HORACE MANN EDUCATORS CORP DE

Our investments support our policy liabilities by serving as a resource for payment of benefits, losses, and expenses and as incremental source of income to support operations. Our strategy is primarily focused on generating income while balancing principal protection and investment risk. Our investment objectives are implemented through portfolios managed by external investment managers with internal management oversight that primarily emphasize investment grade fixed maturity securities that consider the anticipated duration of our liabilities. In addition to these securities, we also invest in limited partnership interests that are managed internally (which include commercial mortgage loan funds) and equity securities that are managed by external investment managers with internal management oversight to help improve returns. Our short-term investments include money market funds, commercial paper, U.S Treasury bills and other short-term investments that support our management of liquidity and investment strategies. Our other investments include Federal Home Loan Bank of Chicago (FHLB) common stock, mortgage loans, and derivatives that support our other business operations and are not speculative investments.

We have separate investment strategies and guidelines for our Property & Casualty, Life & Retirement and Supplemental & Group Benefits portfolios, which recognize different characteristics of the associated insurance liabilities, as well as different tax and regulatory environments. We manage interest rate exposure for our portfolios through asset/liability management techniques that consider the duration of the assets compared to the duration of the insurance policy liabilities. Duration of assets and liabilities will generally differ only because of opportunities to increase yields or because policy values are not interest rate sensitive, as is the case in Property & Casualty and Supplemental & Group Benefits.

The investments of each insurance subsidiary must comply with the insurance laws of such insurance subsidiary's domiciliary state. These laws prescribe the type and amount of investments that may be purchased and held by insurance companies. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, mortgage-backed securities, other asset-backed securities, preferred stocks, common stocks, real estate mortgages, real estate and alternative investments.

Investment Portfolio as of December 31, 2023

(1)All investment grade that includes $341.3 million fair value of investments guaranteed by the full faith and credit of the U.S. Government and $700.7 million fair value of federally sponsored agency securities which are not backed by the full faith and credit of the U.S. Government.

(2)A non-investment grade rating is assigned to a security when it is acquired or when it is downgraded from investment grade, primarily on the basis of the S&P rating for such security, or if there is no S&P rating, the Moody's Investors Service, Inc. (Moody's) or Fitch Ratings, Inc. (Fitch) rating for such security, or if there is no S&P, Moody's or Fitch rating, the NAIC rating for such security. The rating agencies monitor securities and their issuers regularly, and make changes to the ratings as necessary. We incorporate rating changes on a monthly basis.

(3)Includes commercial mortgage-backed securities, asset-backed securities, other mortgage-backed securities and collateralized loan obligations.

(4)Short-term investments mature within one year of being acquired and are carried at cost, which approximates fair value. Short-term investments of $132.9 million are all money market funds and are not rated.

(5)Mortgage loans are carried at amortized cost, net and policy loans are carried at unpaid principal balances.

(6)Approximately 7.3% of our investment portfolio, having a carrying amount of $479.4 million as of December 31, 2023, consisted of securities with some form of credit support, such as insurance. Of the securities with credit support. municipal bonds represented $339.5 million of the carrying amount.

(7)Includes $0.2 million of fixed maturity securities, $1.0 million of equity securities and $2.1 million of short-term investments held in Corporate & Other.

(8)Limited partnership interests are accounted for using the equity method of accounting.

For reporting purposes, we have classified the entire portfolio of fixed maturity securities as available for sale and the portfolio is carried at fair value. An adjustment for net unrealized investment gains (losses) on fixed maturity securities available for sale is recognized as a separate component of accumulated other comprehensive income (loss) (AOCI) within shareholders' equity, net of applicable deferred taxes. Fixed maturity securities held for indefinite periods of time include securities that we intend to use as part of our asset/liability management strategy and that may be sold in response to changes in interest rates, resultant prepayment risk and other related factors, other than securities that are in an unrealized loss position for which we have the stated intent to hold until recovery.

Fixed Maturity Securities Portfolio as of December 31, 2023