HORACE MANN EDUCATORS CORP /DE/

Our liquidity and access to capital were not materially impacted by inflation or changes in interest rates during the year ended December 31, 2025. For further discussion regarding the potential future impacts of inflation and changes 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 of this Annual Report on Form 10-K.

Information regarding our investment portfolio, which is comprised primarily of investment grade, fixed maturity securities, is presented in Part II - Item 7, Results of Operations by Segment, Part I - Item 1, Investments and in Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Annual Report on Form 10-K.

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 and acquisitions, 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

Operating Activities

As a holding company, we conduct our principal operations in the personal lines portion of the property and casualty, supplemental and life 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 the insurance subsidiaries.

For 2025, net cash provided by operating activities increased $101.1 million. Fluctuations in net cash provided by operating activities are primarily due to timing of premium and investment income collections and benefits and claims payments.

Investing Activities

Our insurance subsidiaries maintain significant investments 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.

Financing Activities

Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, issuances and repurchases of our common stock, finance-type reinsurance agreements, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.

For 2025, cash outflows for financing activities were $3.8 million higher. The higher cash outflows were due to lower net cash inflows from FHLB funding agreements of $35.0 million and higher net cash outflow for reverse repurchase agreements of $24.0 million, partially offset by a $45.2 million increase related to the change in Senior Notes described below.

On September 26, 2025, we issued $300.0 million aggregate principal amount of 4.70% Senior Notes due October 1, 2030 and used the net proceeds to fully repay the $250.0 million aggregate principal amount of 4.50% Senior Notes and accrued interest and the remaining net proceeds are available for general corporate purposes.

The following table shows activity from FHLB funding agreements for the periods indicated.

Liquidity Sources and Uses

Our potential sources and uses of funds principally include the following activities:

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.

As of December 31, 2025, we held $1.1 billion 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 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 which is needed to adequately fund and support business growth, primarily based on risk-based capital formulas including those developed by the NAIC. 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 service and retire debt, pay dividends to our shareholders, fund growth initiatives, 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, which include our Revolving Credit Facility, as well as issuances of various securities. 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 us without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 2026 from all of our insurance subsidiaries without prior regulatory approval is approximately $148.8 million, excluding the impact and timing of prior year dividends, of which $115.0 million was paid during the year ended December 31, 2025. 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. Additional information is contained in Part II - Item 8, Note 13 of the Consolidated Financial Statements in this Annual Report on Form 10-K.

Total capital was $2,076.1 million as of December 31, 2025, including $593.4 million of long-term debt. Total debt represented 28.6% of total capital including net unrealized investment losses on fixed maturity securities (26.6% of total capital excluding net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates*) as of December 31, 2025, which remains generally consistent with the Company's long-term capital management objectives.

Shareholders' equity was $1,482.7 million as of December 31, 2025, including net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates. The market value of our common stock and the market value per share were $1,877.7 million and $46.18, respectively, at December 31, 2025. Book value per share was $36.47 as of December 31, 2025 ($40.21 excluding net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates*).

Additional information regarding net unrealized investment gains (losses) on fixed maturity securities as of December 31, 2025 is included in Part II - Item 7, Results of Operations by Segment and Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Annual Report on Form 10-K.

Total shareholder dividends paid were $57.1 million for the year ended December 31, 2025. In 2025, the Board declared regular quarterly dividends of $0.35 per share. Compared to the full year per share dividends paid in 2024 of $1.36, the total 2025 dividends paid per share of $1.40 represented an increase of 2.9%.

On May 13, 2025, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (2025 Program) to begin following the completion of the $50 million repurchase plan that was authorized on May 25, 2022 (2022 Program). Both Programs authorize the repurchase of our common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The Programs do not have expiration dates and may be limited or terminated at any time without notice. During

2025, we repurchased 497,226 shares of our common stock at an average price per share of $41.85 under the 2022 Programs. In total and through December 31, 2025, 1,192,420 shares have been repurchased under the 2022 Program at an average price of $37.31 per share. The repurchase of shares was funded through use of cash. As of December 31, 2025, $55.5 million remained authorized for future share repurchases under the 2025 and 2022 Programs.

The following table summarizes our debt obligations.

(1)We designate our debt obligations as "long-term" based on maturity date at issuance.

On September 26, 2025, we issued $300.0 million aggregate principal amount of 4.70% senior notes (2025 Senior Notes), which will mature on October 1, 2030, issued at a discount resulting in an effective yield of 4.82%. Interest on the 2025 Senior Notes is payable semi-annually at a rate of 4.70%. The 2025 Senior Notes are redeemable in whole or in part, at any time, at our option, at a redemption price equal to the greater of (1) 100% of the principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted, on a semi-annual basis, at the Treasury yield (as defined in the indenture) plus 20 basis points, plus, in either of the above cases, accrued interest up to, but not including the date of redemption. The 2025 Senior Notes are traded in the open market (HMN 4.70).

On September 29, 2025, we issued a notice of redemption for all of the outstanding 4.50% Senior Notes due 2025. The redemption occurred on October 14, 2025 utilizing the proceeds from the 2025 Senior Notes.

On September 15, 2023, we issued $300.0 million aggregate principal amount of 7.25% senior notes (2023 Senior Notes), which will mature on September 15, 2028, issued at a discount resulting in an effective yield of 7.29%. Interest on the 2023 Senior Notes is payable semi-annually at a rate of 7.25%. The 2023 Senior Notes are redeemable in whole or in part, at any time, at our option, at a redemption price equal to the greater of (1) 100% of the principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted, on a semi-annual basis, at the Treasury yield (as defined in the indenture) plus 45 basis points, plus, in either of the above cases, accrued interest to the date of redemption. The 2023 Senior Notes are traded in the open market (HMN 7.25).

As of May 19, 2025, we as borrower, entered into a Fourth Amendment to our Amended and Restated Credit Agreement dated June 21, 2019, as amended (the Credit Agreement), with PNC Bank, National Association as administrative agent, and the lenders party thereto (the Fourth Amendment). The Fourth Amendment, among other things, extends the commitment termination date to May 19, 2030 from the previous termination date of July 12, 2026 and replaces the Eurodollar-based interest rate benchmark included in the Credit Agreement with a Term SOFR Rate (as defined in the Credit Agreement) as an interest rate benchmark. As of December 31, 2025, we had $325.0 million available on the Revolving Credit Facility, with an interest rate based on SOFR plus 115 basis points plus the applicable benchmark adjustment spread. The unused portion of the Revolving Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis as of December 31, 2025.

As of December 31, 2025, we had no 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.

We had no obligation for securities sold under reverse repurchase agreements at December 31, 2025 compared to $12.0 million as of December 31, 2024.

To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form S-3 with the Securities and Exchange Commissions (SEC) on March 8, 2024. 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 8, 2024. Unless withdrawn by us earlier, this registration statement will remain effective through March 8, 2027. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K.

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 remains effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K.

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, with an assigned rating of A (Excellent). Assigned ratings and respective affirmation/review dates as of February 16, 2026 were as follows:

Reinsurance Programs

Information regarding the reinsurance programs for our Property & Casualty, Life & Retirement and Supplemental & Group Benefits segments is located in Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K.