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

FORM 10-Q 

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20222023
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) (Zip Code)
Registrant’s telephone number, including area code: 217-789-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock, $0.001 par valueHMNNew York Stock Exchange


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

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

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

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

As of April 30, 2022,2023, the registrant had 41,431,09740,843,579 common shares, $0.001 par value, outstanding.



HORACE MANN EDUCATORS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20222023
TABLE OF CONTENTS

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



PART I: FINANCIAL INFORMATION
ITEM 1. I Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Horace Mann Educators Corporation:

Results of Review of Interim Financial Information
We have reviewed the consolidated balance sheetssheet of Horace Mann Educators Corporation and subsidiaries (the Company) as of March 31, 2022,2023, the related consolidated statements of operations, comprehensive lossincome (loss), and changes in shareholders' equity for the three-month periods ended March 31, 2023 and 2022, and 2021, andthe related consolidated statements of cash flows for the three-month periods ended March 31, 20222023 and 2021,2022, 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 sheetssheet of the Company as of December 31, 2021,2022, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022,28, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion,As described in Note 1 to the Company's consolidated interim financial information, set forthon 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 accompanyingDecember 31, 2022 consolidated balance sheet. We have not audited and reported on the revised December 31, 2022 consolidated balance sheet asreflecting the adoption of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.ASU No. 2018-12.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
/s/ KPMG LLP
KPMG LLP
  
Chicago, Illinois 
May 9, 202210, 2023 
Horace Mann Educators Corporation1Quarterly Report onFirst Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($ in millions, except share data)
March 31, 2022December 31, 2021
(Unaudited)March 31, 2023December 31, 2022
AssetsAssetsAssets
InvestmentsInvestmentsInvestments
Fixed maturity securities, available for sale, at fair value
(amortized cost, net 2022, $5,970.7; 2021, $5,797.7)
$5,987.4 $6,239.3 
Fixed maturity securities, available for sale, at fair value
(amortized cost, net 2023, $5,803.3; 2022, $5,756.9)
Fixed maturity securities, available for sale, at fair value
(amortized cost, net 2023, $5,803.3; 2022, $5,756.9)
$5,350.0 $5,185.0 
Equity securities at fair valueEquity securities at fair value126.8 147.2 Equity securities at fair value98.8 99.6 
Limited partnership interestsLimited partnership interests801.9 712.8 Limited partnership interests1,045.4 983.7 
Short-term and other investmentsShort-term and other investments337.0 350.2 Short-term and other investments291.1 319.3 
Total investmentsTotal investments7,253.1 7,449.5 Total investments6,785.3 6,587.6 
CashCash49.1 133.7 Cash27.4 42.8 
Deferred policy acquisition costsDeferred policy acquisition costs323.5 248.0 Deferred policy acquisition costs331.6 330.6 
Reinsurance balances receivableReinsurance balances receivable510.9 153.2 Reinsurance balances receivable467.6 468.0 
Deposit asset on reinsuranceDeposit asset on reinsurance2,491.8 2,481.5 Deposit asset on reinsurance2,518.0 2,516.6 
Intangible assetsIntangible assets200.6 145.4 Intangible assets181.5 185.2 
GoodwillGoodwill56.3 43.5 Goodwill54.3 54.3 
Other assetsOther assets320.2 288.1 Other assets333.5 328.7 
Separate Account (variable annuity) assets3,221.9 3,441.0 
Separate Account variable annuity assetsSeparate Account variable annuity assets2,954.7 2,792.3 
Total assetsTotal assets$14,427.4 $14,383.9 Total assets$13,653.9 $13,306.1 
Liabilities and Shareholders' EquityLiabilities and Shareholders' EquityLiabilities and Shareholders' Equity
Policy liabilitiesPolicy liabilitiesPolicy liabilities
Investment contract and policy reserves$7,020.2 $6,577.8 
Future policy benefit reservesFuture policy benefit reserves$1,772.4 $1,718.0 
Policyholders' account balancesPolicyholders' account balances5,234.6 5,260.6 
Unpaid claims and claim expensesUnpaid claims and claim expenses475.7 425.9 Unpaid claims and claim expenses574.8 564.0 
Unearned premiumsUnearned premiums244.4 255.1 Unearned premiums263.3 266.1 
Total policy liabilitiesTotal policy liabilities7,740.3 7,258.8 Total policy liabilities7,845.1 7,808.7 
Other policyholder fundsOther policyholder funds1,009.8 945.9 Other policyholder funds887.1 809.3 
Other liabilitiesOther liabilities415.9 428.2 Other liabilities329.8 299.5 
Short-term debtShort-term debt249.0 249.0 Short-term debt249.0 249.0 
Long-term debtLong-term debt253.7 253.6 Long-term debt249.0 249.0 
Separate Account (variable annuity) liabilities3,221.9 3,441.0 
Separate Account variable annuity liabilitiesSeparate Account variable annuity liabilities2,954.7 2,792.3 
Total liabilitiesTotal liabilities12,890.6 12,576.5 Total liabilities12,514.7 12,207.8 
Preferred stock, $0.001 par value, authorized
1,000,000 shares; none issued
Preferred stock, $0.001 par value, authorized
1,000,000 shares; none issued
— — 
Preferred stock, $0.001 par value, authorized
1,000,000 shares; none issued
— — 
Common stock, $0.001 par value, authorized 75,000,000 shares;
issued, 2022, 66,484,165; 2021, 66,436,821
0.1 0.1 
Common stock, $0.001 par value, authorized 75,000,000 shares;
issued, 2023, 66,710,189; 2022, 66,618,465
Common stock, $0.001 par value, authorized 75,000,000 shares;
issued, 2023, 66,710,189; 2022, 66,618,465
0.1 0.1 
Additional paid-in capitalAdditional paid-in capital496.6 495.3 Additional paid-in capital503.1 502.6 
Retained earningsRetained earnings1,525.9 1,524.9 Retained earnings1,505.2 1,512.4 
Accumulated other comprehensive income (loss), net of tax:Accumulated other comprehensive income (loss), net of tax: Accumulated other comprehensive income (loss), net of tax: 
Net unrealized investment gains on fixed maturity securities20.0 290.7 
Net unrealized investment losses on fixed maturity securitiesNet unrealized investment losses on fixed maturity securities(356.4)(449.6)
Net reserve remeasurements attributable to discount ratesNet reserve remeasurements attributable to discount rates17.8 59.0 
Net funded status of benefit plansNet funded status of benefit plans(10.2)(10.2)Net funded status of benefit plans(8.8)(8.8)
Treasury stock, at cost, 2022, 25,103,083 shares;
2021, 25,043,337 shares
(495.6)(493.4)
Treasury stock, at cost, 2023, 25,842,693 shares;
2022, 25,714,153 shares
Treasury stock, at cost, 2023, 25,842,693 shares;
2022, 25,714,153 shares
(521.8)(517.4)
Total shareholders’ equityTotal shareholders’ equity1,536.8 1,807.4 Total shareholders’ equity1,139.2 1,098.3 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$14,427.4 $14,383.9 Total liabilities and shareholders’ equity$13,653.9 $13,306.1 






SeeThe accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation2Quarterly Report onFirst Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSINCOME (LOSS) (UNAUDITED)
($ in millions, except per share data)
Three Months Ended
March 31,
Three Months Ended
March 31,
20222021 20232022
Statements of OperationsStatements of OperationsStatements of Operations
RevenuesRevenuesRevenues
Net premiums and contract charges earnedNet premiums and contract charges earned$255.9 $227.6 Net premiums and contract charges earned$255.9 $255.8 
Net investment incomeNet investment income97.9 95.5 Net investment income100.4 97.9 
Net investment lossesNet investment losses(15.5)(9.0)Net investment losses(3.9)(15.5)
Other incomeOther income8.5 7.9 Other income1.5 8.5 
Total revenuesTotal revenues346.8 322.0 Total revenues353.9 346.7 
Benefits, losses and expensesBenefits, losses and expensesBenefits, losses and expenses
Benefits, claims and settlement expensesBenefits, claims and settlement expenses177.0 134.3 Benefits, claims and settlement expenses183.2 175.2 
Interest creditedInterest credited40.8 50.6 Interest credited48.7 39.7 
Operating expensesOperating expenses76.8 58.0 Operating expenses79.8 76.7 
DAC unlocking and amortization expense26.4 24.1 
DAC amortization expenseDAC amortization expense23.7 22.0 
Intangible asset amortization expenseIntangible asset amortization expense4.2 3.3 Intangible asset amortization expense3.7 4.2 
Interest expenseInterest expense3.9 3.5 Interest expense6.7 3.9 
Total benefits, losses and expensesTotal benefits, losses and expenses329.1 273.8 Total benefits, losses and expenses345.8 321.7 
Income before income taxesIncome before income taxes17.7 48.2 Income before income taxes8.1 25.0 
Income tax expenseIncome tax expense3.2 8.9 Income tax expense1.5 4.7 
Net incomeNet income$14.5 $39.3 Net income$6.6 $20.3 
Net income per shareNet income per shareNet income per share
BasicBasic$0.35 $0.94 Basic$0.16 $0.48 
DilutedDiluted$0.35 $0.93 Diluted$0.16 $0.48 
Weighted average number of shares and equivalent sharesWeighted average number of shares and equivalent sharesWeighted average number of shares and equivalent shares
BasicBasic41.9 41.9 Basic41.3 41.9 
DilutedDiluted42.1 42.1 Diluted41.4 42.1 
Statements of Comprehensive Loss
Statements of Comprehensive Income (Loss)Statements of Comprehensive Income (Loss)
Net incomeNet income$14.5 $39.3 Net income$6.6 $20.3 
Other comprehensive loss, net of tax:
Change in net unrealized investment gains
(losses) on fixed maturity securities
(270.7)(122.7)
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Change in net unrealized investment losses on fixed maturity securitiesChange in net unrealized investment losses on fixed maturity securities93.2 (334.1)
Change in net reserve remeasurements attributable to discount ratesChange in net reserve remeasurements attributable to discount rates(41.2)181.5 
Change in net funded status of benefit plansChange in net funded status of benefit plans— — Change in net funded status of benefit plans— — 
Other comprehensive loss(270.7)(122.7)
Comprehensive loss$(256.2)$(83.4)
Other comprehensive income (loss)Other comprehensive income (loss)52.0 (152.6)
Comprehensive income (loss)Comprehensive income (loss)$58.6 $(132.3)








SeeThe accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation3Quarterly Report onFirst Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
($ in millions, except per share data)
Three Months Ended
March 31,
Three Months Ended
March 31,
2022202120232022
Common stock, $0.001 par valueCommon stock, $0.001 par valueCommon stock, $0.001 par value
Beginning balanceBeginning balance$0.1 $0.1 Beginning balance$0.1 $0.1 
Options exercisedOptions exercised— — Options exercised— — 
Conversion of common stock unitsConversion of common stock units— — Conversion of common stock units— — 
Conversion of restricted stock unitsConversion of restricted stock units— — Conversion of restricted stock units— — 
Ending balanceEnding balance0.1 0.1 Ending balance0.1 0.1 
Additional paid-in capitalAdditional paid-in capitalAdditional paid-in capital
Beginning balanceBeginning balance495.3 488.4 Beginning balance502.6 495.3 
Options exercised and conversion of common stock
units and restricted stock units
(0.6)(1.2)
Options exercised and conversion of common and
restricted stock units
Options exercised and conversion of common and
restricted stock units
(1.4)(0.6)
Share-based compensation expenseShare-based compensation expense1.9 2.0 Share-based compensation expense1.9 1.9 
Ending balanceEnding balance496.6 489.2 Ending balance503.1 496.6 
Retained earningsRetained earningsRetained earnings
Beginning balanceBeginning balance1,524.9 1,434.6 Beginning balance1,512.4 1,547.0 
Net incomeNet income14.5 39.3 Net income6.6 20.3 
Dividends, 2022, $0.32 per share; 2021, $0.31 per share(13.5)(13.1)
Dividends, 2023, $0.33 per share; 2022, $0.32 per shareDividends, 2023, $0.33 per share; 2022, $0.32 per share(13.8)(13.5)
Effect of adopting ASU 2018-12(1)
Effect of adopting ASU 2018-12(1)
— (0.8)
Ending balanceEnding balance1,525.9 1,460.8 Ending balance1,505.2 1,553.0 
Accumulated other comprehensive income (loss), net of tax:Accumulated other comprehensive income (loss), net of tax:Accumulated other comprehensive income (loss), net of tax:
Beginning balanceBeginning balance280.5 355.1 Beginning balance(399.4)(50.0)
Change in net unrealized investment gains (losses)
on fixed maturity securities
(270.7)(122.7)
Change in net unrealized investment losses
on fixed maturity securities
Change in net unrealized investment losses
on fixed maturity securities
93.2 (334.1)
Change in net reserve remeasurements attributable to discount ratesChange in net reserve remeasurements attributable to discount rates(41.2)181.5 
Change in net funded status of benefit plansChange in net funded status of benefit plans— — Change in net funded status of benefit plans— — 
Ending balanceEnding balance9.8 232.4 Ending balance(347.4)(202.6)
Treasury stock, at costTreasury stock, at costTreasury stock, at cost
Beginning balanceBeginning balance(493.4)(488.1)Beginning balance(517.4)(493.4)
Acquisition of shares(2.2)(1.5)
Treasury stock acquired - share repurchase authorizationTreasury stock acquired - share repurchase authorization(4.4)(2.2)
Ending balanceEnding balance(495.6)(489.6)Ending balance(521.8)(495.6)
Shareholders' equity at end of periodShareholders' equity at end of period$1,536.8 $1,692.9 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.
















SeeThe accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation4Quarterly Report onFirst Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ in millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2022202120232022
Cash flows - operating activitiesCash flows - operating activitiesCash flows - operating activities
Net incomeNet income$14.5 $39.3 Net income$6.6 $20.3 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Net investment losses Net investment losses15.5 9.0  Net investment losses3.9 15.5 
Depreciation and intangible asset amortization Depreciation and intangible asset amortization3.8 5.5  Depreciation and intangible asset amortization6.6 3.8 
Share-based compensation expense Share-based compensation expense2.1 2.2  Share-based compensation expense2.0 2.1 
Income from equity method investments, net of dividends or distributions1.6 (6.8)
Loss from equity method investments, net of dividends or distributions
Loss from equity method investments, net of dividends or distributions
10.0 1.6 
Changes in: Changes in: Changes in:
Accrued investment income(4.5)(5.0)
Insurance liabilities Insurance liabilities450.5 80.8  Insurance liabilities55.8 367.7 
Amounts due under reinsurance agreements Amounts due under reinsurance agreements(357.7)(4.0) Amounts due under reinsurance agreements0.3 (333.0)
Income tax liabilities Income tax liabilities3.4 8.9  Income tax liabilities(9.9)54.5 
Other operating assets and liabilities Other operating assets and liabilities(31.0)9.0  Other operating assets and liabilities5.4 (40.1)
Other(2.5)3.1 
Other, net Other, net5.7 3.3 
Net cash provided by operating activitiesNet cash provided by operating activities95.7 142.0 Net cash provided by operating activities86.4 95.7 
Cash flows - investing activitiesCash flows - investing activities  Cash flows - investing activities  
Fixed maturity securitiesFixed maturity securities  Fixed maturity securities  
PurchasesPurchases(397.4)(478.4)Purchases(185.5)(397.4)
SalesSales168.3 95.5 Sales62.7 168.3 
Maturities, paydowns, calls and redemptionsMaturities, paydowns, calls and redemptions234.4 176.3 Maturities, paydowns, calls and redemptions73.7 234.4 
Equity securitiesEquity securitiesEquity securities
PurchasesPurchases(1.1)(28.4)Purchases(1.1)(1.1)
Sales and repaymentsSales and repayments6.8 0.4 Sales and repayments— 6.8 
Limited partnership interestsLimited partnership interestsLimited partnership interests
PurchasesPurchases(111.0)(58.6)Purchases(75.1)(111.0)
SalesSales20.5 13.7 Sales3.4 20.5 
Change in short-term and other investments, netChange in short-term and other investments, net26.2 40.0 Change in short-term and other investments, net26.6 26.2 
Acquisition of business, net of cash acquiredAcquisition of business, net of cash acquired(164.4)— Acquisition of business, net of cash acquired— (164.4)
Net cash used in investing activitiesNet cash used in investing activities(217.7)(239.5)Net cash used in investing activities(95.3)(217.7)
Cash flows - financing activitiesCash flows - financing activities  Cash flows - financing activities  
Dividends paid to shareholdersDividends paid to shareholders(13.2)(12.9)Dividends paid to shareholders(13.5)(13.2)
Acquisition of treasury stock(2.2)(1.5)
Proceeds from exercise of stock options— 0.3 
Treasury stock acquiredTreasury stock acquired(4.4)(2.2)
Withholding tax payments on RSUs tenderedWithholding tax payments on RSUs tendered(0.9)(1.7)Withholding tax payments on RSUs tendered(1.7)(0.9)
Annuity contracts: variable, fixed and FHLB funding agreements:Annuity contracts: variable, fixed and FHLB funding agreements:  Annuity contracts: variable, fixed and FHLB funding agreements:  
Deposits182.8 235.8 
Benefits, withdrawals and net transfers to
Separate Account (variable annuity) assets
(117.9)(101.1)
Deposits including advances from FHLB funding agreementsDeposits including advances from FHLB funding agreements278.7 182.8 
Benefits, withdrawals and net transfers to
Separate Account variable annuity assets
Benefits, withdrawals and net transfers to
Separate Account variable annuity assets
(152.2)(117.9)
Repayment of FHLB funding agreements Repayment of FHLB funding agreements(85.0)— 
Life policy accounts:Life policy accounts: Life policy accounts: 
DepositsDeposits2.2 2.2 Deposits3.4 2.2 
Withdrawals and surrendersWithdrawals and surrenders(0.8)(1.1)Withdrawals and surrenders(1.1)(0.8)
Change in deposit asset on reinsuranceChange in deposit asset on reinsurance(14.2)(2.8)Change in deposit asset on reinsurance(24.0)(14.2)
Change in book overdraftsChange in book overdrafts1.6 (2.6)Change in book overdrafts(6.7)1.6 
Net cash provided by financing activities37.4 114.6 
Net (decrease) increase in cash(84.6)17.1 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(6.5)37.4 
Net decrease in cashNet decrease in cash(15.4)(84.6)
Cash at beginning of periodCash at beginning of period133.7 22.3 Cash at beginning of period42.8 133.7 
Cash at end of periodCash at end of period$49.1 $39.4 Cash at end of period$27.4 $49.1 

See



The accompanying Notes toare an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation5Quarterly Report onFirst Quarter 2023 Form 10-Q



HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - Basis of Presentation and Significant Accounting Policies
Business
Horace Mann Educators Corporation is a holding company for insurance subsidiaries that market and underwrite personal lines of property and casualty insurance products (primarily personal lines of auto and property insurance), life insurance products, retirement products (primarily tax-qualified fixed and variable annuities), voluntary supplementalworksite direct insurance products (primarily cancer, heart, hospital, supplemental disability and accident coverages), and employer-sponsored group benefit products (primarily short-term and long-term group disability, and group term life coverages), primarily to K-12 teachers, administrators and other employees of public schools and their families (collectively, HMEC, the Company or Horace Mann).
As described more fullyThe Company conducts and manages its business 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 operatingfour reporting segments: (1) Property & Casualty, (2) Life & Retirement, and (3) Supplemental & Group Benefits (which includes the results of Madison National).and (4) Corporate & Other.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in conformity with GAAP, but are not required for interim reporting purposes, have been omitted. These Consolidated Financial Statements and Notes thereto should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Part II - Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022. The results of operations for the three months ended March 31, 20222023 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 statementsunaudited and reflect all adjustments (generally consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Part II - Item 8, Note 1 of the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022.
The Company has reclassified the presentation of certain prior period information to conform to the current year's presentation.
Consolidation
All intercompany transactions and balances between HMEC and its subsidiaries and affiliates have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the reporting date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The most significant critical accounting estimates include valuation of hard-to-value fixed maturity securities, evaluation of credit loss impairments for fixed maturity securities, evaluation of goodwill and intangible assets for impairment, valuation of annuity and life deferred policy acquisition costs, valuation of liabilities for property and casualty unpaid claims and claim expenses,expense reserves, valuation of certain investment contractsliabilities for group benefits unpaid claims and claim expense reserves, valuation of future policy benefit reserves and policyholders' account balances and valuation of assets acquired and liabilities assumedlong-duration insurance contracts under purchasethe new accounting and purchase price allocation.guidance in ASU 2018-12.

Horace Mann Educators Corporation6Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Future Adoption of New Accounting Standards
Accounting for Long-Duration Insurance Contracts
In August 2018, the FASB issued targeted improvementsASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the accountingAccounting 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 guidancerequirements for long-duration insurance contracts. Under the new guidance, theASU 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 for traditional insurance contracts will be required to be updated(LFPB) at least annually, with changes recognized as a benefit expense (i.e., assumptions will no longer be locked-in).
Insurance entities will be requiredand to use a standardupdate the discount rate assumption quarterly, (2) a requirement to measure the liabilities that will be equivalent to the yield from a high-quality bond. The new guidance also changes theaccount for market risk benefits (MRBs) at fair value, (3) simplified amortization offor 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(4) enhanced financial statement presentation and disclosures. ASU 2018-12 became effective for the Company for interim and 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
Effective January 1, 2022, the Company acquired all the equity interests in Madison National pursuant to a Stock Purchase Agreement (Agreement) dated as of July 14, 2021. The adjusted purchase price of the transaction was $172.3 million. The seller of Madison National has a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. The adjusted purchase price is subject to finalization within 165 days of the acquisition 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 operating segment titled "Supplemental & Group Benefits". The amount of revenues and pretax loss for Madison National since the date of 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 $1.2 million non-cash impact from amortization of intangible assets under purchase accounting), respectively.2022.
The Company has not yet completedadopted ASU 2018-12 for LFPB and DAC on a modified retrospective basis such that those balances were adjusted to conform to ASU 2018-12 on January 1, 2021. The Company adopted ASU 2018-12 for MRBs on a full retrospective basis, using hindsight where necessary. For variable annuities, actuarial assumptions (mortality, lapse, and premium payment patterns) used to measure MRBs were unobservable for years prior to 2006 and thus, hindsight was used to determine relevant assumptions for transition purposes. The factors used in applying hindsight included internal experience studies, the processhistorical economic environment, actual performance of estimating the fair valuebusiness, and relevant industry information.
The following table summarizes the balance of Madison National assets acquired and changes in LFPB on January 1, 2021 due to adoption of ASU 2018-12. The impact of shifts between deferred profit liabilities assumed, including, but not limited to, intangible assets, policy reserves(DPL) and certain tax-related balances. Accordingly,LFPB for limited-payment products are presented as offsetting line items in the Company’s preliminary estimateseffect of net premiums exceeding gross premiums and the allocationeffect of decrease/increase of DPL.
($ 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 
(1)     As of January 1, 2021, the adjusted purchase price to the assets acquirednet LFPB for Supplemental Health was $163.5 million for cancer, $31.2 million for accident, $32.0 million for disability and liabilities assumed are subject to change as the Company completes the process. In accordance with Accounting Standards Codification (ASC) 805, Business Combinations, changes if any, to the preliminary estimates and allocation of the adjusted purchase price will be reported in the Company’s financial statements as an adjustment to the opening balance sheet. Based on the Company’s preliminary allocation of the adjusted purchase price, the fair values of the assets acquired and liabilities assumed were as follows:$188.8 million for other supplemental health policies.











Horace Mann Educators Corporation7Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 21 - AcquisitionsBasis of Presentation and Significant Accounting Policies (continued)
The following table summarizes the balance of and changes in DAC on January 1, 2021 due to adoption of ASU 2018-12:
($ in millions)
Whole 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)
Assets:
InvestmentsBalance, end of year December 31, 2020$90.40.1 
CashAdjustment for the difference between carrying amount and short-term investmentsfair value, except for the difference due to instrument-specific credit risk123.46.8 
Reinsurance recoverableAdjustment for cumulative effect of changes in the instrument-specific credit risk at issuance356.0 
Intangible assets(1)
59.4 
Other assets23.2 
Liabilities:
Investment contract and policy reserves274.5 
Unpaid claims and claim expenses48.2 
Unearned premiums1.5 
Other policyholder funds152.8 
Other liabilities15.91.7 
Total identifiable net assets acquiredadjustment for the difference between carrying amount and fair value159.58.5 
GoodwillBalance, beginning of year January 1, 2021(2)
12.88.6 
Purchase priceLess: Reinsurance recoverable— 
Balance, beginning of year January 1, 2021, net of reinsurance$172.38.6 
(1)    Intangible assets consistThe following table presents the effect of the after-tax transition adjustments on consolidated shareholders' equity due to adoption of ASU 2018:
($ in millions)January 1, 2021
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 the discount rate at January 1, 2021. At transition, the Company had several instances, at the cohort level, where net premiums exceeded gross premiums which were recorded as an adjustment to retained earnings. For DAC, the Company removed shadow adjustments previously recorded in accumulated other comprehensive income (loss) (i.e., AOCI) for the impact of net unrealized investment gains (losses) that were included in the pre-ASU 2018-12 expected gross profits amortization calculation as of the transition date.
For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date. The remaining difference between the fair value and carrying amount of MRBs at transition, excluding the amounts recorded in AOCI, was recorded as an adjustment to retained earnings as of the transition date.
Horace Mann Educators Corporation8First Quarter 2023 Form 10-Q



NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
While the requirements of ASU 2018-12 represent a significant change from legacy GAAP, the adoption of ASU 2018-12 did not impact cash flows on the Company’s policies, or the underlying economics of the Company’s business. The Company's insurance subsidiaries' risk-based capital amounts and ratios, and regulatory dividends are not impacted as the National Association of Insurance Commissioners (NAIC) rejected ASU 2018-12.
See Note 11 for summarization of the effects of adopting ASU 2018-12 on the Company's 2022 Consolidated Financial Statements.
Significant Accounting Policies
The following significant accounting policy has been added to reflect the Company's adoption of ASU 2018-12 as described above.
Liability for Future Policy Benefits

LFPB, which is the present value of business acquired,estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of customer relationshipsestimated 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 state licenses.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 intangible assetsliability 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 amortizablelocked-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 estimated livesmarket-observable yields.
Deferred Profit Liability

For limited-payment products, gross premiums received in excess of onenet 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 ten years. See Note 5insurance in force for further information.life insurance contracts and expected future benefit payments for annuity contracts. Interest is accreted on the balance of DPL using the discount rate determined at contract issuance. The Company reviews and updates its estimates of cash flows for DPL at the same time as the estimates of cash flows for the liability for future policy benefits. When cash flows are updated, the updated estimates are used to recalculate DPL at contract issuance. The recalculated DPL as of the beginning of the current reporting period is compared to the carrying amount of DPL as of the beginning of the current reporting period, and any difference is recognized as either a charge or credit to Net premiums and contract charges earned presented in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Horace Mann Educators Corporation9First Quarter 2023 Form 10-Q



NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
DPL is recognized as a component of the Investment contract and future policy benefit reserves presented in the Consolidated Balance Sheets.
Market Risk Benefits

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

DAC are costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts. Such costs include the incremental direct costs of contract acquisition, such as sales commissions; the portion of employees' total compensation and payroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing, and processing policies for contracts that have actually been acquired; and other costs related directly to acquisition activities that would not have been incurred if the contract had not been acquired.
Contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. DAC is amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. For all life insurance products, the constant level basis used is face amount in force. For all deferred annuity products, the constant level basis used is the deposit amount in force. The constant level bases used for amortization are projected using mortality and lapse assumptions that are based on the Company's experience, industry data, and other factors and are consistent with those used for LFPB. If those projected assumptions change in future periods, they will be reflected in the cohort level amortization basis at that time. Unexpected terminations, due to mortality and lapse experience higher than expected, are recognized in the current period as a reduction of the capitalized balances.
Amortization of DAC is recognized as DAC amortization expense presented in the Consolidated Statements of Operations and Comprehensive Income (Loss). The DAC balance is reduced for actual experience in excess of expected experience. Changes in future estimates are recognized prospectively over the remaining expected contract term.
Deferred sales inducements (DSIs) are contract features that are intended to attract new customers or to persuade existing customers to keep their current policy. DSIs may be deferred if the Company can demonstrate that the deferred sales inducement amounts are both incremental to the amounts Company credits on similar contracts without sales inducements and the amounts are higher than the contract's expected ongoing crediting rates for periods after the inducement. Day-one bonuses and persistency bonuses generally meet the criteria to be deferred. DSIs are amortized using the same methodology and assumptions used to amortize DAC.

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





Horace Mann Educators Corporation10First Quarter 2023 Form 10-Q



NOTE 32 - Investments
Net Investment Income
The components of net investment income for the following periods were as follows:
($ in millions)($ in millions)Three Months Ended
March 31,
($ in millions)Three Months Ended
March 31,
2022202120232022
Fixed maturity securitiesFixed maturity securities$58.6 $58.0 Fixed maturity securities$67.7 $58.6 
Equity securitiesEquity securities1.3 1.1 Equity securities2.7 1.3 
Limited partnership interestsLimited partnership interests13.0 11.3 Limited partnership interests4.4 13.0 
Short-term and other investmentsShort-term and other investments2.7 2.8 Short-term and other investments3.5 2.7 
Investment expensesInvestment expenses(2.6)(2.1)Investment expenses(3.6)(2.6)
Net investment income - investment portfolioNet investment income - investment portfolio73.0 71.1 Net investment income - investment portfolio74.7 73.0 
Investment income - deposit asset on reinsuranceInvestment income - deposit asset on reinsurance24.9 24.4 Investment income - deposit asset on reinsurance25.7 24.9 
Total net investment incomeTotal net investment income$97.9 $95.5 Total net investment income$100.4 $97.9 
Net Investment Losses
Net investment gains (losses) gains for the following periods were as follows:
($ in millions)($ in millions)Three Months Ended
March 31,
($ in millions)Three Months Ended
March 31,
2022202120232022
Fixed maturity securitiesFixed maturity securities$(2.3)$(5.4)Fixed maturity securities$(2.4)$(2.3)
Equity securitiesEquity securities(15.5)(2.7)Equity securities(1.0)(15.5)
Short-term investments and otherShort-term investments and other2.3 (0.9)Short-term investments and other(0.5)2.3 
Net investment lossesNet investment losses$(15.5)$(9.0)Net investment losses$(3.9)$(15.5)

The Company, from time to time, sells fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer specificissuer-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 Corporation811Quarterly Report on Form 10-Q



NOTE 32 - Investments (continued)
Net Investment Losses by Transaction Type
The following table reconciles net investment losses by transaction type:
($ in millions)Three Months Ended
March 31,
20222021
Credit loss impairments(1)
$(0.9)$(1.1)
Intent-to-sell impairments(0.9)(2.1)
Total impairments on investments recognized in net income(1.8)(3.2)
Sales and other, net1.1 (2.1)
Change in fair value - equity securities(17.1)(2.8)
Change in fair value and losses realized
on settlements - derivatives
2.3 (0.9)
Net investment losses$(15.5)$(9.0)
(1)    For the three months ended March 31, 2022 and 2021, the Company recognized a valuation allowance of $0.9 million and $1.1 million, respectively, for credit loss impairments with respect to fixed maturity securities available for sale.
Allowance for Credit Loss Impairments on Fixed Maturity Securities
The following table presents changes in the allowance for credit loss impairments on fixed maturity securities classified as available for sale for the category of other asset-backed securities (no other categories of fixed maturity securities have an allowance for credit loss impairments):
($ in millions)Three Months Ended
March 31,
20222021
Beginning balance$7.7 $— 
Credit losses on fixed maturity securities for which credit losses were not previously reported— 1.1 
Net increase related to credit losses previously reported0.9 — 
Reduction of credit allowances related to sales— — 
Write-offs(0.3)— 
Ending balance$8.3 $1.1 

Horace Mann Educators Corporation9Quarterly Report on Form 10-Q



NOTE 3 - 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 $8.3 
Fixed Maturity Securities
The Company's investment portfolio is comprised primarily of fixed maturity securities. Amortized cost, net, gross unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in millions)($ in millions)Amortized
Cost, net
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
($ in millions)Amortized
Cost, net
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
March 31, 2022
March 31, 2023March 31, 2023
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
U.S. Government and federally
sponsored agency obligations:(1)
U.S. Government and federally
sponsored agency obligations:(1)
U.S. Government and federally
sponsored agency obligations:(1)
Mortgage-backed securitiesMortgage-backed securities$613.4 $15.2 $13.1 $615.5 Mortgage-backed securities$637.6 $2.0 $55.6 $584.0 
Other, including U.S. Treasury securitiesOther, including U.S. Treasury securities372.5 11.5 20.9 363.1 Other, including U.S. Treasury securities424.4 1.2 60.6 365.0 
Municipal bondsMunicipal bonds1,530.9 72.2 23.6 1,579.5 Municipal bonds1,363.0 26.3 98.5 1,290.8 
Foreign government bondsForeign government bonds41.3 1.4 0.1 42.6 Foreign government bonds34.1 — 1.5 32.6 
Corporate bondsCorporate bonds2,308.1 63.4 75.5 2,296.0 Corporate bonds2,155.4 17.2 229.1 1,943.5 
Other asset-backed securitiesOther asset-backed securities1,104.5 7.1 20.9 1,090.7 Other asset-backed securities1,188.8 2.9 57.6 1,134.1 
TotalsTotals$5,970.7 $170.8 $154.1 $5,987.4 Totals$5,803.3 $49.6 $502.9 $5,350.0 
December 31, 2021
December 31, 2022December 31, 2022
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
U.S. Government and federally
sponsored agency obligations:(1)
U.S. Government and federally
sponsored agency obligations:(1)
U.S. Government and federally
sponsored agency obligations:(1)
Mortgage-backed securitiesMortgage-backed securities$612.1 $51.9 $1.5 $662.5 Mortgage-backed securities$638.2 $1.3 $69.1 $570.4 
Other, including U.S. Treasury securitiesOther, including U.S. Treasury securities342.5 27.7 4.3 365.9 Other, including U.S. Treasury securities410.0 0.5 67.8 342.7 
Municipal bondsMunicipal bonds1,519.7 184.4 0.7 1,703.4 Municipal bonds1,380.9 16.9 128.1 1,269.7 
Foreign government bondsForeign government bonds40.2 3.4 — 43.6 Foreign government bonds35.1 — 1.6 33.5 
Corporate bondsCorporate bonds2,217.7 176.2 5.2 2,388.7 Corporate bonds2,161.2 12.7 272.2 1,901.7 
Other asset-backed securitiesOther asset-backed securities1,065.5 16.6 6.9 1,075.2 Other asset-backed securities1,131.5 3.6 68.1 1,067.0 
TotalsTotals$5,797.7 $460.2 $18.6 $6,239.3 Totals$5,756.9 $35.0 $606.9 $5,185.0 
(1)    Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $346.8$341.3 million and $376.7$330.8 million; Federal Home Loan Mortgage Corporation (FHLMC) of $303.7$279.3 million and $326.5$273.3 million; and Government National Mortgage Association (GNMA) of $100.7$86.8 million and $112.1$86.2 million as of March 31, 20222023 and December 31, 2021,2022, respectively.
Horace Mann Educators Corporation1012Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 32 - Investments (continued)
The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position atas of March 31, 20222023 and December 31, 2021,2022, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses atas of March 31, 20222023 — 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 March 31, 2022,2023, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before an anticipated recovery in value. There has been a significant increase in interest rates since January 1, 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 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 the Company's 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. The Company's investment portfolios generated sizable unrealized losses as a result of sharp increases in interest rates. Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any credit loss impairments as of March 31, 2022.2023.
($ in millions)($ in millions)12 Months or LessMore than 12 MonthsTotal($ in millions)12 Months or LessMore than 12 MonthsTotal
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
March 31, 2022
March 31, 2023March 31, 2023
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securitiesMortgage-backed securities$238.4 $10.7 $11.0 $2.4 $249.4 $13.1 Mortgage-backed securities$305.4 $22.1 $202.0 $33.5 $507.4 $55.6 
OtherOther116.2 9.2 50.4 11.7 166.6 20.9 Other167.9 12.2 137.3 48.4 305.2 60.6 
Municipal bondsMunicipal bonds456.0 23.4 1.4 0.2 457.4 23.6 Municipal bonds509.6 28.9 363.3 69.6 872.9 98.5 
Foreign government bondsForeign government bonds1.5 0.1 — — 1.5 0.1 Foreign government bonds31.2 1.4 0.4 0.1 31.6 1.5 
Corporate bondsCorporate bonds1,012.5 66.7 74.9 8.8 1,087.4 75.5 Corporate bonds684.9 51.4 781.6 177.7 1,466.5 229.1 
Other asset-backed securitiesOther asset-backed securities637.5 14.5 160.2 6.4 797.7 20.9 Other asset-backed securities339.3 14.1 663.0 43.5 1,002.3 57.6 
TotalTotal$2,462.1 $124.6 $297.9 $29.5 $2,760.0 $154.1 Total$2,038.3 $130.1 $2,147.6 $372.8 $4,185.9 $502.9 
Number of positions with a
gross unrealized loss
Number of positions with a
gross unrealized loss
1,756 189 1,945 
Number of positions with a
gross unrealized loss
1,295 1,626 2,921 
Fair value as a percentage of total fixed
maturity securities at fair value
Fair value as a percentage of total fixed
maturity securities at fair value
41.1 %5.0 %46.1 %
Fair value as a percentage of total fixed
maturity securities at fair value
38.1 %40.1 %78.2 %
December 31, 2021
December 31, 2022December 31, 2022
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securitiesMortgage-backed securities$67.4 $1.3 $3.9 $0.2 $71.3 $1.5 Mortgage-backed securities$458.3 $54.4 $52.6 $14.7 $510.9 $69.1 
OtherOther59.5 1.7 35.1 2.6 94.6 4.3 Other242.7 34.1 65.8 33.7 308.5 67.8 
Municipal bondsMunicipal bonds56.8 0.7 0.6 — 57.4 0.7 Municipal bonds911.6 113.7 42.2 14.4 953.8 128.1 
Foreign government bondsForeign government bonds— — — — — — Foreign government bonds32.7 1.4 0.4 0.2 33.1 1.6 
Corporate bondsCorporate bonds220.7 3.8 44.1 1.4 264.8 5.2 Corporate bonds1,345.0 221.1 148.9 51.1 1,493.9 272.2 
Other asset-backed securitiesOther asset-backed securities379.0 3.8 128.2 3.1 507.2 6.9 Other asset-backed securities543.4 37.1 424.3 31.0 967.7 68.1 
TotalTotal$783.4 $11.3 $211.9 $7.3 $995.3 $18.6 Total$3,533.7 $461.8 $734.2 $145.1 $4,267.9 $606.9 
Number of positions with a
gross unrealized loss
Number of positions with a
gross unrealized loss
516 122 638 
Number of positions with a
gross unrealized loss
2,515 587 3,102 
Fair value as a percentage of total fixed
maturity securities at fair value
Fair value as a percentage of total fixed
maturity securities at fair value
12.6 %3.4 %16.0 %
Fair value as a percentage of total fixed
maturity securities at fair value
68.2 %14.2 %82.4 %



Horace Mann Educators Corporation13First Quarter 2023 Form 10-Q



NOTE 2 - Investments (continued)
With regards to fixed maturity securities that had gross unrealized losses more than 12 months, the number of positions by their respective credit ratings were as follows:
Number of Positions
March 31, 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 securities with an investment grade rating represented 90.6%96.3% of the gross unrealized losses as of March 31, 2022.2023. 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.
Horace Mann Educators Corporation11Quarterly Report on Form 10-Q



NOTE 3 - Investments (continued)
Maturities of Fixed Maturity Securities
The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in millions)($ in millions)Percent of Total Fair ValueMarch 31, 2022($ in millions)Percent of Total Fair ValueMarch 31, 2023
March 31, 2022December 31, 2021Fair
Value
Amortized
Cost, net
March 31, 2023December 31, 2022Fair
Value
Amortized
Cost, net
Estimated expected maturity:Estimated expected maturity:Estimated expected maturity:
Due in 1 year or lessDue in 1 year or less4.1 %4.0 %$248.0 $248.0 Due in 1 year or less4.7 %4.4 %$249.5 $256.3 
Due after 1 year through 5 yearsDue after 1 year through 5 years27.4 27.0 1,638.0 1,628.4 Due after 1 year through 5 years26.0 26.3 1,392.5 1,441.9 
Due after 5 years through 10 yearsDue after 5 years through 10 years27.2 27.7 1,626.1 1,599.9 Due after 5 years through 10 years28.1 27.9 1,501.0 1,581.4 
Due after 10 years through 20 yearsDue after 10 years through 20 years24.1 23.9 1,443.1 1,429.5 Due after 10 years through 20 years25.0 25.0 1,342.2 1,482.3 
Due after 20 yearsDue after 20 years17.2 17.4 1,032.2 1,064.9 Due after 20 years16.2 16.4 864.8 1,041.4 
TotalTotal100.0 %100.0 %$5,987.4 $5,970.7 Total100.0 %100.0 %$5,350.0 $5,803.3 
Average option-adjusted duration, in yearsAverage option-adjusted duration, in years6.66.7Average option-adjusted duration, in years6.36.4










Horace Mann Educators Corporation14First Quarter 2023 Form 10-Q



NOTE 2 - Investments (continued)
Sales of Fixed Maturity and Equity Securities
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were as follows:
($ in millions)($ in millions)Three Months Ended
March 31,
($ in millions)Three Months Ended
March 31,
2022202120232022
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
Proceeds receivedProceeds received$168.3 $95.5 Proceeds received$62.7 $168.3 
Gross gains realizedGross gains realized2.4 1.2 Gross gains realized0.3 2.4 
Gross losses realizedGross losses realized(2.9)(3.4)Gross losses realized(2.7)(2.9)
Equity securitiesEquity securitiesEquity securities
Proceeds receivedProceeds received$5.8 $0.4 Proceeds received$— $5.8 
Gross gains realizedGross gains realized1.7 0.1 Gross gains realized— 1.7 
Gross losses realizedGross losses realized(0.1)— Gross losses realized— (0.1)

Net Unrealized Investment Gains (Losses) on Fixed Maturity Securities
The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in accumulated other comprehensive income (AOCI), before the impact of DAC:AOCI:
($ in millions)Three Months Ended
March 31,
20222021
Net unrealized investment gains (losses)
   on fixed maturity securities, net of tax
Beginning of period$348.9 $439.8 
Change in net unrealized investment gains
   (losses) on fixed maturity securities
(349.8)(159.0)
Reclassification of net investment (gains) losses
   on fixed maturity securities to net income
14.1 6.4 
End of period$13.2 $287.2 
Horace Mann Educators Corporation12Quarterly Report on Form 10-Q



NOTE 3 - Investments (continued)
($ 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)$13.0 
Limited Partnership Interests
Investments in limited partnership interests are accounted for using the equity method of accounting (EMA) and include interests in commercial mortgage loan funds, private equity funds, infrastructure debtequity funds, real estate equity funds, infrastructure equitydebt funds and other funds. Principal factors influencing carrying amount appreciation or declinedepreciation include operating performance, comparable public company earnings multiples, capitalization rates and the economic environment. The Company recognizes an impairment loss for EMA limited partnership interests when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. The carrying amounts of EMA limited partnership interests were as follows:
($ in millions)($ in millions)($ in millions)
March 31, 2022December 31, 2021March 31, 2023December 31, 2022
Commercial mortgage loan fundsCommercial mortgage loan funds$429.2 $346.8 Commercial mortgage loan funds$623.7 $593.6 
Private equity fundsPrivate equity funds70.2 74.0 Private equity funds77.7 76.3 
Infrastructure equity fundsInfrastructure equity funds73.2 72.0 
Real estate equity fundsReal estate equity funds87.7 71.3 
Infrastructure debt fundsInfrastructure debt funds62.8 62.4 Infrastructure debt funds62.6 60.0 
Infrastructure equity funds67.2 58.3 
Other funds(1)
Other funds(1)
172.5 171.3 
Other funds(1)
120.5 110.5 
TotalTotal$801.9 $712.8 Total$1,045.4 $983.7 
(1)Other funds consist primarily of limited partnership interests in hedge funds, real estate equity and corporate mezzanine, venture capital and private credit funds.
Horace Mann Educators Corporation15First Quarter 2023 Form 10-Q



NOTE 2 - Investments (continued)
Offsetting of Assets and Liabilities
The Company's derivatives are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement 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 also subject to enforceable master netting arrangements but there was no offsetting in their presentation in the Company’s Consolidated Balance Sheets. Information regarding the Company's derivatives is contained in Part II - Item 8, Note 5 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022. The following table presents instruments that were subject to a master netting arrangement for the Company.
($ in millions)($ 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
($ 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
Gross
Amounts
Financial
Instruments
Cash
Collateral
Received
Net
Amount
March 31, 2022
March 31, 2023March 31, 2023
Asset derivatives:Asset derivatives:Asset derivatives:
Free-standing derivativesFree-standing derivatives$6.0 $— $6.0 $1.5 $5.2 $(0.7)Free-standing derivatives$9.2 $— $9.2 $— $8.3 $0.9 
December 31, 2021
December 31, 2022December 31, 2022
Asset derivatives:Asset derivatives:Asset derivatives:
Free-standing derivativesFree-standing derivatives$10.7 $— $10.7 $4.5 $6.4 $(0.2)Free-standing derivatives$6.8 $— $6.8 $— $5.9 $0.9 
DepositsReverse Repurchase Agreements
AtIn 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, 20222023 and $73.3 million as of December 31, 2022. The obligation for securities sold under reverse repurchase agreements was a net amount of $70.2 million as of March 31, 2023 and December 31, 2021,2022.
Deposits
As of March 31, 2023 and December 31, 2022, fixed maturity securities with a fair value of $29.1$29.0 million and $26.2$28.6 million, respectively, were on deposit with governmental agencies as required by law in various states for which the insurance subsidiaries of HMEC conduct business. In addition, atas of March 31, 20222023 and December 31, 2021,2022, fixed maturity securities with a fair value of $921.0$948.1 million and $870.1$860.4 million, respectively, were on deposit with the Federal Home Loan Bank of Chicago (FHLB) as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $847.5$869.5 million atas of March 31, 20222023 and $787.5$792.5 million atas of December 31, 2021.2022. The deposited securities are reported as Fixed maturity securities on the Company’s Consolidated Balance Sheets.



Horace Mann Educators Corporation13Quarterly Report on Form 10-Q



NOTE 43 - Fair Value of Financial Instruments

The Company is required to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values of the Company’s insurance contracts other than annuity contracts (which are investment contracts) and EMA limited partnership interests are not required to be disclosed. However, the estimated fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk through 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 each reporting date is included in Part II - Item 8, Note 4 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Horace Mann Educators Corporation1416Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 43 - Fair Value of Financial Instruments (continued)
Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Financial Instruments Measured and Carried at Fair Value on a Recurring Basis
The following table presents the Company's fair value hierarchy for financial assets and financial liabilities measured and carried at fair value on a recurring basis. During the three months ended March 31, 20222023 and 2021,2022, there were no transfers between Level 1 and Level 2. AtAs of March 31, 2022,2023, Level 3 invested assets comprised 5.9%8.0% of the Company’s total investment portfolio at fair value.
($ in millions)($ in millions)Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
($ in millions)Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
Level 1Level 2Level 3 Level 1Level 2Level 3
March 31, 2022
March 31, 2023March 31, 2023
Financial AssetsFinancial Assets
InvestmentsInvestments
Fixed maturity securitiesFixed maturity securities
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securitiesMortgage-backed securities$584.0 $584.0 $— $581.4 $2.6 
Other, including U.S. Treasury securitiesOther, including U.S. Treasury securities364.8 364.8 38.5 326.3 — 
Municipal bondsMunicipal bonds1,290.9 1,290.9 — 1,235.5 55.4 
Foreign government bondsForeign government bonds32.6 32.6 — 32.6 — 
Corporate bondsCorporate bonds1,943.5 1,943.5 13.2 1,646.3 284.0 
Other asset-backed securitiesOther asset-backed securities1,134.2 1,134.2 — 1,032.2 102.0 
Total fixed maturity securitiesTotal fixed maturity securities5,350.0 5,350.0 51.7 4,854.3 444.0 
Equity securitiesEquity securities98.8 98.8 24.3 72.5 2.0 
Short-term investmentsShort-term investments75.0 75.0 75.0 — — 
Other investmentsOther investments41.8 41.8 — 41.8 — 
TotalsTotals$5,565.6 $5,565.6 $151.0 $4,968.6 $446.0 
Separate Account variable annuity assets(1)
Separate Account variable annuity assets(1)
$2,954.7 $2,954.7 $2,954.7 $— $— 
Financial LiabilitiesFinancial Liabilities
Investment contract and future policy benefit reserves, embedded derivativesInvestment contract and future policy benefit reserves, embedded derivatives$1.7 $1.7 $— $1.7 $— 
Other policyholder funds, embedded derivativesOther policyholder funds, embedded derivatives$89.9 $89.9 $— $— $89.9 
December 31, 2022December 31, 2022
Financial AssetsFinancial AssetsFinancial Assets
InvestmentsInvestmentsInvestments
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securitiesMortgage-backed securities$615.5 $615.5 $— $615.5 $— Mortgage-backed securities$570.4 $570.4 $— $567.8 $2.6 
Other, including U.S. Treasury securitiesOther, including U.S. Treasury securities363.1 363.1 25.2 337.9 — Other, including U.S. Treasury securities342.6 342.6 24.6 318.0 — 
Municipal bondsMunicipal bonds1,579.5 1,579.5 — 1,525.4 54.1 Municipal bonds1,269.7 1,269.7 — 1,215.3 54.4 
Foreign government bondsForeign government bonds42.6 42.6 — 42.6 — Foreign government bonds33.6 33.6 — 33.6 — 
Corporate bondsCorporate bonds2,296.0 2,296.0 14.0 2,056.0 226.0 Corporate bonds1,901.7 1,901.7 12.2 1,628.2 261.3 
Other asset-backed securitiesOther asset-backed securities1,090.7 1,090.7 — 1,000.9 89.8 Other asset-backed securities1,067.0 1,067.0 — 962.0 105.0 
Total fixed maturity securitiesTotal fixed maturity securities5,987.4 5,987.4 39.2 5,578.3 369.9 Total fixed maturity securities5,185.0 5,185.0 36.8 4,724.9 423.3 
Equity securitiesEquity securities126.8 126.8 25.6 99.9 1.3 Equity securities99.6 99.6 23.3 74.3 2.0 
Short-term investmentsShort-term investments126.9 126.9 122.0 4.9 — Short-term investments109.4 109.4 109.4 — — 
Other investmentsOther investments38.1 38.1 — 38.1 — Other investments38.6 38.6 — 38.6 — 
TotalsTotals$6,279.2 $6,279.2 $186.8 $5,721.2 $371.2 Totals$5,432.6 $5,432.6 $169.5 $4,837.8 $425.3 
Separate Account (variable annuity) assets(1)
Separate Account (variable annuity) assets(1)
$3,221.9 $3,221.9 $3,221.9 $— $— 
Separate Account (variable annuity) assets(1)
$2,792.3 $2,792.3 $2,792.3 $— $— 
Financial LiabilitiesFinancial LiabilitiesFinancial Liabilities     
Investment contract and policy reserves,
embedded derivatives
$1.5 $1.5 $— $1.5 $— 
Investment contract and future policy benefit reserves, embedded derivativesInvestment contract and future policy benefit reserves, embedded derivatives$1.2 $1.2 $— $1.2 $— 
Other policyholder funds, embedded derivativesOther policyholder funds, embedded derivatives$99.1 $99.1 $— $— $99.1 Other policyholder funds, embedded derivatives$91.0 $91.0 $— $— $91.0 
December 31, 2021
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities$662.5 $662.5 $— $662.5 $— 
Other, including U.S. Treasury securities365.9 365.9 17.7 348.2 — 
Municipal bonds1,703.4 1,703.4 — 1,642.6 60.8 
Foreign government bonds43.6 43.6 — 43.6 — 
Corporate bonds2,388.7 2,388.7 14.9 2,163.5 210.3 
Other asset-backed securities1,075.2 1,075.2 — 976.3 98.9 
Total fixed maturity securities6,239.3 6,239.3 32.6 5,836.7 370.0 
Equity securities147.2 147.2 35.2 110.6 1.4 
Short-term investments157.8 157.8 157.8 — — 
Other investments43.6 43.6 — 43.6 — 
Totals$6,587.9 $6,587.9 $225.6 $5,990.9 $371.4 
Separate Account (variable annuity) assets(1)
$3,441.0 $3,441.0 $3,441.0 $— $— 
Financial Liabilities     
Investment contract and policy reserves,
embedded derivatives
$2.1 $2.1 $— $2.1 $— 
Other policyholder funds, embedded derivatives$106.6 $106.6 $— $— $106.6 
(1)    Separate Account (variable annuity)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)variable annuity assets.
Horace Mann Educators Corporation1517Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 43 - Fair Value of Financial Instruments (continued)
Changes in Level 3 Fair Value Measurements
The reconciliation for all financial assets and financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows:
($ in millions)($ in millions)Financial Assets
Financial
Liabilities(1)
($ in millions)Financial Assets
Financial
Liabilities(1)
Municipal
Bonds
Corporate
Bonds

Mortgage-Backed
and Other
Asset-
Backed
Securities(2)
Total
Fixed
Maturity
Securities
Equity
Securities
Total
Beginning balance, January 1, 2023Beginning balance, January 1, 2023$54.4 $261.3 $107.6 $423.3 $2.0 $425.3 $91.0 
Transfers into Level 3(3)
Transfers into Level 3(3)
— 5.9 0.4 6.3 — 6.3 — 
Transfers out of Level 3(3)
Transfers out of Level 3(3)
— — — — — — — 
Total gains or lossesTotal gains or losses
Net investment gains (losses)
included in net income related
to financial assets
Net investment gains (losses)
included in net income related
to financial assets
— — — — — — — 
Net investment (gains) losses
included in net income related
to financial liabilities
Net investment (gains) losses
included in net income related
to financial liabilities
— — — — — — 0.2 
Net unrealized investment gains
(losses) included in OCI
Net unrealized investment gains
(losses) included in OCI
1.2 0.9 (0.4)1.7 — 1.7 — 
PurchasesPurchases— 19.0 0.2 19.2 — 19.2 — 
IssuancesIssuances— — — — — — 2.1 
SalesSales— (2.6)— (2.6)— (2.6)— 
SettlementsSettlements— — — — — — — 
Paydowns, maturities and distributionsPaydowns, maturities and distributions(0.2)(0.5)(3.2)(3.9)— (3.9)(3.4)
Ending balance, March 31, 2023Ending balance, March 31, 2023$55.4 $284.0 $104.6 $444.0 $2.0 $446.0 $89.9 
Municipal
Bonds
Corporate
Bonds

Mortgage-Backed
and Other
Asset-
Backed
Securities(2)
Total
Fixed
Maturity
Securities
Equity
Securities
Total
Beginning balance, January 1, 2022Beginning balance, January 1, 2022$60.8 $210.3 $98.9 $370.0 $1.4 $371.4 $106.6 Beginning balance, January 1, 2022$60.8 $210.3 $98.9 $370.0 $1.4 $371.4 $106.6 
Transfers into Level 3(3)
Transfers into Level 3(3)
— 67.5 4.7 72.2 — 72.2 — 
Transfers into Level 3(3)
— 67.5 4.7 72.2 — 72.2 — 
Transfers out of Level 3(3)
Transfers out of Level 3(3)
(3.2)— (4.8)(8.0)— (8.0)— 
Transfers out of Level 3(3)
(3.2)— (4.8)(8.0)— (8.0)— 
Total gains or lossesTotal gains or lossesTotal gains or losses
Net investment gains (losses)
included in net income related
to financial assets
Net investment gains (losses)
included in net income related
to financial assets
— — (0.9)(0.9)(0.1)(1.0)— 
Net investment gains (losses)
included in net income related
to financial assets
— — (0.9)(0.9)(0.1)(1.0)— 
Net investment (gains) losses
included in net income related
to financial liabilities
Net investment (gains) losses
included in net income related
to financial liabilities
— — — — — — (5.2)
Net investment (gains) losses
included in net income related
to financial liabilities
— — — — — — (5.2)
Net unrealized investment gains
(losses) included in OCI
Net unrealized investment gains
(losses) included in OCI
(3.4)(6.4)(4.1)(13.9)— (13.9)— 
Net unrealized investment gains
(losses) included in OCI
(3.4)(6.4)(4.1)(13.9)— (13.9)— 
PurchasesPurchases— — — — — — — Purchases— — — — — — — 
IssuancesIssuances— — — — — — 0.9 Issuances— — — — — — 0.9 
SalesSales— — — — — — — Sales— — — — — — — 
SettlementsSettlements— — — — — — — Settlements— — — — — — — 
Paydowns, maturities and distributionsPaydowns, maturities and distributions(0.1)(45.4)(4.0)(49.5)— (49.5)(3.2)Paydowns, maturities and distributions(0.1)(45.4)(4.0)(49.5)— (49.5)(3.2)
Ending balance, March 31, 2022Ending balance, March 31, 2022$54.1 $226.0 $89.8 $369.9 $1.3 $371.2 $99.1 Ending balance, March 31, 2022$54.1 $226.0 $89.8 $369.9 $1.3 $371.2 $99.1 
Beginning balance, January 1, 2021$59.6 $155.8 $139.4 $354.8 $0.3 $355.1 $104.5 
Transfers into Level 3(3)
— 24.1 3.1 27.2 — 27.2 — 
Transfers out of Level 3(3)
— (27.3)(5.9)(33.2)— (33.2)— 
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
— — — — — — 4.3 
Net unrealized investment gains
(losses) included in OCI
(0.9)(2.0)(0.3)(3.2)— (3.2)— 
Purchases— — — — — — — 
Issuances— — — — — — 0.7 
Sales— — — — — — — 
Settlements— — — — — — — 
Paydowns, maturities and distributions(0.1)(1.5)(4.1)(5.7)— (5.7)(1.9)
Ending balance, March 31, 2021$58.6 $149.1 $132.2 $339.9 $0.3 $340.2 $107.6 
(1)Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.
(2)Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.
(3)Transfers into and out of Level 3 during the three months ended March 31, 2023 and 2022 and 2021 were attributablerelated to changes in the availabilityprimary pricing source and changes in observability of observable marketexternal information for individual fixed maturity securities.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.

For the three months ended March 31, 2022,2023, the Company had no net investment losses ofand $1.0 million and noof net investment losses for the three months ended March 31, 2021,2022, that were included in net income and were primarily attributable to credit loss impairments for Level 3 financial assets. For the three months ended March 31, 2022,2023, the Company had net investment gainslosses of $0.2 million and $5.2 million of net investment gains for the three months ended March 31, 2022, that were included in net income and were attributable to changes in the fair value of Level 3 financial liabilities; for the three months ended March 31, 2021, the respective net investment losses were $4.3 million.liabilities.
Horace Mann Educators Corporation1618Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 43 - Fair Value of Financial Instruments (continued)
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized within Level 3.
($ in millions)
Financial
Assets
Fair Value at
March 31, 2022
Valuation Technique(s)Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate(1)
Municipal bonds$54.1 discounted cash flowoption adjusted spread360 - 409 bps
Corporate bonds226.0 discounted cash flow
N spread(2)
213 - 379 bps
discounted cash flow
T spread(3)
100 - 560 bps
discounted cash flowyield2.7% - 10.7%
discounted cash flowdiscount rate11.3% - 12.0%
market comparableoption adjusted spread12.5%
Mortgage-backed and other asset-backed securities89.8 vendor pricehaircut3.0% - 5.0%
discounted cash flowdiscount margin14.6%
discounted cash flowdiscount rate8.5% - 20.0%
discounted cash flowmedian comparable yield10.0% - 22.0%
market comparablemedian price$28.54 - $92.06
discounted cash flow
N spread(2)
213 - 379 bps
discounted cash flow
T spread(3)
100 - 560 bps
Equity securities1.3 Black-Scholesvolatilitylow 30.0% - high 42.1%
discounted cash flowvariable$100.00 - $121.95
($ 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)($ in millions)($ in millions)
Financial
Liabilities
Financial
Liabilities
Fair Value at
March 31, 2022
Valuation Technique(s)Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate(1)
Financial
Liabilities
Fair Value as of
March 31, 2023
Valuation Technique(s)Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate(1)
Derivatives
embedded in
fixed indexed annuity products
Derivatives
embedded in
fixed indexed annuity products
$99.1 discounted cash flowlapse rate5.3%Derivatives
embedded in
fixed indexed annuity products
$89.9 discounted cash flowlapse rate5.4%
mortality multiplier(4)
66.8%
mortality multiplier(4)
67.8%
  option budget 0.9% - 2.5%   option budget 0.9% - 3.5%
non-performance adjustment(5)
5.0%
non-performance adjustment(5)
5.0%
(1)    When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
(2)    "N spread" is the interpolated weighted average life point on the swap curve.
(3)    "T spread" is a specific point on the OTR curve.
(4)    Mortality multiplier is applied to the Annuity 2000 table.
(5)    Determined as a percentage of the risk-free rate.

Horace Mann Educators 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 Part II - Item 8, Note 4 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. Generally, valuation techniques for fixed maturity securities include spread pricing, matrix pricing and discounted cash flow methodologies; include inputs such as quoted prices for identical or similar securities that are less liquid; and are based on lower levels of trading activity than securities classified as Level 2. The valuation techniques and significant unobservable inputs used in the fair value measurement for equity securities classified as Level 3 use similar valuation techniques and significant unobservable inputs as those used for fixed maturity securities.
Horace Mann Educators Corporation17Quarterly Report on Form 10-Q



NOTE 4 - Fair Value of Financial Instruments (continued)
The sensitivity of the estimated fair values to changes in the significant unobservable inputs for fixed maturity and equity securities included in Level 3 include: benchmark yield, liquidity premium, estimated cash flows, prepayment and default speeds, spreads, weighted average life and credit rating. Significant spread widening in isolation will adversely impact the overall valuation, while significant tightening will lead to substantial valuation increases. Significant increases (decreases) in illiquidity premiums in isolation will result in substantially lower (higher) valuations. Significant increases (decreases) in expected default rates in isolation will result in substantially lower (higher) valuations.
Financial Instruments Not Carried at Fair Value
The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. These financial assets and financial liabilities are further described in Part II - Item 8, Note 4 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022. The following table presents the carrying amount, fair value and fair value hierarchy of these financial assets and financial liabilities.
($ in millions)Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
Level 1Level 2Level 3
March 31, 2022
Financial Assets
Other investments$172.0 $175.5 $— $— $175.5 
Deposit asset on reinsurance2,491.8 2,628.4 — — 2,628.4 
Financial Liabilities
Investment contract and policy reserves,
fixed annuity contracts
4,958.0 5,021.8 — — 5,021.8 
Investment contract and policy reserves,
account values on life contracts
106.9 116.9 — — 116.9 
Other policyholder funds910.7 910.7 — 842.9 67.8 
Short-term debt249.0 249.0 — — 249.0 
Long-term debt253.7 265.8 — 265.8 — 
December 31, 2021
Financial Assets
Other investments$148.8 $152.4 $— $— $152.4 
Deposit asset on reinsurance2,481.5 2,935.1 — — 2,935.1 
Financial Liabilities     
Investment contract and policy reserves,
fixed annuity contracts
4,941.3 5,004.9 — — 5,004.9 
Investment contract and policy reserves,
account values on life contracts
105.4 115.4 — — 115.4 
Other policyholder funds839.3 839.3 — 782.8 56.5 
Short-term debt249.0 249.0 — — 249.0 
Long-term debt253.6 277.4 — 277.4 — 











($ 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 — 


Horace Mann Educators Corporation1820Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 54 - Goodwill and Intangible AssetsShort-Duration Insurance Contracts
The Company conducts impairment testing for goodwill and intangible assets at least annually, or more often if events, changes or circumstances indicate that the carrying amount may not be recoverable. See Part II - Item 8, Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding impairment testing.
The carrying amount of goodwill by reporting unit as of March 31, 2022 was as follows:
($ in millions)December 31, 2021ImpairmentAcquisitionMarch 31, 2022
Property & Casualty$9.5 $— $— $9.5 
Life & Retirement14.4 — — 14.4 
Supplemental & Group Benefits19.6 — 12.8 32.4 
Total$43.5 $— $12.8 $56.3 

As of March 31, 2022, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of Benefit Consultants Group, Inc. (BCG) and NTA Life Enterprises, LLC (NTA) during 2019, as well as the acquisition of Madison National during 2022. The acquisitions of BCG, NTA and Madison National resulted in initial recognition of definite-lived intangible assets subject to amortization in the amounts of $14.1 million, $160.4 million and $56.5 million, respectively. As of March 31, 2022 the outstanding amounts of definite-lived intangible assets subject to amortization were as follows:
($ in millions)Weighted Average
Useful Life (in Years)
At inception:
Value of business acquired28$100.1 
Value of distribution acquired1754.0 
Value of agency relationships1417.0 
Value of customer relationships1059.9 
Total20231.0 
Accumulated amortization and impairments:
Value of business acquired(20.5)
Value of distribution acquired(12.4)
Value of agency relationships(6.7)
Value of customer relationships(4.5)
Total(44.1)
Net intangible assets subject to amortization:$186.9 
With regards to the definite-lived intangible assets in the table above, the value of business acquired intangible asset represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of distribution acquired intangible asset represents the present value of future business to be written by the existing agency force. The value of agency relationships intangible asset represents the present value of the commission overrides retained by NTA. The value of customer relationships intangible asset represents the present value of the expected profits from existing BCG customers in force at the date of acquisition as well as the present value of future business to be produced by Madison National's existing independent producing brokers. All of the aforementioned definite-lived intangible assets were valued using the income approach.
Horace Mann Educators Corporation19Quarterly Report on Form 10-Q



NOTE 5 - Goodwill and Intangible Assets (continued)
Estimated future amortization of the Company's definite-lived intangible assets were as follows:
($ in millions)
Year Ending December 31,
2022 (excluding the three months ended March 31, 2022)$12.6 
202315.5 
202415.1 
202514.8 
202614.5 
Thereafter114.4 
Total$186.9 
The value of business acquired intangible asset is being amortized by product based on the present value of future premiums to be received. The value of distribution acquired intangible asset is being amortized on a straight-line basis. The value of agency relationships intangible asset is being amortized based on the present value of future premiums to be received. The value of customer relationships intangible assets are being amortized based on the present value of future profits to be received for BCG and based on the present value of future premiums for Madison National.
Indefinite-lived intangible assets (not subject to amortization) as of March 31, 2022 were as follows:
($ in millions)
Trade names$7.9 
State licenses5.8 
Total$13.7 
The trade names intangible asset represents the present value of future savings accruing to NTA and BCG by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. The state licenses intangible asset represents the regulatory licenses held by NTA and Madison National that were valued using the cost approach.
Horace Mann Educators Corporation20Quarterly Report on Form 10-Q



NOTE 6 -Property & Casualty Unpaid Claims and Claim Expenses
Expense Reserves
The following table is a summary reconciliation of the beginning and ending Property & Casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after reinsurance) basis. The total net Property & Casualty insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations.Operations and Comprehensive Income (Loss). The end of the period gross reservereserves (before reinsurance)reinsurance balances and the reinsurance recoverable balancesbalances) are reflected on a gross basis in the Consolidated Balance Sheets.
($ in millions)($ in millions)Three Months Ended
March 31,
($ in millions)Three Months Ended
March 31,
2022202120232022
Property & CasualtyProperty & CasualtyProperty & Casualty
Beginning gross reserves(1)
Beginning gross reserves(1)
$362.4 $372.2 
Beginning gross reserves(1)
$388.7 $362.4 
Less: reinsurance recoverablesLess: reinsurance recoverables110.3 112.9 Less: reinsurance recoverables100.8 110.3 
Net reserves, beginning of period(2)(1)
Net reserves, beginning of period(2)(1)
252.1 259.3 
Net reserves, beginning of period(2)(1)
287.9 252.1 
Incurred claims and claim expenses:Incurred claims and claim expenses:Incurred claims and claim expenses:
Claims occurring in the current periodClaims occurring in the current period108.3 94.8 Claims occurring in the current period128.8 108.3 
Decrease in estimated reserves for claims occurring
in prior periods(3)
— — 
Increase (decrease) in estimated reserves for claims occurring in prior periods(2)
Increase (decrease) in estimated reserves for claims occurring in prior periods(2)
— — 
Total claims and claim expenses incurred(4)
Total claims and claim expenses incurred(4)
108.3 94.8 
Total claims and claim expenses incurred(4)
128.8 108.3 
Claims and claim expense payments
for claims occurring during:
Claims and claim expense payments
for claims occurring during:
Claims and claim expense payments
for claims occurring during:
Current periodCurrent period33.8 34.4 Current period40.6 33.8 
Prior periodsPrior periods78.4 58.1 Prior periods79.6 78.4 
Total claims and claim expense paymentsTotal claims and claim expense payments112.2 92.5 Total claims and claim expense payments120.2 112.2 
Net reserves, end of period(2)(1)
Net reserves, end of period(2)(1)
248.2 261.6 
Net reserves, end of period(2)(1)
296.5 248.2 
Plus: reinsurance recoverablesPlus: reinsurance recoverables108.0 112.5 Plus: reinsurance recoverables101.3 108.0 
Ending gross reserves(1)
Ending gross reserves(1)
$356.2 $374.1 
Ending gross reserves(1)
$397.8 $356.2 
(1)Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Life & Retirement and Supplemental & Group Benefits of $119.5 million and $78.4 million as of March 31, 2022 and 2021, respectively, in addition to Property & Casualty reserves.
(2)Reserves net of anticipatedexpected reinsurance recoverables.
(3)(2)Shows the amounts by which the Company decreasedincreased (decreased) its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs.costs - also known as prior years' reserve development.
(4)
Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts
There was no prior years' reserve development for LifeProperty & Retirement and Supplemental & Group Benefits of $68.7 million and $39.5 millionCasualty claims for the three months ended March 31, 2023 and 2022, respectively.
Group Benefits Unpaid Claims and 2021, respectively,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 addition to Property & Casualty amounts.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.

There were no net favorable development of total reserves for Property & Casualty claims occurring in prior years for the three months ended March 31, 2022 and 2021, respectively.
Horace Mann Educators Corporation21Quarterly ReportFirst Quarter 2023 Form 10-Q


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 - also known as prior years' reserve development.

Favorable prior years' reserve development for Group Benefits was $4.9 million and $1.9 million for the three months ended March 31, 2023 and 2022, respectively. The favorable development for the three months ended March 31, 2023 was primarily the result of favorable loss trends in specialty health and group for loss years 2022 and prior. The favorable development for the three months ended March 31, 2022 was primarily the result of favorable loss trends in specialty health for loss years 2021 and prior.
Reconciliation of Property & Casualty and Group Benefits Unpaid Claims and Claim Expense Reserves to the Consolidated Balance Sheets
($ 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, $23.7 million for disability and $114.0 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal and maturity payments based on revised expected assumptions.


Horace Mann Educators Corporation23First Quarter 2023 Form 10-Q




NOTE 5 - Long-Duration Insurance Contracts (continued)

The balances of and changes in LFPB as of and for the year ended December 31, 2022 were as follows:
($ in millions)
Whole 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 to the Consolidated Financial Statements. Policy charges assessed against the policyholders for mortality, administration and other services are included in the life premiums and contract charges line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).
The following table presents the balances of and changes in the Separate Account variable annuity liabilities presented in the Consolidated Balance Sheets(1):
($ in millions)Retirement Services
Variable Account Annuities
March 31, 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 76 - Reinsurance
The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on net premiums written and contract deposits; net premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:
($ in millions)($ in millions)Direct
Amount
Ceded to
Other
Companies(1)
Assumed
from Other
Companies
Net
Amount
($ in millions)Direct
Amount
Ceded to
Other
Companies(1)
Assumed
from Other
Companies
Net
Amount
Three months ended March 31, 2023Three months ended March 31, 2023
Net premiums written and contract deposits(2)
Net premiums written and contract deposits(2)
$367.8 $16.6 $10.4 $361.6 
Net premiums and contract charges earnedNet premiums and contract charges earned264.0 18.5 10.4 255.9 
Benefits, claims and settlement expensesBenefits, claims and settlement expenses192.9 12.7 3.0 183.2 
Three months ended March 31, 2022Three months ended March 31, 2022Three months ended March 31, 2022
Net premiums written and contract deposits(2)
Net premiums written and contract deposits(2)
$359.6 $14.9 $12.4 $357.1 
Net premiums written and contract deposits(2)
$360.8 $14.8 $12.4 $358.4 
Net premiums and contract charges earnedNet premiums and contract charges earned260.5 17.2 12.6 255.9 Net premiums and contract charges earned260.4 17.2 12.6 255.8 
Benefits, claims and settlement expensesBenefits, claims and settlement expenses179.5 11.5 9.0 177.0 Benefits, claims and settlement expenses181.6 7.2 0.8 175.2 
Three months ended March 31, 2021
Net premiums written and contract deposits(2)
$320.6 $5.9 $1.5 $316.2 
Net premiums and contract charges earned234.2 8.4 1.8 227.6 
Benefits, claims and settlement expenses135.6 2.5 1.2 134.3 
(1)    Excludes the annuity reinsurance transaction accounted for using the deposit method.
(2)    This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as Exhibit 99.1 in the Company's reports filed with the SEC.
NOTE 8 - Commitments
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $790.4 million and $858.1 million as of March 31, 2022 and December 31, 2021, respectively.
Horace Mann Educators Corporation2234Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 97 - Segment Information
The Company conducts and manages its business through 4in four reporting segments. The 3three operating segments, representing the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management's evaluation of the results of those segments, but classifies those items in the fourth reporting segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items in Corporate & Other have also included corporate debt retirement costs, when applicable.
In 2021 and prior, the Company conducted and managed its business through four operating segments: (1) Property & Casualty, (2) Supplemental, (3) Retirement, and (4) Life. The change in operating segments in 2022 aligns with leadership assignments and how the Company makes operating decisions and assesses performance as well as maintaining discrete financial information to evaluate performance and allocate resources. Accordingly, the presentation of prior period segment information has been reclassified to conform to the current year's presentation.
Summarized financial information for these segments is as follows:
($ in millions)($ in millions)Three Months Ended
March 31,
($ in millions)Three Months Ended
March 31,
2022202120232022
Net premiums and contract charges earnedNet premiums and contract charges earnedNet premiums and contract charges earned
Property & CasualtyProperty & Casualty$150.2 $155.8 Property & Casualty$152.4 $150.2 
Life & RetirementLife & Retirement35.8 39.4 Life & Retirement37.7 35.8 
Supplemental & Group BenefitsSupplemental & Group Benefits69.9 32.4 Supplemental & Group Benefits65.8 69.8 
TotalTotal$255.9 $227.6 Total$255.9 $255.8 
Net investment incomeNet investment incomeNet investment income
Property & CasualtyProperty & Casualty$7.2 $10.8 Property & Casualty$4.0 $7.2 
Life & RetirementLife & Retirement84.2 79.9 Life & Retirement87.9 84.2 
Supplemental & Group BenefitsSupplemental & Group Benefits7.1 5.4 Supplemental & Group Benefits9.1 7.1 
Corporate & OtherCorporate & Other— — Corporate & Other— — 
Intersegment eliminationsIntersegment eliminations(0.6)(0.6)Intersegment eliminations(0.6)(0.6)
TotalTotal$97.9 $95.5 Total$100.4 $97.9 
Net income (loss)Net income (loss)Net income (loss)
Property & CasualtyProperty & Casualty$8.5 $27.9 Property & Casualty$(11.6)$8.5 
Life & RetirementLife & Retirement11.8 11.4 Life & Retirement14.0 15.6 
Supplemental & Group BenefitsSupplemental & Group Benefits11.2 11.3 Supplemental & Group Benefits14.0 13.2 
Corporate & OtherCorporate & Other(17.0)(11.3)Corporate & Other(9.8)(17.0)
TotalTotal$14.5 $39.3 Total$6.6 $20.3 
($ in millions)($ in millions)March 31, 2022December 31, 2021($ in millions)March 31, 2023December 31, 2022
AssetsAssetsAssets
Property & CasualtyProperty & Casualty$1,116.3 $1,243.4 Property & Casualty$1,077.0 $1,083.8 
Life & RetirementLife & Retirement11,707.5 12,064.7 Life & Retirement11,085.1 10,754.5 
Supplemental & Group BenefitsSupplemental & Group Benefits1,484.8 858.8 Supplemental & Group Benefits1,377.1 1,359.3 
Corporate & OtherCorporate & Other183.8 281.8 Corporate & Other169.0 173.4 
Intersegment eliminationsIntersegment eliminations(65.0)(64.8)Intersegment eliminations(54.3)(64.9)
TotalTotal$14,427.4 $14,383.9 Total$13,653.9 $13,306.1 

Horace Mann Educators Corporation2335Quarterly Report onFirst Quarter 2023 Form 10-Q



NOTE 108 - Accumulated Other Comprehensive Income (Loss)
AOCI represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, AOCI includes the after tax change in net unrealized investment gains (losses) on fixed maturity securities, the after tax change in net reserve remeasurements attributable to discount rates and the after tax change in net funded status of benefit plans for the periods as shown in the Consolidated Statements of Changes in Shareholders’ Equity. The following table reconciles these components.
($ in millions)
Net Unrealized Investment
 Gains (Losses)
 on Securities(1)
Net Funded Status of
Benefit Plans(1)
Total(1)
Beginning balance, January 1, 2022$290.7 $(10.2)$280.5 
Other comprehensive income (loss) before reclassifications(284.8)— (284.8)
Amounts reclassified from AOCI(2)
14.1 — 14.1 
Net current period other comprehensive income (loss)(270.7)— (270.7)
Ending balance, March 31, 2022$20.0 $(10.2)$9.8 
Beginning balance, January 1, 2021$366.3 $(11.2)$355.1 
Other comprehensive income (loss) before reclassifications(129.1)— (129.1)
Amounts reclassified from AOCI(2)
6.4 — 6.4 
Net current period other comprehensive income (loss)(122.7)— (122.7)
Ending balance, March 31, 2021$243.6 $(11.2)$232.4 
($ 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, $(17.9)$(2.4) million and $(8.1)$(2.3) million, are included in Net investment gains losses and the related income tax expenses, $(3.8)benefits, $(0.5) million and $(1.7)$(0.5) million, are included in income tax expense in the Consolidated Statements of Operations for the three months ended March 31, 20222023 and 2021,2022, 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 3.2.








Horace Mann Educators Corporation36First Quarter 2023 Form 10-Q


NOTE 119 - Supplemental Consolidated Cash and Cash Flow Information
($ in millions)
March 31, 2022December 31, 2021
Cash$48.3 $133.0 
Restricted cash0.8 0.7 
Total cash and restricted cash reported in the Consolidated Balance Sheets$49.1 $133.7 
($ in millions)Three Months Ended
March 31,
20222021
Cash paid (recovered) for:
Interest$0.6 $0.6 
Income taxes(0.3)(0.1)
($ 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 $42.8 
($ 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 2021,Commitments
Lawsuits and Legal Proceedings
Companies in the insurance industry have been subject to substantial litigation resulting from claims, disputes and other matters. For instance, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies.
At the time of issuance of this Quarterly Report on Form 10-Q, the Company does not have pending litigation from which there is a reasonable possibility of material loss.
Assessments for Insolvencies of Unaffiliated Insurance Companies
The Company is contingently liable for possible assessments under regulatory requirements pertaining to potential insolvencies of unaffiliated insurance companies. Liabilities, which are established based upon regulatory guidance, have generally been insignificant.
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $599.4 million and $704.2 million as of March 31, 2023 and December 31, 2022, respectively.
Note 11 - Prior Period Consolidated Financial Statements
Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (also known as LDTI). The Company adopted LDTI using the modified retrospective approach where permitted with changes applied as of January 1, 2021. As a result of adoption, the Company’s prior period consolidated financial statements have been restated.
The following tables summarize the effects of adopting LDTI on our unaudited Consolidated Financial Statements.







Horace Mann Educators Corporation2437Quarterly Report onFirst 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 AND COMPREHENSIVE INCOME (LOSS) (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
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 $— $49.1 
ITEM 2. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
($ in millions, except per share data)

Measures within this MD&A that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within this Part I - Item 2. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's First Quarter 20222023 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 (referred to in Part I - Items 2 - 4 and Part II of this reportQuarterly Report on Form 10-Q as "we", "our", "us", the "Company", "Horace Mann" or "HMEC") is an insurance holding company. We are not under any obligation to (and expressly disclaim any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. It is important to note that our actual results could differ materially from those projected in forward-looking statements due to a number of risks and uncertainties inherent in our business. SeeAlso, see Part I - ItemItems 1 and 1A in our Annual Report on Form 10-K for the year ended December 31, 20212022 for additional information regarding risks and uncertainties.
This MD&A covers the following:
Page










Horace Mann Educators Corporation25Quarterly Report on Form 10-Q



Introduction
The purpose of this MD&A is to provide an understanding of our consolidated results of operations and financial condition. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part I - Item 1 of this report.Quarterly Report on Form 10-Q.
HMEC is an insurance holding company focused on helping America’s educators and others who serve the community achieve lifelong financial success. Through our subsidiaries, we market and underwrite individual and group insurance and financial solutions tailored to the needs of the educational community including:
personal lines of property and casualty insurance, primarily auto and property coverages
voluntaryretirement products, primarily tax-qualified fixed and variable annuities
life insurance, primarily 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
retirement products, primarily tax-qualified fixed and variable annuities
life insurance, primarily traditional term and whole life insurance products
We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families.families, whether they engage with Horace Mann directly or through their district/employer.
Effective January 1, 2022, we acquired all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (Madison National), for $172.3 million. The Seller will have a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. As a result of the acquisition, Madison National became a wholly owned subsidiary of HMEC.
Beginning in 2022, we are conductingWe conduct and managingmanage our business in four reporting segments. The three operating segments:reporting segments representing our major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (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. The Supplemental & Group Benefits segment includes the results of Madison National.(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 the operatingthese reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in a separatethe fourth reporting segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. See Part I - Item 1, Note 97 of the Consolidated Financial Statements in this reportQuarterly Report on Form 10-Q for more information.
Coronavirus Disease (COVID-19) Considerations
BeginningEffective 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 March 2020, the global pandemic associated with the novel coronavirus COVID-19 and related economic conditions introduced unprecedented challenges for our country. Those challenges are ongoing. We relied on our previously developed Corporate Pandemic Plan to address preparation, prevention and response measures specific to COVID-19 while allowing flexibility to quickly react to evolving circumstances and implement varying actions accordingly.
As discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, we successfully met the challenges of the pandemic environment and are now operating in a hybrid model. In the hybrid working environment, we continue to monitor cybersecurity including increasing security and network monitoring to proactively identify and prevent potential security threats and vulnerabilities.
Although educators have largely remained employed through the pandemic, the impact of the pandemic resulted in slower growth in new sales, particularly sales generated from in-person events at schools. We continue to work with our network of exclusive agents to make sure they are using virtual and other tools so they can reach current and potential educator customers regardless of the level of access they have to a specific school.
For further discussion regarding the current period and potential future impacts of COVID-19 and related economic conditions on HMEC, seethis MD&A. See Part I - Item 1A1, Note 1 of the Consolidated Financial Statements in our Annualthis Quarterly Report on Form 10-K10-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 yearthree months ended DecemberMarch 31, 2021.2023, net income decreased $13.7 million, primarily due to higher catastrophe losses and elevated underlying auto losses in the Property & Casualty segment partially offset by favorable benefits experience in the Supplemental & Group Benefits segment and lower net investment losses.
Horace Mann Educators Corporation2643Quarterly Report onFirst Quarter 2023 Form 10-Q



Consolidated Financial Highlights
(All comparisons vs. same periods in 2021, unless noted otherwise)
($ in millions)Three Months Ended
March 31,
2022-2021
20222021Change %
Total revenues$346.8 $322.0 7.7 %
Net income14.5 39.3 -63.1 %
Per diluted share:
Net income0.35 0.93 -62.4 %
Net investment losses after tax(0.29)(0.17)N.M.
Book value per share$37.14 $40.83 -9.0 %
Net income return on equity - last twelve months6.8 %9.3 %
Net income return on equity - annualized3.5 %9.0 %

For the three months ended March 31, 2022, net income decreased $24.8 million primarily due to an increase in auto loss frequency that is approaching pre-pandemic levels and higher auto severity due to inflation as well as higher net investment losses from changes in fair values of equity securities.
Consolidated Results of Operations
(All comparisons vs. same periods in 2021, unless noted otherwise)
($ in millions)($ in millions)Three Months Ended
March 31,
2022-2021($ in millions)Three Months Ended
March 31,
2023-2022
20222021Change %20232022% Change
Net premiums and contract charges earnedNet premiums and contract charges earned$255.9 $227.6 12.4 %Net premiums and contract charges earned$255.9 $255.8 — %
Net investment incomeNet investment income97.9 95.5 2.5 %Net investment income100.4 97.9 2.6 %
Net investment lossesNet investment losses(15.5)(9.0)N.M.Net investment losses(3.9)(15.5)N.M.
Other incomeOther income8.5 7.9 7.6 %Other income1.5 8.5 -82.4 %
Total revenuesTotal revenues346.8 322.0 7.7 %Total revenues353.9 346.7 2.1 %
Benefits, claims and settlement expensesBenefits, claims and settlement expenses177.0 134.3 31.8 %Benefits, claims and settlement expenses183.2 175.2 4.6 %
Interest creditedInterest credited40.8 50.6 -19.4 %Interest credited48.7 39.7 22.7 %
Operating expensesOperating expenses76.8 58.0 32.4 %Operating expenses79.8 76.7 4.0 %
DAC unlocking and amortization expense26.4 24.1 9.5 %
DAC amortization expenseDAC amortization expense23.7 22.0 7.7 %
Intangible asset amortization expenseIntangible asset amortization expense4.2 3.3 27.3 %Intangible asset amortization expense3.7 4.2 -11.9 %
Interest expenseInterest expense3.9 3.5 11.4 %Interest expense6.7 3.9 71.8 %
Total benefits, losses and expensesTotal benefits, losses and expenses329.1 273.8 20.2 %Total benefits, losses and expenses345.8 321.7 7.5 %
Income before income taxesIncome before income taxes17.7 48.2 -63.3 %Income before income taxes8.1 25.0 -67.6 %
Income tax expenseIncome tax expense3.2 8.9 -64.0 %Income tax expense1.5 4.7 -68.1 %
Net incomeNet income$14.5 $39.3 -63.1 %Net income$6.6 $20.3 -67.5 %

Net Premiums and Contract Charges Earned
For the three months ended March 31, 2022,2023, net premiums and contract charges earned increased $28.3 million, primarily duewere comparable to the inclusion of Madison National partially offset by lower net premiums earned by Property & Casualty.prior year period.
Net Investment Income
Excluding accreted investment income on the deposit asset on reinsurance, forFor the three months ended March 31, 2022,2023, total net investment income increased $1.9$2.5 million, primarily due to an increase inhigher returns on floating rate fixed maturity securities including commercial mortgage fund income,loan funds partially offset by lowernegative returns on other limited partnership interests. Investment yields
Horace Mann Educators Corporation27Quarterly Report on Form 10-Q



continue to be impacted by the low interest rate environment of recent years.interests in private equity funds. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:
Three Months Ended
March 31,
Three Months Ended
March 31,
2022202120232022
Investment yield, excluding limited partnership interests,
pretax - annualized*
Investment yield, excluding limited partnership interests,
pretax - annualized*
4.3%4.2%
Investment yield, excluding limited partnership interests,
pretax - annualized*
4.7%4.3%
Investment yield, excluding limited partnership interests,
after tax - annualized*
Investment yield, excluding limited partnership interests,
after tax - annualized*
3.4%3.3%
Investment yield, excluding limited partnership interests,
after tax - annualized*
3.7%3.4%

During the three months ended March 31, 2022,2023, we continued to identify and purchase investments with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines for the core portfolio. We continue to fund at levels that allow us to maintain our targeted allocation to commercial mortgage loan funds and limited partnership interests in line with our intentwhile maintaining balance to increase our allocation to this portion of our portfolio to increase yields while balancing principal protection and risk.
Net Investment Losses
For the three months ended March 31, 2022, pretax2023, net investment losses increased $6.5decreased $11.6 million, primarily due to a reduction in losses from changes in fair values of equity securities.securities and impairments compared to the prior year period. The breakdown of net investment lossesgains (losses) by transaction type were as follows:
($ in millions)Three Months Ended
March 31,
20222021
Impairments on investments recognized in net income$(1.8)$(3.2)
Sales and other, net1.1 (2.1)
Change in fair value - equity securities(17.1)(2.8)
Change in fair value and losses realized on settlements - derivatives2.3 (0.9)
Net investment losses$(15.5)$(9.0)
Horace Mann Educators Corporation44First Quarter 2023 Form 10-Q



($ 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, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer specificissuer-specific events occurring subsequent to the reporting date that result in a change in our intent to sell a fixed maturity security.
Other Income
For the three months ended March 31, 2022,2023, other income increased $0.6decreased $7.0 million primarily due toin the inclusion of Madison National.employer-sponsored business.
Benefits, Claims and Settlement Expenses
For the three months ended March 31, 2022,2023, benefits, claims and settlement expenses increased $42.7$8.0 million, primarily due to an increase inhigher catastrophe losses and elevated underlying auto losslosses in the Property & Casualty segment partially offset by favorable benefits experience andin the inclusion of Madison National, partially reduced by an offsetting $10.3 million change in interest credited.Supplemental & Group Benefits segment.
Interest Credited
For the three months ended March 31, 2022,2023, interest credited decreased $9.8increased $9.0 million, driven primarily by an offsetting $10.3 million change in benefits, claims and settlement expenses.higher interest rates on advances received from the Federal Home Loan Bank of Chicago (FHLB). Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be reported. The average deferred annuity credited rate, excluding the reinsured annuity block, was 2.6% and 2.4% as of March 31, 20222023 and March 31, 2021,2022, respectively.
Operating Expenses
For the three months ended March 31, 2022,2023, operating expenses increased $18.8$3.1 million, primarily due to inflation.
Deferred Policy Acquisition Costs (DAC) Amortization Expense
For the inclusionthree months ended March 31, 2023, DAC amortization expense increased $1.7 million, due to a write-off of Madison National.DAC 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, due to an increase in floating interest rates on the Revolving Credit Facility.
Income Tax Expense
The effective income tax rate on our pretax income, including net investment losses, was 18.5% and 17.5% for the three months ended March 31, 2023 and 2022, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 5.3 and 6.3 percentage points for the three months ended March 31, 2023 and 2022, respectively.
In August 2022, the Inflation Reduction Act of 2022 (IRA) was passed by the U.S. Congress and signed into law by the Executive Branch. The IRA includes a new Federal alternative minimum tax (AMT), effective in 2023, that is based on the adjusted financial statement income (AFSI) set forth on the applicable financial statement (AFS) of an applicable corporation. A corporation is an applicable corporation if its rolling average pre-tax AFSI over three prior years (starting with 2020-2022) is greater than $1.0 billion. For a group of related entities, the $1.0 billion threshold is determined on a group basis, and the group's AFSI is generally treated as the AFSI for all
Horace Mann Educators Corporation2845Quarterly Report onFirst Quarter 2023 Form 10-Q



Deferred Policy Acquisition Costs (DAC) Unlocking and Amortization Expense
For the three months ended March 31, 2022, DAC unlocking and amortization expense increased $2.3 million, primarily due to unfavorable market-related DAC unlockingseparate taxpayers in the Life & Retirement segment.group. Except under limited circumstances, once a corporation is an applicable corporation, it is an applicable corporation in all future years.
Intangible Asset Amortization Expense
For the three months ended March 31, 2022, intangible asset amortization expense increased $0.9 million, dueAn 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 inclusionextent the tentative AMT liability exceeds regular corporate income tax. However, any AMT paid would be indefinitely available as a credit carryover that could reduce future regular tax in excess of Madison National.AMT.
Interest Expense
ForHMEC and its controlled group of corporations have determined that it likely will not be an applicable corporation in 2023. In making such determination, the three months ended March 31, 2022, interest expense increased $0.4 million.
Income Tax Expense
group has made certain interpretations of, and assumptions regarding, the AMT provisions of the IRA. The effective income tax rate, including net investment (losses) gains, was 18.1%U.S. Treasury Department is expected to issue guidance throughout 2023 that may differ from the group's interpretations and 18.5% forassumptions and that could alter the three months ended March 31, 2022 and 2021, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 6.3 and 3.9 percentage points for the three months ended March 31, 2022 and 2021, respectively.group's determination.
We record liabilities for uncertain tax filing positions where it is more likely than not that the position will not be sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted appropriately based on changes in facts or law. We have no unrecorded liabilities from uncertain tax filing positions.
AtAs of March 31, 2022,2023, our federal income tax returns for years prior to 20142019 are no longer subject to examination by the Internal Revenue Service. We do not anticipate any assessments for tax years that remain subject to examination to have a material effect on our financial position or results of operations.
Outlook for 20222023
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, due to the impact of inflation on our nearer-term auto results as well as the potential impact of market volatility on DAC unlocking, we now believe our 2022 core earnings per share is more likely toestimate that 2023 full year net income will be at the lower end of the guidancewithin a range of $3.45-$3.65 discussed in$2.00 to $2.30 per diluted share, generating a core return on equity* near 6%. This range is unchanged from our Outlook for 20222023 we discussed in theour Annual Report on Form 10-K for the year ended December 31, 2021. The outlook assumes a federal statutory corporate tax rate of 21%.
Horace Mann’s outlook for 2022 reflects accretion from newly acquired Madison National as well as estimates of the initial contributions of strategic growth initiatives. Full-year net investment income from the managed portfolio is estimated to be in line with 2021, with limited partnership portfolio returns modeled closer to the historical averages. We expect that the increase of interest rates in the capital markets that are being experienced may have a significant impact to net unrealized investment gains (losses) on fixed maturity securities reported in our Consolidated Balance Sheets. Results for each segment will reflect different considerations:2022.
Property & Casualty Segment
In 2022, the underlying auto loss ratio2023, net income for Property & Casualty is now expectedanticipated to be higherbetween breakeven and $5 million, reflecting the negative limited partnership portfolio returns in the near term than anticipatedfirst quarter. The primary factors in the original guidance due to inflation. The longer-term combined ratio target remains 95-96%. Theour full-year outlook include:
Catastrophe loss assumption for catastrophe losses continues to beof approximately 9.510 points on the combined ratio, in line with the 10-year average. Net investment income in 2022 is expectedaverage and consistent with historical frequencies and current severities applied to be lower than prior year in this segment, as it benefited from strong limited partnership returns in 2021.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
Net investmentIn 2023, net income for Life & Retirement is anticipated to be in the range of $67 million to $70 million, consistent with prior guidance. This guidance includes the adoption of LDTI effective January 1, 2023. The spread on the fixed annuity business is expected to be upin the range of 220 to 230 basis points. Mortality is anticipated to remain within actuarial expectations, increasing slightly comparedfrom 2022.
Supplemental & Group Benefits Segment
In 2023, net income for Supplemental & Group Benefits is now anticipated to 2021, maintainingbe in the net investment spread near the 2021 level. Market volatility may cause DAC unlockingrange of $45 million to have an outsized impact on segment earnings.$49 million due to strong first quarter results. The assumption for mortality is a return to actuarial expectations.

primary factors in our outlook include:
Horace Mann Educators Corporation2946Quarterly Report onFirst Quarter 2023 Form 10-Q



SupplementalClaims 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 higher allocation of corporate expenses to reflect the segment’s utilization of shared staff, distribution, and other resources.
Corporate & Group BenefitsOther Segment
Claims utilizationCorporate interest expense is expected to be near pre-pandemic levels leadingin the range of $26 million to full-year benefit ratios of about 35% for voluntary products and about 50% for employer-sponsored products. Amortization of intangible assets is expected$27 million in 2023 due to rising interest rates.
Investments
For 2023, we now expect total net investment income to be in a range of $429 million to $439 million, including approximately $13$104 million or 30 cents per share (after tax).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 rising interest rate environment over the past 12 months. Limited partnership returns are now estimated to be below their 10-year average of 8.5%, reflecting the first quarter lower-than-expected limited partnership portfolio returns in the Property & Casualty segment.
As described in Application of Critical Accounting Estimates, certain of our significant accounting measurements require the use of estimates and assumptions. As additional information becomes available, adjustments may be required. Those adjustments are charged or credited to net income for the period in which the adjustments are made and may impact actual results compared to our estimates above. Additionally, see forward-looking information in this Quarterly Report on Form 10-Q as well as Part I - Items 1 and 1A of thisin our Annual Report on Form 10-K for the year ended December 31, 2022 concerning other important factors that could impact actual results. We believe that a projection of net income is not appropriate on a forward-looking basis because it is not possible to provide a valid forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.
Application of Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions based on information available at the time the consolidated financial statements are prepared. These estimates and assumptions affect the reported amounts of our consolidated assets, liabilities, shareholders' equity and net income. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that subsequent events and available information may differ markedly from management's judgments at the time the consolidated financial statements were prepared. We have discussed with the Audit Committee the quality, not just the acceptability, of our accounting principles as applied in our financial reporting. The discussions generally included such matters as the consistency of our accounting policies and their application, and the clarity and completeness of our consolidated financial statements, which include related disclosures.
Information regarding our accounting policies pertaining to these topics is located in the Notes to the Consolidated Financial Statements contained in Part II - Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021.2022. In addition, discussion of accounting policies, including certain sensitivity information, was presented in Management's Discussion and Analysis of Financial Condition and Results of Operations --- Application of Critical Accounting Estimates in that Form 10-K within which we have identified the following accounting estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:
Valuation of hard-to-value fixed maturity securities
Evaluation of credit loss impairments for maturity securities
Evaluation of goodwill and intangible assets for impairment
Valuation of annuity and life deferred policy acquisition costs
Horace Mann Educators Corporation47First Quarter 2023 Form 10-Q



Valuation of liabilities for property and casualty unpaid claims and claim expensesexpense reserves
Valuation of liabilities for group benefits unpaid claims and claim expense reserves
Valuation of certain investment contractcontracts 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, 2022,2023, there were no material changes to accounting policies for areas most subject to significant management judgments identified above.
Valuation of Assets Acquired and Liabilities Assumed under Purchase Accounting and Purchase Price Allocation
InEffective January 1, 2023, we adopted the new accounting guidance in ASU 2018-12 which changed our accounting policies for the valuation of annuity and life deferred policy acquisition costs (DAC) and the valuation of Madison National Life Insurance Company, Inc. (Madison National), assets acquired and liabilities assumed are recognized basedcertain policy reserves (which is now referred to as the liability for future policy benefits or "LFPB"). DAC is now being amortized on estimated fair values asa constant-level basis over the expected term of the date of acquisition. The excess of the purchase price when compared to the fair value of the net tangible and identifiable intangible assets acquired is recognized as goodwill. A significant amount of judgment is involved in estimating the individual fair values of tangible assets, intangible assets, and other assets and liabilities. We used all available information to make these fair value determinations and engaged third-party consultants for valuation assistance. The fair value of assets and liabilities as of the acquisition date were estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an
Horace Mann Educators Corporation30Quarterly Report on Form 10-Q



appropriate discount rate; the cost approach, which required estimates of replacement costs and depreciation and obsolescence estimates; and the market approach. The estimates used in determining fair values were based onrelated contracts. Cash flow assumptions believed to be reasonable but which are inherently uncertain. Accordingly, actual results may differ materially from the projected results used to determine fair value.
The value of business acquired intangible asset (VOBA) represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of relationships acquired intangible asset was valued based on the actuarial appraisal method net of VOBA. This represents expected future premiums arising from ongoing relationshipsmeasure LFPB must be reviewed at least annually, and includes assumed growth in premium in the first projection year as well as all premiums in projection years two through ten. The state licenses intangible asset represents the regulatory licenses held by Madison National that were valued using the cost approach. The valuation of Madison National's policy reserves represents the present value of expected future benefitsif there is a change, must be updated and expenses associated with the policies, valued using the actuarial appraisal approach.
The valuation of the assets acquired and liabilities assumed of Madison National noted above required management to make multiple judgments and assumptions to project future cash flows. Assumptions included future policy and contract charges, premiums, morbidity and mortality, and persistency by product, as well as expenses, investment returns, growth rates and other factors. One of the most significant inputs in these calculations is the discount rate used to arrive at the present valueassumption must be updated quarterly. The new accounting policies are described in more detail in Part I - Item 1, Note 1 of the net cash flows. Actual experienceConsolidated Financial Statements in this Quarterly Report on the purchased business may vary from these projections and the recovery of the net assets recorded is dependent upon the future profitability of the related business.Form 10-Q.
Results of Operations by Segment
Consolidated financial results primarily reflect the results of three operating segments (Propertythe Property & Casualty, Life & Retirement, and Supplemental & Group Benefits)Benefits reporting segments as noted in the Introduction and Outlook for 20222023 sections of this MD&A, as well as the corporate and other line.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 datainformation is described in more detail in Part I - Item 1, Note 97 of the Consolidated Financial Statements in this report.Quarterly Report on Form 10-Q. The following sections provide analysis and discussion of the results of operations for each of the reporting segments as well as investment results.
Property & Casualty
(All comparisons vs. same periods in 2021, unless noted otherwise)
For the three months ended March 31, 2022,2023, net incomeloss reflected the following factors:
Auto loss frequency closer to pre-pandemic levels and higher auto loss severity due to inflationHigher catastrophe losses
A decreaseElevated underlying auto losses
Decrease in net investment income due to less favorablenegative returns on limited partnership interests
Higher underlying property loss ratio* due to higher fire losses offset by lower levels of catastrophe losses
No recognition of prior years' reserve development for the current and prior year periods
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Horace Mann Educators Corporation3148Quarterly Report onFirst Quarter 2023 Form 10-Q



The following table provides certain financial information for Property & Casualty for the periods indicated.
($ in millions, unless otherwise indicated)($ in millions, unless otherwise indicated)Three Months Ended
March 31,
2022-2021($ in millions, unless otherwise indicated)Three Months Ended
March 31,
2023-2022
20222021Change20232022% Change
Financial Data:Financial Data:Financial Data:
Net premiums written*:Net premiums written*:Net premiums written*:
AutoAuto$94.5 $99.2 -4.7 %Auto$101.2 $94.5 7.1 %
Property and otherProperty and other45.1 42.6 5.9 %Property and other47.9 45.1 6.2 %
Total net premiums writtenTotal net premiums written139.6 141.8 -1.6 %Total net premiums written149.1 139.6 6.8 %
Change in unearned net premiumsChange in unearned net premiums10.6 14.0 -24.3 %Change in unearned net premiums3.3 10.6 -68.9 %
Total net premiums earnedTotal net premiums earned150.2 155.8 -3.6 %Total net premiums earned152.4 150.2 1.5 %
Incurred claims and claims expenses:Incurred claims and claims expenses:Incurred claims and claims expenses:
Claims occurring in the current yearClaims occurring in the current year108.3 94.7 14.4 %Claims occurring in the current year128.8 108.3 18.9 %
Prior years' reserve development(1)
Prior years' reserve development(1)
— — — %
Prior years' reserve development(1)
— — — %
Total claims and claim expenses incurredTotal claims and claim expenses incurred108.3 94.7 14.4 %Total claims and claim expenses incurred128.8 108.3 18.9 %
Operating expenses, including DAC amortizationOperating expenses, including DAC amortization39.4 39.5 -0.3 %Operating expenses, including DAC amortization42.9 39.4 8.9 %
Underwriting gain2.5 21.6 -88.4 %
Underwriting gain (loss)Underwriting gain (loss)(19.3)2.5 N.M.
Net investment incomeNet investment income7.2 10.8 -33.3 %Net investment income4.0 7.2 -44.4 %
Income before income taxes10.5 34.4 -69.5 %
Net income / Core earnings*8.5 27.9 -69.5 %
Income (loss) before income taxesIncome (loss) before income taxes(14.6)10.5 N.M
Net income (loss)Net income (loss)(11.6)8.5 N.M
Core earnings (loss)*Core earnings (loss)*(11.6)8.5 N.M
Operating Statistics:Operating Statistics:Operating Statistics:
AutoAutoAuto
Loss and loss adjustment expense ratioLoss and loss adjustment expense ratio76.0 %59.1 %16.9 ptsLoss and loss adjustment expense ratio82.5 %76.0 %6.5 pts
Expense ratioExpense ratio25.8 %25.1 %0.7 ptsExpense ratio28.4 %25.8 %2.6 pts
Combined ratio:Combined ratio:101.8 %84.2 %17.6 ptsCombined ratio:110.9 %101.8 %9.1 pts
Prior years' reserve development(1)
Prior years' reserve development(1)
— %— %— pts
Prior years' reserve development(1)
— %— %— pts
Catastrophe lossesCatastrophe losses0.5 %0.3 %0.2 ptsCatastrophe losses1.8 %0.5 %1.3 pts
Underlying combined ratio*Underlying combined ratio*101.3 %83.9 %17.4 ptsUnderlying combined ratio*109.1 %101.3 %7.8 pts
PropertyPropertyProperty
Loss and loss adjustment expense ratioLoss and loss adjustment expense ratio65.0 %64.1 %0.9 ptsLoss and loss adjustment expense ratio88.1 %65.0 %23.1 pts
Expense ratioExpense ratio27.3 %26.0 %1.3 ptsExpense ratio27.7 %27.3 %0.4 pts
Combined ratio:Combined ratio:92.3 %90.1 %2.2 ptsCombined ratio:115.8 %92.3 %23.5 pts
Prior years' reserve development(1)
Prior years' reserve development(1)
— %— %— pts
Prior years' reserve development(1)
— %— %— pts
Catastrophe lossesCatastrophe losses12.7 %20.1 %-7.4 ptsCatastrophe losses37.9 %12.7 %25.2 pts
Underlying combined ratio*Underlying combined ratio*79.6 %70.0 %9.6 ptsUnderlying combined ratio*77.9 %79.6 %-1.7 pts
Risks in force (in thousands)Risks in force (in thousands)Risks in force (in thousands)
Auto(2)
Auto(2)
372 393 -5.3 %
Auto(2)
365 372 -1.9 %
PropertyProperty175 182 -3.8 %Property170 175 -2.9 %
TotalTotal547 575 -4.9 %Total535 547 -2.2 %
(1)    (Favorable) unfavorable.
(2)    Includes assumed risks in force of 4.

On a reported basis, the 17.69.1 point increase in the auto combined ratio for the three months ended March 31, 20222023 was mainly attributable to a 16.75.2 point increase in the auto underlying loss ratio*. The increaseAs expected, auto frequency outpaced levels experienced in the auto underlying loss ratio reflects a return to more normalprior year period. The challenges being faced by the entire industry, including the unprecedented level of inflation that is driving patterns as well as an increase in severity trends due to inflation. The reported property combined ratio increased 2.2 points andhigher replacement costs; the property underlying loss ratio* increased 8.3 points for the three months ended March 31, 2022 reflecting higher non-catastrophe firetrend toward
Horace Mann Educators Corporation3249Quarterly Report onFirst Quarter 2023 Form 10-Q



losses, whilemore 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 reportedthree months ended March 31, 2023, driven by higher catastrophe losses. The underlying loss ratio increased 0.9 pts asimproved 2.1 points for the increases inthree months ended March 31, 2023 due to lower fire losses were offset by lower catastrophe losses.
For the three months ended March 31, 2022,2023, total Property & Casualty net premiums written* decreased $2.2increased $9.5 million as therate 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, 2022,2023, auto net premiums written* decreased $4.7increased $6.7 million, asprimarily due to rate actions that began in the numbersecond half of auto risks in force continues to decline. Average2022. For the three months ended March 31, 2023, average net premium written and average net premium earned were flat. Theincreased 8.1% and 4.4%, respectively. We anticipate auto rate plan for 2022 now reflects rate increasesrates to increase by 18% to 20% in the high single digit to low double digit range in states representing almost 80% of our auto premiums.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, 2022,2023, property and other net premiums written* increased $2.5$2.8 million due to increases in average net premium written and average net premium earned which increased 6.5%9.8% and 4.0%,8.7% for the three months ended March 31, 2023, respectively, as inflation adjustments to coverage values begancontinue to take effect. With inflationary pressure continuing, adjustmentswe anticipate property rates to coverage values and rates are expectedincrease by 12% to continue to play a role15% in the coming quarters. We anticipate average rate increases in the low single digits for property.2023. The number of educator risks has been overnear or above 80% relative to overall property risks in force over the past two years.
We continue to evaluate and implement actions to further mitigate our exposure in catastrophe-prone areas of the country.exposure. Such actions could include, but are not limited to, non-renewal of property policies,risks, restricted agent geographic placement, limitations on agent new business sales, further tightening of underwriting standards and increased utilization of third-party vendor products.



















Horace Mann Educators Corporation3350Quarterly Report onFirst Quarter 2023 Form 10-Q



Life & Retirement
(All comparisons vs. same periods in 2021, unless noted otherwise)
For the three months ended March 31, 2022,2023, net income reflected the following factors:
Strong annualizedHigher net interest spreadinvestment income primarily due to returns on floating rate fixed annuities of 286 bps for the three months ended March 31, 2022maturity securities including commercial mortgage loan funds
Continued growth inHigher interest credited reflecting interest rates on FHLB funding agreements rising more rapidly than net annuity contract deposits* that increased $6.2 million for the three months ended March 31, 2022investment income due to timing of interest rate resets
Lower mortality costs benefitingin 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

























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Horace Mann Educators Corporation3451Quarterly Report onFirst Quarter 2023 Form 10-Q



The following table provides certain information for Life & Retirement for the periods indicated.
($ in millions)($ in millions)Three Months Ended
March 31,
2022-2021($ in millions)Three Months Ended
March 31,
2023-2022
20222021Change20232022% Change
Life & RetirementLife & RetirementLife & Retirement
Net premiums written and contract deposits*Net premiums written and contract deposits*$136.4 $130.3 4.7 %Net premiums written and contract deposits*$136.1 $136.4 -0.2 %
Net premiums and contract charges earnedNet premiums and contract charges earned35.8 39.4 -9.1 %Net premiums and contract charges earned37.7 35.8 5.3 %
Net investment incomeNet investment income84.2 79.9 5.4 %Net investment income87.9 84.2 4.4 %
Other incomeOther income4.9 4.8 2.1 %Other income3.9 4.9 -20.4 %
Life mortality costsLife mortality costs12.2 14.6 -16.4 %Life mortality costs19.5 21.4 -8.9 %
Interest creditedInterest credited40.7 50.5 -19.4 %Interest credited47.9 39.6 21.0 %
Change in reservesChange in reserves21.7 15.0 44.7 %Change in reserves13.8 13.0 6.2 %
Operating expensesOperating expenses25.8 23.7 8.9 %Operating expenses24.2 25.7 -5.8 %
DAC amortization expense, excluding unlocking7.4 6.9 7.2 %
DAC unlocking2.5 (0.6)N.M.
DAC amortization expenseDAC amortization expense6.8 5.7 19.3 %
Intangible asset amortization expenseIntangible asset amortization expense0.3 0.4 -25.0 %Intangible asset amortization expense0.1 0.3 -66.7 %
Income before income taxesIncome before income taxes14.3 13.6 5.1 %Income before income taxes17.2 19.2 -10.4 %
Income tax expenseIncome tax expense2.5 2.2 13.6 %Income tax expense3.2 3.6 -11.1 %
Net incomeNet income11.8 11.4 3.5 %Net income14.0 15.6 -10.3 %
Core earnings*Core earnings*11.8 11.4 3.5 %Core earnings*14.0 15.6 -10.3 %
Life policies in force (in thousands)Life policies in force (in thousands)163 163 — %Life policies in force (in thousands)162 163 -0.6 %
Life insurance in forceLife insurance in force$19,595 $19,028 3.0 %Life insurance in force$20,155 $19,595 2.9 %
Life persistency - LTMLife persistency - LTM96.2 %96.1 %0.1 ptsLife persistency - LTM95.9 %96.2 %-0.3 pts
Annuity contracts in force (in thousands)Annuity contracts in force (in thousands)229 230 -0.4 %Annuity contracts in force (in thousands)226 229 -1.3 %
Retirement Advantage® contracts in force (in thousands)
16 13 23.1 %
Horace Mann Retirement Advantage® contracts in force (in thousands)
Horace Mann Retirement Advantage® contracts in force (in thousands)
17 16 6.3 %
Cash value persistency - LTMCash value persistency - LTM94.3 %95.0 %-0.7 ptsCash value persistency - LTM93.1 %94.3 %-1.2 pts

For the three months ended March 31, 2022,2023, life annualized sales* were slightly below the prior year period withincreased $0.4 million and life persistency for life products of 96.2% remaining in line with prior year periods.remained strong at 95.9%.
For the three months ended March 31, 2022,2023, net annuity contract depositsdeposits* for variable and fixed annuities increased $6.2 million. Ourdecreased $2.8 million from strong prior year levels. Educators continue to begin their relationship with educators often begins with ourHorace Mann through 403(b) retirement savings products, including our attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency remained strong at 94.3%declined slightly to 93.1%.
As of March 31, 2022,2023, annuity assets under management were up $193.9down $190.2 million, or 3.9%3.7%, compared to a year ago primarily due to market appreciation.depreciation. Assets under administration, which includes annuity assets under management, Horace Mann Retirement Advantage® and other advisory and recordkeeping assets were up $152.7down $628.9 million, or 1.7%7.0%, fromcompared to a year ago as assets under management also rose primarilylargely due to the effect of equity market appreciation over the past 12 months.performance. The year-to-date annualized net interest spread on fixed annuities, excluding reinsurance, increased 33decreased 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.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 $802.6$676.4 million of the Life & Retirement 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 our existing policies and investment portfolio, the impact from investing in that lower interest rate environment could further
Horace Mann Educators Corporation3552Quarterly Report onFirst 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 $3.1$2.6 million in year one and $9.2$7.8 million in year two, further reducing the annualized net interest spread on fixed annuities by approximately 119 basis points and 3026 basis points in the respective periods, compared to the current period annualized net interest spread on fixed annuities. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to guaranteed minimum crediting rates.
The expectation for future annualized net interest spreads on fixed annuities is also an important component in the amortization of DAC. In terms of the sensitivity of this amortization to the annualized net interest spread on fixed annuities, based on DAC as of March 31, 2022 and assuming all other assumptions are met, a 10 basis point deviation in the current year targeted annualized net interest rate spread on the fixed annuities assumption would impact amortization between $0.3 million and $0.4 million. This result may change depending on the magnitude and direction of any actual deviations but represents a range of reasonably likely experience for the noted assumption.
We reinsure a $2.4 billion block of in force fixed annuities with $2.4 billion of assets under management and with a minimum crediting rate of 4.5% which helps mitigate the risk of not being able to generate appropriate spreads on the annuity business. Information regarding the interest crediting rates and balances equal to the guaranteed minimum crediting rates for deferred annuity account values excluding the reinsured block is shown below.
($ in millions)($ in millions)March 31, 2022($ in millions)March 31, 2023
Total Deferred AnnuitiesDeferred Annuities at
Minimum Guaranteed Rate
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
Percent
of Total
Accumulated
Value (AV)
Percent of
Total Deferred
Annuities AV
Percent
of Total
Accumulated
Value
Guaranteed minimum crediting rates:Guaranteed minimum crediting rates:Guaranteed minimum crediting rates:
Less than 2%Less than 2%55.8 %$1,411.1 74.8 %49.6 %$1,056.2 Less than 2%57.0 %$1,432.3 40.7 %37.0 %$583.0 
Equal to 2% but less than 3%Equal to 2% but less than 3%11.2 283.5 83.6 11.1 236.9 Equal to 2% but less than 3%10.9 272.9 69.1 12.0 188.5 
Equal to 3% but less than 4%Equal to 3% but less than 4%24.6 622.8 99.9 29.2 622.4 Equal to 3% but less than 4%23.8 597.4 99.9 37.8 596.9 
Equal to 4% but less than 5%Equal to 4% but less than 5%6.5 165.7 100.0 7.8 165.7 Equal to 4% but less than 5%6.4 161.9 100.0 10.2 161.9 
5% or higher5% or higher1.9 48.0 100.0 2.3 48.0 5% or higher1.9 46.6 100.0 3.0 46.6 
TotalTotal100.0 %$2,531.1 84.1 %100.0 %$2,129.2 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, 20212022 and other factors in this report.Quarterly Report on Form 10-Q.












Horace Mann Educators Corporation3653Quarterly Report onFirst Quarter 2023 Form 10-Q



Supplemental & Group Benefits
(All comparisons vs. same periods in 2021, unless noted otherwise)
For the three months ended March 31, 2022,2023, net income reflected the following factors:
Inclusion of Madison National's resultsImprovement in benefit ratio due to frequency below prior year levels on employer-sponsored products
ImprovedHigher net investment income driven by favorable returns on limited partnership interestslargely 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




hmn-20220331_g4.jpg515
The following table provides certain information for Supplemental & Group Benefits for the periods indicated.
($ in millions)($ in millions)Three Months Ended
March 31,
2022-2021($ in millions)Three Months Ended
March 31,
2023-2022
20222021Change20232022% Change
Supplemental & Group BenefitsSupplemental & Group BenefitsSupplemental & Group Benefits
Net premiums and contract charges earnedNet premiums and contract charges earned$69.9 $32.4 115.7 %Net premiums and contract charges earned$65.8 $69.8 -5.7 %
Net investment incomeNet investment income7.1 5.4 31.5 %Net investment income9.1 7.1 28.2 %
Other incomeOther income1.6 0.7 128.6 %Other income(3.7)1.6 N.M.
Benefits, settlement expenses and change in reservesBenefits, settlement expenses and change in reserves34.8 10.0 248.0 %Benefits, settlement expenses and change in reserves21.1 32.5 -35.1 %
Interest creditedInterest credited0.1 0.1 — %Interest credited0.8 0.1 N.M.
Operating expenses (includes DAC unlocking and amortization
expense)
25.5 11.0 131.8 %
Operating expenses (includes DAC amortization expense)Operating expenses (includes DAC amortization expense)27.9 25.3 10.3 %
Intangible asset amortization expenseIntangible asset amortization expense3.9 2.9 34.5 %Intangible asset amortization expense3.6 3.9 -7.7 %
Income before income taxesIncome before income taxes14.3 14.5 -1.4 %Income before income taxes17.8 16.7 6.6 %
Net income / Core earnings*11.2 11.3 -0.9 %
Net incomeNet income14.0 13.2 6.1 %
Core earnings*Core earnings*14.0 13.2 6.1 %
Benefits ratio(1)
49.9 %31.2 %18.7 pts
Benefit ratio(1)
Benefit ratio(1)
33.3 %46.7 %-13.4 pts
Operating expense ratio(2)
Operating expense ratio(2)
32.4 %28.6 %3.8 pts
Operating expense ratio(2)
39.2 %32.2 %7.0 pts
Pretax profit margin(3)
Pretax profit margin(3)
18.2 %37.7 %-19.5 pts
Pretax profit margin(3)
24.9 %21.4 %3.5 pts
Voluntary products benefits ratio29.3 %30.9 %-1.6 pts
Voluntary premium persistency (rolling 12 months)92.1 %91.5 %0.6 pts
Employer-sponsored products benefits ratio66.1 %— %N.M.
Worksite direct products benefit ratioWorksite direct products benefit ratio22.1 %22.2 %-0.1 pts
Worksite direct premium persistency (rolling 12 months)Worksite direct premium persistency (rolling 12 months)90.6 %92.1 %-1.5 pts
Employer-sponsored products benefit ratioEmployer-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, 2022,2023, total sales* were $3.7$8.2 million. Sales of voluntaryworksite direct products* were $1.4$3.7 million a 40.0%for three months ended March 31, 2023, representing an increase from the prior year period, withof 164.3%. Worksite direct premium persistency up 0.6 pts(rolling 12 months), while down slightly, remains strong at 92.1%90.6%. Sales of employer-sponsored products* added another $2.3were $4.5 million in line with management's expectations.
Net income was flat compared tofor the prior year period. The current period includes the resultsthree months ended March 31, 2023, representing an increase of Madison National which is driving the increases in (1) benefits, settlement expenses and change in reserves, (2) operating expenses (includes DAC unlocking and amortization), and (3) intangible asset amortization expense. The non-cash impact of amortization of intangible assets under purchase accounting reduced net income by $3.9 million95.7%.
Horace Mann Educators Corporation3754Quarterly Report onFirst Quarter 2023 Form 10-Q



pretax for the three months ended March 31, 2022. Pretax profit margin declined because of the newly acquired employer-sponsored products, which are expected to generate a lower margin than voluntary products. For the three months ended March 31, 2022, benefits paid also reflected normal seasonality for the employer-sponsored products.
Corporate & Other
(All comparisons vs. same periods in 2021, unless noted otherwise)
The following table provides certain financial information for Corporate & Other for the periods indicated.
($ in millions)Three Months Ended
March 31,
2022-2021
20222021Change %
Interest expense$3.9 $3.4 14.7 %
Net investment losses pretax(15.5)(9.0)N.M.
Operating expenses(2.0)(1.9)-5.3 %
Net investment losses after tax(12.2)(7.1)N.M.
Net loss(17.0)(11.3)-50.4 %
Core earnings loss*(4.8)(4.2)-14.3 %
($ 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, 2022,2023, the net loss increased primarilydecreased $7.2 million due to lower net investment losses partially offset by an increase in net investment losses. This was mainly due to changes in fair values of equity securities.interest expense on the Revolving Credit Facility.
Investment Results
(All comparisons vs. same periods in 2021, unless noted otherwise)
Our investment strategy is primarily focused on generating income to support product liabilities, and balances principal protection and risk. Total net investment income includes net investment income from our managed investment portfolio as well as accreted investment income from the deposit asset on reinsurance related to our reinsured block of approximately $2.4 billion of fixed annuity liabilities related to legacy individual policies written in 2002 or earlier.
($ in millions)($ in millions)Three Months Ended
March 31,
2022-2021($ in millions)Three Months Ended
March 31,
2023-2022
20222021Change %20232022% Change
Net investment income - investment portfolio$73.0 $71.1 2.7 %
Net investment income - managed investment portfolioNet investment income - managed investment portfolio$74.7 $73.0 2.3 %
Investment income - deposit asset on reinsuranceInvestment income - deposit asset on reinsurance24.9 24.4 2.0 %Investment income - deposit asset on reinsurance25.7 24.9 3.2 %
Total net investment incomeTotal net investment income97.9 95.5 2.5 %Total net investment income100.4 97.9 2.6 %
Pretax net investment lossesPretax net investment losses(15.5)(9.0)N.M.Pretax net investment losses(3.9)(15.5)N.M.
Pretax net unrealized investment gains on fixed maturity securities16.7 363.6 -95.4 %
Pretax net unrealized investment gains (losses) on fixed maturity securitiesPretax net unrealized investment gains (losses) on fixed maturity securities(453.3)16.7 N.M

Excluding accreted investment income on the deposit asset on reinsurance, net investment income increased $1.9 million for the three months ended March 31, 2022, primarily due to an increase in commercial mortgage fund income, partially offset by lower returns on other limited partnership interests.
For the three months ended March 31, 2022,2023, 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 increased $6.5decreased $ 11.6 million, primarily due to the changea reduction in losses from changes in fair valuevalues of equity securities.securities and impairments compared to the prior year period. Pretax net unrealized investment gainslosses on fixed maturity securities as of March 31, 2023 were down $424.9$118.6 million, or 96.2%20.7%, compared to December 31, 2021,2022, reflecting an 83a 40 basis point increasedecrease in the 10-year U.S. Treasury yield, andwhich more than offset slightly wider credit spreads across most asset classes.in investment grade.







Horace Mann Educators Corporation3855Quarterly Report onFirst 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)($ in millions)March 31, 2022($ in millions)March 31, 2023
Number of
Issuers
Fair
Value
Amortized
Cost, net
Pretax Net
Unrealized
Gain (Loss)
Number of
Issuers
Fair
Value
Amortized
Cost, net
Pretax Net
Unrealized
Loss
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
Corporate bondsCorporate bondsCorporate bonds
Banking & FinanceBanking & Finance170 $531.8 $535.2 $(3.4)Banking & Finance169 $471.8 $523.0 $(51.2)
Misc.Misc.36 184.1 185.3 (1.2)
InsuranceInsurance57 157.3 170.2 (12.9)
EnergyEnergy94 179.0 177.4 1.6 Energy86 144.3 158.4 (14.1)
Insurance56 173.2 165.9 7.3 
Healthcare, Pharmacy89 160.8 163.7 (2.9)
Miscellaneous37 144.9 146.1 (1.2)
HealthCare, PharmacyHealthCare, Pharmacy73 116.6 137.5 (20.9)
UtilitiesUtilities78 138.8 141.5 (2.7)Utilities78 114.9 132.5 (17.6)
Real EstateReal Estate42 97.9 107.6 (9.7)
TransportationTransportation51 107.9 109.5 (1.6)Transportation47 86.5 95.6 (9.1)
Real Estate45 105.0 106.4 (1.4)
Food and Beverage36 86.6 84.2 2.4 
Consumer ProductsConsumer Products56 79.7 83.3 (3.6)Consumer Products54 69.5 83.6 (14.1)
Natural GasNatural Gas15 52.9 59.1 (6.2)
All other corporates(1)
All other corporates(1)
362 588.3 594.9 (6.6)
All other corporates(1)
295 447.8 502.5 (54.7)
Total corporate bondsTotal corporate bonds1,074 2,296.0 2,308.1 (12.1)Total corporate bonds952 1,943.6 2,155.3 (211.7)
Mortgage-backed securitiesMortgage-backed securitiesMortgage-backed securities
U.S. Government and federally sponsored agenciesU.S. Government and federally sponsored agencies256 419.3 422.4 (3.1)U.S. Government and federally sponsored agencies239 375.0 412.5 (37.5)
Commercial(2)
Commercial(2)
137 297.5 296.0 1.5 
Commercial(2)
164 302.9 327.9 (25.0)
OtherOther31 17.6 17.8 (0.2)Other29 14.0 15.1 (1.1)
Municipal bonds(3)
Municipal bonds(3)
613 1,579.5 1,530.9 48.6 
Municipal bonds(3)
605 1,290.9 1,363.0 (72.1)
Government bondsGovernment bondsGovernment bonds
U.S.U.S.43 365.9 375.3 (9.4)U.S.44 367.4 428.2 (60.8)
ForeignForeign42.5 41.3 1.2 Foreign32.6 34.2 (1.6)
Collateralized loan obligations(4)
Collateralized loan obligations(4)
210 679.4 680.6 (1.2)
Collateralized loan obligations(4)
252 741.2 764.5 (23.3)
Asset-backed securitiesAsset-backed securities106 289.7 298.3 (8.6)Asset-backed securities128 282.4 302.6 (20.2)
Total fixed maturity securitiesTotal fixed maturity securities2,478 $5,987.4 $5,970.7 $16.7 Total fixed maturity securities2,418 $5,350.0 $5,803.3 $(453.3)
Equity securitiesEquity securitiesEquity securities
Non-redeemable preferred stocksNon-redeemable preferred stocks28 $108.3 Non-redeemable preferred stocks26 $80.4 
Common stocksCommon stocks17 0.5 Common stocks1.0 
Closed-end fundClosed-end fund18.0 Closed-end fund17.4 
Total equity securitiesTotal equity securities46 $126.8 Total equity securities33 $98.8 
TotalTotal2,524 $6,114.2 Total2,451 $5,448.8 
(1)The All other corporates category contains 18 additional industry sectors. Technology,Food and beverage, technology, telecommunications, industry manufacturing, broadcasting and media and leisure entertainment represented $319.8$230.6 million of fair value at March 31, 2022,2023, with the remaining 13 sectors each representing less than $268.5$217.2 million.
(2)At March 31, 2022,2023, 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, 47.7%44.6% are tax-exempt and 76.5%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, 2022.2023.
(4)Based on fair value, 93.6%93.3% of the collateralized loan obligation securities were rated investment grade based on ratings assigned by a nationally recognized statistical ratings organization (NRSO)(NRSRO - S&P, Moody's, Fitch, Dominion, A.M. Best, Morningstar, Egan Jones and Kroll).
Horace Mann Educators Corporation39Quarterly Report on Form 10-Q



As of March 31, 2022,2023, our diversified fixed maturity securities portfolio consisted of 3,8183,722 investment positions, issued by 2,4782,418 entities, and totaled approximately $6.0$5.4 billion in fair value. This portfolio was 85.4%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, 2022, 85.1%2023, 91.9% of these combined portfolios were investment grade, based on fair value, with an overall average quality rating of A+. We have classified the entire fixed maturity securities portfolio as available for sale, which is carried at fair value.
($ in millions)($ in millions)Percent of Portfolio
Fair Value
March 31, 2022($ in millions)Percent of Portfolio
Fair Value
March 31, 2023
December 31, 2021March 31, 2022Fair
Value
Amortized
Cost, net
December 31, 2022March 31, 2023Fair
Value
Amortized
Cost, net
Fixed maturity securitiesFixed maturity securitiesFixed maturity securities
AAAAAA10.1 %10.0 %$595.8 $599.3 AAA10.8 %11.3 %$605.2 $634.4 
AA(2)
AA(2)
36.7 37.2 2,230.0 2,221.4 
AA(2)
39.3 39.1 2,093.6 2,303.7 
AA17.4 16.9 1,014.1 991.7 A17.8 18.2 975.3 1,038.1 
BBBBBB21.3 21.3 1,272.7 1,274.9 BBB24.1 23.6 1,266.6 1,393.2 
BBBB3.1 3.0 180.2 183.0 BB1.8 1.8 95.1 104.3 
BB1.3 1.4 84.5 86.0 B0.9 0.9 47.8 52.0 
CCC or lowerCCC or lower— — 0.8 0.8 CCC or lower— — 1.1 1.7 
Not rated(3)
Not rated(3)
10.1 10.2 609.3 613.6 
Not rated(3)
5.3 5.1 265.3 275.9 
Total fixed maturity securitiesTotal fixed maturity securities100.0 %100.0 %$5,987.4 $5,970.7 Total fixed maturity securities100.0 %100.0 %$5,350.0 $5,803.3 
Equity securitiesEquity securitiesEquity securities
AAAAAA— — $— AAA— %— %
AAAA— — — AA— — — 
AA0.5 %0.5 %0.7 A— — — 
BBBBBB67.3 70.4 89.3 BBB68.7 65.4 64.6 
BBBB12.7 13.6 17.2 BB10.8 10.9 10.8 
BB— — — B— — — 
CCC or lowerCCC or lower— — — CCC or lower— 2.1 2.1 
Not ratedNot rated19.5 15.5 19.6 Not rated20.5 21.6 21.3 
Total equity securitiesTotal equity securities100.0 %100.0 %$126.8 Total equity securities100.0 %100.0 %$98.8 
TotalTotal$6,114.2 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, 2022,2023, the AA rated fair value amount included $356.2$364.8 million of U.S. Government and federally sponsored agency securities and $605.0$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 ana NRSRO.

As of March 31, 2022,2023, the fixed maturity securities portfolio had $154.1$502.9 million of pretax gross unrealized investment losses on $2,760.0$4,185.9 million of fair value related to 1,9452,921 positions. Of the investment positions with gross unrealized losses, there were 36416 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, 20222023 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of impairment.
Horace Mann Educators Corporation4057Quarterly Report onFirst Quarter 2023 Form 10-Q



Liquidity and Capital Resources
Off-Balance Sheet Arrangements
As ofOur liquidity and access to capital were not materially impacted by inflation or changes in interest rates during the three months ended March 31, 20222023. For further discussion regarding the potential future impacts of inflation and 2021, we 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 establishedchanges 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, we are not exposed to any financing, liquidity, market or credit risk that could arise if we engaged in such relationships.year ended December 31, 2022.
Investments
Information regarding our investment portfolio, which is comprised primarily of investment grade fixed maturity securities, is presented in Part I - Item 1, Note 32 of the Consolidated Financial Statements as well as Part I - Item 2 - Investment Results in this report.Quarterly Report on Form 10-Q.
Cash Flow
Our short-term liquidity requirements, within a 12 month operating cycle, are for the timely payment of claims and benefits to policyholders, operating expenses, interest payments and federal income taxes. Cash flow generated from operations has been, and is expected to be, adequate to meet our operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth, pay dividends to shareholders and repurchase shares of our common stock. Long-term liquidity requirements, beyond one year, are principally for the payment of future insurance and annuity policy claims and benefits, as well as retirement of debt. The following table summarizes our consolidated cash flows activity for the periods indicated.
($ in millions)($ in millions)Three Months Ended
March 31,
2022-2021($ in millions)Three Months Ended
March 31,
2023-2022
20222021Change %20232022% Change
Net cash provided by operating activitiesNet cash provided by operating activities$95.7 $142.0 -32.6 %Net cash provided by operating activities$86.4 $95.7 -9.7 %
Net cash used in investing activitiesNet cash used in investing activities(217.7)(239.5)9.1 %Net cash used in investing activities(95.3)(217.7)56.2 %
Net cash provided by financing activities37.4 114.6 -67.4 %
Net (decrease) increase in cash(84.6)17.1 N.M.
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(6.5)37.4 -117.4 %
Net decrease in cashNet decrease in cash(15.4)(84.6)81.8 %
Cash at beginning of periodCash at beginning of period133.7 22.3 N.M.Cash at beginning of period42.8 133.7 -68.0 %
Cash at end of periodCash at end of period$49.1 $39.4 24.6 %Cash at end of period$27.4 $49.1 -44.2 %
Operating Activities
As a holding company, we conduct our principal operations in the personal lines segment of the property and casualty, life, retirement, supplemental and lifegroup insurance industries through our subsidiaries. Our insurance subsidiaries generate cash flow from premium and investment income, generally well in excess of their immediate needs for policy obligations, operating expenses and other cash requirements. Cash provided by operating activities primarily reflects net cash flows generated by theour insurance subsidiaries.
For the three months ended March 31, 2022,2023, net cash provided by operating activities decreased $46.3$9.3 million, primarily due to higher claims paid on insurance policies.
Investing Activities
Our insurance subsidiaries maintain significant investmentsNet cash used in fixed maturity securities to meet future contractual obligations to policyholders. In conjunction with our management of liquidity and other asset/liability management objectives, we, from time to time, will sell fixed maturity securities prior to maturity, and reinvest the proceeds into other investments with different interest rates, maturities or credit characteristics. Accordingly, we have classified the entire fixed maturity securities portfolio as available for sale.
Investinginvesting activities includes our acquisition of Madison National for the three months ended March 31, 2022.2023 and 2022 was $(95.3) million and $(217.7) million, respectively. Prior year investing activities included the acquisition of Madison National.

Investing cash inflows consist primarily of proceeds from the sales and maturities of investments. Investing cash outflows consist primarily of payments for purchases of investments. Our investment strategy is to appropriately match the cash flows and durations of our assets with the cash flows and durations of our liabilities to meet the funding requirements of our business and, generally, the expected principal and interest payments produced by our fixed maturity securities portfolio adequately fund the estimated runoff of our insurance reserves. When market opportunities arise, we may sell selected 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 Corporation4158Quarterly Report onFirst Quarter 2023 Form 10-Q



proceeds received from FHLB funding advances, issuance of debt, our reverse repurchase agreement program, and by the amount of cash which is at times held in short-term investments to facilitate the availability of cash to fund the purchase of appropriate long-term investments, repay maturing debt, and/or to respond to catastrophes.
Financing Activities
Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, changes in the deposit asset on reinsurance, repurchases of our common stock, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
For the three months ended March 31, 2022,2023, net cash provided by financing activities decreased $77.2$43.9 million compared to the prior year period, primarily due to a $70.0$34.3 increase in cash outflows from benefits, withdrawals and net transfers to Separate Account variable annuity assets, a $9.8 million increase in cash outflows from the deposit asset on reinsurance and a $8.3 million increase in cash outflows from the change in book overdrafts; partially offset by a $17.0 million net decreaseincrease in cash inflows from advances received under Federal Home Loan Bank of Chicago (FHLB)FHLB funding agreements.
The following table shows activity from FHLB funding agreements for the periods indicated.
($ in millions)($ in millions)Three Months Ended
March 31,
2022-20212022-2021($ in millions)Three Months Ended
March 31,
2023-20222023-2022
20222021Change $Change %20232022$ Change% Change
Balance at beginning of the periodBalance at beginning of the period$782.5 $590.5 $192.0 32.5 %Balance at beginning of the period$792.5 $782.5 $10.0 1.3 %
Advances received from FHLB funding agreementsAdvances received from FHLB funding agreements60.0 130.0 (70.0)-53.8 %Advances received from FHLB funding agreements162.0 60.0 102.0 N.M.
Principal repayments on FHLB funding agreementsPrincipal repayments on FHLB funding agreements— — — N.M.Principal repayments on FHLB funding agreements(85.0)— (85.0)N.M.
Balance at end of the periodBalance at end of the period$842.5 $720.5 $122.0 16.9 %Balance at end of the period$869.5 $842.5 $27.0 3.2 %


Horace Mann Educators Corporation4259Quarterly Report onFirst 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
SalesProceeds from sales of investments
FundsProceeds 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
FundsProceeds from periodic issuance of additional securities
Proceeds from debt issuances
Proceeds from senior revolving credit facility
Receipt of intercompany settlements related to employee benefit plans
Activities for potential uses of funds
Payment of claims and related expenses
Payment of contract benefits, surrenders and withdrawals
Reinsurance cessions and indemnification program payments
OperatingPayment of operating costs and expenses
Purchase ofPayments 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 repaymentrepayments
Repayment on senior revolving credit facility
Payments related to employee benefit plans
Payments for business acquisitions
We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across HMEC and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across HMEC to enhance flexibility.
Horace Mann Educators Corporation60First Quarter 2023 Form 10-Q



As of March 31, 2022,2023, we held $997.2$966.2 million of cash, U.S. government and agency fixed maturity securities and public equity securities (excluding non-redeemable preferred stocks and foreign equity securities) which, under normal market conditions, could be rapidly liquidated.
Certain remote events and circumstances could constrain our liquidity. Those events and circumstances include, for example, a catastrophe resulting in extraordinary losses, a downgrade of our Senior Notes rating to non-investment grade status or a downgrade in our insurance subsidiaries' financial strength ratings. The rating
Horace Mann Educators Corporation43Quarterly Report on Form 10-Q



agencies also consider the interdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the ratings of other related entities.
Capital Resources
We have determined the amount of capital that is needed to adequately fund and support business growth, primarily based on risk-based capital formulas, including those developed by the National Association of Insurance Commissioners. Historically, our insurance subsidiaries have generated capital in excess of such needed levels. These excess amounts have been paid to us through dividends. We have then utilized these dividends and our access to the capital markets to fund growth initiatives, service and retire debt, pay dividends to our shareholders, repurchase shares of our common stock and for other corporate purposes. If necessary, we also have other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, including a revolving line of credit, as well as issuances of various securities.
The insurance subsidiaries are subject to various regulatory restrictions that limit the amount of annual dividends or other distributions, including loans or cash advances, available to us without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 20222023 from all of our insurance subsidiaries without prior regulatory approval is $131.9$110.3 million, excluding the impact and timing of prior dividends, of which $82.0$19.0 million was paid during the three months ended March 31, 2022.2023. We anticipate that our sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments, shareholder dividends and our share repurchase program.programs. Additional information is contained in Part II - Item 8, Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Total capital was $2,039.5$1,637.2 million as of March 31, 2022,2023, including $502.7$498.0 million of short-term and long-term debt. Total debt represented 24.6%30.4% of total capital including net unrealized investment gainslosses on fixed maturity securities (24.9%(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 on fixed maturity securities*) at March 31, 2022, which was below our long-term target of 25%(losses) and net reserve remeasurements attributable to discount rate).
Shareholders' equity was $1,536.8$1,139.2 million as of March 31, 2022,2023, including net unrealized investment gainslosses on fixed maturity securities of $20.0$356.4 million after taxes and the related impact of DAC associated with annuity contracts and life insurance products with account values.taxes. The market value of our common stock and the market value per share were $1,731.0$1,368.2 million and $41.83,$33.48, respectively, as of March 31, 2022.2023. Book value per share and adjusted book value per share* was $37.14$27.87 and $36.65,$36.16, respectively, as of March 31, 2022.2023.
Additional information regarding net unrealized investment gains (losses) on fixed maturity securities as of March 31, 20222023 is included in Part I - Item 1, Note 32 of the Consolidated Financial Statements as well as in Part I - Item 2 - Investment Results in this report.Quarterly Report on Form 10-Q.
Total shareholder dividends paid to shareholders was $13.2$13.5 million for the three months ended March 31, 2022.2023. In March 2022,of 2023, the Board of Directors (Board) approved regular quarterly dividends of $0.32$0.33 per share.
For the three months ended March 31, 2022,2023, we repurchased 59,746128,540 shares of our common stock at an average price per share of $37.14$34.01 under our share repurchase program, which is further described inprogram. See Part II - Item 8, Note 13 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.2022 for more information. As of March 31, 2022, $13.12023, $36.9 million remained authorized for future share repurchases under the share repurchase program.
Horace Mann Educators Corporation4461Quarterly Report onFirst Quarter 2023 Form 10-Q



The following table summarizes our debt obligations.
($ in millions)($ in millions)Interest
Rates
Final
Maturity
March 31, 2022December 31, 2021($ in millions)Interest
Rates
Final
Maturity
March 31, 2023December 31, 2022
($ in millions)Interest
Rates
Final
Maturity
March 31, 2023December 31, 2022
Short-term debtShort-term debtShort-term debt
Bank Credit FacilityVariable2026$249.0 $249.0 
Revolving Credit FacilityRevolving Credit FacilityVariable2026$249.0 $249.0 
Long-term debt(1)
Long-term debt(1)
Long-term debt(1)
4.50% Senior Notes, Aggregate principal
amount of $250.0 less unaccrued
discount of $0.3 and $0.3 and unamortized
debt issuance costs of $1.0 and $1.1
4.50%2025248.7 248.6 
FHLB borrowings0.00%20225.0 5.0 
4.50% Senior Notes, Aggregate principal
amount of $250.0 less unaccrued
discount of $0.2 and $0.3 and unamortized
debt issuance costs of $0.8 and $1.1
4.50% Senior Notes, Aggregate principal
amount of $250.0 less unaccrued
discount of $0.2 and $0.3 and unamortized
debt issuance costs of $0.8 and $1.1
4.50%2025249.0 248.6 
TotalTotal$502.7 $502.6 Total$498.0 $497.6 
(1)    We designate debt obligations as "long-term" based on maturity date at issuance.

As of March 31, 2022,2023, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (Senior Notes), which will mature on December 1, 2025, issued at a discount resulting in an effective yield of 4.53%. Interest on the Senior Notes is payable semi-annually at a rate of 4.50%. Detailed information regarding the redemption terms of the Senior Notes is contained in the Part II - Item 8, Note 910 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. The Senior Notes are traded in the open market (HMN 4.50).
As of March 31, 2022,2023, we had $5.0 million ofno borrowings outstanding with FHLB. The Board has authorized a maximum amount equal to 15% of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing capacity. The total $5.0 million received matures on May 16, 2022 and is reported as Long-term debt in the Consolidated Balance Sheets.
Effective July 12, 2021, we, as borrower, amended our Credit Agreement (Bank(Revolving Credit Facility). The amended BankRevolving Credit Facility increased the amount available on the senior revolving credit facility from $225.0 million to $325.0 million. PNC Bank, National Association and JPMorgan Chase Bank, N.A. serve as joint lead arrangers under the amended BankRevolving Credit Facility, with The Northern Trust Company, KeyBank National Association, U.S. Bank National Association, Illinois National Bank, and Comerica Bank as lenders participating in the syndicate. Terms and conditions of the amended BankRevolving 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 12, 2026.
On December 31, 2021, we utilized $114.0 million of the senior revolving credit facilityRevolving Credit Facility to fund a portion of the acquisition of Madison National Life Insurance Company, Inc. that occurred effective January 1, 2022, resulting in an amount outstandinga remaining capacity of $249.0 million under the senior revolving credit facility.$76.0 million. We expect that the unused portion of the senior revolving credit facilityRevolving Credit Facility will be available for ongoing working capital, capital expenditures and 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 atas of March 31, 2022.2023.
To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on March 10, 2021. The registration statement, which registered the offer and sale from time to time of an indeterminate amount of various securities, which may include debt securities, common stock, preferred stock, depositary shares, warrants, delayed delivery contracts and/or units that include any of these securities, was automatically effective on March 10, 2021. Unless withdrawn by us earlier, this registration statement will remain effective through March 10, 2024. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.
On March 13, 2018, we filed a "shelf" registration statement on Form S-4 with the SEC which became effective on May 2, 2018. Under this registration statement, we may from time to time offer and issue up to 5,000,000 shares of our common stock in connection with future acquisitions of other businesses, assets or securities. Unless withdrawn by us, this registration statement will remain effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.
Horace Mann Educators Corporation4562Quarterly Report onFirst Quarter 2023 Form 10-Q



Financial Ratings
Our principal insurance subsidiaries are rated by A.M. Best Company, Inc. (A.M. Best), Fitch, Moody's, and S&P. These rating agencies have also assigned ratings to our Senior Notes. The ratings that are assigned by these agencies, which are subject to change, can impact, among other things, our access to sources of capital, cost of capital, and competitive position. These ratings are not a recommendation to buy or hold any of our securities.
All four agencies currently have assigned the same insurance financial strength ratings to our Property & Casualty and Life insurance subsidiaries. Only A.M. Best currently rates our Supplemental & Group Benefits subsidiaries. A.M. Best currently rates our NTA Life subsidiary at the same level as our Property & Casualty and Life & Retirement subsidiaries and our Madison National subsidiary is rated A- (Excellent). Assigned ratings and respective affirmation/review dates as of April 30, 20222023 were as follows:
Insurance FinancialAffirmed/
Strength Ratings (Outlook)Debt Ratings (Outlook)Reviewed
A.M. Best
HMEC (parent company)N.A.bbb(stable)7/14/202128/2022
HMEC's Life & Retirement subsidiariesA(stable)N.A.7/14/202128/2022
HMEC's Property & Casualty subsidiariesA(stable)N.A.7/14/202128/2022
HMEC's Supplemental & Group Benefits
subsidiaries
Madison National Life Insurance CompanyA-(stable)N.A.2/9/7/28/2022
National Teachers Associates Life
Insurance Company
A(stable)N.A.7/14/202128/2022
FitchA(stable)BBB(stable)9/14/202110/18/2022
Moody's
   HMEC (parent company)Baa2(negative)3/1/2023
   HMEC's Life GroupA2(stable)(negative)3/1/2023
   HMEC's P&C GroupBaa2A2(stable)(negative)10/28/20213/1/2023
S&PA(stable)BBB(stable)2/14/20227/2023
Reinsurance Programs
Information regarding the reinsurance programs for our Property & Casualty, Supplemental,Life & Retirement and LifeSupplemental & Group Benefits segments is located in Part III - Item 8, Note 6 and Note 9 of the Consolidated Financial Statements1, Reporting Segments in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
ITEM 3. I Quantitative and Qualitative Disclosures about Market Risk
Market value risk, our primary market risk exposure, is the risk that our invested assets will decrease in value. This decrease in value may be due to (1) a change in the yields realized on our assets and prevailing market yields for similar assets, (2) an unfavorable change in the liquidity of an investment, (3) an unfavorable change in the financial prospects of the issuer of an investment, or (4) a downgrade in the credit rating of the issuer of an investment. Also see Consolidated Results of Operations in Part I - Item 2 of this reportQuarterly Report on Form 10-Q regarding net investment gains (losses).losses.
Horace Mann Educators Corporation4663Quarterly Report onFirst Quarter 2023 Form 10-Q



Significant changes in interest rates expose us to the risk of experiencing losses or earning a reduced level of income based on the difference between the interest rates earned on our investments and the credited interest rates on our insurance and investment contract liabilities. Also see Consolidated Results of Operations in Part I - Item 2 of this reportQuarterly Report on Form 10-Q regarding interest credited to policyholders.
We seek to manage our market value risk by coordinating the projected cash inflows of assets with the projected cash outflows of liabilities. For all of our assets and liabilities, we seek to maintain reasonable durations, consistent with the maximization of income without sacrificing investment quality, while providing for liquidity and diversification. The investment risk associated with variable annuity deposits and the underlying mutual funds is assumed by those contractholders, and not by us. Certain fees that we earn from variable annuity deposits are based on the market value of the funds deposited.
More detailed descriptions of our exposure to market value risks and the management of those risks is contained in Part II - Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
ITEM 4. I Controls and Procedures
Management's Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as amended (Exchange Act), as of March 31, 2022.2023. Based on this evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) that is required to be included in our periodic SEC filings. No material weaknesses in our disclosure controls and procedures were identified in the evaluation and therefore, no corrective actions were taken. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
Changes in Internal Control Over Financial Reporting
Except as noted below, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Effective January 1, 2022, we completed our acquisition of Madison National Life Insurance Company, Inc. (Madison National). We are in the process of integrating Madison National and our controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Therefore, we have elected to exclude Madison National from our assessment of internal control over financial reporting as of March 31, 2022.
Concurrent with the acquisition of Madison National, changesChanges were made to the relevant business processes and the related control activities over purchase accounting in order to monitor and maintain appropriate controls over financial reporting.reporting for long-duration insurance contracts.
Horace Mann Educators Corporation4764Quarterly Report onFirst Quarter 2023 Form 10-Q



PART II: OTHER INFORMATION
ITEM 1A. I Risk Factors
At the time of issuance of this Quarterly Report on Form 10-Q, we believe there are no material changes from the risk factors as previously disclosed in Part I - Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
ITEM 2. I Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On September 30, 2015, theMay 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50.0$50 million of our common stock, par value $0.001 (Program). The Program authorizes the repurchase of our common stockshares in open market or privately negotiated transactions, from time to time, depending on market conditions.conditions (Program). The Program does not have an expiration date and may be limited or terminated at any time without notice. During the three months ended March 31, 2022,2023, we repurchased shares of our common stock under the Program as follows:
PeriodPeriod

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
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 - 31January 1 - 3153,874 $37.13 53,874 $13.3 millionJanuary 1 - 3154,400 $33.86 54,400 $39.5 million
February 1 - 28February 1 - 285,872 37.21 5,872 $13.1 millionFebruary 1 - 2822,121 35.27 22,121 $38.7 million
March 1 - 31March 1 - 31— — — $13.1 millionMarch 1 - 3152,019 33.64 52,019 $36.9 million
TotalTotal59,746 $37.14 59,746 $13.1 millionTotal128,540 $34.01 128,540 $36.9 million
ITEM 5. I Other Information
Not applicable.
ITEM 6. I Exhibits
The following items are filed as Exhibits. Management contracts and compensatory plans are indicated by an asterisk (*).
Exhibit
No.Description
(3) Articles of incorporation and bylaws:
3.1
3.2
Horace Mann Educators Corporation4865Quarterly Report onFirst 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)
10.1(b)
10.2*
10.2(a)*
10.2(b)*
10.2(c)*
10.2(d)*
Horace Mann Educators Corporation4966Quarterly Report onFirst 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(f)*
10.3(g)*
10.3(h)*
10.3(f)10.3(i)*
10.3(g)10.3(j)*
Horace Mann Educators Corporation67First Quarter 2023 Form 10-Q



10.4*
10.5*
10.6*
Horace Mann Educators Corporation50Quarterly Report on Form 10-Q



10.7*
10.8*
10.9*
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:
Horace 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
Horace Mann Educators Corporation51Quarterly Report on Form 10-Q



(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 Corporation5269Quarterly Report onFirst 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)
DateMay 9, 202210, 2023/s/ Marita Zuraitis
Marita Zuraitis
President and Chief Executive Officer
DateMay 9, 202210, 2023/s/ Bret A. Conklin
Bret A. Conklin
Executive Vice President and
Chief Financial Officer
DateMay 9, 202210, 2023/s/ Kimberly A. Johnson
Kimberly A. Johnson
Senior Vice President, Controller and
Principal Accounting Officer

Horace Mann Educators Corporation5370Quarterly Report onFirst Quarter 2023 Form 10-Q