HORACE MANN EDUCATORS CORP DE

Previous wording

We conduct and manage our business in four reporting segments. The three reporting segments representing the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). We do not allocate the impact of corporate-level transactions to these reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in the fourth reporting segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. See Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.

Current wording

We conduct and manage our business in four reporting segments. The three reporting segments representing the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). We do not allocate the impact of corporate-level transactions to these reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in the fourth reporting segment, Corporate & Other. Corporate & Other includes corporate debt service, net investment gains (losses) and certain public company expenses, as well as corporate debt retirement costs, when applicable. In addition to these transactions, Corporate & Other also includes legacy commercial claims. See Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.

Previous wording

For 2023, net premiums and contract charges earned increased $29.4 million as the Property & Casualty segment continues to implement rate and inflation adjustments to coverage values continue to take effect.

Current wording

For 2024, net premiums and contract charges earned increased $88.9 million as the Property & Casualty segment continues to implement rate and inflation adjustments to coverage values.

Previous wording

Total net investment income in 2023 increased $43.9 million, primarily due to higher returns on floating rate fixed maturity securities including commercial mortgage loan funds partially offset by lower returns on limited partnership interests in various equity funds. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

Current wording

Total net investment income in 2024 increased $0.9 million, primarily due to higher returns on the fixed-income portfolio. Lower commercial mortgage loan funds income was partially offset by higher returns on limited partnership interests in various equity funds. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

Previous wording

During 2023, we continued to identify and purchase investments, including alternative 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 also funded commercial mortgage loan funds and limited partnership interests in line with our intended allocation to this portion of our portfolio to increase yields while balancing protection and risk.

Current wording

During 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 also funded commercial mortgage loan funds and limited partnership interests in line with our intended allocation to this portion of our portfolio to increase yields while balancing protection and risk.

Previous wording

For 2023, net investment losses decreased $32.5 million. The breakdown of net investment gains (losses) by transaction type were as follows:

Current wording

For 2024, net investment losses decreased $6.7 million. The breakdown of net investment gains (losses) by transaction type were as follows:

Previous wording

For 2023, other income increased $4.5 million primarily due to an indemnification agreement associated with the employer-sponsored business line.

Current wording

For 2024, other income increased $6.8 million primarily due to an indemnification agreement associated with the employer-sponsored business line.

Previous wording

For 2023, benefits, claims and settlement expenses increased 3% as higher catastrophe losses and non-catastrophe weather losses in the current year offset unfavorable prior year development recorded in 2022 in the Property & Casualty segment.

Current wording

For 2024, benefits, claims and settlement expenses decreased $24.1 million due to favorable prior year development in 2024 in the Property & Casualty segment.

Previous wording

For 2023, interest credited increased $32.3 million, driven primarily by higher interest rates on advances received from the Federal Home Loan Bank of Chicago (FHLB). The net dollar contribution from FHLB advances remained stable year over year as the higher interest credited rates are offset by higher earnings from the floating rate securities backing the program, although the net interest spread percentage declined slightly.

Current wording

For 2024, interest credited increased $10.2 million, driven primarily by higher credited rates on the retained annuity block along with higher interest rates on advances received from the Federal Home Loan Bank of Chicago (FHLB). The net dollar contribution from FHLB advances increased year over year as the higher interest credited rates are more than offset by higher earnings from the floating rate securities backing the program.

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 2.9% for 2023 and 2.5% for 2022.

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 3.2% for 2024 and 2.9% for 2023.

Previous wording

For 2023, DAC unlocking and amortization expense increased $13.0 million, due to premium increases in the Property & Casualty segment driving higher DAC asset levels as well as write-offs of DAC in the Life & Retirement segment related to declines in annuity persistency.

Current wording

For 2024, DAC amortization expense increased $9.9 million, primarily due to premium increases in the Property & Casualty segment driving higher DAC asset levels partially offset by lower levels of write-offs in the Life & Retirement segment as annuity persistency has been stable in the current year.

Previous wording

The effective income tax rate on our pretax income, including net investment gains (losses) was 15.6% and (20.0)% for the years ended December 31, 2023 and 2022, respectively. Income from investments in tax-advantaged securities decreased the effective income tax rates by 7.5 and 39.2 percentage points for 2023 and 2022, respectively. The goodwill and intangible asset impairment charges in the Life & Retirement segment decreased the effective income tax rate by 9.3 percentage points as of December 31, 2022.

Current wording

The effective income tax rate on our pretax income, including net investment gains (losses) was 20.1% and 15.6% for the years ended December 31, 2024 and 2023, respectively. Income from investments in tax-advantaged securities decreased the effective income tax rates by 3.4 and 7.5 percentage points for 2024 and 2023, respectively.

Previous wording

At the time of issuance of this Annual Report on Form 10-K, we estimate that 2024 full year net income will be within a range of $3.00 to $3.30 per diluted share, generating a core return on equity* near 9%. These results anticipate the following:

Current wording

At the time of issuance of this Annual Report on Form 10-K, we estimate that 2025 full year net income will be within a range of $3.60 to $3.90 per diluted share, generating a core return on equity* of 10%+. These results anticipate the following:

Previous wording

•Approximately $35 million in corporate Interest expense included in results for the Corporate & Other segment

Current wording

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

Previous wording

The fair value of a fixed maturity security is the price that would be received in an orderly transaction between market participants at the measurement date. We obtain prices from third-party valuation service providers, our investment managers, and custodian bank, each of which use a variety of valuation service providers, broker quotes, and modeled prices. When necessary, we also internally model securities to develop a price. Differences in prices between the sources that we consider reliable are researched and we use the price that we consider most representative of an exit price in determining the fair value. Typical inputs used by these pricing sources include, but are not limited to, reported trades, broker quotes, yield curves, and involve the benchmarking of similar securities, rating designations, sector groupings, issuer spreads and/or estimated cash flows, prepayment speeds and default rates, among others, in determining the inputs to the prices. Our fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the fixed maturity securities portfolio to be priced through pricing services using observable inputs. Approximately 87.7% of the fixed maturity securities portfolio, based on fair value, was priced through valuation services or priced using observable inputs as of December 31, 2023.

Current wording

The fair value of a fixed maturity security is the price that would be received in an orderly transaction between market participants at the measurement date. We obtain prices from third-party valuation service providers, our investment managers, and custodian bank, each of which use a variety of valuation service providers, broker quotes, and modeled prices. When necessary, we also internally model securities to develop a price. Differences in prices between the sources that we consider reliable are researched and we use the price that we consider most representative of an exit price in determining the fair value. Typical inputs used by these pricing sources include, but are not limited to, reported trades, broker quotes, yield curves, and involve the benchmarking of similar securities, rating designations, sector groupings, issuer spreads and/or estimated cash flows, prepayment speeds and default rates, among others, in determining the inputs to the prices. Our fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the fixed maturity securities portfolio to be priced through pricing services using observable inputs. Approximately 90.9% of the fixed maturity securities portfolio, based on fair value, was priced through valuation services or priced using observable inputs as of December 31, 2024.

Previous wording

The valuation of hard-to-value fixed maturity securities (generally 75 - 125 securities) is more subjective because the markets are less liquid and there is a lack of observable market inputs. This may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur at the measurement date. When the valuation service providers cannot provide prices, the investment managers obtain price quotes from brokers, which may be binding or non-binding price quotes. For those securities where the investment manager cannot obtain broker quotes, they will model the security, generally using cash flows discounted at the appropriate current market rate. Valuation service provides' valuation methodologies, as well as investment managers’ modeling methodologies, are sometimes matrix-based, using indicative evaluation measures and adjustments for specific security characteristics and market sentiment. The selection of the market inputs and assumptions used to estimate the fair value of hard-to-value fixed maturity securities requires judgment and may include: benchmark yield, liquidity premium, prepayment speeds and default rates, spreads, weighted average life and credit rating. The cash flows are based on the contractual terms of the individual security and are adjusted for the inputs and assumptions as appropriate, and the cash flows are then discounted by the yield as determined by the assumptions. The extent of the use of each market input depends on the market sector and market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant or additional inputs may be necessary.

Current wording

The valuation of hard-to-value fixed maturity securities (generally 75 - 125 securities) is more subjective because the markets are less liquid and there is a lack of observable market inputs. This may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur at the measurement date. When the valuation service providers cannot provide prices, the investment managers obtain price quotes from brokers, which may be binding or non-binding price quotes. For those securities where the investment manager cannot obtain broker quotes, or for securities that are internally managed, the manager or the Company's investment professionals will model the security, generally using cash flows discounted at the appropriate current market rate. Valuation service providers' valuation methodologies, as well as investment managers’ modeling methodologies, are sometimes matrix-based, using indicative evaluation measures and adjustments for specific security characteristics and market sentiment. The selection of the market inputs and assumptions used to estimate the fair value of hard-to-value fixed maturity securities requires judgment and may include: benchmark yield, liquidity premium, prepayment speeds and default rates, spreads, weighted average life and credit rating. The cash flows are based on the contractual terms of the individual security and are adjusted for the inputs and assumptions as appropriate, and the cash flows are then discounted by the yield as determined by the assumptions. The extent of the use of each market input depends on the market sector and market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant or additional inputs may be necessary.

Previous wording

Individual fixed maturity securities may have variability based on security specific inputs and characteristics, but overall our portfolio duration is approximately 6.0 years, meaning a 100 basis point increase in yield would result in a 6% decrease in the fair value of fixed maturity securities. As of December 31, 2023, Level 3 invested assets comprised 9.5% of our total investment portfolio based on fair value. Invested assets are classified as Level 3 when fair value is determined based on unobservable inputs and those inputs are significant to the determination of fair value.

Current wording

Individual fixed maturity securities may have variability based on security specific inputs and characteristics, but overall our portfolio duration is approximately 5.6 years, meaning a 100 basis point increase in yield would result in an approximately 6% decrease in the fair value of fixed maturity securities. As of December 31, 2024, Level 3 invested assets comprised 9.5% of our total investment portfolio based on fair value. Invested assets are classified as Level 3 when fair value is determined based on unobservable inputs and those inputs are significant to the determination of fair value.

Previous wording

For fixed maturity securities classified as available for sale, the difference between amortized cost, net of a credit loss allowance (i.e., amortized cost, net) and fair value, net of certain other items and deferred income taxes is reported as a component of accumulated other comprehensive income (loss) (i.e., AOCI) on the Consolidated Balance Sheets and is not reflected in the operating results of any period until reclassified to net income upon the consummation of a transaction with an unrelated third party or when a credit loss allowance transaction is recorded. We evaluate fixed maturity securities where fair value is below amortized cost on a quarterly basis to determine if a credit loss allowance is necessary. These reviews, in conjunction with our investment managers’ quarterly credit reports and relevant factors such as (1) has the security missed any scheduled principal or interest payments in the current quarter; (2) has the security been downgraded to below investment grade by rating agencies or if the security was below investment grade at time of purchase, has the security been downgraded by two or more notches since acquisition; (3) has the security declined in value by more than 10% compared to the prior quarter; (4) has the market yield changed by more than 50 basis points; are all considered in the impairment assessment process.

Current wording

Balance Sheets and is not reflected in the operating results of any period until reclassified to net income upon the consummation of a transaction with an unrelated third party or when a credit loss allowance transaction is recorded. We evaluate fixed maturity securities where fair value is below amortized cost on a quarterly basis to determine if a credit loss allowance is necessary. These reviews, in conjunction with our investment managers’ quarterly credit reports and relevant factors such as (1) has the security missed any scheduled principal or interest payments in the current quarter; (2) has the security been downgraded to below investment grade by rating agencies or if the security was below investment grade at time of purchase, has the security been downgraded by two or more notches since acquisition; (3) has the security declined in value by more than 10% compared to the prior quarter; (4) has the market yield changed by more than 50 basis points; are all considered in the impairment assessment process.

Previous wording

The LFPB is sensitive to the discount rate. The potential effect of a decrease of 50 basis points in the discount rate as of December 31, 2023 would result in an increase to the liability for future policy benefits of approximately $100 million and the potential effect of an increase of 50 basis points in the discount rate would result in a decrease to the liability for future policy benefits of approximately $90 million.

Current wording

The LFPB is sensitive to the discount rate. The potential effect of a decrease of 50 basis points in the discount rate as of December 31, 2024 would result in an increase to the liability for future policy benefits of approximately $85 million and the potential effect of an increase of 50 basis points in the discount rate would result in a decrease to the liability for future policy benefits of approximately $77 million.

Previous wording

Cash flow assumptions are reviewed and updated, as needed, at least annually. Mortality, morbidity, lapse, and expense assumptions used in cash flow modeling are based on judgments that consider our historical experience, industry data, and other factors. On a quarterly basis, cohort level cash flow measures are updated based on the emergence of actual experience. The updated cash flows, based on experience emergence and any assumption updates, are used to determine the updated net premiums, the portion of the gross premium required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be charged to expense as incurred. The updated net premium ratio is used to calculate the updated liability for future policy benefits as of the beginning of the quarter, at the original discount rate. To the extent the present value of future benefits and expenses exceeds the present value of future gross premiums, an immediate charge is recognized in net income, such that net premiums are set equal to gross premiums. The potential impact of increasing (decreasing) our long-term mortality assumption by 5% is an increase (decrease) to the LFPB of approximately $8 million. The potential impact of increasing (decreasing) our long-term lapse assumption by 10% is a decrease (increase) to the LFPB of approximately $1 million. The potential impact of increasing (decreasing) our long-term morbidity assumption by 5% in an increase (decrease) to the LFPB of approximately $4 million.

Current wording

Cash flow assumptions are reviewed and updated, as needed, at least annually. Mortality, morbidity, lapse, and expense assumptions used in cash flow modeling are based on judgments that consider our historical experience, industry data, and other factors. On a quarterly basis, cohort level cash flow measures are updated based on the emergence of actual experience. The updated cash flows, based on experience emergence and any assumption updates, are used to determine the updated net premiums, the portion of the gross premium required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be charged to expense as incurred. The updated net premium ratio is used to calculate the updated liability for future policy benefits as of the beginning of the quarter, at the original discount rate. To the extent the present value of future benefits and expenses exceeds the present value of future gross premiums, an immediate charge is recognized in net income, such that net premiums are set equal to gross premiums. The potential impact of increasing (decreasing) our long-term mortality assumption by 5% is an increase (decrease) to the LFPB of approximately $10 million. The potential impact of increasing (decreasing) our long-term lapse assumption by 10% is a decrease (increase) to the LFPB of approximately $2.0 million. The potential impact of increasing (decreasing) our long-term morbidity assumption by 5% in an increase (decrease) to the LFPB of approximately $4 million.

Previous wording

Reserves are re-estimated quarterly. Changes to reserves are recorded in the period in which development factor changes result in reserve re-estimates. A detailed discussion of the process utilized to estimate loss reserves, risk factors considered and the impact of adjustments recorded during recent years is included in Part II - Item 8, Note 5 of the Consolidated Financial Statements in this Annual Report on Form 10-K.

Current wording

Changes to reserves are recorded in the period in which development factor changes result in reserve re-estimates. A detailed discussion of the process utilized to estimate loss reserves, risk factors considered and the impact of adjustments recorded during recent years is included in Part II - Item 8, Note 5 of the Consolidated Financial Statements in this Annual Report on Form 10-K.

Previous wording

There are a number of assumptions involved in the determination of our Property & Casualty loss reserves. Among the key factors affecting recorded loss reserves for both long-tail and short-tail related coverages, claim severity and claim frequency are of particular significance. We estimate that a 2.0% change in claim severity or claim frequency for unpaid losses is a reasonably likely scenario based on recent experience and would result in a change in the estimated direct reserves of approximately $6.3 million for long-tail liability related exposures

Current wording

There are a number of assumptions involved in the determination of our property & casualty loss reserves. Among the key factors affecting recorded loss reserves for both long-tail and short-tail related coverages, claim severity and claim frequency are of particular significance. We estimate that a 2.0% change in claim severity or claim frequency for unpaid losses is a reasonably likely scenario based on recent experience and would result in a change in the estimated direct reserves of approximately $3.9 million for long-tail liability related exposures (auto liability coverages) and approximately $1.5 million for short-tail liability related exposures (property and auto physical damage coverages). Actual results may differ, depending on the magnitude and direction of the deviation.

Previous wording

The facts and circumstances leading to our re-estimate of reserves relate to revisions of the development factors used to predict how losses are likely to develop from the end of a reporting period until all claims have been paid. Re-estimates occur because actual loss amounts are different than those predicted by the estimated development factors used in prior reserve estimates. As of December 31, 2023, the impact of a reserve re-estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.5 million in net income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by approximately $2.5 million.

Current wording

The facts and circumstances leading to our re-estimate of reserves relate to revisions of the development factors used to predict how losses are likely to develop from the end of a reporting period until all claims have been paid. Re-estimates occur because actual loss amounts are different than those predicted by the estimated development factors used in prior reserve estimates. As of December 31, 2024, the impact of a reserve re-estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.1 million in net income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by approximately $2.1 million.

Previous wording

No prior years' reserve development was recorded in 2023. Unfavorable prior years' reserve re-estimates decreased net income in 2022 by approximately $22.0 million pretax, primarily the result of unfavorable loss trends in auto for accident years 2021 and prior.

Current wording

Favorable prior years' reserve re-estimates increased net income in 2024 by approximately $29.5 million pretax, primarily the result of favorable loss trends for auto and property for accident years 2023 and prior. In addition, during 2024 the Company recognized $17.7 million of losses arising from the legacy commercial line exposures. The Company had no reserves for these liabilities prior to 2024. No prior years' reserve development was recorded in 2023.

Previous wording

•No prior years' reserve development in the current year

Current wording

•Favorable prior years' reserve development in the current year

Previous wording

Including a profit of $8.8 million in the fourth quarter, the Property & Casualty segment’s net loss for the full year 2023 reflected elevated catastrophe and non-catastrophe weather activity for much of the year. Property & Casualty net premiums written were up 10.8% for the year and segment net investment income was up 20.7% for the year.

Current wording

Including a profit of $36.5 million in the fourth quarter, the Property & Casualty segment’s net income for the full year 2024 reflected favorable prior years' reserve development in the current year and non-catastrophe loss activity for much of the year. Property & Casualty net premiums written were up 13.9% for the year and segment net investment income was up 21.4% for the year.

Previous wording

On a reported basis, the 7.3 point decrease in the auto combined ratio in 2023 was mainly attributable to a 1.1 point decrease in the auto underlying loss ratio* and an 7.2 point decrease in prior years' reserve development. Unfavorable prior years' auto reserve development of $28.0 millionwas reported in 2022, reflecting the impact on severity of overall inflation, including higher medical costs, increased usage of medical services and the current judicial environment.

Current wording

On a reported basis, the 13.3 point decrease in the auto combined ratio in 2024 was mainly attributable to a 9.1 point decrease in the auto underlying loss ratio* and favorable prior year development. Favorable prior years' auto reserve development of $15.2 millionwas reported in 2024, reflecting the impact of lower severity.

Previous wording

In 2023, total Property & Casualty net premiums written* increased $66.9 million as rate actions and inflation adjustments to coverage values for property more that offset declines in risks in force. Retention remains strong.

Current wording

In 2024, total Property & Casualty net premiums written* increased $94.9 million as rate actions and inflation adjustments to coverage values for property more than offset declines in risks in force. Retention remained strong despite the rate actions with auto at 85.3%, reflecting a one point decline, and property flat at 89.6%.

Previous wording

In 2023, auto net premiums written* increased $45.1 million, primarily due to rate actions partially offset by the continuing decline in auto risks in force. For 2023, average auto net premium written and average net premium earned increased 13.1% and 8.2%, respectively. Property and other net premiums written* increased $21.8 million due to increases in average net premium written and average net premium earned which increased 11.5% and 9.9% respectively, as rate actions and inflation adjustments to coverage values continue to take effect. The number of educator risks has been at or above 80% relative to overall risks in force over the past two years.

Current wording

In 2024, auto net premiums written* increased $51.6 million, primarily due to rate actions partially offset by the continuing decline in auto risks in force. For 2024, average auto net premium written and average net premium earned increased 15.7% and 16.3%, respectively. Property and other net premiums written* increased $43.3 million due to increases in average net premium written and average net premium earned which increased 18.2% and 17.8% respectively, as rate actions and inflation adjustments to coverage values continue to take effect. The number of educator risks has been at or above 80% relative to overall risks in force over the past two years.

Previous wording

•9.3% increase in net investment income due to higher returns on floating rate securities

Current wording

•1.7% decrease in net investment income due to lower returns on the commercial mortgage loan funds

Previous wording

The Life & Retirement segment net income rose 12.1% in 2023 reflecting higher net investment income. Net investment income rose 9.3% for the full-year as higher returns on floating rate securities more than offset lower returns from limited partnerships. The annualized net interest spread in our fixed annuity business was 218 basis points for the full year compared to 246 basis points in 2022, largely due to lower limited partnership returns as well as higher FHLB borrowing costs as credit spreads tightened year over year. The net dollar contribution from our FHLB funding agreements remained stable compared with 2022, with FHLB interest expense reflected in interest credited. In addition, 2022 net income reflected an after-tax impairment charge of $3.8 million for goodwill and intangible assets due to lower than anticipated revenues associated with the BCG business of the Retirement operating segment.

Current wording

The Life & Retirement segment net income decreased 21.3% in 2024 reflecting the lower net interest margin. Net investment income decreased 1.7% for the full-year due to lower returns on the commercial mortgage loan funds. The annualized net interest spread in our fixed annuity business was 172 basis points for the full year compared to 218 basis points in 2023, largely due to lower commercial mortgage loan funds and higher credited rates on the retained annuity block. The net dollar contribution from our FHLB funding agreements increased $3.8 million compared with 2023, with FHLB interest expense reflected in interest credited.

Previous wording

For 2023, net annuity contract deposits* for variable and fixed annuities increased 6.2% for the year to $455.9 million. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, including the company’s attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency remained strong at 91.5%.

Current wording

For 2024, net annuity contract deposits* for variable and fixed annuities decreased 0.8% for the year to $452.4 million. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, including the company’s attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency remained strong at 91.4%.

Previous wording

Life annualized sales were $9.3 million for the year. Life insurance in force rose to $20.5 billion at year-end.

Current wording

Life annualized sales* were $10.4 million for the year, which was an 11.8% increase over prior year. Life insurance in force rose to $21.1 billion at year-end.

Previous wording

Horace Mann currently has $5.2 billion in annuity assets under management, including $2.2 billion of fixed annuities, $2.6 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 7.0%, benefiting from the strong equity markets.

Current wording

Horace Mann currently has $5.5 billion in annuity assets under management, including $2.2 billion of fixed annuities, $2.9 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 4.8%, benefiting from the strong equity markets.

Previous wording

We actively manage our interest rate risk exposure, considering a variety of factors, including earned interest rates, credited interest rates and the relationship between the expected durations of assets and liabilities. We estimate that over the next 12 months approximately $494.2 million of the Life & Retirement investment portfolio and related investable cash flows will be reinvested at current market rates.

Current wording

We actively manage our interest rate risk exposure, considering a variety of factors, including earned interest rates, credited interest rates and the relationship between the expected durations of assets and liabilities. We estimate that over the next 12 months approximately $512.5 million of the Life & Retirement investment portfolio and related investable cash flows will be reinvested at current market rates.

Previous wording

Interest rates remained high throughout 2023. However, the risk of a deep recession or shock to the economy, such as a global pandemic, could result in a return to historically low interest rates. The current environment of higher interest rates have afforded us the opportunity to invest new insurance cash flows and reinvested cash flows at higher yields, which should be a benefit to net investment income, but the higher interest rates have caused net unrealized investment losses in the portfolios.

Current wording

Interest rates remained relatively elevated throughout 2024. However, the risk of a deep recession or shock to the economy, such as a global pandemic, could result in a return to historically low interest rates. The current environment of higher interest rates have afforded us the opportunity to invest new insurance cash flows and reinvested cash flows at higher yields, which should be a benefit to net investment income, but the higher interest rates have caused net unrealized investment losses in the portfolios.

Previous 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 $1.9 million in year one and $5.7 million in year two, reducing the annualized net interest spread by approximately 7 basis points and 20 basis points in the respective periods, compared to the current period annualized net interest spread. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to minimum guaranteed 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 $2.0 million in year one and $5.9 million in year two, reducing the annualized net interest spread by approximately 7 basis points and 21 basis points in the respective periods, compared to the current period annualized net interest spread. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to minimum guaranteed crediting rates.

Previous wording

•Decline in premium due to run-off of an indemnified block of employer-sponsored products; net premiums earned increased 1.9% excluding the run-off

Current wording

•Slight decline in premium due to run-off* of an indemnified block of employer-sponsored products; net premiums earned increased 2.2% excluding the run-off

Previous wording

2023 net income for the Supplemental & Group Benefits segment was $54.9 million. Segment net premiums earned and benefits expense declined due to an indemnified block that is in run-off. The full-year benefit ratio for the worksite direct product line continued to increase toward the longer-term target although utilization remains below historical levels. The full-year benefit ratio for the employer-sponsored product lines was in line with the prior year but also remains below the longer-term target. Segment net investment income rose 16.8% for the full-year reflecting higher returns on floating rate securities. The non-cash impact of amortization of intangible assets under purchase accounting reduced full-year 2023 core earnings by $14.6 million, pretax, compared to $15.7 million in 2022.

Current wording

2024 net income for the Supplemental & Group Benefits segment was $60.4 million. Segment net premiums earned and benefits expense declined slightly due to an indemnified block that is in run-off. The full-year benefit ratio for the worksite direct product line declined due to a slight increase in lapses. The full-year benefit ratio for the employer-sponsored product lines declined due to favorable impact from the annual reserve assumption review, primarily related to favorable morbidity in our group long-term disability book. Segment net investment income declined 2.1% due to lower returns on the commercial mortgage loan funds. The non-cash impact of amortization of intangible assets under purchase accounting reduced full-year 2024 core earnings by $14.3 million, pretax, compared to $14.6 million in 2023.

Previous wording

Total segment sales for the year were $26.2 million, up 62.7% over the prior year, with worksite direct supplemental product sales of $15.1 million and employer-sponsored products of $11.1 million. Persistency remains relatively stable for the segment.

Current wording

Total segment sales* for the year were $25.6 million, down 2.3% from the prior year, with worksite direct supplemental product sales* of $17.0 million and employer-sponsored products of $8.7 million. Persistency remains strong at 90.5%.

Previous wording

For the full year, total net investment income rose 11.0% and net investment income on the managed portfolio increased 14.3%. The full-year increase reflected the benefit of the higher interest rate environment on floating rate investments. Investment yield on the portfolio excluding limited partnership interests was 4.9%, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.

Current wording

For the full year, total net investment income rose 0.2% and net investment income on the managed portfolio increased 1.3%. The full-year increase reflected the benefit from higher interest rates in the fixed-income portfolios. Investment yield on the portfolio excluding limited partnership interests was 5.10%, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.