HORACE MANN EDUCATORS CORP /DE/

Previous 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 Second Quarter 2026 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 Third Quarter 2026 Investor Supplement.

Previous 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 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 six months ended June 30, 2026, net income increased $12.2 million and $15.2 million, respectively, primarily due to improved Property & Casualty segment results reflecting the impact of improved underlying results and lower catastrophe losses.

Current wording

For the three and nine months ended September 30, 2026, net income increased $0.2 million and $15.4 million, respectively, primarily due to improved Property & Casualty segment results reflecting the impact of improved underlying results and favorable prior year development and higher net investment income that were offset by higher net investment losses.

Previous wording

For the three and six months ended June 30, 2026, net premiums and contract charges earned increased $14.3 million and $29.0 millionas the Property & Casualty segment had higher sales* in the Property business lines and the Company experienced strong growth in our Supplemental and Group Benefits segment.

Current wording

For the three and nine months ended September 30, 2026, net premiums and contract charges earned increased $7.7 million and $36.7 millionas the Property & Casualty segment had higher sales* in the Property business lines and the Company experienced strong growth in our Supplemental and Group Benefits segment.

Previous wording

For the three and six months ended June 30, 2026, total net investment income increased $9.7 million and $4.5 million. The increase for the quarter is primarily due tocontinued strong returns from our fixed income portfolio. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

Current wording

For the three and nine months ended September 30, 2026, total net investment income increased $20.1 million and $24.6 million. The increase for the quarter is primarily due tocontinued 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 in the prior year comparative periods, net investment income increased $14.4 million for the nine months ended September 30, 2026. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

Previous wording

During the three and six months ended June 30, 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.

Current wording

During thethree and nine months ended September 30, 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.

Previous wording

For the three and six months ended June 30, 2026, total net investment losses decreased by $5.8 million and $6.9 million, respectively. The breakdown of net investment gains (losses) by transaction type were as follows:

Current wording

For the three and nine months ended September 30, 2026, total net investment losses increased by $29.5 million and $22.6 million, respectively. The increase was primarily due to the sale of one limited partnership fund during the quarter ended September 30, 2026. The breakdown of net investment gains (losses) by transaction type were as follows:

Previous wording

For the three and six months ended June 30, 2026, other income increased $2.0 million and $4.3 million, respectively.

Current wording

For the three and nine months ended September 30, 2026, other income increased $2.4 million and $6.7 million, respectively.

Previous wording

For the three and six months ended June 30, 2026, benefits, claims and settlement expenses increased $2.8 million and decreased $4.0 million, primarily due to the Property & Casualty segment having lower catastrophe and underlying losses while the Supplemental and Group Benefits segment benefits increased due to higher utilization.

Current wording

For the three and nine months ended September 30, 2026, benefits, claims and settlement expenses decreased $7.2 million and $11.2 million, primarily due to the Property & Casualty segment having lower catastrophe and underlying losses as well as lower Retirement benefits related to assumption changes compared to the prior year.

Previous wording

For the three and six months ended June 30, 2026, interest credited increased $1.9 million and $2.9 million, respectively.

Current wording

For the three and nine months ended September 30, 2026, interest credited decreased $0.1 million and increased $2.8 million, respectively.

Previous 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 June 30, 2026 and June 30, 2025, 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 3.5% and 3.4% as of September 30, 2026 and September 30, 2025, respectively.

Previous wording

For the three and six months ended June 30, 2026, operating expenses increased $11.6 million and $24.3 million, respectively, reflecting higher expenses related to our Early Retirement Offering and acquisition expenses in the Corporate & Other segment.

Current wording

For the three and nine months ended September 30, 2026, operating expenses increased $5.9 million and $30.2 million, respectively, reflecting higher expenses related to our Early Retirement Offering and acquisition expenses in the Corporate & Other segment.

Previous wording

For the three and six months ended June 30, 2026, DAC amortization expense increased $2.1 million and $4.8 million, primarily due to premium increases in the Property & Casualty segment driving higher commission and underwriting expenses which increase DAC asset levels.

Current wording

For the three and nine months ended September 30, 2026, DAC amortization expense increased $0.4 million and $5.2 million, primarily due to premium increases in the Property & Casualty segment driving higher commission and underwriting expenses which increase DAC asset levels.

Previous wording

For the three and six months ended June 30, 2026, intangible asset amortization expense was flat with prior year.

Current wording

For the three and nine months ended September 30, 2026, intangible asset amortization expense was flat with prior year.

Previous wording

For the three and six months ended June 30, 2026, interest expense increased $1.0 million and $1.6 million, respectively, due to an increase in the level of debt associated with the issuance of the 2025 Senior Notes that were used to repay the 2015 Senior Notes.

Current wording

For the three and nine months ended September 30, 2026, interest expense increased $0.7 million and $2.3 million, respectively, due to an increase in the level of debt associated with the issuance of the 2025 Senior Notes that were used to repay the 2015 Senior Notes.

Previous wording

The effective income tax rate on our pretax income, including net investment gains (losses), was 16.5% and 19.5% for the six months ended June 30, 2026 and 2025, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 1.5 and 2.4 percentage points for the six months ended June 30, 2026 and 2025, respectively. The effective tax rate was further reduced by 4.0 and 0.5 percentage points for the six months ended June 30, 2026 and 2025, respectively, as a result of purchases of transferable tax credits to be utilized on the federal income tax returns for the 2026 and 2025 tax years.

Current wording

The effective income tax rate on our pretax income, including net investment gains (losses), was 17.7% and 19.0% for the nine months ended September 30, 2026 and 2025, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 1.8 and 2.0 percentage points for the nine months ended September 30, 2026 and 2025, respectively. The effective tax rate was further reduced by 2.7 and 1.2 percentage points for the nine months ended September 30, 2026 and 2025, respectively, as a result of purchases of transferable tax credits to be utilized on the federal income tax returns for the 2026 and 2025 tax years.

Previous wording

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 related to uncertain tax positions.

Current wording

We record liabilities for uncertain tax positions when it is more likely than not that a 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 related to uncertain tax positions.

Previous 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 $4.60 to $4.90 per diluted share, generating a core return on equity* of over 12%+. 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 $5.75 to $5.95 per diluted share, generating a core return on equity* of over 12%+. These results anticipate the following:

Previous wording

•Property & Casualty segment target profitability of low-mid 90s Combined Ratio with ~$75 million of catastrophe losses

Current wording

•Property & Casualty segment target profitability of low-mid 90s Combined Ratio with ~$60 million of catastrophe losses

Previous wording

•Net investment income between $465 million and $475 million pre-tax, or $365-$375 million excluding the accreted investment income on the deposit asset on reinsurance in the Life & Retirement segment

Current wording

•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

Previous wording

The Property & Casualty segment three and six month net income of $25.8 million and $64.8 million, as well as the three month and six month combined ratio of 89.6% and 86.5%, reflected improved current year underlying results and catastrophe losses below prior year.

Current wording

The Property & Casualty segment three and nine month net income of $38.9 million and $103.7 million, as well as the three month and nine month combined ratio of 83.6% and 85.5%, reflected improved current year underlying results and a higher level of favorable prior years' reserve development.

Previous wording

The current quarter reflects an increase in net premiums written* of 0.1%, with average written premiums* rising for both property and auto. Sales* were lower for the quarter, down 3.6% from the prior year, and household retention remains in line with expectations.

Current wording

The current quarter reflects a decrease in net premiums written* of 4.7%, with average written premiums* rising for both property and auto. Sales* were lower for the quarter, down 0.8% from the prior year, and household retention remains in line with expectations.

Previous wording

The three and six month loss ratios decreased 7.1 and 6.2 points from last year reflecting higher average premiums and lower catastrophe losses. In addition, $6.6 million and $11.6 million of net favorable prior years' reserve development for the three and six months reduced the loss ratio 3.2 and 2.8 points, respectively. Catastrophe losses for the quarter were $24.2 million, pretax, contributing 11.8 points to the combined ratio. In total, there were 22 events designated as catastrophes by Property Claims Services (PCS) in this year’s second quarter. The lower catastrophe losses are driven by lower frequency and severity of policyholder claims. In the second quarter of 2025, catastrophe losses were $29.7 million, pretax, contributing 15.0 points to the combined ratio, from 20 PCS events.

Current wording

The three and nine month loss ratios decreased 3.0 and 5.1 points from last year reflecting higher average premiums for both comparisons and lower catastrophe losses for the nine month comparison. In addition, $8.0 million and $19.6 million of net favorable prior years' reserve development for the three and nine months reduced the loss ratio 3.9 and 3.2 points, respectively. Catastrophe losses increased $3.6 million and decreased $7.0 million, pretax, for the three and nine months ended, contributing 6.5 and 8.0 points to the combined ratio. The lower catastrophe losses for the nine months are driven by lower frequency and severity of policyholder claims. In total, there were 26 events designated as catastrophes by Property Claims Services (PCS) in this year’s third quarter compared to 14 PCS events in the prior year third quarter.

Previous wording

The year-over-year increase in average written premiums* for auto policies in the second quarter was 2.8%, while retention remained stable. The second quarter auto underlying loss ratio* was 65.1%, improving 3.6 points from the prior year quarter, reflecting the benefit of higher average earned premium. The second quarter reported loss ratio benefited 1.6 points from favorable prior years' reserve development.

Current wording

The year-over-year increase in average written premiums* for auto policies in the third quarter was 1.7%, while retention remained stable. The third quarter auto underlying loss ratio* was 66.9%, rising 0.3 points from the prior year quarter. The third quarter reported loss ratio benefited 4.4 points from favorable prior years' reserve development.

Previous wording

The year-over-year increase in average written premiums* for property policies was 7.4% in the second quarter, as rate increases and inflation adjustments to coverage values continue to take effect. Policyholder retention remains stable. The second quarter property and other underlying loss ratio* was 36.0%, a 1.4 point decrease from prior year reflecting the increase in average earned premium*. The second quarter reported loss ratio benefited 5.6 points from favorable prior years' reserve development.

Current wording

The year-over-year increase in average written premiums* for property policies was 2.9% in the third quarter, as rate increases and inflation adjustments to coverage values continue to take effect. Policyholder retention remains stable. The third quarter property and other underlying loss ratio* was 36.6%, a 5.0 point decrease from prior year reflecting the increase in average earned premium*. The third quarter reported loss ratio benefited 3.0 points from favorable prior years' reserve development.

Previous wording

•Higher premiums and contract charges earned and other income in Retirement due to higher assets under administration

Current wording

•Higher premiums and contract charges earned

Previous wording

•Annualized quarterly net interest spread on fixed annuities up 35 basis points

Current wording

•Annualized quarterly and nine month net interest spread on fixed annuities up 139 basis points and 43 basis points, respectively

Previous wording

The quarterly net spread increased 35 basis points primarily due to higher returns in the fixed-income portfolios. Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error of $6.7 million ($5.3 million after tax) in the second quarter of 2025, net investment income decreased $0.4 million and $2.5 million for the three and six months ended June 30, 2026.

Current wording

The quarterly net spread increased 139 basis points primarily due to higher returns in the fixed-income portfolios and limited partnerships. Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error of $6.7 million ($5.3 million after tax) in the second quarter of 2025, net investment income increased $15.9 million and $13.4 million for the three and nine months ended September 30, 2026.

Previous wording

For the Retirement business, net annuity contract deposits were down 2.4% for the quarter at $107.6 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 91.9%.

Current wording

For the Retirement business, net annuity contract deposits were down 1.0% for the quarter at $137.2 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 remained steady at 91.7%.

Previous wording

Horace Mann currently has $6.2 billion in retained annuity assets under management, including $2.2 billion of fixed annuities, $3.6 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 $6.3 billion in retained annuity assets under management, including $2.2 billion of fixed annuities, $3.7 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.

Previous wording

Life annualized sales* were $3.0 million for the quarter. Persistency remains strong. Life insurance in force rose to $21.7 billion at quarter-end.

Current wording

Life annualized sales* were $3.0 million for the quarter. Persistency remains strong. Life insurance in force rose to $21.8 billion at quarter-end.

Previous wording

•Higher benefits ratio for Individual Supplemental and Group Benefits

Current wording

•Higher benefits ratio for Group Benefits

Previous wording

Supplemental & Group Benefits segment net income for the three and six months ended June 30, 2026, of $8.5 million and $18.4 million, was up $0.6 million and down $0.7 million, respectively. The Individual Supplemental benefits ratio was modestly higher, 1.5 points and 1.8 points for the three and six months ended due to higher utilization consistent with our long-term expectations. The Group Benefits benefits ratio increased 17.4 points and 7.8 points for the three and six months ended driven by strong growth momentum, particular within our Paid Family Medical Leave enhancement.

Current wording

Supplemental & Group Benefits segment net income for the three and nine months ended September 30, 2026, of $16.6 million and $35.0 million, was up $1.6 million and up $0.9 million, respectively. The Individual Supplemental benefits ratio was lower, 4.1 points and 0.1 points for the three and nine months ended. The Group Benefits benefits ratio increased 5.5 points and 7.3 points for the three and nine months ended driven by strong growth momentum within our Paid Family Medical Leave enhancement.

Previous wording

Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error of $3.5 million ($2.8 million after tax) in the second quarter 2025, net investment income decreased $0.2 million and $0.7 million for the three and six months ended June 30, 2026.

Current wording

Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error of $3.5 million ($2.8 million after tax) in the second quarter 2025, net investment income increased $0.6 million and decreased $0.1 million for the three and nine months ended September 30, 2026.

Previous wording

Total sales* for the three and six months ended June 30, 2026 increased $2.5 million and $11.1 million due to our strategic investments to drive growth. Individual Supplemental products increased $0.3 million and $0.9 million and Group Benefits products increased $2.2 million and $10.2 million. 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 and nine months ended September 30, 2026 decreased $3.6 million and increased $7.5 million due to our strategic investments to drive growth. Individual Supplemental products increased $0.3 million and $1.2 million and Group Benefits products decreased $3.9 million and increased $6.3 million. 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.

Previous wording

Operating expenses increased $9.1 million and $15.6 million for the three and six months ended June 30, 2026, respectively. The increase included $6.7 million and $13.7 million for the three and six months ended June 30, 2026, respectively related to our voluntary Early Retirement Offering. In addition, the segment incurred $2.5 million of acquisition related expenses that impacted both the quarterly and year to date comparisons.

Current wording

Operating expenses increased $5.8 million and $21.4 million for the three and nine months ended September 30, 2026, respectively. The increase included $2.7 million and $16.4 million for the three and nine months ended September 30, 2026, respectively related to our voluntary Early Retirement Offering. In addition, the segment incurred $2.5 million and $5.0 million of acquisition related expenses for the three and nine months ended September 30, 2026.

Previous wording

For the three and six months ended June 30, 2026, net investment income from our managed investment portfolio increased $10.5 million and $6.1 million, primarily due to higher returns in the fixed-income portfolios. The investment yield on the portfolio excluding limited partnership interests was 4.6%, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.

Current wording

For the three and nine months ended September 30, 2026, net investment income from our managed investment portfolio increased $19.1 million and $25.2 million, primarily due to higher returns in the fixed-income portfolios and limited partnership funds. The investment yield on the portfolio excluding limited partnership interests was 5.0% and 4.7% for the three and nine months ended September 30, 2026, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.

Previous wording

For the three and six months ended June 30, 2026, pretax net investment losses decreased $5.8 million and $6.9 million, primarily due to lower net investment losses from routine portfolio management activities, including lower impairment losses.

Current wording

For the three and nine months ended September 30, 2026, pretax net investment losses increased $29.5 million and $22.6 million, primarily due to losses on investment sales associated with portfolio management activities during the quarter ended September 30, 2026.

Previous wording

Pretax net unrealized investment losses on fixed maturity securities as of June 30, 2026 increased $46.4 million, or 14.9%, compared to December 31, 2025, primarily due to an increase of 30 basis points in US Treasury rates.

Current wording

Pretax net unrealized investment losses on fixed maturity securities as of September 30, 2026 increased $317.0 million, or 101.6%, compared to December 31, 2025, primarily due to a rise in interest rates, with the 10-year US Treasury increasing 111 basis points.

Previous wording

(1)The All other corporates category contains 21 additional industry sectors. Natural Gas, Manufacturing, Entertainment, Food and Beverage, and Retail represented $223.7 million of fair value at June 30, 2026, with the remaining 16 sectors each representing less than $29.1 million.

Current wording

(1)The All other corporates category contains 21 additional industry sectors. Natural Gas, Food and Beverage, Leisure Entertainment, Industry Manufacturing, and Retail represented $203.1 million of fair value at September 30, 2026, with the remaining 16 sectors each representing less than $26.9 million.