HORACE MANN EDUCATORS CORP /DE/

(1) In the second quarter of 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error. See additional disclosure contained in Note 1 of the September 30, 2025 Form 10-Q.

Net Premiums and Contract Charges Earned

For the three and nine months ended September 30, 2025, net premiums and contract charges earned increased $21.2 million and $66.0 million, as the Property & Casualty segment continues to implement rate and inflation adjustments to coverage values and the Company sees strong growth in our Supplemental and Group Benefits segment.

Net Investment Income

For the three and nine months ended September 30, 2025, total net investment income increased $6.6 million and $19.5 million. The increase for the quarter is primarily due to continued strong returns from our fixed income portfolio and higher returns from our limited partnership funds. Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error of $10.2 million, net investment income increased $29.7 million for the nine months ended September 30, 2025. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

(1) In the second quarter of 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error. See additional disclosure contained in Note 1 of the September 30, 2025 Form 10-Q.

The higher investment yields, excluding limited partnership interests, for the nine months ended September 30, 2025 reflected stronger income from the fixed income portfolios.

During the three and nine months ended September 30, 2025, 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 while maintaining balance between principal protection and risk.

Net Investment Gains (Losses)

For the three and nine months ended September 30, 2025, total net investment losses were comparable to prior year and increased by $6.0 million, respectively. The breakdown of net investment gains (losses) by transaction type were as follows:

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

Other Income

For the three and nine months ended September 30, 2025, other income decreased $0.9 million and increased $0.9 million, respectively.

Benefits, Claims and Settlement Expenses

For the three and nine months ended September 30, 2025, benefits, claims and settlement expenses decreased $20.3 million and $37.2 million due to lower catastrophe losses and underlying losses in the Property & Casualty segment as well as lower Life benefits related to assumption changes during the quarter.

Interest Credited

For the three and nine months ended September 30, 2025, interest credited increased $0.9 million and $1.2 million.

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 3.4% and 3.1% as of September 30, 2025 and September 30, 2024, respectively.

Operating Expenses

For the three and nine months ended September 30, 2025, operating expenses increased $13.4 million and $33.6 million, reflecting continued investments in growth and higher incentives driven by better than expected results.

Deferred Policy Acquisition Costs (DAC) Amortization Expense

For the three and nine months ended September 30, 2025, DAC amortization expense increased $3.4 million and $8.9 million, primarily due to premium increases in the Property & Casualty segment driving higher commission and underwriting expenses which increase DAC asset levels.

Intangible Asset Amortization Expense

For the three and nine months ended September 30, 2025, intangible asset amortization expense was flat with prior year.

Interest Expense

For the three and nine months ended September 30, 2025, interest expense increased $0.2 million and $0.3 million, respectively.

Income Tax Expense

The effective income tax rate on our pretax income, including net investment gains (losses), was 19.0% and 19.6% for the nine months ended September 30, 2025 and 2024, respectively. Income from investments in tax-advantaged securities decreased the effective income tax rates by 2.0 and 2.8 percentage points for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate for the nine months ended September 30, 2025 was further reduced by 1.2 percentage points due to purchases of transferable tax credits, which are expected to be used in the 2025 tax year. The company has outstanding commitments of $23.0 million related to such purchases as of September 30, 2025.

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.

As of September 30, 2025, our federal income tax returns for years prior to 2021 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.

On July 4, 2025, the One Big Beautiful Bill Act was signed into U.S. law, introducing a broad range of business tax reform. The Company does not expect the new legislation to have a material impact on its ongoing effective tax rate or financial condition.