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

FORM 10-Q

(MARK ONE)
[x]QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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)

Delaware 37-0911756
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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

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

As of April 30, 1998, 44,009,644 shares of Common Stock, par value $0.001
per share, were outstanding, net of 15,233,396 shares of treasury stock.

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HORACE MANN EDUCATORS CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 1998

INDEX

Page
----

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997....................... 1

Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997................. 2

Consolidated Statements of Changes in Shareholders'
Equity for the Three Months Ended March 31, 1998 and 1997.. 3

Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997................. 4

Notes to Consolidated Financial Statements................... 5

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 11

PART II - OTHER INFORMATION................................................. 20

Item 4. Submission of Matters to a Vote of Security Holders

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES.................................................................. 21

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

March 31, December 31,
1998 1997
---------- -----------

ASSETS
Investments
Fixed maturities, available for sale, at market (amortized
cost, 1998, $2,582,162; 1997, $2,535,538)................. $2,674,555 $2,638,794
Short-term and other investments............................ 200,017 130,252
---------- ----------
Total investments........................................ 2,874,572 2,769,046
Cash.......................................................... 10,187 353
Accrued investment income and premiums receivable............. 93,631 103,951
Value of acquired insurance in force and goodwill............. 106,140 107,976
Deferred policy acquisition costs............................. 90,545 85,883
Other assets.................................................. 96,475 104,943
Variable annuity assets....................................... 1,086,827 959,760
---------- ----------
Total assets............................................. $4,358,377 $4,131,912
========== ==========

LIABILITIES, REDEEMABLE SECURITIES AND SHAREHOLDERS' EQUITY

Policy liabilities

Fixed annuity contract liabilities.......................... $1,238,440 $1,245,459
Interest-sensitive life contract liabilities................ 373,439 364,205
Unpaid claims and claim expenses............................ 317,862 322,335
Future policy benefits...................................... 179,832 179,562
Unearned premiums........................................... 166,353 166,996
---------- ----------
Total policy liabilities................................. 2,275,926 2,278,557
Other policyholder funds...................................... 123,586 122,107
Other liabilities............................................. 225,690 126,847
Short-term debt............................................... 42,000 42,000
Long-term debt................................................ 99,609 99,599
Variable annuity liabilities.................................. 1,082,907 956,253
---------- ----------
Total liabilities........................................ 3,849,718 3,625,363
---------- ----------

Warrants, subject to redemption............................... 577 577
---------- ----------

Preferred stock............................................... - -
Common stock.................................................. 59 59
Additional paid-in capital.................................... 340,503 340,564
Retained earnings............................................. 368,197 349,274
Accumulated other comprehensive income (Net
unrealized gains on fixed maturities and equity securities).. 55,614 62,167
Treasury stock, at cost....................................... (256,291) (246,092)
---------- ----------
Total shareholders' equity............................... 508,082 505,972
---------- ----------
Total liabilities, redeemable
securities, and shareholders' equity................... $4,358,377 $4,131,912
========== ==========

See accompanying notes to consolidated financial statements.

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

Three Months Ended
March 31,
------------------
1998 1997
-------- --------

Insurance premiums written and contract deposits......... $196,954 $179,870
======== ========

Revenues
Insurance premiums and contract charges earned.......... $141,207 $131,419
Net investment income................................... 48,520 49,787
Realized investment gains............................... 6,371 857
-------- --------
Total revenues...................................... 196,098 182,063
-------- --------

Benefits, losses and expenses
Benefits, claims and settlement expenses................ 97,430 90,500
Interest credited....................................... 24,129 24,384
Policy acquisition expenses amortized................... 11,446 10,840
Operating expenses...................................... 27,225 24,509
Amortization of intangible assets....................... 1,836 2,706
Interest expense........................................ 2,360 2,454
-------- --------
Total benefits, losses and expenses................. 164,426 155,393
-------- --------

Income before income taxes............................... 31,672 26,670
Income tax expense....................................... 9,213 7,270
-------- --------
Net income............................................... $ 22,459 $ 19,400
======== ========

Net income per share
Basic................................................... $ 0.51 $ 0.41
======== ========
Diluted................................................. $ 0.50 $ 0.40
======== ========

Weighted average number of shares and equivalent shares
Basic................................................... 44,176 47,330
Diluted................................................. 44,961 48,045

See accompanying notes to consolidated financial statements.

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)

Three Months Ended
March 31,
---------------------
1998 1997
---- ----

Common stock
Beginning balance.......................................... $ 59 $ 58
Options exercised, 1998, 77,532 shares;
1997, 371,944 shares...................................... - -
--------- ---------
Ending balance............................................. 59 58
--------- ---------

Additional paid-in capital
Beginning balance.......................................... 340,564 330,234
Options exercised.......................................... 1,414 5,714
Catastrophe-linked equity put option premium............... (1,475) -
--------- ---------
Ending balance............................................. 340,503 335,948
--------- ---------

Retained earnings
Beginning balance.......................................... 349,274 278,669
Net income................................................. 22,459 19,400
Cash dividends, 1998, $0.08 per share;
1997, $0.0675 per share................................... (3,536) (3,208)
--------- ---------
Ending balance............................................. 368,197 294,861
--------- ---------

Accumulated other comprehensive income (Net unrealized
gains (losses) on fixed maturities and equity securities)
Beginning balance......................................... 62,167 29,736
Increase (decrease) for the period........................ (6,553) (25,799)
--------- ---------
Ending balance............................................ 55,614 3,937
--------- ---------

Treasury stock, at cost
Beginning balance, 1998, 14,896,796 shares;
1997, 11,176,196 shares................................... (246,092) (154,302)
Purchase of 297,000 shares in 1998;
586,400 shares in 1997 (See note 5)....................... (10,199) (13,348)
--------- ---------
Ending balance, 1998, 15,193,796 shares;
1997,11,762,596 shares.................................... (256,291) (167,650)
--------- ---------
Shareholders' equity at end of period....................... $ 508,082 $ 467,154
========= =========

Comprehensive income
Net income................................................. $ 22,459 $ 19,400
Other comprehensive income................................. (6,553) (25,799)
--------- ---------
Total..................................................... $ 15,906 $ (6,399)
========= =========

See accompanying notes to consolidated financial statements.

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Three Months Ended
March 31,
----------------------
1998 1997
---- ----

Cash flows from operating activities
Premiums collected........................................ $ 156,335 $ 148,861
Policyholder benefits paid................................ (114,314) (112,546)
Policy acquisition and other operating expenses paid...... (40,515) (40,036)
Federal income taxes paid................................. (800) (30,306)
Investment income collected............................... 53,754 51,419
Interest expense paid..................................... (3,319) (3,951)
Other..................................................... 1,541 2,310
--------- ---------
Net cash provided by operating activities.............. 52,682 15,751
--------- ---------

Cash flows from investing activities
Fixed maturities
Purchases................................................ (330,130) (265,366)
Sales.................................................... 198,927 217,068
Maturities............................................... 105,117 62,001
Net cash received from (used for)
short-term and other investments.......................... 15,109 (11,932)
--------- ---------
Net cash provided by (used in) investing activities.... (10,977) 1,771
--------- ---------

Cash flows from financing activities
Purchase of treasury stock................................ (10,199) (13,348)
Dividends paid to shareholders............................ (3,536) (3,208)
Principal borrowing (payments) on Bank Credit Facility.... - -
Exercise of stock options................................. 1,414 5,714
Catastrophe-linked equity put option premium.............. (1,475) (1,250)
Annuity contracts, variable and fixed
Deposits................................................. 54,343 46,793
Maturities and withdrawals............................... (45,109) (34,210)
Net transfer to variable annuity assets.................. (27,207) (26,285)
Net increase (decrease) in interest-sensitive
life account balances.................................... (102) 418
--------- ---------
Net cash used in financing activities.................. (31,871) (25,376)
--------- ---------

Net increase (decrease) in cash............................ 9,834 (7,854)
Cash at beginning of period................................ 353 13,704
--------- ---------
Cash at end of period...................................... $ 10,187 $ 5,850
========= =========

See accompanying notes to consolidated financial statements.

HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 and 1997
(Dollars in thousands)

Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements of Horace
Mann Educators Corporation (the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes that these financial statements
contain all adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company's consolidated financial position as of March 31,
1998 and December 31, 1997 and the consolidated results of operations, changes
in shareholders' equity and cash flows for the three months ended March 31, 1998
and 1997.

It is suggested that these financial statements be read in conjunction
with the financial statements and the notes thereto contained in the December
31, 1997 Form 10-K filed by the Company.

The results of operations for the three months ended March 31, 1998
are not necessarily indicative of the results to be expected for the full year.

The Company has reclassified the presentation of certain prior period
information to conform with the 1998 presentation.

Note 2 - Debt

Indebtedness outstanding was as follows:

March 31, December 31,
1998 1997
--------- ------------

Short-term debt:
$65,000 Bank Credit Facility, IBOR + 0.325%
(6.0% as of March 31, 1998)................... $ 42,000 $ 42,000
Long-term debt:
6-5/8% Senior Notes, due January 15, 2006.
Face amount less unaccrued discount
of $391 and $401 (6.7% imputed rate).......... 99,609 99,599
-------- --------
Total....................................... $141,609 $141,599
======== ========

Note 3 - Investments

The following sets forth the composition and value of the Company's
fixed maturity securities portfolio by rating category. The Company has
classified the entire fixed maturity securities portfolio as available for sale,
which is carried at market value.

Percent of
Carrying Value March 31, 1998
------------------------- ----------------------------
Rating of Fixed March 31, December 31, Carrying Amortized
Maturity Securities(1) 1998 1997 Value Cost
---------------------- --------- ------------ ---------- ----------

AAA.................... 44.4% 42.7% $1,186,810 $1,154,966
AA..................... 7.1 7.1 191,332 182,761
A...................... 18.8 20.3 502,835 481,431
BBB.................... 23.1 23.3 617,745 595,006
BB..................... 1.5 1.6 39,285 37,667
B...................... 4.0 4.0 107,661 101,149
CCC or lower........... 0.1 0.1 2,476 4,654
Not rated(2)........... 1.0 0.9 26,411 24,528
----- ----- ---------- ----------
Total................ 100.0% 100.0% $2,674,555 $2,582,162
===== ===== ========== ==========

(1) Ratings are as assigned primarily by Standard & Poor's Corporation ("S&P")
when available, with remaining ratings as assigned on an equivalent basis
by Moody's Investors Service, Inc. ("Moody's"). Ratings for publicly traded
securities are determined when the securities are acquired and are updated
monthly to reflect any changes in ratings.

(2) This category includes $17.8 million of publicly traded securities not
currently rated by S&P, Moody's or the NAIC and $8.6 million of private
placement securities not rated by either S&P or Moody's. The National
Association of Insurance Commissioners (the "NAIC") has rated 89.0% of
these private placements as investment grade. $0.8 million of the remaining
$0.9 million of private placements were rated as investment grade by the
NAIC in 1995 and are under review for the assignment of a current rating.

The following table presents a maturity schedule of the Company's fixed
maturity securities. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.

Percent Carrying
of Total Value
------------------------- ----------
March 31, December 31, March 31,
Scheduled Maturity 1998 1997 1998
- ------------------ --------- ------------ ----------

Due in 1 year or less................ 4.9% 5.6% $ 131,782
Due after 1 year through 5 years..... 27.2 24.2 728,656
Due after 5 years through 10 years... 33.4 34.8 892,565
Due after 10 years through 20 years.. 18.7 19.6 500,288
Due after 20 years................... 15.8 15.8 421,264
----- ----- ----------
Total................................ 100.0% 100.0% $2,674,555
===== ===== ==========

Note 4 - Shareholders' Equity

Share Repurchase Programs

During 1997, the Company repurchased 3,720,600 shares, 8% of the
Company's outstanding shares at December 31, 1996, at an aggregate cost of
$91,790 under a $100,000 stock repurchase program announced in February 1997. In
January 1998, the Company's Board of Directors authorized an additional
repurchase of shares of the Company's common stock up to $100,000. Based on the
market price of the Company's common shares at the time, $100,000 represented
approximately 8% of the Company's then outstanding shares. Shares of common
stock may be purchased from time to time through open market and private
purchases, as available. The repurchase of shares is financed through use of
cash and, if needed, the Bank Credit Facility.

During the three months ended March 31, 1998, the Company repurchased
297,000 shares at an aggregate cost of $10,199 which was financed with cash from
operations.

Note 5 - Value of Annuity Business Acquired

The value of annuity business acquired was recorded in the application
of purchase accounting at the time that the Company was acquired in 1989 and is
being amortized over 20 years, in proportion to projected future gross profits.
Reflecting the significant recent market appreciation, the retention of the
business and their impact on projected future gross profits, scheduled annual
amortization of the December 31, 1997 balance has been revised as follows: 1998,
$3,119; 1999, $3,132; 2000, $3,176; 2001, $3,220; and 2002, $3,207.

Note 6 - Comprehensive Income

Effective January 1, 1998, the Company adopted Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income. Comprehensive income
represents the change in shareholders' equity during a reporting period from
transactions and other events and circumstances from non-shareholder sources.
For the Company, comprehensive income is equal to net income plus the change in
net unrealized gains and losses on fixed maturities and equity securities for
the period as shown in the Statement of Changes in Shareholders' Equity in prior
periods. The adoption of SFAS No. 130 resulted in revised and additional
disclosures but had no effect on the financial position, results of operations,
or liquidity of the Company. Comprehensive income was $15,906 and ($6,399) for
the three months ended March 31, 1998 and 1997, respectively, with the change
between years due primarily to the change in the market value of fixed maturity
securities.

Note 7 - 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 reported and policy benefits are estimated in a manner consistent with the
insurance liability associated with the policy. The effect of reinsurance on
premiums written; premiums earned; and benefits, claims and settlement expenses
were as follows:

Ceded to Assumed
Gross Other from State
Amount Companies Facilities Net
-------- --------- ---------- --------

Three months ended
March 31, 1998
- ------------------

Premiums written................. $197,870 $5,262 $4,346 $196,954
Premiums earned.................. 142,495 5,245 3,957 141,207
Benefits, claims and
settlement expenses............ 101,384 7,502 3,548 97,430

Three months ended
March 31, 1997
- ------------------

Premiums written................. $181,832 $5,990 $4,028 $179,870
Premiums earned.................. 130,809 5,229 5,839 131,419
Benefits, claims and
settlement expenses............ 91,968 8,291 6,823 90,500

The Company maintains an excess and catastrophe treaty reinsurance program
for its property and casualty subsidiaries. The Company reinsures 95% of
catastrophe losses above a retention of $7.5 million per occurrence up to $80
million per occurrence. This program is augmented by a $100 million equity put
that provides an option to sell shares of the Company's convertible preferred
stock with a floating rate dividend at a pre-negotiated price in the event
losses from catastrophes, individually or in the aggregate during a calendar
year, exceed the catastrophe reinsurance program coverage limit. Before tax
benefits, the equity put provides a source of capital for up to $154 million of
catastrophe losses above the reinsurance coverage limit. The fee for the equity
put has been charged directly to additional paid-in capital. For liability
coverages, including the educator professional liability policy, the Company
reinsures each loss above a retention of $0.5 million up to $20 million. The
Company also reinsures each property loss above a retention of $0.5 million up
to $1.5 million.

Note 8 - Segment Information

Effective January 1, 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 specifies the presentation and disclosure of operating segment information
reported in the annual and interim reports issued to shareholders and requires
that reported segment information be consistent with what the Company's
management uses to make operating decisions and assess performance. The adoption
of SFAS No. 131 had no effect on the financial position, results of operations,
or liquidity of the Company. Adoption of SFAS No. 131 resulted in no changes in
the way the Company has reported its segment results with the exception of
realized investment gains and losses which are managed in the aggregate and
accordingly have been reclassified to the Corporate and Other segment. Segment
information for prior periods has been restated to conform to this presentation.

The Company's operations include the following operating segments:
property and casualty, annuity and life insurance. The property and casualty
insurance segment includes primarily personal lines automobile and homeowners
products. The annuity segment includes primarily fixed and variable tax-
qualified annuity products. The life insurance segment includes primarily
interest-sensitive life and traditional life products.

Note 8 - Segment Information-(Continued)

Summarized financial information for these segments is as follows:

Three Months Ended
March 31,
-----------------------
1998 1997
---------- ----------

Revenues
Property and casualty.................... $ 125,965 $ 119,646
Annuity.................................. 30,921 30,835
Life..................................... 32,711 30,798
Corporate and other,
including realized investment gains.... 6,775 1,061
Intersegment eliminations................ (274) (277)
---------- ----------
Total.............................. $ 196,098 $ 182,063
========== ==========

Net income
Operating income
Property and casualty.................. $ 12,539 $ 13,723
Annuity................................ 5,299 4,254
Life................................... 2,646 2,950
Corporate and other,
including interest expense........... (2,166) (2,084)
---------- ----------
Total operating income............. 18,318 18,843
Realized investment gains, after tax..... 4,141 557
---------- ----------
Total.............................. $ 22,459 $ 19,400
========== ==========

March 31, December 31,
1998 1997
---------- ------------
Assets
Property and casualty.................... $ 748,193 $ 742,487
Annuity.................................. 2,694,291 2,531,309
Life..................................... 826,233 777,488
Corporate and other...................... 124,423 125,624
Intersegment eliminations................ (34,763) (44,996)
---------- ----------
Total.............................. $4,358,377 $4,131,912
========== ==========

Revenues include insurance premiums and contract charges earned, net
investment income and realized investment gains and losses. Operating income is
equal to net income before realized investment gains, after tax.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Information

Statements made in the following discussion that state the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future are forward-looking statements. It is important to note that the
Company's actual results could differ materially from those projected in such
forward-looking statements due to, among other risks and uncertainties inherent
in the Company's business, the following important factors:

. Changes in the composition of the Company's assets and liabilities
through acquisitions or divestitures.

. Prevailing interest rate levels, including the impact of interest rates
on (i) unrealized gains and losses on the Company's investment portfolio
and the related after-tax effect on the Company's shareholders' equity
and total capital and (ii) the book yield of the Company's investment
portfolio.

. The impact of fluctuations in the capital markets on the Company's
ability to refinance outstanding indebtedness or repurchase shares of
the Company's outstanding common stock.

. The frequency and severity of catastrophes such as hurricanes,
earthquakes and storms, and the ability of the Company to maintain a
favorable catastrophe reinsurance program.

. Future property and casualty loss experience and its impact on estimated
claims and claim adjustment expenses for losses occurring in prior
years.

. The Company's ability to develop and expand its agency force and its
direct product distribution systems, as well as the Company's ability to
maintain and secure product sponsorships by local, state and national
education associations.

. The competitive impact of new entrants such as mutual funds and banks
into the tax deferred annuity products markets, and the Company's
ability to profitably expand its property and casualty business in
highly competitive environments.

. Changes in insurance regulations, including (i) those effecting the
ability of the Company's insurance subsidiaries to distribute cash to
the holding company and (ii) those impacting the Company's ability to
profitably write property and casualty insurance policies in one or more
states.

. Changes in federal income tax laws and changes resulting from federal
tax audits effecting corporate tax rates or taxable income, and
regulations changing the relative tax advantages of the Company's life
and annuity products to customers.

. The Company's ability to maintain favorable claims-paying ability
ratings.

. Adverse changes in policyholder mortality and morbidity rates.

Three Months Ended March 31, 1998 Compared With Three Months Ended March 31,
1997

Insurance Premiums and Contract Charges Earned

Insurance premiums and contract charges earned, which excludes annuity and
life contract deposits, increased 7.5% for the three months ended March 31,
1998, compared to the same period in 1997.

Insurance premiums written and contract deposits of $197.0 million for the
three months ended March 31, 1998 increased 9.5%, compared to $179.9 million for
the same period in 1997, driven principally by a 16.0% increase in annuity
deposits and an 8.2% growth in property and casualty premiums written. Insurance
premiums written and contract deposits in the Company's primary product lines,
automobile (excluding involuntary), property, annuity and life, increased 9.9%
to $192.6 million for the three months ended March 31, 1998, compared to $175.3
million for the same period in 1997. Involuntary automobile business includes
allocations of business from state mandatory automobile insurance facilities and
assigned risk business. Involuntary automobile premiums written for the three
months ended March 31, 1998 decreased 5.3% compared to the same period in 1997.

Automobile (excluding involuntary) and homeowners earned premiums increased
7.9% to $110.0 million for the three months ended March 31, 1998, compared to
$101.9 million for the same period in 1997, primarily as a result of a 5.5%
increase in automobile (excluding involuntary) and homeowners policies in force.
The 846,000 automobile (excluding involuntary) and homeowners policies in force
at March 31, 1998 represented an increase of 44,000 policies since March 31,
1997 and an increase of 9,000 policies since December 31, 1997.

Automobile (excluding involuntary) and homeowners premiums written
increased 8.7% to $111.0 million for the three months ended March 31, 1998,
compared to $102.1 million for the same period in 1997. The average premium per
policy in the first three months of 1998 increased approximately 3% compared to
a year earlier and contributed a similar increase to the first quarter growth in
premiums written. For the three months ended March 31, 1998, new direct premiums
written of $11.6 million were comparable to $11.8 million for the same period
last year. Renewal direct premiums written of $100.8 million for the three
months ended March 31, 1998 increased 9.8% compared to $91.8 million for the
same period in 1997.

Annuity contract charges earned increased 38.5% to $3.6 million for the
three months ended March 31, 1998, compared to $2.6 million for the same period
in 1997, due to a 52% increase in variable annuity cash value on deposit at the
end of the quarter compared to a year earlier. Total annuity deposits received
during the three months ended March 31, 1998 increased 16.0% to $54.3 million,
compared to $46.8 million for the same period in 1997, reflecting a $3.3
million, or 9.5%, increase in scheduled deposits for retirement annuities and a
$4.2 million, or 35.0%, increase in rollover deposits from other companies and
single premiums. In response to changes in the tax law, the Company introduced
new IRA annuities during the first quarter of 1998. Annuity deposits received
for these new IRA retirement options represented approximately 1.5 percentage
points of the 16.0% growth in annuity deposits received.

For the three months ended March 31, 1998, life insurance premiums and
contract charges earned were $21.6 million, compared to $20.4 million for the
same period in 1997, representing an increase of 5.9%. Life insurance in force
on March 31, 1998 increased 6.6% compared to March 31, 1997. The

lapse rate for ordinary life insurance in force of 7.0% for the three months
ended March 31, 1998 improved 1.0 percentage point compared to 8.0% reported for
the same period in 1997.

Net Investment Income

Net investment income of $48.5 million for the three months ended March 31,
1998 decreased 2.6% compared to $49.8 million for the same period in 1997. The
decrease in net investment income was due primarily to the utilization of
capital for the share repurchase program and customers' preference for variable
versus fixed annuity contracts. Investments (at amortized cost) decreased 1.7%,
or $45.7 million, from March 31, 1997 excluding $84.0 million of short-term
investments held at March 31, 1998 as securities lending collateral required to
be classified as investments beginning in 1998 under Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." The pretax yield on average investments
(excluding the securities lending collateral) was 7.3% (4.8% after tax) for the
three months ended March 31, 1998 compared to a pretax yield of 7.3% (4.9% after
tax) for the same period in 1997.

Realized Investment Gains and Losses

Realized investment gains were $6.4 million for the three months ended
March 31, 1998, compared to $0.9 million for the same period in 1997.

Benefits, Claims and Settlement Expenses

Total benefits, claims and settlement expenses increased 7.6% to $97.4
million for the three months ended March 31, 1998, compared to $90.5 million for
the same period in 1997.

Property and casualty claims and settlement expenses were $86.0 million for
the three months ended March 31, 1998, compared to $80.8 million for the same
period in 1997. The property and casualty loss ratio of 74.4% for the three
months ended March 31, 1998 was equal to the same period in 1997. Improvements
in both the frequency and severity of non-weather-related claims offset higher
weather-related losses in the first quarter of 1998. Losses from severe weather
in the first quarter of 1997 were unusually low. Catastrophe losses after
reinsurance but before federal income tax benefits for the three months ended
March 31, 1998 were $3.8 million and accounted for 3.2 points on the loss ratio,
compared to catastrophe losses of $1.2 million, 1.1 points on the loss ratio,
for the same period in 1997. The provision for claims and claim adjustment
expenses for insured events in prior years continued to reflect favorable
development in the first three months of both 1998 and 1997. Property and
casualty claims and settlement expenses were reduced by a decrease in estimated
losses and loss adjustment expenses for claims occurring in prior years of $5.8
million and $10.9 million for the three months ended March 31, 1998 and 1997,
respectively.

The Company's catastrophe reinsurance program covers 95% of catastrophe
losses above a retention of $7.5 million up to $80 million for each catastrophe
in 1998. The Company's catastrophe reinsurance program is augmented by a $100
million equity put that provides an option to sell shares of the Company's
convertible preferred stock with a floating rate dividend at a pre-negotiated
price in the event losses from catastrophes, individually or in the aggregate
during a calendar year, exceed the catastrophe reinsurance program coverage
limit. Before tax benefits, the equity put provides a source of capital for up
to $154 million of catastrophe losses above the reinsurance coverage limit.

Life benefits were $11.4 million for the three months ended March 31, 1998,
reflecting a 17.5% increase, compared to $9.7 million for the same period in
1997. The first quarter of 1998 reflected higher individual life mortality
experience compared to the same period in 1997.

Interest Credited to Policyholders

Interest credited to policyholders was $24.1 million for the three months
ended March 31, 1998, compared to $24.4 million interest credited for the same
period in 1997. Interest credited to fixed annuity contracts decreased $0.9
million, or 4.6%, to $18.6 million for the three months ended March 31, 1998,
from $19.5 million for the same period in 1997. The fixed annuity average annual
interest rate credited was 5.6% for the three months ended March 31, 1998,
compared to a rate of 5.7% for the same period in 1997. Fixed rate annuity
accumulated deposits decreased 3.1% over the 12 months ended March 31, 1998.

Life insurance interest credited increased $0.6 million, or 12.2%, to $5.5
million for the three months ended March 31, 1998, compared to the same period
in 1997, primarily as a result of continued growth in the interest-sensitive
whole life insurance reserves and account balances.

Policy Acquisition and Operating Expenses

Policy acquisition and operating expenses represent the Company's insurance
underwriting expenses. For the three months ended March 31, 1998, policy
acquisition and operating expenses of $38.7 million increased $3.4 million, or
9.6%, compared to $35.3 million for the first three months of 1997. The property
and casualty expense ratio was 20.0% for the three months ended March 31, 1998,
compared to 19.2% for the same period last year and includes an increase due to
timing for some items related to state insurance facilities.

Effective January 1, 1998, the Company adopted the accounting treatment
required by the American Institute of Certified Public Accountants' Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." It is anticipated that adoption of this statement
will initially decrease the Company's operating expenses by approximately $2.5
million before income taxes for the year ended December 31, 1998 as costs
incurred to develop internal-use software are capitalized and depreciated over
their expected useful lives. First quarter 1998 capitalized costs were $0.6
million before income taxes, less than $0.01 per share.

Amortization of Intangible Assets

Amortization of intangible assets decreased by $0.9 million to $1.8 million
for the three months ended March 31, 1998, compared to $2.7 million for the same
period in 1997. This decrease resulted from lower amortization of the value of
annuity business acquired in the 1989 acquisition of the Company. The value of
annuity business acquired is amortized in relation to the present value of the
estimated future gross profit amounts expected to be realized over the life of
the book of contracts. The estimates of expected gross profit are evaluated
periodically, and the amortization is adjusted when actual experience or other
evidence suggests that earlier estimates should be revised. Accordingly, the
amortization decreased as the estimated expected future gross profits increased
due to significant recent market appreciation and retention of the business.

Interest Expense

The Company's interest expense of $2.4 million for the three months ended
March 31, 1998 was comparable to the same period last year. The debt to capital
ratio of 21.8% as of March 31, 1998 was within the Company's target operating
range of 20% to 25%.

Income Tax Expense

The effective income tax rate was 29.0% for the three months ended March
31, 1998 compared to the 27.3% effective income tax rate for last year
reflecting an increase in realized investment gains at a rate of 35.0%. Income
from investments in tax-advantaged securities reduced the effective income tax
rate 3 percentage points in the three months ended March 31, 1998 and 1997, and
acquisition related tax benefits reduced the effective rate 5 and 6 percentage
points in the three months ended March 31, 1998 and 1997, respectively.

Operating Income

Operating income (net income before realized investment gains and losses)
was $18.4 million for the three months ended March 31, 1998, compared to $18.8
million for the same period in 1997, a decrease of $0.4 million, or 2.1%.
Operating income in the first quarter of 1997 was helped by unusually mild
weather and a low level of weather-related property insurance claims which
benefited property insurance results. Earnings and investment income were
reduced compared to the first quarter last year due to the utilization of
capital in the Company's share repurchase programs.

Included in the Company's operating income are non-cash charges for the
amortization of the value of acquired insurance in force and goodwill related to
the 1989 acquisition of the Company. Excluding these non-cash charges for the
amortization of intangible assets, operating income was $19.6 million for the
three months ended March 31, 1998, compared to $20.6 million for the same period
in 1997.

Property and casualty segment operating income was $12.6 million for the
three months ended March 31, 1998, compared to $13.8 million for the same period
in 1997. Unusually mild weather, that benefited property insurance results in
1997, and reduced investment income in 1998, primarily from utilization of
capital in the Company's share repurchase programs, contributed to the change in
these results. For the first three months, after tax catastrophe losses were
$2.4 million in 1998, compared to $0.8 million for 1997. The property and
casualty combined loss and expense ratio for the three months ended March 31,
1998 was 94.1%, compared to the 93.6% reported for the same period in 1997,
reflecting the higher weather-related claims. Before catastrophe losses, the
combined loss and expense ratio was 90.9% for the first three months of 1998,
compared to 92.5% for the same period in 1997.

Annuity segment operating income of $5.3 million for the three months ended
March 31, 1998 increased 26.2%, compared to the $4.2 million reported for the
same period in 1997, reflecting 51.7% growth in variable annuity deposits and a
fixed net interest margin that was comparable to the same period last year.
Annuity segment profit continues to shift from the interest margin on fixed
annuity accumulations to fees on variable mutual fund deposits. Variable annuity
deposits were $1.1 billion at March 31, 1998. Total accumulated fixed and
variable annuity deposits of $2,437.4 million increased $327.1 million, or
15.5%, compared to March 31, 1997. This increase resulted from a net increase in
variable funds on deposit of $249.9 million, or 38.7%, plus net increases in
market value of underlying mutual funds of $120.3 million, and a decrease in
fixed annuity funds on deposit of $43.1 million, or 3.1%.

Life insurance segment operating income was $2.7 million for the three
months ended March 31, 1998, compared to the $2.9 million reported for the same
period in 1997. The first quarter 1998 life results reflect higher individual
life mortality experience, compared to the same period in 1997.

Net Income

Net income, which includes realized investment gains, for the three months
ended March 31, 1998 was $22.5 million, or $0.50 per diluted share, reflecting a
16.0% increase in income and a 25.0% increase in net income per diluted share
compared to the same period in 1997. The Company's share repurchase program
reduced net income by $1.2 million for the three months ended March 31, 1998,
but resulted in an increase of $0.01 in first quarter 1998 earnings per share.
After tax realized investment gains were $4.1 million for the three months ended
March 31, 1998, compared to $0.6 million for the same period in 1997.

Liquidity and Financial Resources

Investments

The Company's investment strategy emphasizes investment grade, publicly
traded fixed income securities. At March 31, 1998, fixed income securities
comprised 95.8% of investments excluding the securities lending collateral. Of
the fixed income investment portfolio, 93.5% was investment grade and 99.7% was
publicly traded. The average quality of the total fixed income portfolio was A+
at March 31, 1998.

The duration of the investment portfolio is managed to provide cash flow to
satisfy policyholder liabilities as they become due. The average option adjusted
duration of total investments was 4.4 years at March 31, 1998 and 4.3 years at
December 31, 1997. The Company has included in its annuity products substantial
surrender penalties to reduce the likelihood of unexpected increases in policy
or contract surrenders. All annuities issued since 1982 and approximately 75% of
all outstanding fixed annuity accumulated cash values are subject in most cases
to substantial early withdrawal penalties.

Cash Flow

The short-term liquidity requirements of the Company, within a 12-month
operating cycle, are for the timely payment of claims and benefits to
policyholders, operating expenses, interest payments and federal income taxes.
Cash flow in excess of these amounts has been used to fund business growth,
retire short-term debt, pay dividends to shareholders and repurchase shares of
the Company's common stock. Long-term liquidity requirements, beyond one year,
are principally for the payment of future insurance policy claims and benefits
and retirement of long-term notes.

Operating Activities

As a holding company, HMEC conducts its principal operations in the
personal lines segment of the property and casualty and life insurance
industries through its subsidiaries. HMEC's 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. Net cash provided by operating activities was $52.7 million for
the three months ended March 31, 1998 compared to $15.8 million for the same
period in 1997 with the increase primarily due to a decrease in federal income
tax payments. In both years, cash provided by operating activities primarily
reflected net cash generated by the insurance subsidiaries.

Payment of principal and interest on debt, fees related to the catastrophe-
linked equity put option, dividends to shareholders and parent company operating
expenses, as well as the share repurchase program, are dependent upon the
ability of the insurance subsidiaries to pay cash dividends or make other cash
payments to HMEC, including tax payments pursuant to tax sharing agreements. The
insurance subsidiaries are subject to various regulatory restrictions which
limit the amount of annual dividends or other distributions, including loans or
cash advances, available to HMEC without prior approval of the insurance
regulatory authorities. Dividends which may be paid by the insurance
subsidiaries to HMEC during 1998 without prior approval are approximately $82
million. Although regulatory restrictions exist, dividend availability from
subsidiaries has been, and is expected to be, more than adequate for HMEC's
capital needs.

Investing Activities

HMEC's insurance subsidiaries maintain significant investments in fixed
maturity securities to meet future contractual obligations to policyholders. In
conjunction with its management of liquidity and other asset/liability
management objectives, the Company, from time to time, will sell fixed maturity
securities prior to maturity and reinvest the proceeds in other investments with
different interest rates, maturities or credit characteristics. Accordingly, the
Company has classified the entire fixed maturities portfolio as available for
sale. During the first three months of 1998, net cash used in investing
activities was $11.0 million. This net amount reflects $330.1 million in
purchases of fixed maturity investments, funded by net investment sales or
maturities of $319.1 million and net cash provided by operating activities.

Financing Activities

Financing activities include primarily repurchases of the Company's common
stock, payment of scheduled dividends, the receipt and withdrawal of funds by
annuity policyholders and borrowings and repayments under the Company's debt
facilities. Shareholder dividends paid for the three months ended March 31, 1998
were $3.5 million. In the three months ended March 31, 1998, the Company paid
fees of $1.5 million related to the catastrophe-linked equity put which augments
its reinsurance program and such fees were charged directly to additional paid-
in capital.

For the three months ended March 31, 1998, receipts from annuity contracts
of $54.3 million were greater than contract maturities and withdrawals of $45.1
million. Net transfers to variable annuity assets were $27.2 million during the
first three months of 1998, compared to $26.3 million during the same period in
1997. Interest-sensitive life account balances decreased $0.1 million during the
first three months of 1998.

During the three months ended March 31, 1998, the Company repurchased
297,000 shares of its common stock at an aggregate cost of $10.2 million, or
$34.34 per share, $8 million completed the $100 million share repurchase program
announced in 1997 and the remainder was acquired under an additional $100
million share repurchase program announced in January 1998 . The repurchase of
these shares was financed with cash from operations. During the three months
ended March 31, 1998, the Company received $1.4 million related to the exercise
of common stock options including tax benefits.

Capital Resources

Historically, the Company's insurance subsidiaries have generated capital
in excess of what has been needed to fund business growth. These excess amounts
have been paid to HMEC through dividends. HMEC has then utilized these dividends
and its access to the capital markets to retire long-term debt, repurchase
shares of its common stock, increase dividends to its shareholders and for other
corporate purposes. Management anticipates that the Company's sources of capital
will continue to generate capital in excess of the needs for business growth,
debt interest payments and shareholder dividends. In January 1998, the Company's
Board of Directors adopted an additional repurchase program for shares of the
Company's common stock of up to $100 million.

The total capital of the Company was $650.3 million at March 31, 1998,
including $99.6 million of long-term debt and $42.0 million of short-term debt.
Long-term debt as a percentage of total shareholders' equity was 19.6% as of
March 31, 1998, compared to 19.7% as of December 31, 1997 with the change
including the effects of the repurchase of shares for treasury stock. Total debt
to capital at March 31, 1998 was 21.8%, well within the Company's target
operating range of 20% to 25%.

Shareholders' equity was $508.1 million at March 31, 1998, including an
unrealized gain in the Company's investment portfolio of $55.6 million after
taxes and the related impact on deferred policy acquisition costs associated
with interest-sensitive policies. In December 1997, the Company's common stock
was split two-for-one. The market value of the Company's common stock and the
market value per share were $1,547.1 million and $35 1/8, respectively, at March
31, 1998. Book value per share was $11.54 at March 31, 1998, $10.28 excluding
investment market value adjustments.

In January 1996, the Company issued $100.0 million face amount of 6 5/8%
Senior Notes ("Senior Notes"), which will mature on January 15, 2006, at a
discount of 0.5%. Interest on the Senior Notes is payable semi-annually. The
Senior Notes are redeemable in whole or in part, at any time at the Company's
option. The Senior Notes have an investment grade rating from Standard & Poor's
Corporation ("S&P") (A-), Duff & Phelps Credit Rating Co. ("Duff & Phelps") (A),
and Moody's Investors Service, Inc. ("Moody's") (Baa2) and are traded on the New
York Stock Exchange (HMN 6 5/8). The net proceeds from the sale of the Senior
Notes were used to finance the redemption of the Company's convertible notes.

As of both March 31, 1998 and December 31, 1997, the Company had short-term
debt comprised of $42.0 million outstanding under the Bank Credit Facility. The
Bank Credit Facility allows unsecured borrowings of up to $65.0 million at
Interbank Offering Rates plus 0.3% to 0.5% or Bank of America National Trust and
Savings Association reference rates. The rate on the borrowings under the Bank
Credit Facility was Interbank Offering Rate plus 0.3%, or 6.0%, as of March 31,
1998. The commitment for the Bank Credit Facility terminates on December 31,
2001.

The Company's ratio of earnings to fixed charges for the three months ended
March 31, 1998 was 14.2x compared to 11.7x for the same period in 1997.

Total shareholder dividends were $3.5 million for the three months ended
March 31, 1998. In February 1997, the Board authorized the fifth consecutive
annual increase in the Company's dividend since the Company's initial public
offering in 1991 and increased the quarterly dividend by 22.7% to $0.0675 per
share. In November 1997, in conjunction with the Company's two-for-one stock
split, the Board of Directors authorized the sixth increase to the Company's
quarterly dividend, the second increase in 1997. The regular quarterly dividend
increased by 19% to $0.08 per share.

In January 1998, the Company's Board of Directors adopted an additional
repurchase program for shares of the Company's common stock of up to $100
million. Based on the market price of the Company's common shares at the time
the Board adopted this program, $100 million would represent approximately 8% of
the Company's outstanding shares. Shares of common stock may be purchased from
time to time through open market and private purchases, as available. The
repurchase program will be financed through use of cash and, if needed, the Bank
Credit Facility. At March 31, 1998, HMEC (the holding company) had cash and
invested assets of $34.5 million available for the share repurchase program.

During the first three months of 1998, options were exercised for the
issuance of 77,532 shares, 0.2% of the Company's shares outstanding at December
31, 1997.

The Company's catastrophe reinsurance program is augmented by a $100
million equity put. This equity put provides for an option to sell shares of the
Company's convertible preferred stock with a floating rate dividend at a pre-
negotiated price in the event losses from catastrophes, individually or in the
aggregate during a calendar year, exceed $80 million, the 1998 coverage limit of
the reinsurance program.

Year 2000

In 1990, the Company established programming standards to address the year
2000 for new computer systems. By early 1995, the Company had developed a
comprehensive plan to address the issue and began converting its existing
computer systems to be year 2000 compliant. At March 31, 1998, over 60% of all
business applications, representing more than 40% of all of the Company's
program code, were year 2000 compliant. Management anticipates completing
conversion of the remaining internal business applications by the end of 1998.
Vendors that have not already completed conversion have indicated their plans to
become year 2000 compliant by the end of 1998. During 1999, additional testing
of all systems and final reviews of individual personal computer applications
will be completed.

Costs for this compliance project represent the allocation of existing
internal information technology resources to address year 2000 compliance and
are not expected to be incremental costs to the Company. The total cost of the
compliance project is estimated to be $6 million, before tax benefits, and is
being funded through operating cash flows. The Company is expensing all costs
associated with these system changes and through March 31, 1998 has expensed
$3.8 million before tax benefits, including a cost of $0.5 million for the three
months ended March 31, 1998.

Recent Accounting Changes

Employers' Disclosures about Pensions and Other Postretirement Benefits

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which will be implemented in
the Company's December 31, 1998 financial statements. SFAS No. 132 will not
affect employee benefits expense or net income. SFAS No. 132 standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful as
they were when SFAS No. 87, 88 and 106 were issued.

PART II: OTHER INFORMATION

Item 4: Submission of Matters to a Vote of Security Holders

None.

Item 6: Exhibits and Reports on Form 8-K

(a) The following items are filed as Exhibits.
(10) Material contracts:
10.1 Catastrophe Equity Securities Issuance Option
Agreement entered by and between HMEC and Centre
Reinsurance, dated February 15, 1997 and related
letter from Centre Reinsurance, incorporated by
reference to Exhibit 10.12 to HMEC's Annual Report
on Form 10-K for the year ended December 31, 1996,
filed with the Securities and Exchange Commission on
March 26, 1997.
10.1(a) Amendment effective February 15, 1997 to Catastrophe
Equity Securities Issuance Option Agreement.
(11) Statement re computation of per share earnings.
(27) Financial Data Schedule.

(b) No reports on Form 8-K were filed by the Company during the first
quarter of 1998.

SIGNATURES

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

HORACE MANN EDUCATORS CORPORATION
(Registrant)

Date May 14, 1998 /s/ Paul J. Kardos
--------------------------- ---------------------------------------
Paul J. Kardos, President and
Chief Executive Officer

Date May 14, 1998 /s/ Larry K. Becker
--------------------------- ---------------------------------------
Larry K. Becker, Executive
Vice President and Chief
Financial Officer