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

As of October 31, 2021,April 30, 2022, the registrant had 41,487,55041,431,097 common shares, $0.001 par value, outstanding.

PART I: FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Horace Mann Educators Corporation:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheetsheets of Horace Mann Educators Corporation and subsidiaries (the Company) as of September 30, 2021,March 31, 2022, the related consolidated statements of operations, comprehensive income (loss)loss and changes in shareholders' equity for the three-month and nine-month periods ended September 30,March 31, 2022 and 2021, and 2020, and cash flows for the nine-month periodthree-month periods ended September 30,March 31, 2022 and 2021, and 2020, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheetsheets of the Company as of December 31, 2020,2021, 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 26, 2021,25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020,2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

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

 

NOTE 1 - Basis of Presentation and Significant Accounting Policies

Business

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

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

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in conformity with GAAP, but are not required for interim reporting purposes, have been omitted. These Consolidated Financial Statements and Notes thereto should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Part II - Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.2021. The results of operations for the three and nine months ended September 30, 2021March 31, 2022 are not necessarily indicative of the results to be expected for the full year.

The accompanying Consolidated Financial Statements and Notes thereto are unaudited. These financial statements reflect all adjustments (generally consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Part II - Item 8, Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Consolidation

All intercompany transactions and 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 the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the reporting date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The most significant critical accounting estimates include valuation of hard-to-value fixed maturity securities, (including evaluation of impairments),credit loss impairments for fixed maturity securities, evaluation of goodwill and intangible assets for impairment, valuation of annuity and life deferred policy acquisition costs, valuation of liabilities for property and casualty unpaid claims and claim expenses, and valuation of certain investment contracts and policy reserves.reserves and valuation of assets acquired and liabilities assumed under purchase accounting and purchase price allocation.

Future Adoption of New Accounting Standards

Accounting for Long-Duration Insurance Contracts

In August 2018, the FASB issued accounting and disclosure guidance that contains targeted improvements to the accounting and disclosure guidance for long-duration insurance contracts. Under the new guidance, the cash flow assumptions used to measure the liability for future policy benefits for traditional insurance contracts will be required to be updated at least annually with changes recognized as a benefit expense (i.e., assumptions will no longer be locked-in).

Insurance entities will be required to use a standard discount rate to measure the liabilities that will be equivalent to the yield from a high-quality bond. The new guidance also changes the amortization of deferred policy acquisition costs (DAC) to be on a constant-level basis over the expected term of the related contracts with no interest accruing on the DAC balance. The new guidance also introduces a new category of contract features associated with deposit type contracts referred to as market risk benefits (MRBs). Contract features meeting the definition of a MRB will be measured at fair value. New disclosures will be required for long-duration insurance contracts in order to provide better transparency into the exposure of insurance entities and the drivers of their results. For public business entities, the guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those years. With regards to the liability for future policy benefits and DAC, the guidance applies to contracts in force as of the beginning of the earliest period presented and may be applied retrospectively. With regards to MRBs, the guidance is to be applied retrospectively at the beginning of the earliest period presented. Early adoption is permitted. Management is currently evaluating the impact this guidance will have on the results of operations and financial position of the Company.

NOTE 2 - Acquisitions

On July 14, 2021,Effective January 1, 2022, the Company announced that it entered into a Stock Purchase Agreement (Agreement), by and among the Company and Independence Capital Corp. and Independence Holding Company (Seller) to acquireacquired all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the lawspursuant to a Stock Purchase Agreement (Agreement) dated as of July 14, 2021. The adjusted purchase price of the Statetransaction was $172.3 million. The seller of Wisconsin (Madison National). The Agreement provides, among other things, that, upon the terms and subject to the conditions set forth in the Agreement, the Company will acquire all the equity interests in Madison National (Acquisition) for $172.5 million. The Seller will havehas a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. The Agreement and the consummationadjusted purchase price is subject to finalization within 165 days of the transactions contemplatedacquisition date pursuant to the terms of the Agreement. As a result of the acquisition, Madison National became a wholly owned subsidiary of the Company. Madison National is a leading writer of employer-sponsored benefits provided to educators by K-12 school districts. Founded in 1961 and headquartered in Madison, Wisconsin, Madison National offers short- term and long-term group disability, group term life, and worksite solutions products, including accident and critical illness.

Madison National's results are being reported in the Agreement have been approved byoperating segment titled "Supplemental & Group Benefits". The amount of revenues and pretax loss for Madison National since the Company’s Boarddate of Directors. acquisition included in the Company's Consolidated Statement of Operations for the three months ended March 31, 2022 are $40.0 million and $(0.7) million (inclusive of the $1.2 million non-cash impact from amortization of intangible assets under purchase accounting), respectively.

The Company has clearednot yet completed the anti-trust reviewprocess of estimating the fair value of Madison National assets acquired and liabilities assumed, including, but not limited to, intangible assets, policy reserves and certain tax-related balances. Accordingly, the Company’s preliminary estimates and the closingallocation of the Acquisition is expectedadjusted purchase price to occur early during the first quarter of 2022,assets acquired and liabilities assumed are subject to change as the satisfaction or waiverCompany completes the process. In accordance with Accounting Standards Codification (ASC) 805, Business Combinations, changes if any, to the preliminary estimates and allocation of applicable closing conditionsthe adjusted purchase price will be reported in the Company’s financial statements as well as approval by certain regulators.

NOTE 3 - Investments (continued)

Net Investment (Losses) GainsIncome

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

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

Allowance for Credit Loss Impairments on Fixed Maturity Securities

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

Fixed Maturity Securities

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

The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses at September 30, 2021March 31, 2022 — which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition — as temporary. As of September 30, 2021,March 31, 2022, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before an anticipated recovery in value. Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any impairments as of September 30, 2021.March 31, 2022.