HORACE MANN EDUCATORS CORP DE

General Regulation at State Level

As an insurance holding company, we are subject to extensive regulation by the states in which our insurance subsidiaries are domiciled or transact business. Our principal insurance subsidiaries are domiciled in Illinois, Wisconsin, Texas, and New York and are overseen by the Illinois Department of Insurance, the Wisconsin Office of the Commissioner of Insurance, Texas Department of Insurance, and the New York Department of Financial Services. Some regulations, such as those addressing unclaimed property, generally apply to all corporations. In addition, the laws of the various states establish regulatory agencies with broad administrative powers, which relate to a wide variety of matters, including granting and revoking licenses to transact business, regulating trade practices and rate setting, licensing agents, requiring statutory financial statements, monitoring insurer solvency and reserve adequacy, and prescribing the type and amount of investments permitted and the manner in which they may be sold. On an ongoing basis, various state legislators and insurance regulators examine the nature and scope of state insurance regulation.

In addition to individual state monitoring and regulation, state regulators develop coordinated regulatory policies through the National Association of Insurance Commissioners (NAIC). States have adopted NAIC risk-based capital guidelines to evaluate the adequacy of statutory capital and surplus in relation to an insurance company's risks. Based on current guidelines, the risk-based capital statutory requirements are not expected to have a negative regulatory impact on our insurance subsidiaries. As of December 31, 2024 and 2023, statutory capital and surplus of each of our insurance subsidiaries were above required levels. States have also adopted the NAIC's U.S. Own Risk and Solvency Assessment which requires insurance companies to submit their own assessment of their current and future risks and provide a consolidated group-level perspective on risk and capital formulated through an internal risk self-assessment process.

Regulation of insurance continues to evolve. Some changes arise as a result of economic developments, such as changes in investment laws made to recognize new investment products or to respond to perceived investment risks, while others reflect concerns about insurance availability, prices, enterprise risk management guidelines, allegations of unfair-discriminatory pricing, underwriting practices, or solvency concerns. For example, many states impose restrictions on the ability of an insurer to withdraw from certain lines of business. Over the past several years, legislation, regulatory measures, and voter initiatives have been introduced, and in some cases adopted, which deal with use of non-public consumer information, use of credit information in underwriting and rating, insurance rate development, rate of return limitations, and the ability of insurers to cancel or non-renew insurance policies.

Regulation at Federal Level

Although the federal government generally does not directly regulate the insurance industry, federal initiatives often impact the insurance business. Current and proposed federal measures which may significantly affect insurance and retirement business include employee benefits regulation, standards applied to employer sponsored retirement plans, standards applied to broker-dealers and investment advisers, controls on the costs of medical care, medical entitlement programs such as Medicare, structure of retirement plans and accounts, changes to the insurance industry antitrust exemption, and minimum solvency requirements. Also, see Part I - Item 1A of this Annual Report on Form 10-K. In 2022, the SEC proposed a new disclosure rule that would require public companies to disclose on several climate-related factors, including climate-related risk management and greenhouse gas emissions, among others. In March 2024, the SEC adopted final rules requiring public companies to disclose climate-related risks, greenhouse gas emissions, and financial impacts of climate-related events. However, enforcement was stayed in April 2024 due to legal challenges questioning the SEC's authority. As of November 2024, the rules remain on hold pending litigation, with the outcome expected to shape the future of climate-related disclosure requirements. The legal proceedings are expected to continue into 2025. Other federal regulations such as the Patient Protection and Affordable Care Act, Fair Credit Reporting Act, Gramm-Leach-Bliley Act and USA PATRIOT Act, including its anti-money laundering regulations, also impact our business.

The variable annuities underwritten by Horace Mann Life Insurance Company (HMLIC) are regulated by the SEC. Horace Mann Investors, Inc., and BCG Securities, Inc. (BCGS), our broker-dealer and Registered Investment Adviser subsidiaries, are also regulated by the SEC, the Financial Industry Regulatory Authority, Inc. (FINRA), the Municipal Securities Rule-making Board and various state securities regulators.

Changes in federal income taxation of the build-up of cash value within a life insurance policy or an annuity contract could have a materially adverse impact on our ability to market and sell such products. Various legislation to this effect has been proposed in the past, but has not been enacted. Although no such legislative proposals are known to exist at this time, such proposals may be made again in the future. Changes in other federal and state laws and regulations could also affect the relative tax and other advantages of our annuity and life products.

Financial Regulation Legislation

In addition, from time to time, the United States Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) created the Federal Insurance Office (FIO) within the U.S. Department of the Treasury. FIO studies the current insurance regulatory system and is charged with monitoring and providing specific reports on various aspects of the insurance industry, including the collection of information about the insurance industry and monitoring the industry for systemic risk. However, FIO does not have general supervisory or regulatory authority over the insurance business.

Privacy and Cybersecurity

We are subject to various federal and state laws and regulations with respect to privacy, data protection and cybersecurity. Some states have adopted NAIC’s Insurance Data Security Model Law, which establishes standards for data security and the investigation and notification of cybersecurity events. In 2023, the SEC adopted a new cybersecurity disclosure rule for public companies. This rule requires that public companies report material cybersecurity incidents on a Form 8-K within four business days of the materiality determination. In addition, state privacy laws continue to evolve. The California Consumer Privacy Act went into effect in January 2020, and provides additional privacy rights for California residents by enacting the California Privacy Rights Act, which became effective January 1, 2023. Colorado, Connecticut, Utah and Virginia have enacted similar privacy laws, all of which became effective in 2023. Federal and state regulators are expected to continue to enact legislation related to privacy and cybersecurity, which may require additional compliance efforts and changes to policies, procedures and operations.

Regulation of Artificial Intelligence

We are governed by various federal and state laws and regulations related to the use, deployment, and development of artificial intelligence (AI) technologies. As a publicly traded insurance company, we leverage AI across multiple areas, including underwriting, claims processing, risk assessment, fraud detection, customer engagement, and operational efficiency. Consequently, the regulatory landscape surrounding AI has significant implications for our business operations

At the federal level, no comprehensive AI-specific law currently exists. However, agencies like the Federal Trade Commission (FTC) have issued guidance on ethical AI usage, emphasizing compliance with consumer protection, fairness, and transparency laws. The FTC advises that AI systems must be free from bias, avoid deceptive practices, and remain transparent to consumers. The Equal Employment Opportunity Commission (EEOC) also addresses AI use in employment decisions to prevent discrimination.

At the state level, several laws target AI specifically. For example, the California Consumer Privacy Act (CCPA) and its amendment, the California Privacy Rights Act (CPRA), regulate personal data management and provide consumers with rights regarding AI-driven decisions. The Colorado Privacy Act (CPA) includes provisions on profiling and automated decision-making transparency, further influencing AI-based systems.

We closely monitor regulatory developments to maintain compliance with applicable laws and best practices. As AI regulations continue to evolve, including the potential introduction of comprehensive federal or state laws, we expect that additional compliance measures may become necessary. We remain committed to navigating this dynamic regulatory environment while optimizing AI to improve our services and operational efficiency.