HORACE MANN EDUCATORS CORP DE

Net Premiums and Contract Charges Earned

For the three months ended March 31, 2024, net premiums and contract charges earned increased $19.3 million as the Property & Casualty segment continues to implement and earn in rate and other actions.

Net Investment Income

For the three months ended March 31, 2024, total net investment income increased $5.0 million primarily due to stronger income from the fixed income portfolio partially offset by weaker returns in one commercial mortgage loan fund and two real estate-related limited partnerships. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

The lower investment yields, excluding limited partnership interests, are due to commercial mortgage loan fund returns that were below historic averages in the first quarter of 2024.

During the three months ended March 31, 2024, 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.

Net Investment Gains (Losses)

For the three months ended March 31, 2024, total net investment gains increased by $6.1 million, respectively. The breakdown of net investment gains (losses) by transaction type were as follows:

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer-specific events occurring subsequent to the reporting date that result in a change in our intent to sell a fixed maturity security.

Other Income

For the three months ended March 31, 2024, other income increased $1.7 million due to lower offsets compared to the prior year from an indemnification agreement associated with the employer-sponsored business line.

Benefits, Claims and Settlement Expenses

Benefits, claims and settlement expenses declined $6.9 million for the three months ended March 31, 2024, primarily due to moderated catastrophe and non-catastrophe weather activity compared to prior year in the Property & Casualty segment and a favorable market risk benefit adjustment in the Life & Retirement segment.

Interest Credited

For the three months ended March 31, 2024, interest credited increased $4.2 million driven primarily by higher interest rates on advances received from the Federal Home Loan Bank of Chicago (FHLB). The net contribution from FHLB advances remained stable year over year as the higher interest credited rates are offset by higher earnings from the floating rate investments backing the program.

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 3.0% and 2.6% as of March 31, 2024 and March 31, 2023, respectively.

Operating Expenses

For the three months ended March 31, 2024, operating expenses increased 5.9% reflecting inflation and investments being made in infrastructure.

Deferred Policy Acquisition Costs (DAC) Amortization Expense

For the three months ended March 31, 2024, DAC amortization expense increased $3.3 million primarily due to premium increases in the Property & Casualty segment driving higher DAC asset levels.

Intangible Asset Amortization Expense

For the three months ended March 31, 2024, intangible asset amortization expense decreased $0.1 million.

Interest Expense

For the three months ended March 31, 2024, interest expense increased $2.0 million due to an increase in the interest rate as well as a $48.2 million increase in the the level of debt associated with the issuance of the 2023 Senior Notes.

Income Tax Expense

The effective income tax rate on our pretax income, including net investment gains (losses), was 19.7% and 18.5% for the the three months ended March 31, 2024 and 2023, respectively. Income from investments in tax-

advantaged securities decreased the effective income tax rates by 2.5, and 5.3 percentage points for the three months ended March 31, 2024 and 2023, respectively.

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 from uncertain tax filing positions.

As of March 31, 2024, our federal income tax returns for years prior to 2020 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.