HORACE MANN EDUCATORS CORP /DE/

(1) In the second quarter of 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error. See additional disclosure contained in Note 1 of the June 30, 2025 Form 10-Q.

Net Premiums and Contract Charges Earned

For the three and six months ended June 30, 2025, net premiums and contract charges earned increased $21.7 million and $44.8 million, as the Property & Casualty segment continues to implement rate and inflation adjustments to coverage values.

Net Investment Income

For the three and six months ended June 30, 2025, total net investment income increased $2.4 million and $12.9 million. The increase for the quarter is primarily due to continued strong returns from our fixed income portfolio and higher returns from our commercial mortgage loan and 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, net investment income increased $12.6 million and $23.1 million for the three and six months ended June 30, 2025. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

(1) In the second quarter of 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error. See additional disclosure contained in Note 1 of the June 30, 2025 Form 10-Q.

The higher investment yields, excluding limited partnership interests, for the six months ended June 30, 2025 reflected stronger income from the fixed income portfolios.

During the three and six months ended June 30, 2025, 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 and six months ended June 30, 2025, total net investment losses were comparable to prior year and increased by $5.5 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 and six months ended June 30, 2025, other income decreased $0.5 million and increased $1.8 million, respectively.

Benefits, Claims and Settlement Expenses

Benefits, claims and settlement expenses decreased $23.8 million for the three months ended June 30, 2025 due to lower catastrophe losses and underlying losses in the Property & Casualty segment as well as lower life mortality. Benefits, claims and settlement expenses decreased $16.9 million for the six months ended June 30, 2025 due to lower catastrophe losses and underlying losses in the Property & Casualty segment which were partially offset by higher benefits for long term disability in Group.

Interest Credited

For the three and six months ended June 30, 2025, interest credited decreased $1.1 million and $1.2 million.

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 3.3% and 3.1% as of June 30, 2025 and June 30, 2024, respectively.

Operating Expenses

For the three and six months ended June 30, 2025, operating expenses increased 16.7% and 12.1%, reflecting inflation, investments being made in growth initiatives and infrastructure, and increased compensation accruals driven by better than expected results.

Deferred Policy Acquisition Costs (DAC) Amortization Expense

For the three and six months ended June 30, 2025, DAC amortization expense increased $2.9 million and $5.5 million, primarily due to premium increases in the Property & Casualty segment driving higher commission and underwriting expenses which increase DAC asset levels.

Intangible Asset Amortization Expense

For the three and six months ended June 30, 2025, intangible asset amortization expense decreased $0.1 million and $0.1 million.

Interest Expense

For the three and six months ended June 30, 2025, interest expense decreased $0.1 million and increased $0.1 million, respectively.

Income Tax Expense

The effective income tax rate on our pretax income, including net investment gains (losses), was 19.5% and 19.4% for the six months ended June 30, 2025 and 2024, respectively. Income from investments in tax-advantaged securities decreased the effective income tax rates by 2.4 and 3.1 percentage points for the six months ended June 30, 2025 and 2024, 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 June 30, 2025, our federal income tax returns for years prior to 2021 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.

On July 4, 2025, the One Big Beautiful Bill Act was signed into U.S. law, introducing a broad range of business tax reform provisions. The Company has evaluated the law's provisions on our operations and we do not expect the legislation to have a material impact on our financial statements or effective tax rate. Because the law was enacted after the close of the second quarter, no impacts for this legislation are reflected in results for the six months ended June 30, 2025.