HORACE MANN EDUCATORS CORP /DE/

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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 Third Quarter 2025 Investor Supplement.

Current wording

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 2026 Investor Supplement.

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unknown risks, uncertainties and other factors. Horace Mann Educators Corporation (referred to in this Quarterly 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. Also, see Part I - Items 1 and 1A in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information regarding risks and uncertainties.

Current wording

Statements made in this 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 this Quarterly 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. Also, see Part I - Items 1 and 1A in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding risks and uncertainties.

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Our vision is to be the company of choice to provide insurance and financial solutions for all educators and others who serve their communities, whether they engage with Horace Mann directly or through their district/employer. We believe the unique value of Horace Mann is providing solutions tailored for educators at each stage of their lives, empowering them to achieve lifelong financial success. Our motivation stems from our gratitude for educators: They are looking after our children's futures, and we believe they deserve someone to look after theirs. Our commitment to having a positive impact on our customers' lives extends to all our corporate stakeholders, including employees, agents, investors and the communities where we live and work.

Current wording

Our vision is to be the company of choice to provide insurance and financial solutions for all educators and others who serve their communities, whether they engage with Horace Mann directly or through their district/employer. We believe the unique value of Horace Mann is providing solutions tailored for educators at each stage of their lives, empowering them to achieve lifelong financial success. Our motivation stems from our gratitude for educators: They are looking after our children's futures, and we believe they deserve someone to

Previous wording

For the three and nine months ended September 30, 2025, net income increased $24.0 million and $61.3 million, respectively, primarily due to improved Property & Casualty segment results reflecting both the actions the Company has taken to reduce earnings volatility, and to a larger degree, unusually less severe weather activity including the impact of lower catastrophe losses.

Current wording

For the three months ended March 31, 2026, net income increased $3.0 million primarily due to improved Property & Casualty segment results reflecting the impact of improved underlying results and lower catastrophe losses.

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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.

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For the three months ended March 31, 2026, net premiums and contract charges earned increased $14.7 million as the Property & Casualty segment had higher sales* in the Property business lines and the Company sees strong growth in our Supplemental and Group Benefits segment.

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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:

Current wording

For the three months ended March 31, 2026, total net investment income decreased $5.2 million. The decrease for the quarter is primarily due to lower returns from our limited partnership funds. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

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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.

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During the three months ended March 31, 2026, 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. The Company continues to deploy capital in accordance with its strategic asset allocation framework, with the objective of maintaining diversification while balancing risk and return. Investments are allocated across public and private fixed income strategies, commercial mortgage loan funds, and limited partnership interests based on relative value considerations, portfolio capacity, and income objectives.

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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:

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For the three months ended March 31, 2026, total net investment losses decreased by $1.1 million. The breakdown of net investment gains (losses) by transaction type were as follows:

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

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For the three months ended March 31, 2026, other income increased $2.3 million.

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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.

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For the three months ended March 31, 2026, benefits, claims and settlement expenses decreased $6.8 million due to lower catastrophe losses and underlying losses in the Property & Casualty segment as well as lower Life benefits due to favorable mortality compared to prior year.

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

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For the three months ended March 31, 2026, interest credited increased $1.0 million.

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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.

Current wording

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 3.3% as of March 31, 2026 and March 31, 2025, respectively.

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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.

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For the three months ended March 31, 2026, DAC amortization expense increased $2.7 million, primarily due to premium increases in the Property & Casualty segment driving higher commission and underwriting expenses which increase DAC asset levels.

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

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For the three months ended March 31, 2026, intangible asset amortization expense was flat with prior year.

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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.

Current wording

The effective income tax rate on our pretax income, including net investment gains (losses), was 17.9% and 19.6% for the three months ended March 31, 2026 and 2025, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 2.1 and 2.3 percentage points for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate was further reduced by 1.7 and 0.2 percentage points for the three months ended March 31, 2026 and 2025, respectively, as a result of purchases of transferable tax credits to be utilized on the federal income tax returns.

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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.

Current wording

As of March 31, 2026, our federal income tax returns for years prior to 2022 are no longer subject to examination by the Internal Revenue Service. We do not expect any assessments for tax years that remain subject to examination to have a material effect on our financial position or results of operations.

Previous wording

At the time of issuance of this Quarterly Report on Form 10-Q, we estimate that 2025 full year core earnings* will be within a range of $4.50 to $4.70 per diluted share, generating a core return on equity* of over 10%. These results anticipate the following:

Current wording

At the time of issuance of this Quarterly Report on Form 10-Q, we estimate that 2026 full year core income will be within a range of $4.20 to $4.50 per diluted share, generating a core return on equity* of over 11%+. These results anticipate the following:

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•Property & Casualty segment target profitability of Auto in the mid-90s Combined Ratio and Property at a 90 or below Combined ratio with ~$65 million of catastrophe losses

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•Property & Casualty segment target profitability of low-mid 90s Combined Ratio with ~$90 million of catastrophe losses

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•Supplemental & Group Benefits segment target blended benefit ratio of 39%

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•Supplemental & Group Benefits segment target blended benefits ratio of 39%

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•Net investment income between $473 million and $477 million pre-tax, or $373-$377 million excluding the accreted investment income on the deposit asset on reinsurance in the Life & Retirement segment

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•Net investment income between $485 million and $495 million pre-tax, or $385-$395 million excluding the accreted investment income on the deposit asset on reinsurance in the Life & Retirement segment

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•Approximately $40 million to $45 million in corporate Interest expense and other items included in results for the Corporate & Other segment

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•Approximately $35 million to $40 million in corporate interest expense and other items included in results for the Corporate & Other segment

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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 in our Annual Report on Form 10-K for the year ended December 31, 2024 concerning other important factors that could impact actual results. Our projections due not include a forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.

Current wording

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 in our Annual Report on Form 10-K for the year ended December 31, 2025 concerning other important factors that could impact actual results. Our projections do not include a forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.

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The Property & Casualty segment primarily markets private passenger auto insurance and residential home insurance. Horace Mann offers standard auto coverages, including liability, collision and comprehensive. Property coverage includes both homeowners and renters policies. For both auto and property coverage, Horace Mann offers educators a discounted rate and the Educator Advantage® package of features. The Property & Casualty segment represented 49% of total revenues in 2024.

Current wording

The Property & Casualty segment primarily markets private passenger auto insurance and residential home insurance. Horace Mann offers standard auto coverages, including liability, collision and comprehensive. Property coverage includes both homeowners and renters policies. For both auto and property coverage, Horace Mann offers educators a discounted rate and the Educator Advantage® package of features. The Property & Casualty segment represented 51% of total revenues in 2025.

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•Higher net investment income driven by limited partnership portfolio and the fixed income portfolio

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•Higher net investment income driven by limited partnership portfolio

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The Property & Casualty segment three and nine month net income of $31.8 million and $75.1 million, as well as the three month and six month combined ratio of 87.8% and 91.4%, respectively, reflected improved current year underlying results and catastrophe losses below prior year and recent prior periods.

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The Property & Casualty segment three month net income of $39.0 million, as well as the three month combined ratio of 83.3%, reflected improved current year underlying results and catastrophe losses below prior year.

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The current quarter reflects an increase in net premiums written* of 9.3%, with average written premiums* rising for both property and auto. Sales* were steady for the quarter, up 5.4% from the prior year, and household retention remains in line with expectations.

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The current quarter reflects an increase in net premiums written* of 4.8%, with average written premiums* rising for both property and auto. Sales* were steady for the quarter, down 1.8% from the prior year, and household retention remains in line with expectations.

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The three and nine month loss ratios decreased 11.7 and 12.8 points from last year reflecting higher average premiums and catastrophe losses that were below recent prior periods. In addition, $3.0 million and $13.8 million of net favorable prior years' reserve development for the three and nine months reduced the loss ratio 1.5 and 2.3 points, respectively. Catastrophe losses for the quarter were $9.9 million, pretax, contributing 4.8 points to the combined ratio. In total, there were 14 events designated as catastrophes by Property Claims Services (PCS) in this year’s third quarter. The lower catastrophe losses are driven by lower frequency and severity of policyholder claims. In the third quarter of 2024, catastrophe losses were $34.0 million, pretax, contributing 18.1 points to the combined ratio, from 20 PCS events.

Current wording

The three month loss ratio decreased 5.2 points from last year reflecting higher average premiums and lower catastrophe losses. In addition, $5.0 million of net favorable prior years' reserve development for the three months reduced the loss ratio 2.5 points. Catastrophe losses for the quarter were $11.3 million, pretax, contributing 5.6 points to the combined ratio. In total, there were 21 events designated as catastrophes by Property Claims Services (PCS) in this year’s first quarter. The lower catastrophe losses are driven by lower frequency and severity of policyholder claims. In the first quarter of 2025, catastrophe losses were $16.4 million, pretax, contributing 8.5 points to the combined ratio, from 18 PCS events.

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The year-over-year increase in average written premiums* for auto policies remained elevated in the third quarter at 6.6%, with retention consistent with the second quarter, and in line with expectations, given the rate actions the Company has taken. The third-quarter auto underlying loss ratio* was 66.6%, improving 4.9 points from the prior year quarter, reflecting the benefit of higher average earned premium. The third quarter reported loss ratio benefited 0.2 points from favorable prior years' reserve development.

Current wording

The year-over-year increase in average written premiums* for auto policies in the first quarter was 5.4%, while retention remained stable. The first quarter auto underlying loss ratio* was 64.2%, improving 2.8 points from the prior year quarter, reflecting the benefit of higher average earned premium. The first quarter reported loss ratio benefited 2.5 points from favorable prior years' reserve development.

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The year-over-year increase in average written premiums* for property policies was 13.8% in the third quarter, as rate increases and inflation adjustments to coverage values continue to take effect. Policyholder retention remains strong. The third-quarter property underlying loss ratio* was 41.2%, a 0.2 point decrease from prior year reflecting the increase in average earned premium*. The third quarter reported loss ratio benefited 3.6 points from favorable prior years' reserve development.

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The year-over-year increase in average written premiums* for property policies was 8.6% in the first quarter, as rate increases and inflation adjustments to coverage values continue to take effect. Policyholder retention remains stable. The first quarter property and other underlying loss ratio* was 36.4%, a 0.1 point decrease from prior year reflecting the increase in average earned premium*. The first quarter reported loss ratio benefited 2.5 points from favorable prior years' reserve development.

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The Life & Retirement segment markets 403(b) tax-qualified fixed, fixed indexed and variable annuities; the Horace Mann Retirement Advantage® open architecture platform for 403(b)(7) and other defined contribution plans; and other retirement products to educators as well as traditional term and whole life insurance products. Horace Mann is one of the largest participants in the K-12 educator portion of the 403(b) tax-qualified annuity market, measured by 403(b) net premiums written on a statutory accounting basis. The Life & Retirement segment represented 34% of total revenues in 2024.

Current wording

The Life & Retirement segment markets 403(b) tax-qualified fixed, fixed indexed and variable annuities; the Horace Mann Retirement Advantage® open architecture platform for 403(b)(7) and other defined contribution plans; traditional term and whole life insurance products and indexed universal life (IUL) products. Horace Mann is one of the largest participants in the K-12 educator portion of the 403(b) tax-qualified annuity market, measured by 403(b) net premiums written on a statutory accounting basis. The Life & Retirement segment represented 32% of total revenues in 2025.

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•Benefits expense in Life decreased due to annual assumption updates related to mortality for both comparisons

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•Benefits expense in Life decreased related to favorable mortality costs

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•Annualized quarterly and nine month net interest spread on fixed annuities up 3 basis points and 28 basis points, respectively

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•Annualized quarterly net interest spread on fixed annuities down 37 basis points

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For the Retirement business, net annuity contract deposits were up 9.3% for the quarter at $138.6 million. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, which provide encouraging cross-sell opportunities. Average persistency rose from the prior period to 92.0%.

Current wording

For the Retirement business, net annuity contract deposits were down 5.5% for the quarter at $104.7 million primarily reflecting product mix and market conditions. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, which provide encouraging cross-sell opportunities. Average persistency rose from the prior period to 92.1%.

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Horace Mann currently has $5.9 billion in annuity assets under management, including $2.2 billion of fixed annuities, $3.3 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 due to the effect of equity market performance on assets.

Current wording

Horace Mann currently has $5.8 billion in annuity assets under management, including $2.2 billion of fixed annuities, $3.2 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 due to the effect of equity market performance on assets.

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Life annualized sales* were $2.9 million for the quarter. Persistency remains strong. Life insurance in force rose to $21.4 billion at quarter-end.

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Life annualized sales* were $2.8 million for the quarter. Persistency remains strong. Life insurance in force rose to $21.6 billion at quarter-end.

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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 $2.6 million in year one, reducing the annualized net interest spread on fixed annuities by approximately 10 basis points, 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.

Current wording

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 on fixed annuities by approximately 8 basis points, compared to the current period annualized net interest spread on fixed annuities.

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The Supplemental & Group Benefits segment markets group solutions for districts and other public employers, as well as individual supplemental products typically distributed through the employer channel. The Supplemental & Group Benefits segment provides group term life, disability and specialty health insurance, along with supplemental products including cancer, heart, hospital, supplemental disability and accident coverages. The Supplemental & Group Benefits segment represented 18% of total revenues in 2024.

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The Supplemental & Group Benefits segment markets group solutions for districts and other public employers, as well as individual supplemental products typically distributed through the employer channel. The Supplemental & Group Benefits segment provides group term life, disability and specialty health insurance, along with supplemental products including cancer, heart, hospital, supplemental disability and accident coverages. The Supplemental & Group Benefits segment represented 17% of total revenues in 2025.

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•Lower benefits ratio for Group Benefits for the quarter and higher benefits ratio for the year

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•Higher benefits ratio for Individual Supplemental

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Supplemental & Group Benefits segment net income for the three and nine months ended September 30, 2025, of $15.0 million and $34.1 million, was up $0.2 million and down $5.8 million, respectively. The Individual Supplemental benefits ratio decreased 2.4 points and 1.8 points for the three and nine months ended as we continue to see favorable policyholder utilization trends relative to our long-term expectations. The Group Benefits benefit ratio decreased 7.9 points and increased 0.8 points for the three and nine months due to favorable policy utilization during the quarter and slightly elevated for the year. Operating expense increase reflects inflation and investments being made in growth initiatives and infrastructure.

Current wording

Supplemental & Group Benefits segment net income for the three months ended March 31, 2026 of $9.9 million was down $1.3 million. The Individual Supplemental benefits ratio increased 2.1 points due to higher utilization consistent with our long-term expectations. The Group Benefits benefits ratio decreased 1.4 points due to higher premiums driven by higher sales*. Operating expense increase reflects inflation and investments being made in growth initiatives and infrastructure.

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Total sales* for the three and nine months ended September 30, 2025 increased $4.7 million with Individual Supplemental product sales increasing $1.7 million and Group Benefits products increasing $3.0 million. Individual Supplemental sales increased 40.5% and Group Benefits sales increased 90.9% due to our strategic investments to drive growth. Variability in sales between comparable periods is typical for Group Benefits given the relatively small scale and the longer sales cycle of this business. Persistency remains strong for the segment.

Current wording

Total sales* for the three months ended March 31, 2026 increased $8.6 million due to our strategic investments to drive growth. Individual Supplemental products increased $0.6 million and Group Benefits products increased $8.0 million. Individual Supplemental sales increased 11.3% and Group Benefits sales increased 258.1%. Variability in sales between comparable periods is typical for Group Benefits given the relatively small scale and the longer sales cycle of this business. Persistency remains strong for the segment.