HORACE MANN EDUCATORS CORP /DE/

•Increase of 12 basis points in the annualized net interest spread due to improved net investment income

•Life Benefits decreased 4.8%

•Higher operating expenses due to investments in growth initiatives

The following table provides certain information for the Life & Retirement segment for the years indicated.

(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 December 31, 2025 Form 10-K.

The Life & Retirement segment net income increased 0.9% in 2025. Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error disclosed in Note 1, net investment income increased $9.6 million for the full-year due to strong limited partnership returns and improved commercial loan results. The annualized net interest spread in our fixed annuity business was 184 basis points for the full year compared to 172 basis points in 2024, largely due to higher limited partnership and commercial mortgage loan funds income and lower credited rates on the FHLB funding agreement block. The net dollar contribution from our FHLB funding agreements increased $1.8 million compared with 2024, with FHLB interest expense reflected in interest credited.

For 2025, net annuity contract deposits* for variable and fixed annuities increased 6.7% for the year to $482.8 million. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, including the company’s attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency rose to 91.7%.

Life annualized sales* were $11.2 million for the year, which was an 7.7% increase over prior year. Life insurance in force rose to $21.5 billion at year-end.

Horace Mann currently has $5.9 billion in annuity assets under management, including $2.2 billion of fixed annuities, $3.4 billion of variable annuities and $0.4 billion of fixed indexed annuities. Assets under administration, which includes Horace Mann Retirement Advantage® and other advisory and recordkeeping assets, were up 8.8%, benefiting from the strong equity markets.

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 $416.7 million of the Life & Retirement investment portfolio and related investable cash flows will be reinvested at current market rates.

Interest rates declined modestly in the second half of 2025. However, the risk of a deep recession or shock to the economy, such as a global pandemic, could result in further reductions in interest rates. The current environment of interest rates has afforded us the opportunity to invest new insurance cash flows and reinvested cash flows at higher yields, which should be a benefit to net investment income, but the higher interest rates have caused net unrealized investment losses in the portfolios.

As a general guideline, based on our existing policies and investment portfolio, the impact from a 100 basis point decline in the average reinvestment rate would reduce Life & Retirement net investment income by approximately $2.1 million in year one, reducing the annualized net interest spread by approximately 8 basis points, compared to the current period annualized net interest spread. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to minimum guaranteed crediting rates.

We reinsure a $2.3 billion block of in force fixed annuities 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.