(1)    Property and Casualty catastrophe losses were incurred as follows:

  2017 2016
Three months ended    
March 31 $17.2
 $12.7
June 30 32.4
 27.3
September 30 8.6
 8.4
Total year-to-date $58.2
 $48.4
(2)    Shows the amounts by which the Company decreased its reserves in each of the periods indicated for claims occurring in previous years to reflect subsequent information on such claims and changes in their projected final settlement costs.
  2017 2016
Three months ended    
March 31 $(1.0) $(2.0)
June 30 (0.6) (1.6)
September 30 (0.5) (0.7)
Total year-to-date $(2.1) $(4.3)

For the three month periodmonths ended September 30, 2017, the Company's benefits, claims and settlement expenses decreased $0.8 million, or 0.6%, compared to the prior year period.

For the nine month period ended September 30, 2017, the Company'sMarch 31, 2023, benefits, claims and settlement expenses increased $41.3$8.0 million, or 10.2%, comparedprimarily due to the prior year period primarily reflecting elevatedhigher catastrophe losses and non-catastrophe weather-relatedelevated underlying auto losses in the Property and& Casualty that occurredsegment partially offset by favorable benefits experience in the first half of the year.
For the nine month period ended September 30, 2017, the favorable development of prior years’ Property and Casualty reserves of $2.1 million was the result of actual and remaining projected losses for prior years being below the level anticipated in the immediately preceding December 31 loss reserve estimate. At September 30, 2017,


the favorable development was predominantly the result of favorable severity trends in the homeowners loss emergence for accident years 2015 and prior.

For the nine month period ended September 30, 2016, the favorable development of prior years’ Property and Casualty reserves of $4.3 million was the result of actual and remaining projected losses for prior years being below the level anticipated in the immediately preceding December 31 loss reserve estimate. At September 30, 2016, the favorable development was predominantly the result of favorable severity trends in the homeowners loss emergence for accident years 2014 and prior.
For the nine month period ended September 30, 2017, the automobile loss ratio of 80.1% increased by 0.8 points compared to the prior year period, including (1) the impact of catastrophe costs that resulted in a 0.3 point increase and (2) the impacts of higher current accident year non-catastrophe weather-related losses. The homeowners loss ratio of 79.2% for the nine month period ended September 30, 2017, increased 12.5 points compared to the prior year period, including current accident year catastrophe and non-catastrophe weather-related loss experience as well as development of prior years’ reserves that had 1.4 points less favorable impact in the current year. Catastrophe costs represented 30.9 points of the homeowners loss ratio for the current period compared to 25.9 points for the prior year period.

Supplemental & Group Benefits segment.
Interest Credited to Policyholders
($ in millions) Three Months Ended September 30, 
Change From
Prior Year
 Nine Months Ended September 30, Change From
Prior Year
  2017 2016 Percent Amount 2017 2016 Percent Amount
Retirement (annuity) $38.8
 $37.4
 3.7% $1.4
 $114.4
 $109.4
 4.6% $5.0
Life 11.3
 11.2
 0.9% 0.1
 33.8
 33.5
 0.9% 0.3
Total $50.1
 $48.6
 3.1% $1.5
 $148.2
 $142.9
 3.7% $5.3
For the nine month periodthree months ended September 30, 2017,March 31, 2023, interest credited inincreased $9.0 million, driven primarily by higher interest rates on advances received from the Retirement segment increased 4.6% compared toFederal Home Loan Bank of Chicago (FHLB). Under the prior year period reflecting a 5.1% increase in average accumulated fixed deposits, at an average crediting ratedeposit method of 3.5%.
The netaccounting, the interest spread on fixed annuity assets under management measures the difference between the rate of income earnedcredited on the underlying invested assets and the rate of interest which policyholders are credited on their account values.reinsured annuity block continues to be reported. The nine month 2017 annualized net interest spread on fixed annuity assets was 188 basis points, a decrease of 7 basis points compared to the prior year period.
As of September 30, 2017, fixed annuity account values totaled $4.6 billion, including $4.3 billion of deferred annuities. As shown in the table below, for approximately 86.7%, or $3.8 billion of theaverage deferred annuity account values,credited rate, excluding the credited interest ratereinsured annuity block, was equal to the minimum guaranteed rate. Due to limitations on the Company’s ability to further lower interest crediting rates, coupled with the expectation for continued low reinvestment interest rates, management anticipates fixed annuity spread compression in future periods. The majority of assets backing the net interest spread on fixed annuity business is invested in fixed maturity securities.
The Company actively manages its interest rate risk exposure, considering a variety of factors, including earned interest rates, credited interest rates 2.6% and the relationship between the expected durations of assets and liabilities. Management estimates that over the next 12 months approximately $467 million of the Retirement and Life combined investment portfolio and related investable cash flows will be reinvested at current market rates. As interest rates remain at low levels, borrowers may prepay or redeem the securities with greater frequency in order to borrow at lower market rates, which could increase investable cash flows and exacerbate the reinvestment risk.
As a general guideline, for a 100 basis point decline in the average reinvestment rate and based on the Company’s existing policies and investment portfolio, the impact from investing in that lower interest rate environment could further reduce Retirement segment net investment income by approximately $1.8 million in year one and $5.4 million in year two, further reducing the net interest spread by approximately 4 basis points and 11


basis points in the respective periods, compared to the current period annualized net interest spread. The Company could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to minimum guaranteed crediting rates.
The expectation for future net interest spreads is also an important component in the amortization of deferred policy acquisition costs. In terms of the sensitivity of this amortization to the net interest spread, based on deferred policy acquisition costs2.4% as of September 30, 2017March 31, 2023 and assuming all other assumptions are met, a 10 basis point deviation in the current year targeted interest rate spread assumption would impact amortization between $0.30 million and $0.40 million. This result may change depending on the magnitude and direction of any actual deviations but represents a range of reasonably likely experience for the noted assumption.
Additional information regarding the interest crediting rates and balances equal to the minimum guaranteed rate for deferred annuity account values is shown below.
($ in millions) September 30, 2017
      Deferred Annuities at
  Total Deferred Annuities Minimum Guaranteed Rate
  
Percent
of Total
 
Accumulated
Value (“AV”)
 
Percent of
Total Deferred
Annuities AV
 
Percent
of Total
 
Accumulated
Value
Minimum guaranteed interest rates:  
  
  
  
  
Less than 2% 24.9% $1,083.8
 51.3% 14.7% $556.5
Equal to 2% but less than 3% 7.1
 307.4
 83.0% 6.8
 255.1
Equal to 3% but less than 4% 14.1
 614.0
 99.9% 16.3
 613.4
Equal to 4% but less than 5% 52.6
 2,288.7
 100.0% 60.7
 2,288.7
5% or higher 1.3
 55.4
 100.0% 1.5
 55.4
Total 100.0% $4,349.3
 86.7% 100.0% $3,769.1

The Company 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 “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended DecemberMarch 31, 2016, and other factors discussed herein.
Policy Acquisition Expenses Amortized
Amortized policy acquisition expenses were $24.2 million for the three month period ended September 30, 2017, comparable to the $24.5 million for the prior year period. For Retirement, the unlocking of deferred policy acquisition costs (“unlocking”) resulted in a $0.7 million decrease in amortization for the three month period ended September 30, 2017 as compared to a $0.1 million decrease in amortization in the prior year period.

Amortized policy acquisition expenses were $73.9 million for the nine month period ended September 30, 2017 compared to $73.1 million for the prior year period. The increase was largely attributable to increased written premium in Property and Casualty. For Retirement, unlocking resulted in a $0.7 million favorable change in amortization for the nine month period ended September 30, 2017 as compared to the prior year period.


2022, respectively.
Operating Expenses
For the three month periodmonths ended September 30, 2017,March 31, 2023, operating expenses of $44.2increased $3.1 million, were comparableprimarily due to the prior year period as the current period benefitted from decreases in incentive compensation accruals as well as lower employee medical costs.inflation.

Deferred Policy Acquisition Costs (DAC) Amortization Expense
For the nine month periodthree months ended September 30, 2017, operating expensesMarch 31, 2023, DAC amortization expense increased $1.7 million, due to a write-off of $139.1DAC in the Life & Retirement segment related to a decrease in annuity premium persistency.
Intangible Asset Amortization Expense
For the three months ended March 31, 2023, intangible asset amortization expense decreased $0.5 million.
Interest Expense
For the three months ended March 31, 2023, interest expense increased $2.8 million, increased $8.5 million, or 6.5%, compareddue to an increase in floating interest rates on the prior year period, consistent with management’s expectations as the Company makes expenditures supporting targeted strategies in product, distribution and infrastructure which are intended to enhance the overall customer experience, increase sales and support favorable policy retention and business cross-sale ratios.
The Property and Casualty expense ratio of 26.7% for the nine month period ended September 30, 2017 was slightly below the prior year period.

Revolving Credit Facility.
Income Tax Expense
The effective income tax rate on the Company’sour pretax income, including net realized investment gains and losses, was 17.6%18.5% and 26.6%17.5% for the nine month periodsthree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 12.5%5.3 and 7.4%6.3 percentage points for the nine month periodsthree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. Further,
In August 2022, the adoptionInflation 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 accounting standardFederal 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 employee share-based payments on January 1, 2017 reduced the effective income tax rate by 5.3% for the nine month period ended September 30, 2017. The new accounting standard requires that the entire excess tax benefit/deficiency from employee share-based payments be recognizedall
Horace Mann Educators Corporation45First Quarter 2023 Form 10-Q



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 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 statement rather than allocatingtax. However, any AMT paid would be indefinitely available as a credit carryover that could reduce future regular tax in excess of AMT.
HMEC and its controlled group of corporations have determined that it likely will not be an applicable corporation in 2023. In making such determination, the excess tax benefit/deficiency betweengroup has made certain interpretations of, and assumptions regarding, the equity sectionAMT provisions of the balance sheetIRA. The U.S. Treasury Department is expected to issue guidance throughout 2023 that may differ from the group's interpretations and assumptions and that could alter the income statement.group's determination.
The Company recordsWe 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. The Company hasWe have no unrecorded liabilities from uncertain tax filing positions.
At September 30, 2017, the Company’sAs of March 31, 2023, our federal income tax returns for years prior to 20142019 are no longer subject to examination by the IRS. Management doesInternal Revenue Service. We do not anticipate any assessments for tax years that remain subject to examination to have a material effect on the Company’sour financial position or results of operations.


Net Income
For the three month period ended September 30, 2017, the Company’s net income of $26.5 million decreased $0.4 million compared to the prior year period. For the nine month period ended September 30, 2017, the Company's net income of $44.1 million decreased $19.8 million reflecting a record level of catastrophe losses as well as elevated non-catastrophe weather-related losses that occurred in the first half of the year. Additional detail is included in the “Executive Summary” at the beginning of this MD&A.
Net income (loss) by segment and net income per share were as follows:
($ in millions) Three Months Ended September 30, 
Change From
Prior Year
 Nine Months Ended September 30, Change From
Prior Year
  2017 2016 Percent Amount 2017 2016 Percent Amount
Analysis of net income (loss) by segment:  
  
  
  
        
Property and Casualty $13.4
 $6.7
 100.0 % $6.7
 $2.2
 $16.0
 -86.3 % $(13.8)
Retirement 13.6
 15.7
 -13.4 % (2.1) 36.9
 39.3
 -6.1 % (2.4)
Life 4.8
 4.6
 4.3 % 0.2
 14.3
 13.1
 9.2 % 1.2
Corporate and Other (1) (5.3) (0.1) N.M.
 (5.2) (9.3) (4.5) 106.7 % (4.8)
Net income $26.5
 $26.9
 -1.5 % $(0.4) $44.1
 $63.9
 -31.0 % $(19.8)
                 
Effect of catastrophe costs, after tax,
included above
 $(5.6) $(5.5) 1.8 % $(0.1) $(37.8) $(31.5) 20.0 % $(6.3)
Effect of net realized investment gains
(losses), after tax, included above
 $(2.2) $2.7
 N.M.
 $(4.9) $(0.8) $3.8
 -121.1 % $(4.6)
                 
Diluted:  
  
  
  
        
Net income per share $0.64
 $0.65
 -1.5 % $(0.01) $1.06
 $1.55
 -31.6 % $(0.49)
Weighted average number of common and
common equivalent shares (in millions)
 41.6
 41.3
 0.7 % 0.3
 41.5
 41.4
 0.2 % 0.1
                 
Property and casualty combined ratio:  
  
  
  
        
Total 95.8 % 101.5 % -
 -5.7 pts
 106.5 % 102.4 % -
 4.1 pts
Effect of catastrophe costs, included above 5.3 % 5.3 % -
 0 pts
 12.0 % 10.5 % -
 1.5 pts
Effect of prior years’ reserve development,
included above
 -0.3 % -0.4 % -
 0.1 pts
 -0.4 % -0.9 % -
 0.5 pts
N.M. - Not meaningful.
(1)The Corporate and Other segment includes interest expense on debt, net realized investment gains and losses, corporate debt retirement costs (when applicable), certain public company expenses and other corporate-level items. The Company does not allocate the impact of corporate-level transactions to the operating segments, consistent with the basis for management’s evaluation of the results of those segments.

As described in footnote (1) to the table above, the Corporate and Other segment reflects corporate-level transactions. Of those transactions, net realized investment gains and losses may vary notably between reporting periods and are often the driver of fluctuations in the level of this segment’s net income or loss. For the nine month period ended September 30, 2017, net realized investment gains after tax were $0.8 million, compared to net realized investment gains after tax of $3.8 million for the prior year period.
Return on average shareholders’ equity based on net income was 4.7% and 6.3% for the trailing 12 month periods ended September 30, 2017 and 2016, respectively.








Outlook for 20172023
The following discussion provides outlook information for our results of operations and capital position.
At the time of issuance of this Quarterly Report on Form 10-Q, management estimateswe estimate that 20172023 full year net income before net realized investment gains and losses will be within a range of $1.45$2.00 to $1.65$2.30 per diluted share. Within 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 anticipated to be between breakeven and Casualty, this projection incorporates$5 million, reflecting the elevated catastrophe losses and non-catastrophe weather-related losses duringnegative limited partnership portfolio returns in the first halfquarter. The primary factors in our full-year outlook include:
Catastrophe loss assumption of 2017,approximately 10 points on the combined ratio, in line with estimatesthe 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 weather-related losses for the second half of the year returning to historic averages. The full year auto underlying combined ratioLife & Retirement is anticipated to be similarin the range of $67 million to 2016 and$70 million, consistent with prior guidance. This guidance includes the full year property combined ratio, including catastrophe losses, is anticipated to be slightly below 100%. Net income for Retirement will continue to be impacted byadoption of LDTI effective January 1, 2023. The spread on the prolonged low interest rate environment and the interest spread is anticipated to grade down to the low 180s. The Company expects to invest approximately $0.10 per diluted share in Retirement related to the Company's strategic initiatives in product, distribution and infrastructure. Life mortality experience was more favorable than anticipated for the first half of 2017, however, Life net income for the full yearfixed annuity business is expected to be comparablein the range of 220 to 2016,230 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 include:
Horace Mann Educators Corporation46First Quarter 2023 Form 10-Q



Claims utilization for 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 infrastructure for this business as well as a returnhigher allocation of corporate expenses to higher mortality levelsreflect the segment’s utilization of shared staff, distribution, and other resources.
Corporate & Other Segment
Corporate interest expense is expected to be in the range of $26 million to $27 million in 2023 due to rising interest rates.
Investments
For 2023, we now expect total net investment income pressure. Asto be in a resultrange 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 in a range of $325 million to $335 million reflects stronger returns from our commercial mortgage loan portfolio as well as the benefits of the continued lowrising interest rate environment management anticipates the Company’s overall portfolio yield to decline by approximately 10 basis points over the coursepast 12 months. Limited partnership returns are now estimated to be below their 10-year average of 2017, impacting each of8.5%, reflecting the three operating segments. In addition tofirst quarter lower-than-expected limited partnership portfolio returns in the segment-specific factors, the Company’s initiatives for customer service and infrastructure improvements, as well as enhanced programs and training for the Company’s agency force, all intended to enhance the overall customer experience and support further improvement in policy retention, sales and business cross-sell ratios, will continue and result in a moderate increase in expense levels compared to 2016.
Property & Casualty segment.
As described in “CriticalApplication of Critical Accounting Policies”,Estimates, certain of the Company’sour significant accounting measurements require the use of estimates and assumptions. As additional information becomes available, adjustments may be required. 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 management’s estimateour estimates above. Additionally, see “Forward-looking Information”forward-looking information in this Quarterly Report on Form 10-Q as well as Part I - Items 1 and “Item 1A. Risk Factors”1A in the Company’sour Annual Report on Form 10-K for the year ended December 31, 20162022 concerning other important factors that could impact actual results. Management believesWe believe that a projection of net income including net realized investment gains and losses is not appropriate on a forward-looking basis because it is not possible to provide a valid forecast of net realized investment gains and losses,(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, 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 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 Corporation47First Quarter 2023 Form 10-Q



Valuation of liabilities for property and casualty unpaid claims and claim expense reserves
Valuation of liabilities for group benefits unpaid claims and claim expense reserves
Valuation of certain investment 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 March 31, 2023, there were no material changes to accounting policies for areas most subject to significant management judgments identified above.
Effective 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 certain policy reserves (which is now referred to as the liability for future policy benefits or "LFPB"). DAC is now being amortized on a constant-level basis over the expected term of the related contracts. Cash flow assumptions used to measure LFPB must be reviewed at least annually, and if there is a change, must be updated and the discount rate assumption must be updated quarterly. The new accounting policies are described in more detail in Part I - Item 1, Note 1 of the Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Results of Operations by Segment
Consolidated financial results primarily reflect the results of the Property & Casualty, Life & Retirement, and Supplemental & Group Benefits reporting segments as noted in the Introduction and Outlook for 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 information is described in more detail in Part I - Item 1, Note 7 of the Consolidated Financial Statements in this 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
For the three months ended March 31, 2023, net loss reflected the following factors:
Higher catastrophe losses
Elevated underlying auto losses
Decrease in net investment income due to negative returns on limited partnership interests

691
Horace Mann Educators Corporation48First Quarter 2023 Form 10-Q



The following table provides certain financial information for Property & Casualty for the periods indicated.
($ in millions, unless otherwise indicated)Three Months Ended
March 31,
2023-2022
20232022% Change
Financial Data:
Net premiums written*:
Auto$101.2 $94.5 7.1 %
Property and other47.9 45.1 6.2 %
Total net premiums written149.1 139.6 6.8 %
Change in unearned net premiums3.3 10.6 -68.9 %
Total net premiums earned152.4 150.2 1.5 %
Incurred claims and claims expenses:
Claims occurring in the current year128.8 108.3 18.9 %
Prior years' reserve development(1)
— — — %
Total claims and claim expenses incurred128.8 108.3 18.9 %
Operating expenses, including DAC amortization42.9 39.4 8.9 %
Underwriting gain (loss)(19.3)2.5 N.M.
Net investment income4.0 7.2 -44.4 %
Income (loss) before income taxes(14.6)10.5 N.M
Net income (loss)(11.6)8.5 N.M
Core earnings (loss)*(11.6)8.5 N.M
Operating Statistics:
Auto
Loss and loss adjustment expense ratio82.5 %76.0 %6.5 pts
Expense ratio28.4 %25.8 %2.6 pts
Combined ratio:110.9 %101.8 %9.1 pts
Prior years' reserve development(1)
— %— %— pts
Catastrophe losses1.8 %0.5 %1.3 pts
Underlying combined ratio*109.1 %101.3 %7.8 pts
Property
Loss and loss adjustment expense ratio88.1 %65.0 %23.1 pts
Expense ratio27.7 %27.3 %0.4 pts
Combined ratio:115.8 %92.3 %23.5 pts
Prior years' reserve development(1)
— %— %— pts
Catastrophe losses37.9 %12.7 %25.2 pts
Underlying combined ratio*77.9 %79.6 %-1.7 pts
Risks in force (in thousands)
Auto(2)
365 372 -1.9 %
Property170 175 -2.9 %
Total535 547 -2.2 %
(1)    (Favorable) unfavorable.
(2)    Includes assumed risks in force of 4.

On a reported basis, the 9.1 point increase in the auto combined ratio for the three months ended March 31, 2023 was mainly attributable to a 5.2 point increase in the auto underlying loss ratio*. As expected, auto frequency outpaced levels experienced in the prior 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 Corporation49First Quarter 2023 Form 10-Q



more severe accidents; and increased usage and costs of medical services, also continue. We continue to implement rate and other underwriting changes that address these trends.
The reported property combined ratio increased 23.5 points for the three months ended 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 months ended March 31, 2023, total Property & Casualty net premiums written* increased $9.5 million 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 months ended March 31, 2023, auto net premiums written* increased $6.7 million, primarily due to rate actions that began in the second half of 2022. For the three months ended March 31, 2023, average net premium written and average net premium earned increased 8.1% and 4.4%, respectively. We anticipate auto rates to increase by 18% to 20% in 2023 supplemented by 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 months ended March 31, 2023, property and other net premiums written* increased $2.8 million due to increases in average net premium written and average net premium earned which increased 9.8% and 8.7% for the three months ended March 31, 2023, respectively, as inflation adjustments to coverage values continue to take effect. With inflationary pressure continuing, we anticipate property rates to increase by 12% to 15% in 2023. The number of educator risks has been near 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. Such actions could include, but are not limited to, non-renewal of property 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 Corporation50First Quarter 2023 Form 10-Q



Life & Retirement
For the three months ended March 31, 2023, net income reflected the following factors:
Higher net investment income primarily due to returns on floating rate fixed maturity securities including commercial mortgage loan funds
Higher interest credited reflecting interest rates on FHLB funding agreements rising more rapidly than net investment income due to timing of interest rate resets
Lower mortality costs in Life results 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

























614
616
Horace Mann Educators Corporation51First Quarter 2023 Form 10-Q



The following table provides certain information for Life & Retirement for the periods indicated.
($ in millions)Three Months Ended
March 31,
2023-2022
20232022% Change
Life & Retirement
Net premiums written and contract deposits*$136.1 $136.4 -0.2 %
Net premiums and contract charges earned37.7 35.8 5.3 %
Net investment income87.9 84.2 4.4 %
Other income3.9 4.9 -20.4 %
Life mortality costs19.5 21.4 -8.9 %
Interest credited47.9 39.6 21.0 %
Change in reserves13.8 13.0 6.2 %
Operating expenses24.2 25.7 -5.8 %
DAC amortization expense6.8 5.7 19.3 %
Intangible asset amortization expense0.1 0.3 -66.7 %
Income before income taxes17.2 19.2 -10.4 %
Income tax expense3.2 3.6 -11.1 %
Net income14.0 15.6 -10.3 %
Core earnings*14.0 15.6 -10.3 %
Life policies in force (in thousands)162 163 -0.6 %
Life insurance in force$20,155 $19,595 2.9 %
Life persistency - LTM95.9 %96.2 %-0.3 pts
Annuity contracts in force (in thousands)226 229 -1.3 %
Horace Mann Retirement Advantage® contracts in force (in thousands)
17 16 6.3 %
Cash value persistency - LTM93.1 %94.3 %-1.2 pts

For the three months ended March 31, 2023, life annualized sales* increased $0.4 million and life persistency remained strong at 95.9%.
For the three months ended March 31, 2023, net annuity contract deposits* for variable and fixed annuities decreased $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 declined slightly to 93.1%.
As of March 31, 2023, annuity assets under management were down $190.2 million, or 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 $628.9 million, or 7.0%, compared to a year ago largely due to the effect of equity market performance. The year-to-date annualized net interest spread on fixed annuities, excluding reinsurance, decreased 80 basis points compared to a year ago, primarily reflecting higher interest credited, which includes interest on FHLB funding agreements that rose more rapidly than net investment 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 $676.4 million of the Life & Retirement investment portfolio and related investable cash flows will be reinvested at current market rates.

Horace Mann Educators Corporation52First 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, based on our existing policies and investment portfolio, the impact from a 100 basis point decline in the average reinvestment rate would reduce Life & Retirement net investment income by approximately $2.6 million in year one and $7.8 million in year two, reducing the annualized net interest spread on fixed annuities by approximately 9 basis points and 26 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.
We reinsure a 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)March 31, 2023
Total Deferred AnnuitiesDeferred Annuities at
Minimum Guaranteed Rate
Percent
of Total
Accumulated
Value (AV)
Percent of
Total Deferred
Annuities AV
Percent
of Total
Accumulated
Value
Guaranteed minimum crediting rates:
Less than 2%57.0 %$1,432.3 40.7 %37.0 %$583.0 
Equal to 2% but less than 3%10.9 272.9 69.1 12.0 188.5 
Equal to 3% but less than 4%23.8 597.4 99.9 37.8 596.9 
Equal to 4% but less than 5%6.4 161.9 100.0 10.2 161.9 
5% or higher1.9 46.6 100.0 3.0 46.6 
Total100.0 %$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, 2022 and other factors in this Quarterly Report on Form 10-Q.











Horace Mann Educators Corporation53First Quarter 2023 Form 10-Q



Supplemental & Group Benefits
For the three months ended March 31, 2023, net income reflected the following factors:
Improvement in benefit ratio due to frequency below prior year levels on employer-sponsored products
Higher net investment income largely due to repositioning of the portfolio for the employer-sponsored business
Increased level of operating expenses reflecting investment being made in the segment's infrastructure as well as higher allocation of corporate expenses




515
The following table provides certain information for Supplemental & Group Benefits for the periods indicated.
($ in millions)Three Months Ended
March 31,
2023-2022
20232022% Change
Supplemental & Group Benefits
Net premiums and contract charges earned$65.8 $69.8 -5.7 %
Net investment income9.1 7.1 28.2 %
Other income(3.7)1.6 N.M.
Benefits, settlement expenses and change in reserves21.1 32.5 -35.1 %
Interest credited0.8 0.1 N.M.
Operating expenses (includes DAC amortization expense)27.9 25.3 10.3 %
Intangible asset amortization expense3.6 3.9 -7.7 %
Income before income taxes17.8 16.7 6.6 %
Net income14.0 13.2 6.1 %
Core earnings*14.0 13.2 6.1 %
Benefit ratio(1)
33.3 %46.7 %-13.4 pts
Operating expense ratio(2)
39.2 %32.2 %7.0 pts
Pretax profit margin(3)
24.9 %21.4 %3.5 pts
Worksite direct products benefit ratio22.1 %22.2 %-0.1 pts
Worksite direct premium persistency (rolling 12 months)90.6 %92.1 %-1.5 pts
Employer-sponsored products benefit ratio42.6 %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 months ended March 31, 2023, total sales* were $8.2 million. Sales of worksite direct products* were $3.7 million for three 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 Corporation54First Quarter 2023 Form 10-Q



Corporate & Other
The following table provides certain financial information for Corporate & Other for the periods indicated.
($ in millions)Three Months Ended
March 31,
2023-2022
20232022% Change
Interest expense$(6.7)$(3.9)-71.8 %
Net investment losses, pretax(3.9)(15.5)N.M.
Other operating expenses, net investment income and other income(1.7)(2.0)15.0 %
Net investment losses, after tax(3.1)(12.2)N.M.
Net loss(9.8)(17.0)42.4 %
Core loss*(6.7)(4.8)-39.6 %

For the three months ended March 31, 2023, the net loss decreased $7.2 million due to lower net investment losses partially offset by an increase in interest expense on the Revolving Credit Facility.
Investment Results
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)Three Months Ended
March 31,
2023-2022
20232022% Change
Net investment income - managed investment portfolio$74.7 $73.0 2.3 %
Investment income - deposit asset on reinsurance25.7 24.9 3.2 %
Total net investment income100.4 97.9 2.6 %
Pretax net investment losses(3.9)(15.5)N.M.
Pretax net unrealized investment gains (losses) on fixed maturity securities(453.3)16.7 N.M

For the three months ended March 31, 2023, net investment income from our managed investment portfolio increased $1.7 million, primarily due to a higher contribution from floating rate fixed maturity securities including commercial mortgage loan funds.
For the three months ended March 31, 2023, pretax 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. 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 Corporation55First Quarter 2023 Form 10-Q



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)March 31, 2023
Number of
Issuers
Fair
Value
Amortized
Cost, net
Pretax Net
Unrealized
Loss
Fixed maturity securities
Corporate bonds
Banking & Finance169 $471.8 $523.0 $(51.2)
Misc.36 184.1 185.3 (1.2)
Insurance57 157.3 170.2 (12.9)
Energy86 144.3 158.4 (14.1)
HealthCare, Pharmacy73 116.6 137.5 (20.9)
Utilities78 114.9 132.5 (17.6)
Real Estate42 97.9 107.6 (9.7)
Transportation47 86.5 95.6 (9.1)
Consumer Products54 69.5 83.6 (14.1)
Natural Gas15 52.9 59.1 (6.2)
All other corporates(1)
295 447.8 502.5 (54.7)
Total corporate bonds952 1,943.6 2,155.3 (211.7)
Mortgage-backed securities
U.S. Government and federally sponsored agencies239 375.0 412.5 (37.5)
Commercial(2)
164 302.9 327.9 (25.0)
Other29 14.0 15.1 (1.1)
Municipal bonds(3)
605 1,290.9 1,363.0 (72.1)
Government bonds
U.S.44 367.4 428.2 (60.8)
Foreign32.6 34.2 (1.6)
Collateralized loan obligations(4)
252 741.2 764.5 (23.3)
Asset-backed securities128 282.4 302.6 (20.2)
Total fixed maturity securities2,418 $5,350.0 $5,803.3 $(453.3)
Equity securities
Non-redeemable preferred stocks26 $80.4 
Common stocks1.0 
Closed-end fund17.4 
Total equity securities33 $98.8 
Total2,451 $5,448.8 
(1)The All other corporates category contains 18 additional industry sectors. Food and beverage, technology, telecommunications, broadcasting and media and leisure entertainment represented $230.6 million of fair value at March 31, 2023, with the remaining 13 sectors each representing less than $217.2 million.
(2)At 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, 44.6% are tax-exempt and 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 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).

As of March 31, 2023, our diversified fixed maturity securities portfolio consisted of 3,722 investment positions, issued by 2,418 entities, and totaled approximately $5.4 billion in fair value. This portfolio was 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 Corporation56First 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 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)Percent of Portfolio
Fair Value
March 31, 2023
December 31, 2022March 31, 2023Fair
Value
Amortized
Cost, net
Fixed maturity securities
AAA10.8 %11.3 %$605.2 $634.4 
AA(2)
39.3 39.1 2,093.6 2,303.7 
A17.8 18.2 975.3 1,038.1 
BBB24.1 23.6 1,266.6 1,393.2 
BB1.8 1.8 95.1 104.3 
B0.9 0.9 47.8 52.0 
CCC or lower— — 1.1 1.7 
Not rated(3)
5.3 5.1 265.3 275.9 
Total fixed maturity securities100.0 %100.0 %$5,350.0 $5,803.3 
Equity securities
AAA— %— %
AA— — — 
A— — — 
BBB68.7 65.4 64.6 
BB10.8 10.9 10.8 
B— — — 
CCC or lower— 2.1 2.1 
Not rated20.5 21.6 21.3 
Total equity securities100.0 %100.0 %$98.8 
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 March 31, 2023, the AA rated fair value amount included $364.8 million of U.S. Government and federally sponsored agency securities and $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 March 31, 2023, the fixed maturity securities portfolio had $502.9 million of pretax gross unrealized investment losses on $4,185.9 million of fair value related to 2,921 positions. Of the investment positions with gross unrealized losses, there were 416 trading below 80.0% of the carrying value as of 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 March 31, 2023 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of impairment.
Horace Mann Educators Corporation57First Quarter 2023 Form 10-Q



Liquidity and FinancialCapital Resources
Off-Balance Sheet Arrangements
At September 30, 2017Our liquidity and 2016,access to capital were not materially impacted by inflation or changes in interest rates during the Company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been establishedthree months ended 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 purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise if the Company engaged in such relationships.
year ended December 31, 2022.
Investments
Information regarding the Company’sour investment portfolio, which is comprised primarily of investment grade fixed maturity securities, is locatedpresented in “ResultsPart I - Item 1, Note 2 of Operations -- Net Realized Investment Gains and Losses (Pretax)” and in the “Notes to Consolidated Financial Statements -- Noteas well as Part I - Item 2 -- Investments”.
- Investment Results in this Quarterly Report on Form 10-Q.
Cash Flow
TheOur short-term liquidity requirements, of the Company, 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 the Company’sour operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth,


and pay dividends to shareholders.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 long-term debt. The following table summarizes our consolidated cash flows activity for the periods indicated.
($ in millions)Three Months Ended
March 31,
2023-2022
20232022% Change
Net cash provided by operating activities$86.4 $95.7 -9.7 %
Net cash used in investing activities(95.3)(217.7)56.2 %
Net cash provided by (used in) financing activities(6.5)37.4 -117.4 %
Net decrease in cash(15.4)(84.6)81.8 %
Cash at beginning of period42.8 133.7 -68.0 %
Cash at end of period$27.4 $49.1 -44.2 %
Operating Activities
As a holding company, HMEC conducts itswe conduct our principal operations in the personal lines segment of the property and casualty, life, retirement, supplemental and lifegroup insurance industries through itsour subsidiaries. HMEC’sOur 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 theour insurance subsidiaries.
For the nine month periodthree months ended September 30, 2017,March 31, 2023, net cash provided by operating activities increased compared to the same period in 2016, largelydecreased $9.3 million, primarily due to an increasehigher claims paid on insurance policies.
Investing Activities
Net cash used in Premiums collectedinvesting activities for the three months ended March 31, 2023 and Investment income collected in2022 was $(95.3) million and $(217.7) million, respectively. Prior year investing activities included the current period.acquisition of Madison National.
PaymentsInvesting 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 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 on debt, dividends to shareholders and parent company operating expenses are largely dependent on the ability of the insurance subsidiaries to pay cash dividends or make other cash payments to HMEC, including tax payments pursuant to tax sharing agreements. Payments for share repurchase programs also have this dependency. If necessary, HMEC also has other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, which include a revolving line of credit, as well as issuances of various securities. The insurance subsidiaries are subject to various regulatory restrictions which limit the amount of annual dividends or other distributions, including loans or cash advances, available to HMEC without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 2017 from all of HMEC’s insurance subsidiaries without prior regulatory approval is approximately $91.0 million, of which $44.9 million was paid during the nine month period ended September 30, 2017. Although regulatory restrictions exist, dividend availability from subsidiaries has been, and is expected to be, adequate for HMEC’s capital needs. Additional information is contained in “Notes to Consolidated Financial Statements -- Note 10 -- Statutory Information and Restrictions” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Investing Activities
HMEC’s insurance subsidiaries maintain significant investments inproduced by our fixed maturity securities to meet future contractual obligations to policyholders. In conjunction with its managementportfolio adequately fund the estimated runoff of liquidity and other asset/liability management objectives, the Company, from time to time, willour insurance reserves. When market opportunities arise, we may sell fixed maturity securities prior to maturity, as well as equityselected securities and reinvest the proceeds 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 is influenced by
Horace Mann Educators Corporation58First 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 othershort-term investments with different interest rates, maturities to facilitate the availability of cash to fund the purchase of appropriate long-term investments, repay maturing debt, and/or credit characteristics. Accordingly, the Company has classified the entire fixed maturity and equity securities portfolios as available for sale.
to respond to catastrophes.
Financing Activities
Financing activities include primarily payment of dividends, the receipt and withdrawal of funds by annuity contractholders, issuances andchanges in the deposit asset on reinsurance, repurchases of HMEC’sour common stock, fluctuations in bankbook overdraft balances, and borrowings, repayments and repurchases related to its debt facilities.
The Company’s annuity business produced net negative cash flows in the first nine months of 2017. For the nine month periodthree months ended September 30, 2017, receipts from annuity contractsMarch 31, 2023, net cash provided by financing activities decreased $43.0$43.9 million or 11.0%, compared to the prior year period, as describedprimarily due to a $34.3 increase in “Results of Operations -- Insurance Premiums and Contract Charges”. In total, annuity contractcash outflows from benefits, withdrawals and net transfers to Separate Account variable annuity accumulatedassets, a $9.8 million increase in cash values increased $54.6outflows 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 $17.0 million net increase in cash inflows from FHLB funding agreements.
The following table shows activity from FHLB funding agreements for the periods indicated.
($ in millions)Three Months Ended
March 31,
2023-20222023-2022
20232022$ Change% Change
Balance at beginning of the period$792.5 $782.5 $10.0 1.3 %
Advances received from FHLB funding agreements162.0 60.0 102.0 N.M.
Principal repayments on FHLB funding agreements(85.0)— (85.0)N.M.
Balance at end of the period$869.5 $842.5 $27.0 3.2 %


Horace Mann Educators Corporation59First Quarter 2023 Form 10-Q



Liquidity Sources and Uses
Our potential sources and uses of funds principally include the following activities:
Property & CasualtyLife & RetirementSupplemental & Group BenefitsCorporate & 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 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 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 Corporation60First Quarter 2023 Form 10-Q



As of March 31, 2023, we held $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 22.7%, compared toa downgrade in our insurance subsidiaries' financial strength ratings. The rating agencies also consider the prior year period. Duringinterdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the nine month period ended September 30, 2017, financing activities included an increaseratings of $77.9 million attributable to fixed account withdrawals due to the transfer of all the Company's 401(k) assets to a third-party provider.


other related entities.
Capital Resources
The Company hasWe have determined the amount of capital whichthat 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 (the “NAIC”).Commissioners. Historically, the Company’sour insurance subsidiaries have generated capital in excess of such needed capital.levels. These excess amounts have been paid to HMECus through dividends. HMEC hasWe have then utilized these dividends and itsour access to the capital markets to fund growth initiatives, service and retire long-term debt, pay dividends to itsour shareholders, fund growth initiatives, repurchase shares of itsour common stock and for other corporate purposes. Management anticipatesIf 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 Company’samount 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 2023 from all of our insurance subsidiaries without prior regulatory approval is $110.3 million, excluding the impact and timing of prior dividends, of which $19.0 million was paid during the three months ended 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 itsour share repurchase program.programs. Additional information is contained in “Notes toPart II - Item 8, Note 14 of the Consolidated Financial Statements -- Note 10 -- Statutory Information and Restrictions” of the Company’sin our Annual Report on Form 10-K for the year ended December 31, 2016.2022.
The totalTotal capital was $1,637.2 million as of the Company was $1,637.8 million at September 30, 2017,March 31, 2023, including $247.4$498.0 million of short-term and long-term debt and no short-term debt outstanding.debt. Total debt represented 17.9%30.4% of total capital including net unrealized investment losses on fixed maturity securities (25.2% excluding net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributable to discount rates*) as of March 31, 2023, which was slightly above our long-term target of 25.0% for our debt to capital ratio excluding net unrealized investment gains (losses) and losses (15.1%net reserve remeasurements attributable to discount rate).
Shareholders' equity was $1,139.2 million as of March 31, 2023, including net unrealized investment gains and losses) at September 30, 2017, which was below the Company’s long-term targetlosses on fixed maturity securities of 25%.
Shareholders’ equity was $1,390.4 million at September 30, 2017, including a net unrealized investment gain in the Company’s investment portfolio of $255.7$356.4 million after taxes and the related impact of deferred policy acquisition costs associated with investment contracts and life insurance products with account values.taxes. The market value of the Company’sour common stock and the market value per share were $1,600.0$1,368.2 million and $39.35,$33.48, respectively, at September 30, 2017.as of March 31, 2023. Book value per share and adjusted book value per share* was $34.20 at September 30, 2017 ($27.91 excluding the net unrealized investment gain*).
$27.87 and $36.16, respectively, as of March 31, 2023.
Additional information regarding the net unrealized investment gain in the Company’s investment portfolio at September 30, 2017gains (losses) on fixed maturity securities as of March 31, 2023 is included in “ResultsPart I - Item 1, Note 2 of Operations -- Net Realizedthe Consolidated Financial Statements as well as in Part I - Item 2 - Investment Gains and Losses (Pretax)”.
Results in this Quarterly Report on Form 10-Q.
Total shareholder dividends were $34.6paid to shareholders was $13.5 million for the nine month periodthree months ended September 30, 2017.March 31, 2023. In March May and September 2017,of 2023, the Board of Directors announced(Board) approved regular quarterly dividends of $0.275$0.33 per share.
For the nine month periodthree months ended September 30, 2017, the CompanyMarch 31, 2023, we repurchased 48,440128,540 shares of itsour common stock or 0.1% of the outstanding shares at December 31, 2016, at an aggregate cost of $1.7 million, or an average price per share of $34.26$34.01 under itsour share repurchase program, which is further described in “Notes toprogram. See Part II - Item 8, Note 13 of the Consolidated Financial Statements -- Note 9 -- Shareholders’ Equity and Common Stock Equivalents” of the Company’sin our Annual Report on Form 10-K for the year ended December 31, 2016.2022 for more information. As of September 30, 2017, $27.8March 31, 2023, $36.9 million remained authorized for future share repurchases under the share repurchase program.
Horace Mann Educators Corporation61First Quarter 2023 Form 10-Q



The following table summarizes our debt obligations.
($ in millions)Interest
Rates
Final
Maturity
March 31, 2023December 31, 2022
Short-term debt
Revolving Credit FacilityVariable2026$249.0 $249.0 
Long-term debt(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%2025249.0 248.6 
Total$498.0 $497.6 
(1)    We designate debt obligations as "long-term" based on maturity date at issuance.

As of September 30, 2017, the CompanyMarch 31, 2023, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (“Senior Notes due 2025”)(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 due 2025 is payable semi-annually at a rate of 4.50%. Detailed information regarding the redemption terms of the Senior Notes due 2025 is contained in the “Notes toPart II - Item 8, Note 10 of the Consolidated Financial Statements -- Note 7 -- Debt” of the Company’sin our Annual Report on Form 10-K for the year ended December 31, 2016.2022. The Senior Notes due 2025 are traded in the open market (HMN 4.50).
As of September 30, 2017, the CompanyMarch 31, 2023, we had no balanceborrowings outstanding under its Bankwith 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.
Effective July 12, 2021, we, as borrower, amended our Credit Facility.Agreement (Revolving Credit Facility). The Bankamended Revolving Credit Facility provides for unsecured borrowingsincreased 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 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 up to $150.0 million andthe amended Revolving Credit Facility are substantially consistent with the prior agreement, with an interest rate based on LIBOR plus 115 basis points. The amended Revolving Credit Facility expires on July 30, 2019. Interest accrues at varying spreads relative12, 2026.
On December 31, 2021, we utilized $114.0 million of the Revolving Credit Facility to prime or Eurodollar base ratesfund a portion of the acquisition of Madison National Life Insurance Company, Inc. that occurred effective January 1, 2022, resulting in a remaining capacity of $76.0 million. We expect that the unused portion of the Revolving Credit Facility will be available for ongoing working capital, capital expenditures and is payable monthly or quarterly depending on the applicable base rate.general corporate expenditures. The unused portion of the BankRevolving Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis at September 30, 2017.


as of March 31, 2023.
To provide additional capital management flexibility, the Companywe filed a “universal shelf”"universal shelf" registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on March 12, 2015.10, 2021. The registration statement, which registered the offer and sale by the Company 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 12, 2015.10, 2021. Unless withdrawn by the Companyus earlier, this registration statement will remain effective through March 12, 2018. The Senior Notes due 2025, described above, were issued utilizing this registration statement.10, 2024. No other securities associated with the registration statement have been issued asat the time of the dateissuance 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 Corporation62First Quarter 2023 Form 10-Q



Financial Ratings
HMEC’sOur principal insurance subsidiaries are rated by S&P, Moody’s, A.M. Best Company, Inc. (“A.M. Best”)(A.M. Best), Fitch, Moody's, and Fitch Ratings, Inc. (“Fitch”).S&P. These rating agencies have also assigned ratings to the Company’s long-term debt securities.our Senior Notes. The ratings that are assigned by these agencies, which are subject to change, can impact, among other things, the Company’sour access to sources of capital, cost of capital, and competitive position. These ratings are not a recommendation to buy or hold any of the Company’sour 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, 2017April 30, 2023 were unchanged fromas follows:
Insurance FinancialAffirmed/
Strength Ratings (Outlook)Debt Ratings (Outlook)Reviewed
A.M. Best
HMEC (parent company)N.A.bbb(stable)7/28/2022
HMEC's Life & Retirement subsidiariesA(stable)N.A.7/28/2022
HMEC's Property & Casualty subsidiariesA(stable)N.A.7/28/2022
HMEC's Supplemental & Group Benefits
subsidiaries
Madison National Life Insurance CompanyA-(stable)N.A.7/28/2022
National Teachers Associates Life
Insurance Company
A(stable)N.A.7/28/2022
FitchA(stable)BBB(stable)10/18/2022
Moody's
   HMEC (parent company)Baa2(negative)3/1/2023
   HMEC's Life GroupA2(negative)3/1/2023
   HMEC's P&C GroupA2(negative)3/1/2023
S&PA(stable)BBB(stable)2/7/2023
Reinsurance Programs
Information regarding the disclosurereinsurance programs for our Property & Casualty, Life & Retirement and Supplemental & Group Benefits segments is located in the Company’sPart I - Item 1, Reporting Segments in our Annual Report on Form 10-K for the year ended December 31, 2016. Assigned ratings were as follows (unless otherwise indicated, the insurance financial strength ratings for the Company’s Property2022.
ITEM 3.IQuantitative and Casualty insurance subsidiaries and the Company’s principal Life insurance subsidiary are the same):
Insurance Financial
Strength RatingsDebt Ratings
(Outlook)(Outlook)
As of October 31, 2017
S&PA(stable)BBB(stable)
Moody’s
Horace Mann Life Insurance CompanyA3(positive)N.A.
HMEC’s Property and Casualty subsidiariesA3(positive)N.A.
HMECN.A.Baa3(positive)
A.M. BestA(stable)bbb(stable)
FitchA(stable)BBB(stable)

N.A. – Not applicable.
Reinsurance Programs
Information regarding the reinsurance program for the Company’s Property and Casualty segment is located in “Business -- Property and Casualty Segment -- Property and Casualty Reinsurance” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Information regarding the reinsurance program for the Company’s Life segment is located in “Business -- Life Segment” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Qualitative Disclosures about Market Value Risk
Market value risk, the Company’sour primary market risk exposure, is the risk that the Company’sour invested assets will decrease in value. This decrease in value may be due to (1) a change in the yields realized on the Company’sour assets and prevailing market yields for similar assets, (2) an unfavorable change in the liquidity of thean investment, (3) an unfavorable change in the financial prospects of the issuer of thean investment, or (4) a downgrade in the credit rating of the issuer of thean investment. See also “ResultsAlso see Consolidated Results of Operations -- Net Realized Investment Gains and Losses (Pretax)”.in Part I - Item 2 of this Quarterly Report on Form 10-Q regarding net investment losses.
Horace Mann Educators Corporation63First Quarter 2023 Form 10-Q




Significant changes in interest rates expose the Companyus to the risk of experiencing losses or earning a reduced level of income based on the difference between the interest rates earned on the Company’sour investments and the credited interest rates on the Company’sour insurance and investment contract liabilities. See also “ResultsAlso see Consolidated Results of Operations -- Interest Creditedin Part I - Item 2 of this Quarterly Report on Form 10-Q regarding interest credited to Policyholders”.policyholders.
The Company seeksWe seek to manage itsour market value risk by coordinating the projected cash inflows of assets with the projected cash outflows of liabilities. For all itsof our assets and liabilities, the Company seekswe 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 the Company.us. Certain fees that the Company earnswe earn from variable annuity deposits are based on the market value of the funds deposited.
More detailed descriptions of the Company’sour exposure to market value risks and the management of those risks is presentedcontained in “Management’s Discussion and AnalysisPart II - Item 7A of Financial Condition and Results of Operations -- Market Value Risk” of the Company’sour Annual Report on Form 10-K for the year ended December 31, 2016.2022.

Item 3:   Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 305 of Regulation S-K is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Market Value Risk” contained in this Quarterly Report on Form 10-Q.

Item 4:   ITEM 4.IControls and Procedures
Management’sManagement's Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’sour management, including the Company’s Chief Executive Officerour chief executive officer and Chief Financial Officer, the Companychief financial officer, we conducted an evaluation of the effectiveness of the design and operation of the Company’sour disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”)(Exchange Act), as of September 30, 2017 pursuant to Rule 13a-15(b) of the Exchange Act.March 31, 2023. Based on this evaluation, the Chief Executive Officerchief executive officer and Chief Financial Officerchief financial officer concluded that the Company’sour disclosure controls and procedures are effective in timely alerting them to material information relating to the Companyus (including itsour consolidated subsidiaries) that is required to be included in the Company’sour periodic Securities and Exchange CommissionSEC filings. No material weaknesses in the Company’sour disclosure controls and procedures were identified in the evaluation and therefore, no corrective actions were taken. There were no significant changes in the Company’sour 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
ThereExcept as noted below, there were no changes in the Company’sour internal control over financial reporting that occurred(as defined in Rule 13a-15(f) under the Exchange Act) during the Company’s last fiscal quarterperiod covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.
Changes were made to relevant business processes and the related control activities over accounting and reporting for long-duration insurance contracts.
Horace Mann Educators Corporation64First Quarter 2023 Form 10-Q



PART II: OTHER INFORMATION
Item 1A:  ITEM 1A.IRisk Factors
At the time of issuance of this Quarterly Report on Form 10-Q, management believeswe believe there are no material changes from the risk factors as previously disclosed in the Company’sPart I - Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016. The following risk factor is updated to reflect recent developments; however, in general the described risks are comparable to those previously disclosed.2022.


The Department of Labor (“DOL”) fiduciary rule and the possible adoption by the Securities and Exchange Commission (“SEC”) of a fiduciary standard of care could have a material adverse effect on our business, financial condition and results of operations.
On April 6, 2016, the DOL released a final regulation which more broadly defines the types of activities that will result in a person being deemed a “fiduciary” for purposes of the prohibited transaction rules of the Employee Retirement Income Security Act (“ERISA”) and Internal Revenue Code Section 4975. Section 4975 prohibits certain kinds of compensation with respect to transactions involving assets in certain accounts, including individual retirement accounts (“IRAs”).
The DOL rule was originally to be effective on April 10, 2017, but under a delay measure, the fiduciary definition went into effect on June 9, 2017, with certain conditions for prohibited transaction exemption relief delayed until January 1, 2018. The DOL is continuing its examination of the rule as directed by President Trump.
The DOL regulation will affect the ways in which financial services representatives can be compensated for sales to participants in ERISA employer-sponsored qualified plans and sales to IRA customers, and it will impose significant additional legal obligations and disclosure requirements. The DOL regulation could have a material adverse effect on our business and results of operations. While the regulation does not affect non-ERISA employer-sponsored qualified plans, such as public school 403(b) plans, it could have the following impacts, among others:

It could inhibit our ability to sell and service IRAs, resulting in a change and/or a reduction of the types of products we offer for IRAs, and impact our relationship with current clients.
It could require changes in the way that we compensate our agents, thereby impacting our agents’ business model.
It could require changes in our distribution model for financial services products and could result in a decrease in the number of our agents.
It could increase our costs of doing IRA business and increase our litigation and regulatory risks.
It could increase the cost and complexity of regulatory compliance for our Retirement segment’s products, including our recently introduced fixed indexed annuity product.

Further, in January 2011, under the authority of the Dodd-Frank Act, the SEC submitted a report to Congress recommending that the SEC adopt a fiduciary standard of conduct for broker-dealers. According to the SEC, notice of proposed rulemaking is anticipated in 2017. This regulatory activity by the SEC also has the potential to adversely impact our business, financial condition and results of operations.

In addition, Nevada passed a fiduciary statute and other states are considering passing their own “fiduciary rules.” Individual state regulation of the “fiduciary rules,” with varying legal and compliance requirements, creates market uncertainty.



Item 2:   ITEM 2.IUnregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On December 7, 2011, the Company’sMay 25, 2022, our Board of Directors (the “Board”) authorized a share repurchase program allowing repurchases of up to $50.0$50 million of Horace Mann Educators Corporation’s Common Stock, par value $0.001 (the “2011 Plan”). On September 30, 2015, the Board authorized an additional share repurchase program allowing repurchases of up to $50.0 million to begin following the completion of the 2011 Plan and utilization of that authorization began in January 2016. Both share repurchase programs authorize the repurchase ofour common shares in open market or privately negotiated transactions, from time to time, depending on market conditions.conditions (Program). The current share repurchase programProgram does not have an expiration date and may be limited or terminated at any time without notice. During the three month periodmonths ended September 30, 2017, the CompanyMarch 31, 2023, we repurchased shares of HMEC common stockunder the Program as follows:

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 - 3154,400 $33.86 54,400 $39.5 million
February 1 - 2822,121 35.27 22,121 $38.7 million
March 1 - 3152,019 33.64 52,019 $36.9 million
Total128,540 $34.01 128,540 $36.9 million
Period 



Total Number
of Shares
Purchased
 



Average Price
Paid Per Share
 

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum Number
(or Approximate Dollar
Value) of Shares
That May Yet Be
Purchased Under The
Plans or Programs
         
July 1 - 31 
 
 
 $29.5 million
August 1 - 31 
 
 
 $29.5 million
September 1 - 30 48,440
 $34.26
 48,440
 $27.8 million
Total 48,440
 $34.26
 48,440
 $27.8 million

Item 5:   ITEM 5.IOther Information
Not applicable.
The Company is not aware of any information required to be disclosed in a report on Form 8-K during the three month period ended September 30, 2017 which has not been filed with the Securities and Exchange Commission.



Item 6:   ITEM 6.IExhibits
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
3.2Form of Certificate for shares of Common Stock, $0.001 par value per share, of HMEC, incorporated by reference to Exhibit 4.5 to HMEC’s Registration Statement on Form S-3 (Registration No. 33-53118) filed with the SEC on October 9, 1992.
3.3
Horace Mann Educators Corporation65First Quarter 2023 Form 10-Q



(4) Instruments defining the rights of security holders, including indentures:
4.1
4.1(a)
4.2
4.3
(10) Material contracts:
10.1
10.1(a)
10.2*10.1(b)
10.2*
10.2(a)*


10.2(b)*
10.2(c)*
10.2(d)*
Horace Mann Educators Corporation66First Quarter 2023 Form 10-Q



10.2(e)*
10.3*
10.3(a)*
10.3(b)*
10.3(c)*
10.3(d)*
10.3(e)*
10.3(e)10.3(f)*
10.3(g)*
10.3(h)*
10.3(f)10.3(i)*
10.3(g)10.3(j)*
10.4*Horace Mann Educators Corporation67First Quarter 2023 Form 10-Q



10.4*


10.5*
10.6*
10.7*
10.8*
10.9*
10.9(a)*10.10*
10.10*
10.10(a)*
10.11*
10.11(a)*
10.11(b)*
10.12
10.13
10.14
(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:
31.1Horace Mann Educators Corporation68First Quarter 2023 Form 10-Q



31.1
31.2


(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
32.1
32.2
(99) Additional exhibits:
99.1
(101) Interactive Data File:
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase
Horace Mann Educators Corporation69First 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)
HORACE MANN EDUCATORS CORPORATION
(Registrant)
DateNovember 8, 2017May 10, 2023/s/ Marita Zuraitis
Marita Zuraitis
President and Chief Executive Officer
DateNovember 8, 2017May 10, 2023/s/ Bret A. Conklin
Bret A. Conklin
Executive Vice President and
Chief Financial Officer
DateNovember 8, 2017May 10, 2023/s/ Kimberly A. Johnson
Kimberly A. Johnson
Senior Vice President, Controller and
Principal Accounting Officer


53
Horace Mann Educators Corporation70First Quarter 2023 Form 10-Q