Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
Consolidated Financial Highlights
Consolidated Results of Operations
Outlook for 202 6
Application of Critical Accounting Estimates
Results of Operations by Segment
Investment Results
Liquidity and Capital Resources
Future Adoption of New Accounting Standards
Effects of Inflation and Changes in Interest Rates
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
PART I
ITEM 1. I Business
Introduction
Measures within this Annual Report on Form 10-K that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within Part I of this Annual Report on Form 10-K. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Annual Report on Form 10-K and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Fourth Quarter 2025 Investor Supplement.
Forward-looking Information
Statements made in this Annual Report on Form 10-K that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to known and unknown risks, uncertainties and other factors. Horace Mann Educators Corporation (referred to in this Annual Report on Form 10-K as "we", "our", "us", the "Company", "Horace Mann" or "HMEC") is an insurance holding company. We are not under any obligation to (and expressly disclaim any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. It is important to note that our actual results could differ materially from those projected in forward-looking statements due to a number of risks and uncertainties inherent in our business. See Part I - Item 1A of this Annual Report on Form 10-K for additional information regarding risks and uncertainties.
Overview, History and Available Information
We are an insurance holding company incorporated in Delaware. Our headquarters is located in Springfield, Ill. We also operate corporate offices in Dallas, Tx., Madison, Wisc., and Cherry Hill, N.J.
Founded by Educators for Educators®, our business began in Springfield in 1945 when two school teachers saw a need to provide automobile insurance to their association members. Horace Mann Educators Corporation (HMEC) was originally named Illinois Education Association (IEA). The Company expanded its business to other states and broadened its product line to include group and individual life insurance in 1949, 403(b) tax-qualified retirement annuities in 1961 and homeowners insurance in 1965.
HMEC was formed as an insurance holding company, and products and services were offered through its subsidiaries, which included: Horace Mann Insurance Company (HMIC), Teachers Insurance Company (TIC), Horace Mann Property & Casualty Insurance Company (HMP) and Horace Mann Life Insurance Company (HML). HMIC, the initial property and casualty insurer, was originally incorporated as the Swiss National Insurance Company, U.S.A. and commenced business on Dec. 23, 1963. The present name, Horace Mann Insurance Company, was adopted on Nov. 2, 1967.
In 1968, INA Corporation (INA), a Philadelphia-based insurance and financial services corporation, acquired a 25% interest in Horace Mann. In 1974, INA began increasing its holdings of Horace Mann and by January 1975 had acquired the entire company. In 1982, INA Corporation merged with Connecticut General Corporation, forming a new holding company known as CIGNA Corporation (CIGNA). In August 1989, an investor group directed by Gibbons, Green, van Amerongen, L.P. (subsequently Gibbons, Goodwin, van Amerongen) (GGvA) and certain members of the Company's senior management acquired what is now known as HMEC from CIGNA.
That newly independent company began trading on the New York Stock Exchange (NYSE) under the symbol HMN following an initial public offering in November 1991. Over the next 30 years, the Company continued to expand its reach into the education market, providing personal line insurance and financial services products. By the mid-2010s, the Company served educators in 47 states.
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Annual Report on Form 10-K 1
In 2019, the Company increased its market share when it acquired all of the equity interests in NTA Life Enterprises, LLC (NTA). NTA provides products and services through its insurance subsidiaries, National Teachers Associates Life Insurance Company (NTALIC) and NTA Life Insurance Company of New York (NTALIC NY). In 2022, we enhanced our value proposition for school districts by acquiring Madison National Life Insurance Company, Inc. (MNL) from its former parent, Independence Holding Company (IHC).
Today, we are proud to be the largest multiline financial services company focused on helping America’s educators and others who serve their communities achieve lifelong financial success. Our individual solutions include auto insurance, homeowners insurance, life insurance, retirement solutions and supplemental health insurance. We also provide group benefits for disability, life and supplemental health. We have three reporting segments: Property & Casualty, Life & Retirement, and Supplemental & Group Benefits.
We do not allocate the impact of corporate-level transactions to the three reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in a separate reporting segment, Corporate & Other.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and all amendments to those reports, are available free of charge through the Investors section of our website, investors.horacemann.com, as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission (SEC). The EDGAR filings of such reports are also available at the SEC's website, www.sec.gov.
Also available in the Investors section of our website are our Corporate Governance Principles, Code of Conduct, Vendor Code of Conduct and other corporate policies as well as the charters of the HMEC Board of Directors (Board), Audit Committee, Compensation Committee, Executive Committee, Investment and Finance Committee and Nominating and Governance Committee. Copies also may be obtained by writing to Investor Relations, Horace Mann Educators Corporation, 1 Horace Mann Plaza, Springfield, Illinois 62715-0001. Our corporate social responsibility (CSR) reporting is available through the CSR section of our website, csr.horacemann.com.
On June 10, 2025, our Chief Executive Officer (CEO) submitted the Annual Section 12(a) CEO Certification to the NYSE without any qualifications. We filed with the SEC, as exhibits to the Annual Report on Form 10-K for the year ended December 31, 2024, the CEO and Chief Financial Officer (CFO) certifications required under Section 302 of the Sarbanes-Oxley Act.
Corporate Strategy
Our vision is to be the company of choice to provide insurance and financial solutions for all educators and others who serve their communities, whether they engage with Horace Mann directly or through their district/employer. We believe the unique value of Horace Mann is providing solutions tailored for educators at each stage of their lives, empowering them to achieve lifelong financial success. Our motivation stems from our gratitude for educators: They are looking after our children's futures, and we believe they deserve someone to look after theirs. Our commitment to having a positive impact on our customers' lives extends to all our corporate stakeholders, including employees, agents, investors and the communities where we live and work.
Education Market Opportunity
For more than 80 years, Horace Mann has served the education community with a deep understanding of educators’ unique financial and insurance needs. Our long-standing presence has enabled us to build a trusted brand, specialized products, and a differentiated distribution model with direct access in schools and districts across the country. As a result, we have a clear perspective of the education market and confidence in our ability to drive sustained, profitable growth.
The U.S. educator market represents approximately 14 million households, all of which Horace Mann can reach through our omni-channel distribution model. We maintain business-to-business relationships with more than half of U.S. K–12 school districts and have local agent representation in over 60% of the territories in which we operate. In markets without a local agent presence, we leverage strong call center and digital capabilities to ensure consistent nationwide access so educators can meet us where and how they prefer.
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In addition to the core educator market, we also have access to education-adjacent households where our brand, products, and services are well positioned to resonate. Our approach to these markets is disciplined and deliberate, focused on testing and learning in areas where we believe we have a clear right to win while remaining firmly anchored in education.
Our strategy is grounded in deep market expertise, scalable capabilities, and a differentiated product , distribution , and infrastructure (PDI) model. We are confident this approach positions Horace Mann to deliver sustained, profitable growth in service of educators, school districts, and trusted partners.
Products and Services
We help K-12 educators achieve their financial goals through a variety of products and services tailored to meet their unique needs.
Individual protection and savings solutions include auto insurance, property insurance, liability insurance, 403(b) retirement plans, mutual funds, life insurance, student loan solutions, credit monitoring, and financial wellness workshops.
In addition, Horace Mann offers a wide range of employee benefit protection products, including life, disability, accident, hospital, cancer and critical illness coverages. Products may be provided by employers or offered as voluntary coverages for employees to purchase. These options enable school districts, employers, or associations to enrich their employee or member total rewards by providing direct access to valuable financial protection products.
Distribution and Marketing
Horace Mann has a unique competitive advantage where we can meet clients at home, at work and throughout the community. Our omni-channel distribution model integrates relationship-based advice, digital access, and centralized expertise to deliver broad market reach, flexibility across geographies, and a scalable foundation for long-term growth.
Our model provides educators with choice and high-quality, expert consultation. For individual products and solutions, educators may choose to work with our exclusive agents who bring local market knowledge and specialized expertise in educators’ financial needs. These needs often include navigating state-specific retirement systems, managing student loan debt, and addressing out-of-pocket classroom expenses. Customers have access to a full suite of products, tools, and educational resources that support informed decision-making and consistent service.
In parallel, broker partners and benefit specialists provide employer-sponsored solutions through school districts and other public-sector employers, supporting benefit design, recruitment, and retention objectives. Together, these channels allow Horace Mann to deliver a consistent standard of consultation, service, and support across the education market.
Digital capabilities play a complementary role in our distribution strategy, enabling educators to easily and efficiently research, explore, and connect with Horace Mann. Our digital platforms support quoting, education, and lead generation while seamlessly integrating with our agent and service teams to ensure continuity of the customer experience.
Our Coverage Consultation Center provides centralized expertise that supports both customers and agents. The Center serves educators who prefer to engage by phone or who do not have a local agent, while also assisting agents in meeting specialized or complex customer needs. This centralized capability enhances service consistency, improves responsiveness, and increases our ability to scale across markets.
Our marketing strategy supports this integrated model by driving awareness, engagement, and lead generation within the education community. We leverage a diversified mix of digital, direct, and partnership-based marketing efforts, including long-standing relationships with professional associations and mission-aligned organizations. Additionally, through the Horace Mann Club TM , educators can access a wide range of exclusive offerings, including fitness and wellness partnerships, financial tools, classroom resources, professional development programs, and more. These partnerships strengthen local access, reinforce brand trust, and create additional opportunities for growth.
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Annual Report on Form 10-K 3
Infrastructure
We continue to invest in our Information Technology infrastructure to support ease of doing business through a modern, scalable environment. Our primary focus areas include:
• Generative Artificial Intelligence (GenAI) - positioning GenAI as a foundational, enterprise-wide capability intended to enhance decision-making, productivity, and customer engagement, while maintaining appropriate governance, controls, and risk management practices.
• Data Enlightenment - leveraging our extensive historical data assets to support data-informed decisions and actions across the organization.
• Digital Transformation - enhancing our end-to-end digital capabilities through the adoption of modern tools, platforms, and operating concepts.
Key initiatives that represent tangible progress against these focus areas include:
• Guidewire property and casualty platform, which supports improved customer and agent experience through capabilities such as electronic signatures, real-time policy issuance and changes, coverage comparison features, and consolidated billing.
• LifePro administration system for life, retirement, annuity, and supplemental products, which is intended to improve customer experience and drive operating efficiencies.
• Workday Financials system, which provides an integrated, end-to-end Corporate financial process platform to support scalability and growth.
• Individual Supplement and Group Benefits platform enhancements , which are designed to deliver a more robust, seamless, and automated end-to-end process, supporting growth initiatives and earnings diversification.
Our technology investments increasingly incorporate Generative AI to support operational efficiency, enhance customer interactions, and streamline internal workflows. During 2025, we expanded the use of GenAI across the enterprise while continuing to advance our AI risk management practices. In doing so, we have considered elements of the National Institute of Standards and Technology (NIST) AI Risk Management Framework and evolving regulatory expectations as reference points in shaping our approach. This approach is intended to support responsible innovation while reinforcing our commitment to ethics, security, and customer trust.
In 2026, we expect to further scale the application of Generative AI across Claims, Customer Care, and Operations. These efforts are intended to improve cycle times, service quality, employee productivity, and operating efficiency; however, the realization of such benefits is subject to execution, adoption, and other risk factors. As our use of Generative AI evolves, we will continue to enhance our governance, security, and compliance processes, informed by industry frameworks such as NIST. Efficiencies generated through technology and automation initiatives are expected to be reinvested to support strategic growth priorities.
Human Capital Resources
As of December 31, 2025, Horace Mann had approximately 1,800 employees located in Springfield, Illinois; Dallas, Texas; Madison, Wisconsin; Cherry Hill, New Jersey; and throughout the United States as part of our remote workforce.
Human Capital Oversight
Our Board of Directors, through its Compensation Committee, oversees our human capital management strategy. Our Chief Administrative Officer has executive responsibility for human capital management and regularly reports to senior management and the Board on matters including talent acquisition and retention, workforce planning, compensation, employee engagement, and succession planning.
We are committed to maintaining a workplace grounded in ethical conduct, inclusion, and accountability. Our Code of Conduct and related policies establish expectations for employee behavior and compliance across the organization.
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Talent Strategy and Development
We seek to attract, develop, and retain employees with the skills and capabilities needed to support our long-term strategy. Our talent management approach includes workforce planning, leadership development, performance management, and succession planning.
We provide employees with opportunities for professional growth through structured development programs, training resources, and leadership development initiatives. Employees participate in a performance management process designed to align individual objectives with company goals and reinforce accountability and performance.
Total Rewards
Our Total Rewards strategy is designed to attract and retain talent by offering competitive compensation and benefits. Employees are eligible for base pay, performance-based incentive compensation, and merit increases aligned with individual and company performance.
We offer a range of benefits, including health coverage, retirement savings plans, and wellness resources, consistent with market practices. We maintain a hybrid workforce model that supports flexibility while enabling collaboration and productivity.
Workforce Planning
In December 2025, we announced a voluntary Early Retirement Offering as part of disciplined workforce planning efforts aligned with our long-term business strategy. Eligibility for the program was based on age and years of service. The program was voluntary and designed to provide eligible employees with enhanced benefits as they consider retirement or other life transitions. As of December 31, 2025, no liability has been recognized, as employee acceptance and associated obligations will occur in 2026.
Reporting Segments
In 2025, we conducted our business across four reporting segments. The three reporting segments representing the major lines of business are: Property & Casualty, Life & Retirement, and Supplemental & Group Benefits. 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 in those segments, but classify those items in the fourth reporting segment, Corporate & Other.
These segments are defined based on the way management organizes the business for making operating decisions and assessing performance. Management maintains discrete financial information for these segments to evaluate performance and allocate resources.
The calculations of segment data are described in more detail in Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K. Additionally, the business operations of each segment are explained in this section. The financial performance of each segment is discussed in Part II - Item 7 of this Annual Report on Form 10-K.
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Property & Casualty segment
The Property & Casualty segment's primary insurance products include private passenger auto insurance, residential home insurance, and personal umbrella insurance.
We offer standard auto coverages, including liability, collision and comprehensive. Property coverage includes both homeowners and renters policies. For both auto and property coverage, we offer educators a discounted rate and the Educator Advantage ® package of features. This includes value-added benefits specifically for educators, such as liability coverage for transporting students in an insured vehicle and reimbursement for stolen school fundraising items.
We have third-party programs in a majority of states to provide higher-risk auto and property coverages. We also have a number of other insurance coverages with third-party vendors that underwrite and bear the risk of such insurance. We receive commissions on these risks.
Similarly, we have increased our offering of third-party partner products in many areas to meet additional educator needs such as coverage for small business owners or classic/collector autos.
326,040 a uto risks in force and
163,711 property risks in force at December 31, 2025.
Geographic distribution
Our Property & Casualty business is geographically diversified. For the year ended December 31, 2025, based on direct premiums for all product lines, the top five states and their portion of total direct insurance premiums were California, 15.4%; Texas, 9.2%; North Carolina, 7.6%; Minnesota, 6.2%; and Georgia, 4.9%.
Competition
Competition in this market for personal protection products is from a number of national providers of personal lines insurance, including Allstate, Farmers, Liberty Mutual, Nationwide and State Farm, as well as a number of regional companies. We also compete for auto business with other companies such as GEICO, Progressive and USAA, many of which feature direct marketing distribution. A number of technology start-ups have also entered the market.
In our target market, we believe that our principal competitive advantages in the sale of property and casualty products are overall service, school partnerships, price, and name recognition.
$804.4 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our Property & Casualty subsidiaries are licensed to write business in 49 states and the District of Columbia.
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Catastrophe Losses (Pretax) (1)
The number of catastrophe events and the level of catastrophe losses can fluctuate significantly from year to year. Our catastrophe losses for the last five years are shown in the following table ($ in millions).
Year
Month
Event Description
States/Region
Total
March
Wind and Thunderstorm
Other single events less than $5.0 million
September
Hurricane Helene
Other single events less than $5.0 million
March
Wind and Thunderstorm
May
Wind and Thunderstorm
June
Wind and Thunderstorm
June
Wind and Thunderstorm
Other single events less than $5.0 million
May
Wind and Thunderstorm
May
Wind and Thunderstorm
May
Wind and Thunderstorm
December
Winter Storm Elliott
Northern Plains, Midwest and North East
Other single events less than $5.0 million
February
Winter Storm Viola
August
Hurricane Ida
December
Wildfire Marshall
Other single events less than $5.0 million
(1) Net of reinsurance and before income tax benefits. Includes allocated loss adjustment expenses.
Fluctuations in catastrophe losses impact a property and casualty insurance company's claims and claim adjustment expenses incurred.
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Claims and Claim Expenses Incurred (1) , 2023 - 2025 ($ in millions)
(1) Claims and claim expenses incurred include the impact of prior years' reserve development as quantified in Property & Casualty reserves. Catastrophe totals are net of reinsurance and before income tax benefits.
Property & Casualty Reserves
Property & Casualty unpaid claims and claim expense reserves (reserves) represent management's best estimate of ultimate unpaid costs of losses and settlement expenses for reported claims and claims that have been incurred but not yet reported (IBNR). We calculate and record a single best estimate of the reserve as of each reporting date in conformity with actuarial standards of practice. We engage an independent property and casualty actuarial consulting firm to prepare an independent study of our Property & Casualty reserves as of December 31 of each year. For additional information regarding the process used to estimate Property & Casualty reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending Property & Casualty insurance claims and claim expense reserves and prior years' reserve development recorded in each of the three years ended December 31, 2025, see Part I - Item 1A - Risk Factors - "Our property and casualty loss reserves may not be adequate", Part II - Item 7, Application of Accounting Estimates and Results of Operations for the Property & Casualty Segment, and Part II - Item 8, Note 5 in the Consolidated Financial Statements of this Annual Report on Form 10-K.
All of our reserves for Property & Casualty unpaid claims and claim expenses are carried at the full value of estimated liabilities and are not discounted for interest expected to be earned on the reserves.
Property & Casualty Reinsurance
All reinsurance is obtained through contracts which generally are entered into for each calendar year. Although reinsurance does not legally discharge us from primary liability for the full amount of our risks, it does allow for recovery from assuming reinsurers to the extent of the reinsurance ceded. Past due reinsurance recoverables as of December 31, 2025 were not material.
We maintain catastrophe excess of loss reinsurance coverage. For 2025, our catastrophe excess of loss reinsurance coverage consisted of one contract in addition to a minimal amount of coverage by the Florida Hurricane Catastrophe Fund. For 2025, our retention was $35.0 million and the catastrophe excess of loss reinsurance coverage provided 95% coverage for the layers of $25.0 million excess of $35.0 million, $35.0 million excess of $60.0 million, and $90.0 million excess of $95.0 million. For 2026, our retention will remain at $35.0 million and the catastrophe excess of loss reinsurance coverage will provide 95% coverage for the layers of $25.0 million excess of $35.0 million, $35.0 million excess of $60.0 million, $90.0 million excess of $95.0 million, and $55.0 million excess of $185.0 million.
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The following table identifies our most significant reinsurers under the catastrophe first event excess of loss reinsurance program, their percentage participation in this program and their ratings by A.M. Best Company (A.M. Best) and Standard & Poor's Global Inc. (S&P) as of January 1, 2026. No other single reinsurer's percentage participation in 2026 or 2025 exceeds 5%. We monitor reinsurers' financial strength by reviewing A.M. Best and S&P ratings. For 2026 and 2025, all catastrophe reinsurance participants have an AM Best or S&P rating of A or higher.
A.M. Best Rating
S&P Rating
Reinsurer
Parent
Lloyd's of London Syndicates
Swiss Re Underwriters Agency, Inc.
Swiss Reinsurance Company, Ltd.
HHC
Tokio Marine HHC
R+V Versicherung AG
DZ BANK AG
Transatlantic Reinsurance Company
Berkshire Hathaway, Inc.
Everest Reinsurance Company
Everest Re Group, Ltd.
SCOR Global P&C SE
SCOR SE
NR - Not rated.
N/A - Not applicable.
We have not joined the California Earthquake Authority (CEA). Our exposure to losses from earthquakes is managed through our underwriting standards, our earthquake policy coverage limits and deductible levels, and the geographic distribution of our business, as well as our reinsurance program. After reviewing the exposure to earthquake losses from our own risks and from what it would be with participation in the CEA, including estimated start-up and ongoing costs related to CEA participation, we believe it is in our best economic interest to offer earthquake coverage directly to our property policyholders.
For liability coverages in 2025, we reinsured each loss above a retention of $5.0 million per occurrence up to $20.0 million in a clash event. A clash cover is a reinsurance casualty excess contract requiring two or more casualty coverages or risks issued by us to be involved in the same loss occurrence for coverage to apply. The clash event coverage is unchanged for 2026.
We market personal lines excess liability risks. The limits of these risks are $1.0 million to $5.0 million in excess of $0.5 million of underlying auto and homeowners liability coverage. In 2025, we reinsured risks on a quota share basis with Renaissance Reinsurance and Swiss Reinsurance who each assume 25% of losses for a total of 50%, including allocated loss adjustment expenses and premiums for all states. Policies written in 2026 will be subject to a 55% quota share with Renaissance Reinsurance and Swiss Reinsurance each assuming a 25% quota share and DEVK Rueckversicherungs assuming 5%.
For auto insurance sold in Michigan, Personal Injury Protection (PIP) unlimited coverage is offered in compliance with Michigan state law. For these risks with unlimited coverage, we participate in the Michigan Catastrophic Claims Association (MCCA). For risks issued in 2025, MCCA reimbursed PIP losses including allocated loss adjustment expenses in excess of $0.6 million.
Our property and casualty insurance subsidiaries are members of an intercompany pooling arrangement. Pooling arrangements permit the participating companies to rely on the capacity of the entire pool's statutory capital and surplus rather than just on its own statutory capital and surplus. Under such arrangements, the members share substantially all insurance business that is written and allocate the combined premiums, losses, and expenses.
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Life & Retirement segment
Our Life & Retirement segment markets 403(b) tax-qualified fixed, fixed indexed and variable annuities; the Horace Mann Retirement Advantage ® open architecture platform for 403(b)(7) and other defined contribution plans; traditional term and whole life insurance products and indexed universal life (IUL) products. We offer educator rates for our life insurance customers.
Educators in our target market continue to benefit from the provisions of Section 403(b) of the Internal Revenue Code (Code) which allows public school employees and employees of other tax-exempt organizations, such as not-for-profit private schools, to utilize pretax income to make periodic contributions to a qualified retirement plan (also see Regulation - Regulation at Federal Level).
We are one of the largest participants in the K-12 educator portion of the 403(b) tax-qualified annuity market, measured by 403(b) net written premium on a statutory accounting basis. Our 403(b) tax-qualified annuities are voluntarily purchased by individuals employed by public school systems or other tax-exempt organizations through employee benefit plans of those entities.
In 2025, 43.7% of net annuity contract deposits* were for 403(b) tax-qualified annuities. At year-end 2025, 55.0% of accumulated annuity value on deposit was 403(b) tax-qualified. To further assist registered representatives in delivering our value proposition, we have agreements with third-party vendors to market 529 college savings programs and provide brokerage clearing arrangements.
We offer a lineup of several life product portfolios. Life by Design ® is a portfolio of our manufactured and branded life insurance products that specifically address the financial planning needs of educators. The Life by Design ® portfolio features individual whole life and individual term products, including 10, 15, 20 and 30-year level term policies. The Life by Design ® policies have premiums that are guaranteed for the duration of the contract.
We offer a combination product called Life Select ® that mixes a base of either traditional whole life, 20-pay life or life paid-up at age 65 with a variety of term riders to allow for more flexibility in tailoring the coverage to customers' varying life insurance needs. Additional products include single premium whole life products and Cash Value Term — a term policy that builds cash value while providing the income protection of traditional level term life insurance.
We offer an IUL product with interest crediting strategies linked to the S&P 500 Index and the Dow Jones Industrial Average (DJIA), offering a contingent return based on equity market performance. Along with our current product offerings, we continue to introduce new marketing support tools to aid the agency force.
We also maintain a closed block of Experience Life ® policies. This product, discontinued in 2006, represents a flexible premium life insurance contract consisting mainly of whole life and term elements, along with an interest bearing policy account.
During 2025, the average face amount of individual life insurance policies issued by us was approximately $213,000 and the average face amount of individual life insurance policies in force at December 31, 2025 was approximately $134,000. Life insurance in force rose to $21.5 billion at year-end.
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Retirement assets under management
We market both fixed and variable annuity contracts, primarily on a tax-qualified basis. Total accumulated fixed and variable annuity cash value on deposit at December 31, 2025 was $5.9 billion, net of reinsurance.
Fixed-only annuities provide a guarantee of principal and a guaranteed minimum rate of return. These contracts are backed by our general account investments. We bear the investment risk associated with the investments and may change the declared interest rate on these contracts subject to contract guarantees.
We also offer fixed indexed annuity (FIA) products with interest crediting strategies linked to the S&P 500 Index and the DJIA.
213,137 annuity contracts in force at December 31, 2025.
Variable annuities combine a fixed account option with equity-linked and bond-linked sub-account options. By utilizing tools that provide assistance in determining needs and making asset allocation decisions, contractholders are able to choose the investment mix that matches their personal risk tolerance and retirement goals. As of December 31, 2025, we had 119 variable sub-account options including funds managed by some of the larger participants in the mutual fund industry.
Annuities are marketed under the Personal Retirement Planner annuity series, which includes a flexible premium deferred variable annuity, a flexible premium deferred fixed indexed annuity, a single premium deferred fixed annuity and a single premium immediate annuity. There are no surrender charges for early withdrawal across this series.
We also have funding agreements as part of our participation in the Federal Home Loan Bank (FHLB) program that provide an additional source of spread-based income.
Retirement assets under administration
In addition to annuities, we market the Horace Mann Retirement Advantage ® open architecture platform for 403(b)(7) and other defined contribution plans. This platform combines a wide array of mutual funds integrated with a group unallocated fixed annuity stable value fund. This platform provides us with greater flexibility to offer customized 403(b)(7) and other qualified plan solutions to better meet the needs of school districts and other non-for-profit plan sponsors. In 2019, we acquired a recordkeeping administrator, Benefit Consultants Group, Inc. (BCG) and we migrated the administration of our Horace Mann Retirement Advantage ® platform from a third-party vendor to the BCG platform. We offer our group unallocated fixed annuity and Horace Mann Stable Value Solution, as an option within a number of the 401(k) plans administered by BCG. BCG had $1.0 billion of recordkeeping assets under administration as of December 31, 2025.
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Retirement Assets Under Administration, 2023 - 2025 ($ in billions)
Geographic distribution
Our Life & Retirement business is geographically diversified. For the year ended December 31, 2025, based on direct premiums and contract deposits for all product lines, the top five states and their portion of total direct premiums and contract deposits were Pennsylvania, 8.6%; Indiana, 6.5%; Minnesota, 5.9%; Texas, 5.1%; and California, 5.0%.
Competition
National providers of annuities and other financial service platforms that serve the retirement needs of educators and others that serve the community, include AXA; Life Insurance Company of the Southwest, a subsidiary of National Life Insurance Company; Security Benefit; Teachers Insurance and Annuity Association – College Retirement Equities Fund; The Variable Annuity Life Insurance Company, a subsidiary of Corebridge Financial; and Voya Financial, Inc. Select mutual fund families and financial planners also compete in this marketplace.
We believe that our principal competitive advantages in the sale of retirement products and life insurance are school-based sales and service, product features, perceived stability of the insurer, price, overall service and name recognition.
$639.2 million in direct premiums and contract deposits, defined as premiums collected before reinsurance as determined under statutory accounting principles. Our principal life subsidiary is licensed to write business in 49 states and the District of Columbia.
The market for tax-deferred retirement products in our target market was impacted by the revised Code Section 403(b) regulations, which made the 403(b) market more comparable to the 401(k) market than it was in the past. This change made the 403(b) market more attractive to some of the larger companies experienced in 401(k) plans, including both insurance and mutual fund companies, that had not previously been active competitors in this business.
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Horace Mann Educators Corporation
Annuity Reinsurance
We reinsure a $3.1 billion block of in force fixed and variable annuity business with a minimum crediting rate of 4.5%. The reinsured fixed business represents approximately 50% of our in force fixed annuity account balances. The arrangement contains investment guidelines and a trust to help meet our risk management objectives. Under the annuity reinsurance agreement, approximately $ 2.3 billion of fixed annuity reserves are reinsured on a coinsurance basis. The separate account assets and liabilities of approximately $0.8 billion are reinsured on a modified coinsurance basis and thus, remain on our consolidated financial statements, but the related results of operations are fully reinsured. The annuity reinsurance agreement does not expose the reinsurer (RGA Reinsurance Company, a subsidiary of Reinsurance Group of America, Incorporated) to a reasonable possibility of a significant loss from insurance risk. Therefore, we recognize the annuity reinsurance agreement using the deposit method of accounting.
Life Reinsurance
The maximum individual life insurance risk retained by our Life segment is $500,000 on any individual life. The excess of the amounts retained are reinsured with life reinsurers that are rated A (Excellent) or above by A.M. Best. We also maintain a life catastrophe reinsurance program. In 2025, we reinsured 100% of the catastrophe risk in excess of $1.0 million up to $35.0 million per occurrence, with one reinstatement. For 2026, our catastrophe risk coverage is unchanged. Our life catastrophe risk reinsurance program covers acts of terrorism and includes nuclear, biological and chemical explosions but excludes other acts of war.
Supplemental & Group Benefits segment
The Supplemental & Group Benefits segment offers employer-sponsored group coverage including accident, critical illness, limited-benefit fixed indemnity insurance, term life, short-term disability and long-term disability. Additionally, we offer individual supplemental products including heart, cancer, disability and accident coverages. We also have funding agreements as part of our participation in the FHLB program that provide an additional source of spread-based income.
The Supplemental & Group product portfolio is designed to help districts and other employers improve recruitment and retention. As the competition for top talent intensifies, public sector employers are increasingly looking to offer benefits that are competitive with those of the private sector. The products we provide are part of a typical "total rewards" compensation package, including some products paid by the employer and provided to groups of employees, as well as products that employees can select as part of their benefit enrollment process.
275,183 t otal Supplemental policies in force an d 874,556 total Group covered lives at December 31, 2025
Group products may be purchased by employers to include in benefit packages for all employees or offered as a voluntary option for employees to purchase. Our typical group products are guaranteed issue, meaning no individual underwriting is required; in some instances an employee can apply for and purchase expanded coverage with individual medical underwriting. Group products can be customized to complement each employer's benefit package features. These group products typically have minimum participation rates and are underwritten at the group level to account for population size, industry, gender and age distribution, and other applicable risk factors.
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Annual Report on Form 10-K 13
Our typical supplemental policies provide "HIPAA Excepted" benefits with simplified underwriting. They are most often purchased after face-to-face consultation and discussion in the workplace, often during a benefit enrollment process. Payment for supplemental products can be made directly to Horace Mann via recurring bank draft, credit card, or payroll deduction. These products offer defined benefit amounts that are paid directly to the insured, and are payable in addition to any other insurance coverages. An insured can use the supplemental benefit payments to cover medical or non-medical costs.
Supplemental products remain an important tool in the changing healthcare landscape, particularly with the prevalence of high deductible health care plans and an increasing focus on employee health and wellness. Our supplemental products offer indemnity benefits rather than the reimbursement of actual costs. Benefit risks are well controlled with specified limitations regarding preexisting conditions, the frequency of occurrences, maximum benefits per occurrence, and maximum occurrences. Diagnosis or treatment is a required element when establishing proof of loss necessary for benefit payments. Our supplemental disability products have various elimination periods and only provide short-term benefit periods. Sound underwriting strategies and disciplined underwriting methods help ensure loss experience is commensurate with pricing expectations.
$159.5 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our principal group products insurance subsidiary is licensed to write business in 49 states, the U.S. Virgin Islands and the District of Columbia.
$126.0 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our principal supplemental products insurance subsidiary is licensed to write business in 49 states, the U.S. Virgin Islands and the District of Columbia.
Geographic distribution of business
Our Group line of business is concentrated in the Upper Midwest, while our Supplemental business is concentrated in the Southern states including California. This provides opportunities for growth for both lines of business. For the year ended December 31, 2025, based on direct premiums for all product lines, the top five states and their portion of total direct insurance premiums for the Supplemental business were California, 30.3%; Texas, 12.6%; Florida, 7.2%; North Carolina, 5.2%; and Louisiana, 5.1%. The top five states and their portion of total direct insurance premiums for the Group business were Minnesota, 14.8%; Wisconsin, 13.3%; Pennsylvania, 9.7%; Indiana, 9.0%; and Iowa, 8.7%.
Competition
Competition in this market for employee benefit products is robust and consists of a number of national and regional carriers offering disability, accident, and health insurance, including Aflac, American Fidelity, Colonial (a subsidiary of Unum), Reliance Standard, The Standard, Trustmark, and Washington National (a subsidiary of
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CNO). Other carriers, such as Guardian, MetLife, Securian, and Voya, offer similar group products although, typically, focused on large cases in the private sector. A number of additional carriers have also entered parts of the employee benefit market.
In our target market, we believe that our principal competitive advantages in the sale of supplemental and Group products are overall service, product features, school and union partnerships, price, and name recognition.
Group Reserves
Unpaid claims and claim expense reserves for the Group products (Group reserves) represent management's best estimate of ultimate unpaid costs of losses and settlement expenses for reported claims and claims IBNR. We calculate and record a single best estimate of the Group reserves as of each reporting date in conformity with actuarial standards of practice. For additional information regarding the process used to estimate Group reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending Group claims and claim expense reserves and prior years' reserve development recorded for the year ended December 31, 2025, see Part I - Item 1A - Risk Factors - "Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition", Part II - Item 7, Results of Operations for the Supplemental & Group Benefits Segment, and Part II - Item 8, Note 5 of the Consolidated Financial Statements of this Annual Report on Form 10-K.
Group Reinsurance
We retained approximately 73.1% of gross and assumed group disability, life, and specialty health benefits in 2025. Reinsurance is used to manage our product portfolio, reduce the potentially adverse financial impact of large individual or group risks, and to reduce the strain on statutory income and surplus related to new business. We purchase quota share reinsurance and excess reinsurance in amounts deemed appropriate by our risk committee. We monitor our retention amounts by product line and have the ability to adjust our retention as appropriate.
Our current reinsurance program serves three primary purposes:
• We have legacy blocks of individual life, annuity and long term care benefits that are no longer strategic; these blocks are in runoff and effectively 100% ceded to remove the financial impact to us
• Reinsurance is purchased on a quota share basis to manage the surplus impact of new business
• For certain products, we use reinsurance above certain retention limits to mitigate large risks above our current risk appetite
These three uses roughly correspond to the percentages in the table below.
The following reinsurers represent approximately 98.0% of total ceded premium for the year ended December 31, 2025:
A.M. Best Rating
Reinsurer
Ceded Premiums
National Guardian Life Insurance Company
Clear Spring Life and Annuity Company
RGA Reinsurance Company
Total:
We remain liable with respect to the insurance in force, which has been reinsured, in the unlikely event that the assuming reinsurers are unable to satisfy their obligations. The ceding of reinsurance does not discharge us from the primary liability of the insured.
Supplemental Reserves
Supplemental policy reserves represent our best estimate of the present value of future ultimate benefits, net of future premiums, to be provided for cancer, heart, hospital, disability and accident claims. The reserves are a single best estimate calculated in accordance with actuarial standards of practice. Unpaid claims and claim expenses provide provisions for claims reported to us plus an estimated accrual for claims IBNR. For additional information regarding the process used to estimate Supplemental reserves and the risk factors involved, see
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Part I - Item 1A - Risk Factors - "Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition”, Part II - Item 7, Results of Operations for the Supplemental & Group Benefits Segment, and Part II - Item 8, Note 6 of the Consolidated Financial Statements of this Annual Report on Form 10-K.
Supplemental Reinsurance
We retain all of the risk on our supplemental product lines, including accidental death risk embedded within certain products. However, other accidental death and dismemberment risks issued through life insurance policies and riders are ceded 100%. The maximum life insurance risk retained on any individual life is $100,000. The excess risk on the life insurance products is ceded to and reinsured by a third party that is rated A (Excellent) by A.M. Best.
Corporate & Other
Corporate & Other includes capital raising activities (including debt financing and related interest expense), net investment gains (losses), certain public company expenses and other corporate-level transactions including expenses related to business acquisition activity and termination of defined benefit plans. We do not allocate the impact of corporate-level transactions to the other reporting segments, consistent with the basis for management's evaluation of the results of those segments.
In addition, Corporate & Other includes commercial exposures related to legacy commercial claims. In the late 1960s and early 1970s, the Company reinsured certain commercial lines policies as a member of various insurance pooling arrangements. On January 1, 1975, the Company entered into a quota share retrocession treaty. Ultimately, after a series of amendments to the treaty and various corporate transactions involving the reinsurer, these obligations were assumed by Randall & Quilter Investment Holdings Limited (R&Q). It is management’s understanding that since 1975, claims arising under these legacy commercial lines policies were handled by various third parties pursuant to the terms of the January 1, 1975 reinsurance treaty and its subsequent amendments.
Investments
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, or may invest, in limited partnership interests that are selected and monitored 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 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.
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Investment Portfolio as of December 31, 2025
($ in millions)
% of Total
Fair Value
Fair Value
Total
Life &
Retirement
Supplemental & Group Benefits
Property &
Casualty (7)
Amortized
Cost, net
Publicly Traded Fixed Maturity Securities, Equity
Securities and Short-term Investments:
U.S. Government and agency obligations: (1)
Mortgage-backed securities
Other, including U.S. Treasury securities
Investment grade corporate and public utility
bonds
Non-investment grade corporate and
public utility bonds (2)
Investment grade municipal bonds
Non-investment grade municipal bonds (2)
Investment grade other asset-backed
securities (3)
Non-investment grade other asset-backed
securities (2)(3)
Foreign government bonds
Redeemable preferred stock
Equity securities:
Non-redeemable preferred stocks,
investment grade
Non-redeemable preferred stocks,
non-investment grade
Common stocks
Short-term investments (4)
Total publicly traded securities
Other Invested Assets:
Investment grade private placements
Non-investment grade private placements (2)
Mortgage loans (5)
Policy loans (5)
Limited partnership interests (6)
FHLB
Other
Total other invested assets
Total investments
(1) All investment grade that include s $316.7 million fair value of investments guaranteed by the full faith and credit of the U.S. Government and $698.1 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 $210.5 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) Limited partnership interests are accounted for using the equity method of accounting.
(7) Includes $13.7 million of fixed maturity securities, $3.8 million of equity securities, $76.7 million of short-term investments, and $29.4 million of limited partnership interests held in Corporate & Other.
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Annual Report on Form 10-K 17
Fixed Maturity Securities
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, 2025
% of Fixed Maturity
Securities Portfolio
% of Total
Investment Portfolio
Investment grade
Non-investment grade
Average credit quality
Average option-adjusted duration (years)
Percent maturing in next 5 years
Cash Flow
Information regarding our sources and uses of cash, including payment of principal and interest with respect to our indebtedness, and payment of dividends to our shareholders, is contained in Part II - Item 8, Note 13 of the Consolidated Financial Statements and in Part II - Item 7, Liquidity and Capital Resources of this Annual Report on Form 10-K.
The ability of our insurance subsidiaries to pay cash dividends to us is subject to state insurance department regulations which generally permit dividends to be paid for any 12 month period in amounts equal to the greater of (i) net income for the preceding calendar year or (ii) 10% of surplus, determined in conformity with statutory accounting principles, as of the preceding December 31. Any dividend in excess of these levels requires the prior approval of the Director or Commissioner of the state insurance department of the state in which the dividend paying insurance subsidiary is domiciled. The aggregate amount of dividends that may be paid in 2026 from all of our insurance subsidiaries without prior regulatory approval is approximately $162.5 million, excluding the impact and timing of prior year dividends, of which $115.0 million was paid during the year ended December 31, 2025.
Notwithstanding the foregoing, if insurance regulators otherwise determine that payment of a dividend or any other payment to an affiliate would be detrimental to an insurance subsidiary's policyholders or creditors, because of the financial condition of the insurance subsidiary or otherwise, the regulators may block dividends or other payments to affiliates that would otherwise be permitted without prior approval.
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Regulation
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, 2025 and 2024, 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.
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.
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Annual Report on Form 10-K 19
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.
Changing Climate Conditions
Horace Mann works to better understand and manage climate risks that directly affect our customers, insurance products, investment portfolio and other stakeholders. We recognize that climate change is of growing concern and an important issue for the insurance industry. Our Board formally recognizes the importance of carbon neutrality.
Our Board oversees our Enterprise Risk Management (ERM) Committee’s (ERM Committee) risk assessments and risk mitigation strategies, including recommended actions to address climate change risks. These actions include managing climate risks through our ongoing risk assessments to help us improve the accuracy of our climate-related risk models, refine how we price and underwrite policies, and avoid an over concentration of insurance coverages and investments in geographies disproportionately likely to be affected by climate risk. In
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Horace Mann Educators Corporation
addition, we also purchase reinsurance to provide an additional layer of financial protection against large property and casualty catastrophe losses. Our 2026 coverage provides a layer of $240 million above a company retention of $35 million.
We also are working to mitigate the impact of climate risks on our results. Rising temperatures and changing weather patterns in recent years are widely associated with more frequent and severe weather events and natural catastrophes, leading to higher insurance claims and costs and creating additional uncertainty as to future trends and exposures. We want to be there for our customers in the event of a loss of our customers' property and help them recover from hurricanes, windstorms, hail, severe winter weather, wildfires and earthquakes. We are actively monitoring trends in the frequency and severity of events and ongoing academic research on potential future impacts of climate change on weather volatility and will consider options to adjust our views on risk as new information becomes available. Members of the ERM Committee are responsible for updates to the Board and various Board committees on key risks and emerging risk topics.
As we look ahead, we believe climate change risks should be understood, modeled and priced into our insurance products and services. There are also public policy implications, such as discouraging overbuilding in high-risk areas through flood insurance requirements and state regulatory approaches to insurance premium approvals; and modifying and enforcing building codes to better protect at-risk communities against the effects of natural catastrophes.
Similar to other insurers, we may be subject to increased losses from catastrophes and other weather-related events that are exacerbated by weather/climate variability.
As we discuss in Part I - Item 1A—Risk Factors—“Climate change may adversely affect our financial position, results of operations and cash flows" of this Annual Report on Form 10-K, several factors make increased losses more likely:
• More people living in high-risk areas combined with population growth in areas with weaker enforcement of building codes, urban expansion and an increase in the average size of a house. For example, hurricane activity has impacted areas further inland than previously experienced, and demographic changes have resulted in larger populations located in coastal areas that historically have been subject to severe storms and related storm surge, expanding the potential for losses from hurricanes.
• Elevated frequency and severity of wildfire losses due, in part, to record droughts in western states that some climate studies suggest are likely to increase over time, as well as demographic changes in areas prone to wildfires.
• Less reliable catastrophe models due to the increased unpredictability in frequency and severity of severe weather events, emerging trends in climate conditions, inadequate reflection of regulatory changes and the other factors mentioned above.
In addition, changing climate conditions may present other issues for our business as discussed in Part I - Item 1A - Risk Factors of this Annual Report on Form 10-K. For example, among other things:
• Changing climate conditions could also impact the creditworthiness of issuers of securities in which we invest. For example, water supply adequacy could impact the creditworthiness of bond issuers with significant assets or business activities in the Southwestern United States, and more frequent and/or severe hurricanes could impact the creditworthiness of issuers with significant assets or business activities in the Southeastern United States, among other areas.
• Increased regulation adopted in response to potential changes in climate conditions may impact us and our customers, including state insurance regulations that could impact our ability to manage property exposures in areas vulnerable to significant climate driven losses. For example, one state passed legislation that restricted a carrier's ability to cancel or non-renew certain policies within or adjacent to declared state of emergency zip codes. If we are unable to implement risk-based pricing, modify policy terms or reduce exposures to the extent necessary to address rising losses related to catastrophes and smaller scale weather events (should those increased losses occur), our business may be adversely affected.
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Annual Report on Form 10-K 21
Enterprise Risk Management
As a multi-line insurance company, we are exposed to many risks which are a function of the products we underwrite and the environments within which we operate. Since certain risks can be correlated, an event or a series of events can impact multiple areas of our business simultaneously and have a material effect on our results of operations, financial position and liquidity. These exposures require an entity-wide view of risk and an understanding of the potential impact on all aspects of our operations. It also requires us to manage our risk-taking to be within our appetite in a prudent and balanced effort to create and preserve value for all our stakeholders. Our ERM activities involve both the identification and assessment of a broad range of risks and the execution of coordinated strategies to effectively manage them. ERM also includes an evaluation of our risk capital needs, which takes into account regulatory requirements and credit rating considerations, in addition to economic and other factors. ERM is an integral part of our business operations. All risk owners across all functions, all corporate leaders and the Board are engaged in ERM. ERM involves risk-based analytics, as well as reporting and feedback throughout the enterprise in support of our long-term financial strategies and objectives.
To aid our risk analysis, we use property and casualty catastrophe models that are run by our reinsurance intermediary. Life & Retirement asset cash flows are projected using third-party software for certain security types. We also utilize proprietary third-party computer modeling processes to evaluate capital adequacy. These analytical techniques are an integral component of our ERM process and further support our long-term financial strategies and objectives.
Within Horace Mann, ERM is an ongoing assessment process used to identify and manage or mitigate risk, which will continue to influence our strategy and direction. The ERM Committee objectives include the following:
• Apply appropriate consideration to risk in strategic and operational decision-making
• Define and communicate risk appetite and risk management policies
• Approve and oversee processes aimed at identifying, evaluating, and managing risk
• Monitor and discuss emerging risks and risk management capabilities
The ERM Committee is composed of senior executives from across Horace Mann and has ultimate oversight over the risk management process, with each leader having ownership and accountability over certain identified key risks. Our Chief Risk Officer (CRO), in conjunction with the ERM Committee, is responsible for working with the business leaders to ensure that they are actively monitoring and managing their key risks. The CRO is also responsible for identifying and monitoring key corporate level risks that encompass more than one business/division. There is ongoing and regular communication within the ERM Committee.
Members of the ERM Committee are responsible for updates to the Board and various Board committees on key risks and emerging risk topics. The interaction of all the various individuals, committees, reports, and processes results in an on-going process, which we believe puts us in the best position to effectively and efficiently manage risk.
Our ERM efforts build upon the foundation of an effective internal control environment. However, we can provide only reasonable, not absolute, assurance that these objectives will be met. Further, the design of any risk management or control system must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. As a result, the possibility of material financial loss remains despite our significant and comprehensive ERM efforts. An investor should carefully consider the risks and all other information set forth in this Annual Report on Form 10-K, including disclosures in Part I - Item 1A—Risk Factors, Part II - Item 7A—Quantitative and Qualitative Disclosures About Market Risk, and Part II - Item 8—Financial Statements and Supplementary Data.
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Horace Mann Educators Corporation
ITEM 1A. I Risk Factors
Index to Risk Factors
Page
Introduction
Risks Related to Economic Conditions, Market Conditions and Investments
Strategic Risks
Operational Risks
Financial Strength, Credit and Counterparty Risks
Regulatory and Legal Risks
Artificial Intelligence Risks
Introduction
We have identified what we believe reflect key significant risks to the organization, and in turn to our shareholders, which are outlined below. Any of the risks described below could result in a significant or material adverse effect on our results of operations or financial condition. In addition to these enumerated risks, we face numerous other strategic, operational and emerging risks that could in the aggregate lead to shortfalls to our long-term goals or add to short-term volatility in our earnings. Additionally, many risk factors are correlated, which could exacerbate the financial impact. The disclosures in this section reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past. The following review of important risk factors should not be construed as exhaustive and should be read in conjunction with the Forward-looking Information section located in Part I - Item 1 of this Annual Report on Form 10-K as well as Part II - Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K and other reports and materials we submit to the SEC. The words or phrases believe, anticipate, estimate, project, plan, expect, intend, hope, forecast, evaluate, will likely result or will continue or words or phrases of similar import generally involve forward-looking statements. All of the risks that may affect our financial or operating performance may not be material at this time but may become material in the future.
Risks Related to Economic Conditions, Market Conditions and Investments
Volatile financial markets and adverse economic environments can affect financial market risk as well as our financial condition and results of operations.
Our business and results of operations are materially affected by conditions in the capital markets and the U.S. economy, as well as by the global economy to the extent it affects the U.S. economy. Actual or perceived stressed conditions, volatility and disruptions in financial asset classes or various capital markets can have an adverse effect on us, both because we have a large investment portfolio and our benefit and claim liabilities are sensitive to changing market factors, including interest rates, credit spreads, derivative prices and availability, and volatility of capital markets. In an economic downturn characterized by higher unemployment and lower family income, the demand for our products could be adversely affected as customers are unwilling or unable to purchase them. In addition, we may experience an elevated incidence of , utilization of benefits relative to our estimate assumptions, and increased or surrenders of policies. Such changes in the economy could affect our earnings and have a material effect on our financial condition, results of operations and our ability to receive dividends from our insurance subsidiaries.
Significant market volatility in reaction to geopolitical risks, changing monetary policy, and uncertain fiscal policy may exacerbate some of the risks we face. Equity and credit market volatility may reduce net investment income from limited partnership interests accounted for using the equity method of accounting, negatively impacting the results of operations. Declining equity markets may also decrease separate account values as well as fixed account values of our retirement products, reducing certain fees generated by these products.
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While interest rates are off recent highs, a return to these levels or higher could raise the cost of borrowing and volatility in U.S. financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations.
The economic consequences of tariffs, including the potential for higher claims costs and increased volatility affecting the Company’s investment portfolios, may influence the Company’s financial performance, pricing strategies, and capital management.
Changes in interest rates could have a material adverse effect on our financial condition and results of operations.
Some of our products and investments expose us to interest rate risks which may reduce our investment spread and net income or increase our capital requirements.
Low interest rates may reduce income from our investment portfolio and increase our future policy benefit reserves. In addition, during periods of sustained lower interest rates, we may need to reinvest proceeds from certain investments at a lower yield, reducing our investment income. Moreover, borrowers may prepay or redeem the fixed income securities and loans in our investment portfolio with greater frequency. Although we may be able to lower interest crediting rates to help offset decreases in spread on Retirement products, our ability to lower these rates is limited to our products that have adjustable interest crediting rates, which could be limited by competition or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields. As a result, our investment spread on Retirement products may decrease or become negative.
During periods of declining interest rates, life insurance and annuity products may be more attractive investments to consumers, resulting in increased premium payments on certain products, repayment of policy loans and increased persistency, while our new investments carry lower returns. During periods of declining interest rates, our future policy benefit reserves would increase due to the impact on discount rates.
Interest rate increases may also harm our profitability. During periods of rapidly increasing interest rates, we may not be able to replace the investments in our general account with higher yielding investments needed to fund the higher crediting rates required to stay competitive. This could result in a lower spread, lower profitability, and decreased sales. In addition, policy loans, surrenders and withdrawals may increase as policyholders seek investments with higher perceived returns. This may result in cash outflows requiring the sale of investments on less favorable terms, resulting in investment losses. Interest rate increases may harm the value of our investment portfolio, for example by decreasing the estimated fair values of fixed income securities. Furthermore, if interest rates rise, our unrealized gains on fixed income securities will decrease and our unrealized losses may increase. In addition, our investment borrowings from the Federal Home Loan Bank are secured by collateral, the fair value of which can be significantly impacted by general market conditions. If the fair value of pledged collateral falls below specific levels, we would be required to pledge additional eligible collateral or repay all or a portion of the investment borrowings, resulting in reduced investment income. Finally, an increase in interest rates may decrease fee income associated with the in the value of variable annuity account balances invested in fixed income funds.
Our investment portfolios are subject to the risk of loss.
The success of our investment strategy is crucial to the success of our business. We are exposed to investment risk through our investments, which primarily consist of public and private fixed maturity securities, equity securities and alternative assets including private equity, commercial mortgage loan and real estate funds.
Investment risk may result from (1) economic conditions, (2) adverse capital market conditions, including disruptions in individual market sectors or a lack of buyers in the marketplace, (3) volatility, (4) credit spread changes, (5) benchmark interest rate changes, and (6) declines in the value of underlying collateral. These factors may impact the credit quality, liquidity, and value of our investments, potentially resulting in higher capital charges and unrealized or realized losses. Also, certain investments we hold, regardless of market conditions, are relatively illiquid and our ability to promptly sell these assets for their full value may be limited.
We report our fixed maturity securities and other financial instruments at fair value. Valuations may include inputs and assumptions that are less observable or require greater estimation, particularly during periods of market
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disruption, resulting in values which may be higher or lower than the value at which the investments may ultimately be sold. Further, rapidly changing, and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported in our financial statements, and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition.
We evaluate our investment portfolio for credit losses. There can be no assurance that we have accurately assessed the level of credit losses taken. Additional credit losses may need to be taken in the future, and historical trends may not be indicative of future credit losses. Any event reducing the value of our securities may have a material adverse effect on our business, results of operations, or financial condition.
Strategic Risks
The personal lines insurance, retirement and supplemental group benefit markets are highly competitive and our financial condition and results of operations may be adversely affected by competitive forces.
We operate in a highly competitive environment and compete with numerous insurance companies, as well as mutual fund families, independent agent companies and financial planners. In some instances and geographic locations, competitors have specifically targeted the educator marketplace with specialized products and programs. We compete in our target market with a number of national providers of personal auto and property insurance, life insurance, retirement products and supplemental group benefits.
The insurance industry consists of a large number of insurance companies, some of which have substantially greater financial resources, more diversified product lines, more sophisticated product pricing, greater economies of scale and/or lower-cost marketing approaches compared to us. In our target market, we believe that the principal competitive factors in the sale of property and casualty insurance products and supplemental insurance products are overall service, worksite sales and service, price, and name recognition. We believe that for our market, the principal competitive factors in the sale of retirement products, life insurance products and supplemental group benefits are worksite sales and service, product features, perceived stability of the insurer, price, overall service and name recognition.
Particularly in the Property & Casualty business, our insurance subsidiaries have experienced pricing and profitability cycles. During these periods of intense competition, they may be unable to add policyholders and increase revenues without adversely impacting profit margins. With respect to these cycles, the factors having the greatest impact include significant and/or rapid changes in loss costs, including changes in loss frequency and/or severity, prior approval and restrictions in certain states for price increases, intense price competition, less restrictive underwriting standards, aggressive marketing, and increased advertising, which have resulted in higher industry-wide combined loss and expense ratios. Competition from direct writers and large, mass market carriers has been particularly aggressive, evidenced in part by their significant national advertising expenditures. In addition, advancements in vehicle technology and safety features, such as accident prevention technologies or the development of autonomous or partially autonomous vehicles — once widely available and utilized, as well as expanded availability of usage-based insurance, could materially alter the way that auto insurance is marketed, priced and underwritten. The of our insurance subsidiaries to effectively anticipate the impact of these issues on our business and compete in the property and casualty business could affect their financial condition and results of operations and the resulting ability to distribute cash to us.
In the Retirement business, there are several factors driving increased competition. First, the current IRS Section 403(b) regulations have made the 403(b) market similar to the 401(k) market. These changes have increased and could continue to increase the number of competitors in the 403(b) market, as it has become more attractive to some of the larger companies experienced in 401(k) plans, including both insurance and mutual fund companies, which had not previously been active competitors in this business. Further, while not yet widespread, there has been continued pressure in some states to adopt state-sponsored or mandated 403(b) plans with single-provider or limited-provider options; this pressure has come from competitor lobbying efforts and state legislature pension reform initiatives. The inability of our insurance subsidiaries to compete successfully in these circumstances could adversely affect their financial condition and results of operations and the resulting ability to distribute cash to us.
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The development and maintenance of our various distribution channels are critical to growth in product sales and profits.
Our success in marketing and selling our products is largely dependent upon the efforts of our exclusive agent sales force and the success of their agency operations. If we are unable to recruit additional agents, fail to develop and retain high-producing agents, are unable to maintain the productivity of those agency operations, or are unable to maintain market penetration in existing territories, sales of our products could likely decline and our financial condition and results of operations could be adversely affected.
We also distribute group benefits under agreements with third-party distribution partners, with distribution highly concentrated in one partner. If we are unable to retain our critical distribution partner or are unable to expand to additional distribution partners, our sales could be adversely impacted.
We utilize a diversified distribution approach to help mitigate these risks by enabling us to reach educators where, when, and how they prefer to engage, including through local agents, our call center, digital experiences, and strategic partnerships. A failure to effectively develop or maintain these distribution channels, develop new methods of reaching consumers, or realize cost efficiencies could impact our ability to grow our business and generate revenues, and new sales could suffer.
If we are not able to maintain secure access to educators, our financial condition and results of operations could be adversely affected.
Our ability to successfully increase new business in the educator market is largely dependent on our ability to effectively access educators either in their school buildings or through other approaches. While this is especially true for the sale of 403(b) tax-qualified retirement products via payroll deduction and Individual Supplemental sales, any significant decrease in access, either through fewer payroll slots, increased security measures, impacts of state or federal level pension reform initiatives, or for other reasons, could adversely affect the sale of all lines of business and require us to change our traditional approach to worksite marketing and promotion, as well as contact with potential customers. With the current IRS regulations regarding Section 403(b) arrangements, including retirement products, our ability to maintain and increase our share of the 403(b) market, and the access it gives for other product lines, will depend on our ability to successfully compete in this market. Some school districts and benefit consultants have placed emphasis on the relative financial strength ratings of competing companies, as well as low-cost product and distribution approaches, which may put us at a competitive disadvantage relative to other more highly rated insurance companies.
Our ability to maintain and obtain product and corporate endorsements from, and/or marketing agreements with, local, state and national education-related associations is important to our marketing strategy. In addition to teacher organizations, we have established relationships with various other educator, principal, school administrator and school business official groups. These contacts and endorsements help to establish our brand name and presence in the educational community and to enhance access to educators.
Lack of successful execution on acquisition integration strategies could result in impairment of goodwill and intangible assets that could adversely affect our results of operations.
We accounted for the NTA and MNL acquisitions using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recognized on our consolidated balance sheet at their respective fair values as of the acquisition date, including recognition of intangible assets. Any excess of the purchase consideration over the fair value of the acquired net tangible and intangible assets is recognized as goodwill.
As of December 31, 2025, the Company's Consolidated Balance Sheet reflected goodwill and intangible assets recognized in connection with the recent acquisitions (see Part II - Item 8, Note 9 of the Consolidated Financial Statements for more information). To the extent the acquisitions do not provide the modeled returns, the value of goodwill or intangible assets could become impaired and thus, we may be required to recognize material non-cash charges relating to such impairment, which could adversely affect our results of operations.
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Operational Risks
A catastrophe event, a series of multiple catastrophe events or a series of non-catastrophe severe weather events could have a material adverse effect on our financial condition and results of operations.
Underwriting results of property and casualty insurers are subject to weather and other conditions prevailing in an accident year. While one year may be relatively free of major weather or other disasters, not all of which are designated by the insurance industry as a catastrophe, another year may have numerous such events causing results for such a year to be materially worse than for previous years.
Our Property & Casualty insurance subsidiaries have experienced, and we anticipate that in the future they will continue to experience, catastrophe losses. A catastrophe event, a series of multiple catastrophe events or a series of non-catastrophe severe weather events could have a material adverse effect on the financial condition and results of operations of our insurance subsidiaries.
Various events can cause catastrophes, including hurricanes, windstorms, hail, severe winter weather, wildfires, earthquakes, explosions and terrorism. The frequency and severity of these catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposures in the area affected by the event and the severity of the event. Although catastrophes can cause losses in a variety of property and casualty lines, most of the catastrophe-related claims of our insurance subsidiaries are related to property coverages. Our ability to provide accurate estimates of ultimate catastrophe losses is based on several factors, including:
• the proximity of the catastrophe occurrence date to the date of our estimate;
• potential inflation of property and auto repair costs in the affected area;
• supply chain interruptions resulting in cost increases, including availability of services and materials;
• the occurrence of multiple catastrophes in a geographic area over a relatively short period of time; and
• the outcome of litigation which may be filed against us by policyholders, state attorneys general and other parties relative to loss coverage disputes and loss settlement payments.
Based on 2025 direct premiums earned, 60.9% of the total annual premiums for our Property & Casualty business were for policies issued in the ten largest states in which the insurance subsidiaries write property and casualty coverage. Included in this top ten group are certain states which are considered to be more prone to catastrophe occurrences: California, Texas, North Carolina, Minnesota, Georgia, South Carolina, and Louisiana.
Our property and casualty loss reserves may not be adequate.
Our Property & Casualty insurance subsidiaries maintain loss reserves to provide for their estimated ultimate liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred as of the end of each reporting date. If these loss reserves prove inadequate, a loss is recognized and measured by the amount of the shortfall and, as a result, the financial condition and results of operations of the insurance subsidiaries may be adversely affected, potentially affecting their ability to distribute cash to us.
Reserves do not represent an exact calculation of liability. Reserves represent estimates, generally involving actuarial projections at a given time, of what the insurance subsidiaries expect the ultimate settlement and adjustment of claims will cost, net of salvage and subrogation. Estimates are based on assessments of known facts and circumstances, assumptions related to the ultimate cost to settle such claims, estimates of future trends in claims severity and frequency, changing judicial theories of liability and other factors. These variables are affected by both internal and external events, including changes in claims handling procedures, economic inflation, unpredictability of court decisions, plaintiffs' expanded theories of liability, risks inherent in major litigation and legislative changes. Many of these items are not directly quantifiable, particularly on a prospective basis. Significant reporting lags may exist between the occurrence of an insured event and the time it is reported. Our insurance subsidiaries adjust their reserve estimates regularly as experience develops and further are reported and settled.
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While the rate of inflation has started to stabilize, the higher inflation over the past few years has significantly increased our loss costs in our auto and property businesses. It is possible that inflation could remain at elevated levels for a prolonged period, or increase from these high levels, which could in turn lead to further increases in our loss costs. The impact of inflation on loss costs could be more pronounced for those lines of business that are considered “longer tail,” such as auto liability, as they require a relatively long period of time to finalize and settle claims for a given accident year. Recent changes in the macroeconomic environment have impacted medical labor and materials costs, the potential persistency of which could result in future loss costs which are higher than our current expectations. The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during volatile or uncertain economic conditions, due to changes in behavior of claimants and policyholders, including an increase in reporting of exposures and/or , reduced maintenance of insured properties, increased frequency of small or in the reporting or adjudication of , and supply chain constraints.
Due to the inherent uncertainty in estimating reserves for losses and loss adjustment expenses, we cannot be certain that the ultimate liability will not exceed amounts reserved, with a resulting adverse effect on our financial condition and results of operations.
Our legacy commercial lines exposure could encounter adjustments to loss reserve estimates.
Estimating loss reserves for legacy commercial lines policies issued as early as the 1960s is inherently uncertain. Claims arising out of commercial lines policies can take years, or even decades, to emerge and be resolved. Uncertainty arises from various factors, including changes in legal and regulatory environments, evolving judicial interpretations, medical cost inflation, and emerging litigation trends such as social inflation. Additionally, our assumptions regarding claim frequency, severity, and development patterns may prove inaccurate, leading to reserve deficiencies or redundancies.
Actual experience differing significantly from our life and health pricing and reserving assumptions could negatively affect our results of operations and financial condition.
The profitability of our supplemental insurance, group, life insurance, and annuity products depends significantly upon the extent to which our actual experience is consistent with the assumptions used in setting prices for our products and establishing liabilities for our future policy benefits and claims. The premiums we charge and the liabilities we hold for future policy benefits are based on assumptions reflecting several factors, including the amount of premiums we will receive in the future, rate of return on assets we purchase, expected claims, mortality, morbidity, lapse rates and expenses. In addition, for our supplemental products, historical results may not be indicative of future performance due to, among other things, changes in our mix of business, regulatory actions or changes in legal doctrine impacting our products or lines of business, or any number of economic cyclical effects including inflation.
Due to the nature of the underlying risks and the degree of uncertainty associated with the determination of the liabilities for unpaid policy benefits and claims, we cannot precisely determine the amounts we will ultimately pay to settle these liabilities, the timing of such payments, or whether the assets supporting the liabilities, together with future premium, will be sufficient to satisfy the liabilities. As a result, we may experience volatility in the level of our profitability and our reserves from period to period. To the extent that actual experience is less favorable than our underlying assumptions, we could be required to increase our liabilities, which my harm our financial strength and reduce our profitability.
A large-scale pandemic, the occurrence of terrorism, or military actions may have an adverse effect on our business.
A large-scale pandemic, the occurrence of terrorism or military and other actions may result in loss of life, property damage, and disruptions to commerce and reduced economic activity. Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets, changes in interest rates, reduced liquidity and economic activity caused by a large-scale pandemic. Additionally, a large-scale pandemic or terrorist act could have a material effect on sales, liquidity and operating results.
The effects of a global pandemic on the U.S. economy, our customers, our agents, our employees, our investments and our communities, as well as any preventative or protective actions that we, our employees and agency force, our third-party service providers and suppliers, or governments may take to mitigate the impact of a global pandemic could have an adverse effect on our ability to conduct business and on our financial condition
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and results of operations. Impacts to our business have been and could continue to be widespread and may result in the following:
• employees contracting effects from a global pandemic;
• increased competition in hiring and retaining employees and agents;
• sustained lack of access to schools and educators that could materially impact our sales and premium volumes;
• public school systems facing budget constraints due to the economic impacts of the pandemic that could result in educator layoffs;
• unprecedented volatility in financial markets that could materially affect our investment portfolio valuations and returns as well as our ability to generate targeted spreads on indexed products;
• regulatory mandates and/or legislative changes, including premium grace periods and premium credits;
• changes in frequency and/or severity of claims;
• supply chain interruptions resulting in cost increases, including availability of services and materials;
• increased credit risk;
• business disruption for insurance agents who market and sell our insurance products; and,
• business disruptions to third parties at which we outsource certain business functions to or on which we rely for technology.
The full extent to which pandemics or terrorist acts could affect the global economy, the financial markets and our business, our financial condition and our results of operations will depend on future developments and factors that cannot be predicted.
Climate change may adversely affect our financial position, results of operations, and cash flows.
Climate change presents risk to us and there are concerns that the increased frequency, severity and geographic spread of weather-related catastrophes and other losses, as well as time of year of occurrence are indicative of changing weather patterns, whether as a result of climate-warming trends (global climate change) caused by human activities or otherwise, which could cause such events to persist. Increased weather-related catastrophes could lead to higher overall losses, which we may not be able to recoup, particularly in a highly regulated and competitive environment, and higher reinsurance costs. Certain catastrophe models assume an increase in frequency and severity of certain weather or other events, which could result in a disproportionate impact on insurers with certain geographic concentrations of risk. This could also likely increase the risks of writing property insurance in coastal areas or areas to wildfires or hail and wind activity, particularly in jurisdictions that restrict pricing and underwriting flexibility. The of rising sea levels or other as a result of global climate change may also cause property values in coastal or such other communities to decrease, reducing the total amount of insurance coverage that is required.
In the short term, extreme weather conditions cause financial impacts and disruptions in our daily Property & Casualty operations. We have experienced millions of dollars in losses from catastrophes such as hurricanes, wildfires, wind, and thunderstorms. Catastrophes can also impact a property and casualty insurance company's claims and claim adjustment expenses incurred.
In addition, global climate change could have an impact on our fixed maturity securities and limited partnership portfolios, resulting in realized and unrealized losses in future periods that could have a material adverse effect on our financial position, results of operations and cash flows. It is not possible to foresee which, if any, assets, industries or markets may be materially and adversely affected, nor is it possible to foresee the magnitude of such effect.
Legal, regulatory, and social responses to climate change could adversely affect our financial condition, results of operations, and cash flows. Regulatory and stakeholder focus on climate-related risks and disclosures continues to evolve, which has resulted in, and may continue to result in, new or modified laws, regulations, and
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reporting requirements. In March 2024, the SEC adopted final rules requiring enhanced climate-related disclosures; however, the effectiveness and enforcement of these rules have been stayed due to ongoing legal challenges, and the scope, timing, and applicability of any such requirements remain uncertain. Regardless of the outcome of this litigation, climate-related regulatory requirements and stakeholder expectations may continue to develop at the federal, state, and international levels. We expect that changes in these laws, regulations and proposals could negatively impact our business, including by increasing our legal, compliance and information technology costs. For additional impacts from the regulatory environment, see Part I - Item 1A - Risk Factors - 'Legal, statutory and regulatory developments could adversely impact our business by increasing costs or making our business less profitable."
Cybersecurity breaches could have an adverse effect on our business and reputation.
Cybersecurity threats and incidents have increased in recent years in frequency, levels of persistence, sophistication and intensity, and we may be subject to heightened cyber-related risks. Our business depends on the proper functioning and availability of our information technology platform, including communications and data processing systems, our proprietary systems, and systems of our third-party service providers. We have implemented and maintain what we believe to be reasonable security measures, but we cannot guarantee that the controls and procedures we have in place to protect or recover our respective systems and the information stored on such systems will be effective, successful or sufficiently rapid to avoid harm to our business. Moreover, while we generally perform cybersecurity due diligence on our key service providers, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them. Due to applicable laws, regulations, rules, standards and contractual obligations, we may be held responsible for cyber-attacks, security breaches or other similar incidents attributed to our service providers as they relate to the information we share with them.
Cybersecurity threats are evolving in nature and becoming increasingly difficult to detect, and may come from a variety of sources, including organized criminal groups, “hacktivists,” terrorists, and nation state-supported actors. These threats include, among other things, computer viruses, worms, malware, ransomware, denial of service attacks, defective software, credential stuffing, social engineering, phishing attacks, human error, fraud, theft, or improper access by employees or service providers, and other similar threats. Furthermore, cyber-attacks increasingly involve the use of artificial intelligence (AI) and machine learning, with bad actors using these technologies to launch more automated, targeted, and coordinated attacks. Any cybersecurity incident, including system failure, cyber-attacks, security breaches, by malware or other , with respect to our or our service providers’ information technology systems, could or our operations, result in a of applicable cybersecurity, privacy, data protection or other laws, regulations, rules, standards or contractual obligations, our reputation, cause a of customers or sensitive customer data, give rise to civil , , , monetary or other , subject us to additional regulatory or notification obligations, and/or increase our compliance costs, any of which could affect our business, financial conditions and results of operations.
We may not be able to anticipate all cyber-attacks, security breaches or other similar incidents, detect or react to such incidents in a timely manner, or adequately remediate any such incident. It may also take considerable time for us to investigate and evaluate the full impact of cyber-attacks, particularly for sophisticated attacks, which may inhibit our ability to provide prompt, full, and reliable information about cybersecurity incidents to our customers, regulators, and the public. In addition, recent disclosure requirements add additional risk that bad actors might use the information with malicious intent, exacerbating the impacts of a breach. While management is not aware of any cyber-attack, security breach or other similar incident that has had a material effect on our operations, there can be no assurances that such an that could have a material impact on us will not occur in the future.
Further, the cybersecurity, privacy and data protection regulatory environment is evolving, and it is likely that the costs of complying with new or developing regulatory requirements will increase. For example, we operate in a number of jurisdictions with strict cybersecurity, privacy, data protection and other related laws, regulations, rules and standards, which could be violated in the event of a significant cyber-attack, security breach or other similar incident affecting personal, proprietary or confidential information or in the event of noncompliance by our personnel with such obligations.
We cannot ensure that any limitations of liability provisions in our agreements with clients, service providers and other third parties with which we do business would be enforceable or adequate or otherwise protect us from any liabilities or damages with respect to any claim in connection with a cyber-attack, security breach or other
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similar incident. In addition, while we maintain insurance that would mitigate the financial loss under such scenarios, providing what we believe to be appropriate policy limits, terms and conditions, we cannot guarantee that our insurance coverage will be adequate for all financial and non-financial consequences from a cybersecurity event, that insurance will continue to be available to us on economically reasonable terms, or at all, or that our insurer will not deny coverage as to any future claim.
Successful execution of our business growth strategy is dependent on effective implementation of new or enhanced technology systems and applications.
Our ability to effectively execute our business growth strategy and leverage potential economies of scale is dependent on our ability to provide the requisite technology components for that strategy. Our ability to replace or supplement dated, legacy business systems — such as our Life & Retirement and Property & Casualty policy administrative systems, as well as our financial system — with more flexible, maintainable, and customer accessible solutions will be necessary to achieve our plans. The inherent difficulty in replacing and/or modernizing these older technologies, coupled with our limited experience in these endeavors, presents an increased risk of failing to deliver these technology solutions in a cost effective and timely manner. Our scale will require us to develop innovative solutions to address these challenges, including consideration of "software as a service" arrangements and other third-party based information technology capabilities. More modern approaches to software development and utilization of third-party vendors can augment our internal capacity for these implementations but may not adequately reduce the operational risks of timely and cost-effective delivery.
Loss of key vendor relationships could affect our operations.
We increasingly rely on services and products provided by a number of vendors in the U.S. and abroad. These include, for example, vendors of computer hardware and software, including on-demand software, and vendors of services such as investment management advisement, third-party administrators of our supplemental group benefit products, information technology services — such as those associated with policy administrative systems — and delivery services for customer policy-level communications. In the event that one or more of our vendors suffers a bankruptcy or otherwise becomes unable to continue to provide products or services, we may suffer operational difficulties and financial losses.
Our ability to attract, develop, engage, and retain top talent, maintain optimal staffing levels, and foster/sustain a highly inclusive and engaging culture contributes to our success.
Competition from within the insurance industry and from other industries, including the technology sector, for qualified employees with highly specialized knowledge in areas such as underwriting, data and analytics, technology and e-commerce, has often been intense and we have experienced increased competition in hiring and retaining employees.
Factors that affect our ability to attract and retain such employees include:
• competitive total rewards, including compensation and benefits;
• robust training and development programs;
• reputation as a successful business with a culture of fair hiring, and of training and promoting qualified employees; and,
• recognition and responsiveness to changing trends (i.e., remote/hybrid work arrangements) and other circumstances that affect employees.
The unexpected loss of key personnel could have a material adverse impact on our business because of the loss of their skills, knowledge of our products and offerings and years of industry experience and, in some cases, the difficulty of promptly finding qualified replacement personnel. The risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits.
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Financial Strength, Credit and Counterparty Risks
Losses due to defaults by others could reduce our profitability or negatively affect the value of our investments.
Third-party debtors may not pay or perform their obligations. These parties may include the issuers whose securities we hold, customers, reinsurers, borrowers under mortgage loans, trading counterparties, derivative counterparties, clearing agents, exchanges, clearing houses and other financial intermediaries. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, downturns in the economy or real estate values, operational failure or other reasons.
During or following an economic downturn, our municipal bond portfolio could be subject to a higher risk of default or impairment due to declining municipal tax bases and revenue. States are currently barred from seeking protection in federal bankruptcy court. However, federal legislation could possibly be enacted to allow states to declare bankruptcy in connection with deficit reductions or mounting unfunded pension liabilities, which could adversely impact the value of our municipal bond portfolio.
The default of a major market participant could disrupt the securities markets or clearance and settlement systems in the U.S. or abroad. A failure of a major market participant could cause some clearance and settlement systems to assess members of that system, including our broker-dealer and Registered Investment Adviser regulatory entities, or could lead to a chain of defaults that could adversely affect us. A default of a major market participant could disrupt various markets, which could in turn cause market declines or volatility and negatively impact our financial condition and results of operations.
Uncollectible reinsurance, as well as reinsurance availability and pricing, can have a material adverse effect on our business volume and profitability.
Reinsurance is a contract by which one insurer, called a reinsurer, agrees to cover a portion of the losses incurred by a second insurer in the event a claim is made under a policy issued by the second insurer. Although a reinsurer is liable to our insurance subsidiaries according to the terms of the reinsurance policy, the insurance subsidiaries remain primarily liable as the direct insurers on all risks reinsured. As a result, reinsurance does not eliminate the obligation of our insurance subsidiaries to pay all claims, and each insurance subsidiary is subject to the risk that one or more of its reinsurers will be unable or unwilling to honor its obligations.
Although we limit participation in our reinsurance programs to reinsurers with high financial strength ratings and also limit the amount of coverage from each reinsurer, our insurance subsidiaries cannot guarantee that their reinsurers will pay in a timely fashion, if at all. Reinsurers may become financially unsound by the time that they are called upon to pay amounts due, which may not occur for many years.
Additionally, the availability and cost of reinsurance are subject to prevailing market conditions beyond our control. For example, significant losses from hurricanes, wildfires, or terrorist attacks, an increase in capital requirements, or a future lapse of the provisions of the Terrorism Risk Insurance Act could have a significant adverse effect on the reinsurance market.
If one of our insurance subsidiaries is unable to obtain adequate reinsurance at reasonable rates, that insurance subsidiary would have to increase its risk exposure and/or reduce the level of its underwriting commitments, which could have a material adverse effect upon the business volume and profitability of the subsidiary. Alternatively, the insurance subsidiary could elect to pay the higher than reasonable rates for reinsurance coverage, which could have a material adverse effect upon its profitability until policy premium rates could be raised, in some cases subject to approval by state regulators, to incorporate this additional cost.
We are subject to the credit risk of our counterparties, including reinsurers who reinsure business from our insurance companies.
Our insurance subsidiaries may cede certain risks to third-party insurance companies through reinsurance. In the event of insolvency of a reinsurer, our financial condition and results of operation could be negatively impacted.
HMLIC entered into a reinsurance agreement with RGA to effectuate the reinsurance of a block of in force fixed and variable annuities on a coinsurance and modified coinsurance basis. The variable portion of the reinsured annuities is reinsured on a modified coinsurance basis and assets supporting the variable account liabilities are still held in separate accounts. Because the reinsurance agreement covers a large volume of our in-force annuity
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business, the transaction exposes us to a concentration of credit risk with respect to this counterparty. RGA's financial obligations for the general account liabilities of the reinsured annuity contracts are secured by its assets placed in a comfort trust for our sole use and benefit. Upon RGA's material breach of the reinsurance agreement, deterioration of its risk-based capital ratio to a certain level, or certain other events, we may recapture the reinsured business. However, in the event of RGA's insolvency, our right to use the assets in the trust account may be delayed. Also, if at the time of its insolvency the comfort trust account is not funded at a level to fully discharge all its obligations, our claims to the extent not covered by the assets in the comfort trust would be those of a general creditor.
Any downgrade in or adverse change in outlook for our claims-paying ratings, financial strength ratings or credit ratings could adversely affect our financial condition and results of operations.
Claims-paying ratings and financial strength ratings have become an increasingly important factor in establishing the competitive position of insurance companies. In the evolving 403(b) retirement market, school districts and benefit consultants have placed an emphasis on the relative financial strength ratings of competing companies. Each rating agency reviews its ratings periodically and from time to time may modify its rating criteria including, among other factors, its expectations regarding capital adequacy, profitability and revenue growth. A downgrade in the ratings or adverse change in the ratings outlook of any of our insurance subsidiaries by a major rating agency could result in substantial loss of business for that subsidiary if school districts, policyholders, distribution partners or independent agents move their business to other companies having higher claims-paying ratings and financial strength ratings than we have. This loss of business could have a material effect on the results of operations and financial condition of that subsidiary.
A downgrade of our debt rating also could adversely affect our cost and flexibility of borrowing, which could have an adverse effect on our liquidity, financial condition and results of operations.
Regulatory and Legal Risks
Changes in tax rates, laws or regulations could adversely impact our financial results.
A significant part of our retirement business involves fixed and variable 403(b) tax-qualified products, which are purchased voluntarily by individuals employed by public school systems or other tax-exempt organizations. Our financial condition and results of operations could be adversely affected by changes in federal and state laws and regulations that affect the relative tax and other advantages of our retirement products to clients or the tax benefits of programs utilized by our customers. As a result of persisting economic conditions, revenue challenges exist at federal, state, and local government levels. These challenges could increase the risk of future adverse impacts on current tax-advantaged products or result in notable reforms to educator pension programs.
Current federal income tax laws generally permit the tax-deferred accumulation of earnings on the premiums paid by holders of retirement and life insurance products. Taxes, if any, are generally payable on income attributable to a distribution under the contract for the year in which the distribution is made. From time to time, Congress has considered legislation that would reduce or eliminate the benefit of such deferral of taxation on the accretion of value within life insurance and non-qualified annuity contracts. Enactment of this legislation, or other tax reform efforts could result in fewer sales of life insurance and retirement products.
Changes in U.S. federal or state laws, regulations, or interpretations could aversely affect our financial condition and results of operations. Legislative, regulatory, or administrative actions may occur with limited advance notice and may apply retroactively. We are unable to predict the likelihood, timing, or scope of any future tax law changes or their potential effects on our business. We continue to monitor developments and assess their potential impact on our operations and financial performance.
Our business is subject to extensive regulation, which limits our operating flexibility and could negatively impact our financial results.
We are subject to extensive regulation and supervision in the jurisdictions in which we do business. Each jurisdiction has a unique and complex set of laws and regulations. Furthermore, certain federal laws impose additional requirements on businesses, including insurers. Regulation generally is designed to protect the interests of policyholders, as opposed to stockholders and non-policyholder creditors. Such regulations, among other things, impose restrictions on the amount and type of investments our insurance subsidiaries may hold.
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Annual Report on Form 10-K 33
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. However, FIO does not have general supervisory or regulatory authority over the business of insurance. FIO has suggested an expanded federal role in some circumstances. Additional federal regulations could adversely affect the efficiency and effectiveness of business processes, financial condition and results of operations of us, insurers of similar size and/or the insurance industry as a whole.
Our insurance subsidiaries are regulated by a department of insurance in each state and territory in which we do business. Certain states have established minimum capital requirements for insurance companies licensed to do business in their state. These regulators have the discretionary authority through licensing to limit or prohibit writing new business within the jurisdiction when, in the state’s judgment, the insurance subsidiary is not maintaining adequate statutory surplus or capital. States also regulate the rates insurers may charge for certain property and casualty products. Legislation and voter initiatives have expanded, in some instances, the states' regulation of rates and have increased data reporting requirements. Consumer-related pressures to roll back rates, even if not enacted by legislation or upheld upon judicial appeal, may affect our ability to obtain timely rate increases or operate at desired levels of profitability. Changes in insurance regulations, including those affecting the ability of our insurance subsidiaries to distribute cash to us and those affecting the ability of our insurance subsidiaries to write profitable property and casualty insurance policies in one or more states, may adversely affect the financial condition and results of operations of the insurance subsidiaries.
Our insurance subsidiaries are subject to a system of assessing minimum capital adequacy, known as risk-based capital (RBC). RBC is used to identify companies that may merit further regulatory action by analyzing the adequacy of the insurer's surplus in relation to statutory requirements. Our insurance subsidiaries could be adversely affected by regulations that change statutory surplus and RBC requirements. If an insurer’s ratio falls below specified levels, the insurer is subject to different degrees of regulatory action depending on the magnitude of the deficiency. This could have a material adverse effect upon the business volume and profitability of the insurance subsidiaries as well as result in increased regulatory scrutiny or action by state regulatory authorities.
Our broker-dealer and investment advisor subsidiaries are subject to regulation and supervision by the SEC, FINRA and certain state regulatory bodies. The SEC, FINRA and other governmental agencies, as well as state securities commissions, may examine or investigate the activities of broker-dealers and investment advisors. It is possible that any examination or investigation could lead to enforcement action by the regulator and/or may result in payment of fines and penalties, payments to customer or both, which could have an adverse effect on the Company’s financial condition or results of operations.
In the event of insolvency, liquidation or other reorganization of any of our insurance subsidiaries, our creditors and stockholders would have no right to proceed against any such insurance subsidiary or cause the liquidation or bankruptcy of any such insurance subsidiary under federal or state bankruptcy laws. The insurance laws of the domiciliary state would govern such proceedings and the relevant insurance commissioner would act as liquidator or rehabilitator for the insurance subsidiary. Creditors and policyholders of any such insurance subsidiary would be entitled to full payment from the assets of the insurance subsidiary before we, as a stockholder, would be entitled to receive any distribution.
Legal, statutory and regulatory developments could adversely impact our business by increasing costs or making our business less profitable.
Because state legislatures remain concerned about the availability and affordability of property and casualty insurance and the protection of policyholders, our insurance subsidiaries expect that they will continue to face expanded regulations to address these concerns. In addition, legislative and regulatory restrictions are constantly evolving and are subject to then-current political pressures. For example, following major events, states have considered, and in some cases have adopted, proposals such as homeowner's 'Bill of Rights" restrictions on storm deductibles, additional mandatory claim handling guidelines, and mandatory coverages. Environmental, Social, and Governance standards (ESG) and sustainability have become major topics encompassing a wide range of issues, including climate change, which are subject to public policy debates and could lead to regulations that increase our cost of doing business. In addition to increased costs, the regulatory environment may not allow us to fully incorporate potential future climate change into our pricing actions.
Further, the Dodd-Frank Act enacted wide-ranging changes in the supervision and regulation of the financial industry providing greater oversight of financial industry participants, enhanced public company corporate
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governance practices and executive compensation disclosures, and greater protections to individual consumers and investors. Certain elements of the Dodd-Frank Act remain subject to implementing regulations that are yet to be adopted by the applicable regulatory agencies. Compliance with adopted regulations could affect the products and services we choose to offer and would likely result in increased compliance costs.
The financial position of our insurance subsidiaries also may be affected by court decisions that expand insurance coverage beyond the intention of the insurer at the time it originally issued an insurance policy.
We expect that changes in these laws, regulations and proposals could negatively impact our business, including by increasing our legal, compliance and information technology costs, and potentially other costs, including greater risks of client lawsuits and enforcement activity by regulators. These changes may also affect the products and services we choose to offer to clients, as well as the compensation that we and our financial professionals receive in connection with such products and services, which could adversely impact our profitability or ability to recruit and retain agents or distribution partners.
Litigation may harm our financial strength or reduce our profitability.
Companies in the insurance industry have been subject to substantial litigation resulting from claims, disputes and other matters. Most recently, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies. The resolution of similar future claims against any of our insurance subsidiaries, including the potential adverse effect on our reputation and charges against the earnings of our insurance subsidiaries as a result of legal defense costs, a settlement agreement or an adverse finding or findings against our insurance subsidiaries in such a claim, could have a material effect on the financial condition and results of operations of our insurance subsidiaries. See also Part II - Item 8, Note 14 of the Consolidated Financial Statements of this Annual Report on Form 10-K.
Events, including those external to our operations, could damage our reputation.
There are many events which may harm our reputation, including, but not limited to, those discussed in this Item 1A regarding regulatory investigations, legal proceedings, and cyber or other information security incidents. Any negative public perception, founded or otherwise, can be widely and rapidly shared over social media or other means, and could cause damage to our reputation. Damage to our reputation could reduce demand for our insurance products, reduce our ability to recruit and retain employees, or lead to greater regulatory scrutiny of our operations.
As an insurance company, we are paid to accept certain risks. Those who conduct our business, including executive officers and members of management, employees and independent agents, do so in part by making decisions that involve exposing us to risk. These include decisions such as maintaining effective underwriting and pricing discipline, maintaining effective claims management and customer service performance, managing our investment portfolio, delivering effective technology solutions, complying with established sales practices, executing our capital management strategy, exiting a line of business and/or pursuing strategic growth initiatives, and other decisions. Although we employ controls and procedures designed to monitor business decisions and prevent us from taking excessive risks or unintentionally failing to comply with internal policies and practices, there can be no assurance that these controls and procedures will be effective. If our employees and independent agents take excessive risks and/or fail to comply with internal policies and practices, the impact of those events may our market position and reputation.
Artificial Intelligence Risks
Our increasing reliance on AI technologies introduces risks that could impact our business operations, regulatory compliance, financial performance, and customer relationships. These risks include potential inaccuracies in AI-driven processes, increased regulatory scrutiny, unintended biases, data privacy and security concerns, operational disruptions, and broader ethical considerations. Evolving and increasingly complex AI-related laws, regulations, and industry standards may increase our compliance costs and regulatory exposure, and failure to maintain effective governance, oversight, and risk controls could materially and adversely affect our business, results of operations, or reputation. While we are committed to implementing AI responsibly and aligning with best practices, there can be no assurance that AI-related risks will not affect our business, reputation, or compliance obligations.
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Annual Report on Form 10-K 35
Further, AI technologies also have the potential to materially alter the competitive landscape. Specifically, there is a risk that existing or new market participants can utilize AI technology to reduce their operating costs and accelerate speed to market for new market participants.
ITEM 1B. I Unresolved Staff Comments
None.
ITEM 1C. I Cybersecurity
As a multi-line insurance company, our business operations rely upon secure information technology systems for data processing, storage, and reporting. We maintain a cybersecurity risk management program based on recognized standards such as the National Institute of Standards and Technology Cybersecurity Framework, other industry standards, and contractual requirements.
The Chief Information Security Officer (CISO) oversees the cybersecurity program, which includes employee education, proactive threat monitoring and investigation, incident response, oversight of third-party service providers, and other elements of our cybersecurity risk management program. Despite the design of our security measures and controls, our information technology systems may become subject to cyberattacks.
Unauthorized access to or unintentional dissemination of confidential, highly sensitive customer, employee, or company data through a breach of our facilities, networks, or databases, or those of our agents or third-party information technology and software vendors, could result in loss or theft of assets or operational disruption, regulatory actions, litigation, remediation costs, and reputational harm.
During the last fiscal year, we did not identify any cybersecurity events that had a material effect on the Company. As of the date of this Annual Report on Form 10-K, we have not identified any risks from cybersecurity threats that have materially affected, or are reasonably likely to materially affect, the Company's business strategy, results of operations, or financial condition.
The CISO is responsible for developing, maintaining, and enforcing cybersecurity and cyber risk-related policies; helping to ensure the Company and its subsidiaries satisfy applicable regulatory requirements and third-party risk assessment expectations; identifying and keeping abreast of security threats; as well as overseeing and implementing regular security awareness training for all employees. We adjust our policies, standards, and processes based on assessment results.
In leading the cybersecurity risk management program, the CISO regularly works with other divisions of the company, including legal, compliance, information technology, internal audit, and others to address potential risk from external threats, internal actions, and relationships with third-party service providers.
Horace Mann’s CISO has more than two decades of experience in IT, including network, infrastructure, and cybersecurity leadership. Before coming to Horace Mann, he led perimeter security at a publicly traded company, and the cybersecurity team of more than 150 members at another publicly traded company. In addition to the CISO, our internal cybersecurity team also works with third-party cybersecurity vendors to enhance the cybersecurity program and to assess, monitor, and respond to cybersecurity threats.
The Board of Directors exercises risk management oversight, including cybersecurity risk, through the Audit Committee . The Audit Committee receives quarterly reports regarding our risk management program. These include regular reports from the CISO on the state of our cybersecurity risk management program and updates on cybersecurity matters, key cybersecurity initiatives, risk mitigation efforts, and assessments of emerging threats.
The CISO is responsible for identifying and reporting cybersecurity incidents to the Disclosure Committee. A preliminary assessment of the nature and scope of potential incidents is conducted by a cross-functional team, including information security, compliance, legal, and other participants as necessary. Using a risk-based process, incidents are escalated to the Disclosure Committee. The Disclosure Committee is composed of senior executives from across Horace Mann and has oversight over SEC disclosure controls. After notification, the Disclosure Committee (or a designated subgroup) would review known information and develop an action plan,
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which may include Board outreach, expert retention, insurance notification, communication plans, and a materiality assessment.
While we and our IT providers employ security technologies and controls designed to address a rapidly changing and evolving IT environment (including data encryption processes and intrusion detection systems), conduct risk assessments, and maintain other internal control procedures intended to protect our and our customers' data, we acknowledge that no system can completely eliminate cyber attacks and accordingly provide only reasonable assurance that these objectives will be met. Further, the design of any cybersecurity risk management program or control system must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. As a result, the possibility of material financial loss remains despite our cybersecurity efforts. An investor should carefully consider the risks, and all other information set forth in this Annual Report on Form 10-K, including disclosures in Part I - Item 1A—Risk Factors.
ITEM 2. I Properties
As of December 31, 2025, we owned three buildings located in Springfield, Ill. comprised of our headquarters of approximately 225,000 square feet, a warehouse of approximately 11,000 square feet and one other building of approximately 12,000 square feet. In addition, we lease office space in suburban Dallas, Tx., Cherry Hill, N.J, and Madison, Wisc. which are utilized by one or more of all four reporting segments, depending on the location. For more information regarding our reporting segments, see Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K. We believe our properties and facilities are suitable and adequate for current operations.
ITEM 3. I Legal Proceedings
At the time of issuance of this Annual Report on Form 10-K, we do not have a pending litigation from which there is a reasonable possibility of material loss.
ITEM 4. I Mine Safety Disclosures
Not applicable.
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Annual Report on Form 10-K 37
PART II
ITEM 5. I Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Dividends
Our common stock is traded on the NYSE under the symbol HMN. The following table provides the high and low bid information of our common stock on the NYSE Composite Tape and the cash dividends paid per share of common stock during the periods indicated.
Market Price
Dividends
Fiscal Period
High
Low
Paid
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
The payment of dividends in the future is subject to the discretion of the Board and will depend upon general business conditions, legal restrictions and other factors the Board may deem to be relevant. Additional information is contained in Part I - Item 1, Cash Flow and in Part II - Item 8, Note 13 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
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Shareholder Return Performance Graph
The graph below sets forth the total five-year shareholder return on our common stock. The graph assumes a $100 investment as of December 31, 2020. The S&P 500 Index and the S&P 500 Insurance Index assume an annual reinvestment of dividends in calculating total return. We assume reinvestment of quarterly dividends when paid.
Comparison of Cumulative Five-Year Total Return to Shareholders
Dec. 2020
Dec. 2021
Dec. 2022
Dec. 2023
Dec. 2024
Dec. 2025
HMEC
S&P 500 Insurance Index
S&P 500 Index
Holders and Shares Issued
As of February 17, 2026, the number of holders of our common stock was approximately 43,250.
For information required by Item 201(d) of Regulation S-K regarding the equity compensation plan, see Part III - Item 12, of this Annual Report on Form 10-K.
Issuer Purchases of Equity Securities
On May 13, 2025, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (2025 Program) to begin following the completion of the $50 million repurchase plan which was authorized on May 22, 2022 (2022 Program). Both Programs authorize the repurchase of our common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The Programs do not have expiration dates and may be limited or terminated at any time without notice.
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Annual Report on Form 10-K 39
For the quarterly periods ended 2025 and 2024, we repurchased shares of our common stock under the Programs as follows:
Period
Total Number
of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased
under the Programs
Approximate Dollar
Value of Shares
that may yet be
Purchased under the Programs
Fourth Quarter
$55.5 million
Third Quarter
$62.4 million
Second Quarter
$69.2 million
First Quarter
$26.2 million
Fourth Quarter
$26.3 million
Third Quarter
$26.3 million
Second Quarter
$30.2 million
First Quarter
$34.9 million
ITEM 6. I [Reserved]
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ITEM 7. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
($ in millions, except per share data)
Measures within this MD&A that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within this Part II - Item 7. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Annual Report on Form 10-K and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Fourth Quarter 2025 Investor Supplement.
Increases or decreases in this MD&A that are not meaningful are marked "N.M.".
This MD&A covers the following:
Page
Introduction
Consolidated Financial Highlights
Consolidated Results of Operations
Outlook for 2026
Application of Critical Accounting Estimates
Results of Operations by Segment
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Corporate & Other
Investment Results
Liquidity and Capital Resources
Future Adoption of New Accounting Standards
Effects of Inflation and Changes in Interest Rates
Introduction
The purpose of our MD&A is to provide an understanding of our consolidated results of operations and financial condition and should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part II - Item 8 of this Annual Report on Form 10-K. Our MD&A generally discusses the results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of the results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II - Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission (SEC) on February 27, 2025.
HMEC is an insurance holding company focused on helping America’s educators and others who serve the community achieve lifelong financial success. Through our subsidiaries, we market and underwrite individual and group insurance and financial solutions tailored to the needs of the educational community including:
• personal lines of property and casualty insurance, primarily auto and property coverages
• retirement products, primarily tax-qualified fixed, variable and fixed indexed annuities
• life insurance, primarily traditional term, whole life, and indexed universal life insurance products
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Annual Report on Form 10-K 41
• individual supplemental insurance products, including accident, cancer, critical illness, hospital, and supplemental disability
• group benefits insurance products, primarily group disability, group life, and group supplemental health
We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families, whether they engage with Horace Mann directly or through their district/employer, as well as other markets of those who serve the community.
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 capital raising activities (including debt financing and related interest expense), net investment gains (losses), certain public company expenses and other corporate-level transactions including expenses related to business acquisition activity and termination of defined benefit plans. 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.
Consolidated Financial Highlights
($ in millions)
Year Ended December 31,
Change %
Total revenues
Net income
Per diluted share:
Net income
Net investment losses, after tax
Book value per share
Net income return on equity - last twelve months
pts
For 2025, net income increased $59.3 million compared to the prior year primarily due to improved underlying auto and property loss ratios*.
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Consolidated Results of Operations
($ in millions)
Year Ended December 31,
Change %
Net premiums and contract charges earned
Net investment income (1)
Net investment losses
Other income
Total revenues
Benefits, claims and settlement expenses
Interest credited
Operating expenses
DAC unlocking and amortization expense
Intangible asset amortization expense
Interest expense
Total benefits, losses and expenses
Income before income taxes
Income tax expense
Net income
(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 December 31, 2025 Form 10-K.
Net Premiums and Contract Charges Earned
For 2025, net premiums and contract charges earned increased $82.4 million due to sales* growth and implemented rate and inflation adjustments in the Property & Casualty segment and strong growth from higher sales* in Supplemental and Group Benefits.
Net Investment Income
Total net investment income in 2025 increased $18.6 million, primarily due to improved core fixed income, commercial mortgage loan fund results, and strong limited partnership returns. 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 $28.8 million. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:
Year Ended December 31,
Investment yield, excluding limited partnership interests, pretax - annualized* (1)
Investment yield, excluding limited partnership interests, after tax - annualized* (1)
(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 December 31, 2025 Form 10-K.
During 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. The company continues to deploy capital in accordance with its strategic asset allocation framework, with the objective of maintaining diversification while balancing risk and return. Investments are allocated across public and private fixed income strategies, commercial mortgage loan funds, and limited partnership interests based on relative value considerations, portfolio capacity, and income objectives.
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Annual Report on Form 10-K 43
Net Investment Losses
For 2025, net investment losses decreased $4.3 million. The breakdown of net investment gains (losses) by transaction type were as follows:
($ in millions)
Year Ended December 31,
Credit loss and intent-to-sell impairments
Sales and other, net
Change in fair value - equity securities
Change in fair value and losses realized on settlements - derivatives
Net investment losses
From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at the reporting date. Generally, such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in our intent to hold a fixed maturity security.
Other Income
For 2025, other income increased $0.9 million.
Benefits, Claims and Settlement Expenses
For 2025, benefits, claims and settlement expenses decreased $33.5 million due to lower catastrophe losses and improved underlying loss ratios* in the Property & Casualty segment.
Interest Credited
For 2025, interest credited increased $1.0 million, driven primarily by higher credited rates on the retained annuity block. This was mostly offset by lower interest rates on advances received from the Federal Home Loan Bank of Chicago (FHLB) and lower interest credited related to our reinsured annuity block.
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 3.4% for 2025 and 3.2% for 2024.
Operating Expenses
For 2025, operating expenses increased $51.1 million reflecting investments being made in technology, marketing, and distribution to help drive efficiencies and growth. 2025 operating expenses also reflected costs related to the termination of the Horace Mann Pension Plan and elevated donations to the Horace Mann Educators Foundation.
Deferred Policy Acquisition Costs (DAC) Amortization Expense
For 2025, DAC amortization expense increased $13.4 million, primarily due to premium increases in the Property & Casualty segment driving higher DAC asset levels.
Interest Expense
For 2025, interest expense increased $1.8 million, due to an increase in the level of debt associated with the issuance of the 2025 Senior Notes that were used to repay the 2015 Senior Notes.
Income Tax Expense (Benefit)
The effective income tax rate on our pretax income, including net investment gains (losses) was 19.4% and 20.1% for the years ended December 31, 2025 and 2024, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rate by 2.4 and 3.4 percentage points for 2025 and 2024, respectively. For the year ended December 31, 2025, the effective tax rate was further reduced by 0.7 percentage points as a result of purchases of transferable tax credits to be utilized for the 2025 tax year.
We record liabilities for uncertain tax filing positions when 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.
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As of December 31, 2025, our federal income tax returns for years prior to 2022 are no longer subject to examination by the Internal Revenue Service. We do not expect 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 enacted into U.S. law, introducing various business tax reforms. We do not expect this legislation to have a material impact on our effective tax rate, financial condition, or results of operations. See Part II - Item 8, Note 11 of the Consolidated Financial Statements in this Annual Report on Form 10-K for further information.
Outlook for 2026
The following discussion provides outlook information for our results of operations and capital position.
Consolidated Results
At the time of issuance of this Annual Report on Form 10-K, we estimate that 2026 full year core income will be within a range of $4.20 to $4.50 per diluted share, generating a core return on equity* of 11%+. These results anticipate the following:
• Property & Casualty segment target profitability of low-mid 90s Combined Ratio with ~$90 million of catastrophe losses
• Life & Retirement segment long-term target net interest spread between 220 and 230 bps and mortality in line with actuarial assumptions
• Supplemental & Group Benefits segment target blended benefit ratio of 39%
• Net investment income between $485 million and $495 million pre-tax, or $385-$395 million excluding the accreted investment income on the deposit asset on reinsurance in the Life & Retirement segment
• Approximately $35 million to $40 million in corporate Interest expense and other items included in results for the Corporate & Other segment
As described in Critical Accounting Estimates, certain of our significant accounting measurements require the use of estimates and assumptions. As additional information becomes available, adjustments may be required. Those adjustments are charged or credited to net income for the period in which the adjustments are made and may impact actual results compared to our estimates above. Additionally, see forward-looking information in Part I - Items 1 and 1A of this Annual Report on Form 10-K concerning other important factors that could impact actual results. Our projections do not include a forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.
Core income and core return on equity are non-GAAP financial measures. We are unable to provide a reconciliation of these forward-looking non-GAAP measures to the most directly comparable GAAP measures without unreasonable effort because certain items, including net investment gains (losses), changes in market risk benefits, and other market-driven items, are inherently uncertain and difficult to predict. These items could be material to our results in accordance with U.S. GAAP.
Application of Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions based on information available at the time the consolidated financial statements are prepared. These estimates and assumptions affect the reported amounts of our consolidated assets, liabilities, shareholders' equity and net income. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that subsequent events and available information may differ markedly from management's judgments at the time the consolidated financial statements were prepared. We have discussed with the Audit Committee the quality, not just the acceptability, of our accounting principles as applied in our financial reporting. The discussions generally included such matters as the consistency of our accounting policies and their application, and the clarity and completeness of our consolidated financial statements, which include related disclosures. Information regarding our accounting policies pertaining to these topics is located in the Notes to Consolidated Financial Statements set forth in Part II - Item 8 of this Annual Report on Form 10-K.
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Annual Report on Form 10-K 45
We have identified the following accounting estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:
• Valuation of hard-to-value fixed maturity securities
• Evaluation of credit loss impairments for fixed maturity securities
• Valuation of future policy benefit reserves
• Valuation of liabilities for property and casualty unpaid claims and claim expense reserves
Although variability is inherent in these accounting estimates, we believe the amounts provided are appropriate based upon the facts available during preparation of the consolidated financial statements.
Valuation of Hard-to-Value Fixed Maturity Securities
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 92.1% of the fixed maturity securities portfolio, based on fair value, was priced through valuation services or priced using observable inputs as of December 31, 2025.
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.
As part of determining the fair value of fixed maturity securities, including hard-to-value fixed maturity securities, we address the estimation uncertainty in the fair value estimates through our valuation processes. The uncertainty is caused by the availability and observability of the fair value, and more specifically the inputs to fair value, of individual securities. We assess whether individual prices have become stale, are using appropriate methodologies and assumptions, exceed certain acceptable thresholds as compared to previous prices and alternative pricing sources, and how those prices are developed and assessed when provided by valuation service providers. In addition, we may evaluate prices for individual securities by comparing the prices to third party prices or prices based on internal models.
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 an approximately 6% decrease in the fair value of fixed maturity securities. As of December 31, 2025, Level 3 invested assets comprised 7.8% of our total investment portfolio based on fair value. Invested assets are
46 Annual Report on Form 10-K
Horace Mann Educators Corporation
classified as Level 3 when fair value is determined based on unobservable inputs and those inputs are significant to the determination of fair value.
Evaluation of Credit Loss Impairments for Fixed Maturity Securities
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 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 assessment process.
For each fixed maturity security where fair value is below amortized cost, we assess whether management with the appropriate authority has made the decision to sell or whether it is more likely than not we will be required to sell the security before the anticipated recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance is written-off and the amortized cost basis of the security is written down to the fair value, with the losses recorded as a net investment loss.
If we have not made the decision to sell the fixed maturity security and it is not more likely than not we will be required to sell the fixed maturity security before the anticipated recovery of its amortized cost basis, we evaluate whether we expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. We estimate the anticipated recovery based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s effective interest rate and are compared to the amortized cost basis of the security. The determination of whether we expect to received cash flow sufficient to recover the entire amortized cost basis of the security is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. Our investment managers will calculate the anticipated recovery value of the security by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security at the time of purchase for fixed-rate securities. We will then review the assumptions/methodologies for reasonableness. The information reviewed generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected , expected recoveries, and the value of underlying collateral. Other information, such as industry analyst reports and forecasts, sector credit ratings, financial condition of the bond insurer for insured fixed maturity securities, and other market data relevant to the realizability of contractual cash flows, may also be considered.
If we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed maturity security, a credit loss allowance is recorded as a net investment loss for the shortfall in expected cash flows; however, the amortized cost basis, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If we determine that the fixed maturity security does not have sufficient cash flows or other information to estimate the anticipated recovery value for the security, we may conclude that the entire decline in fair value is deemed to be credit related and the loss is recognized as a net investment loss. Subsequent changes in the anticipated recoveries, limited by the amount of previous taken credit allowances, are recorded through changes in the allowance for credit losses and recognized through net investment loss.
When a security is disposed or deemed uncollectible and written-off, we reverse amounts previously recognized in the credit loss allowance through net investment loss.
Valuation of Future Policy Benefit Reserves
The Company adopted ASU 2018-12 for Liabilities for future policy benefits (LFPB) on a modified retrospective basis such that those balances were adjusted to conform to ASU 2018-12 on January 1, 2021.
Horace Mann Educators Corporation
Annual Report on Form 10-K 47
The LFPB represents the cost of claims, minus projected future net premiums, that we estimate we will eventually pay to our policyholders and the related expenses for our traditional and limited-payment long duration contracts. Liabilities for future policy benefits are initially established in the same period in which we issue a policy, and equal the difference between projected future policy benefits and projected future net premiums, allowing a margin for expenses and profit. The liabilities for future policy benefits build up and release over time, based on the emergence of cash flows, including premiums received and claims paid, and updated expectations for future cash flows.
The liabilities are estimated using assumptions that include discount rate, mortality, morbidity, lapses, and expenses. For traditional and limited-payment contracts, a standard discount rate is used to remeasure the liabilities that is equivalent to market level yields for upper-medium-grade (low credit risk) fixed income instruments. The discount rate assumption is updated quarterly. For liability cash flows that are projected beyond the duration of market-observable level yields for upper-medium-grade (low credit risk) fixed income instruments, we use the last market-observable level yield and use linear interpolation to determine yield assumptions for durations that do not have market-observable yields.
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, 2025 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.
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 $12 million. The potential impact of increasing (decreasing) our long-term lapse assumption by 10% is a decrease (increase) to the LFPB of approximately $3 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.
See Part II – Item 8, Note 6 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.
Valuation of Liabilities for Property & Casualty Unpaid Claims and Claim Expense Reserves
Underwriting results of Property & Casualty are significantly influenced by estimates of our ultimate liability for insured events. There is a high degree of uncertainty inherent in the estimates of ultimate losses underlying the liabilities for unpaid claims and claim expenses. This inherent uncertainty is particularly significant for liability-related exposures due to the extended period, often many years that transpire between a loss event, receipt of related claims data from policyholders and ultimate settlement of the claim. Reserves for Property & Casualty claims include provisions for payments to be made on reported claims (case reserves), incurred but not yet reported (IBNR) claims and associated settlement expenses (together, loss reserves).
The process by which these reserves are established requires reliance upon estimates based on known facts and on interpretations of circumstances, including our experience with similar cases and historical trends involving claim payments and related patterns, pending levels of unpaid claims and product mix, as well as other factors including court decisions, economic conditions, public attitudes and medical costs. We calculate and record a single best estimate of the reserve as of each reporting date.
In addition, beginning in 2024 property & casualty includes loss and loss adjustment reserves and IBNR related to legacy commercial claims. The claims, which include asbestos, environmental, and sexual molestation claims, are related to legacy, long-tail commercial lines policies that were issued as early as the 1960s, under a previous ownership structure in business lines in which we no longer operate.
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Horace Mann Educators Corporation
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.
Based on our products and coverages, historical experience, and modeling of various actuarial methodologies used to develop reserve estimates, there is the potential of variability of the Property & Casualty loss reserves.
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 $4.4 million for long-tail liability related exposures (auto liability coverages) and approximately $1.4 million for short-tail liability related exposures (property and auto physical damage coverages). Actual results may differ, depending on the magnitude and direction of the deviation.
Our actuaries discuss their loss and loss adjustment expense actuarial analysis with management. As part of this discussion, the indicated point estimate of the IBNR loss reserve by line of business (coverage) is reviewed. Our actuaries also discuss any indicated changes to the underlying assumptions used to calculate the indicated point estimate. Any variance between the indicated reserves from these changes in assumptions and the previously carried reserves is reviewed. After discussion of these analyses and all relevant risk factors, management determines whether the reserve balances require adjustment. Our best estimate of loss reserves may change depending on a revision in the underlying assumptions.
Our liabilities for unpaid claims and claim expense reserves for property & casualty were as follows:
($ in millions)
December 31, 2025
December 31, 2024
Case
Reserves
IBNR
Reserves
Total (1)
Case
Reserves
IBNR
Reserves
Total (1)
Auto liability
Auto other
Property
All other
Total
(1) These amounts are gross, before reduction for ceded reinsurance reserves.
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, 2025, the impact of a reserve re-estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.9 million in net income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by approximately $2.9 million.
Favorable prior years' reserve re-estimates increased net income in 2025 by approximately $18.8 million pretax, primarily the result of favorable loss trends for auto and property for accident years 2024 and prior. During 2024 the Company recognized favorable prior years' reserve re-estimates of $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 $17.7 million of losses arising from the legacy commercial line exposures. The Company had no reserves for these liabilities prior to 2024.
Horace Mann Educators Corporation
Annual Report on Form 10-K 49
Results of Operations by Segment
Consolidated financial results primarily reflect the results of Property & Casualty, Life & Retirement, and Supplemental & Group Benefits reporting segments as noted in the Introduction section of this MD&A, as well as the Corporate & Other reporting segment. These segments are defined based on financial information management uses to evaluate performance and to determine the allocation of resources.
The determination of segment data is described in more detail in Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K. The following sections provide analysis and discussion of results of operations for each of the reporting segments as well as investment results.
Property & Casualty
2025 net income reflected the following factors:
• Increases in average written premium per policy
• Improved underlying loss ratio* for both auto and property
• Lower catastrophe losses
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Horace Mann Educators Corporation
The following table provides certain financial information for Property & Casualty for the years indicated.
($ in millions, unless otherwise indicated)
Year Ended December 31,
Change %
Financial Data:
Net premiums written*:
Auto
Property and other
Total net premiums written
Change in unearned net premiums
Total net premiums earned
Incurred claims and claims expenses:
Claims occurring in the current year
Prior years' reserve development (1)
Total claims and claim expenses incurred
Operating expenses, including DAC amortization
Underwriting gain (loss)
Net investment income
Income (loss) before income taxes
Net income (loss)
Core earnings (loss)*
Operating Statistics:
Auto
Loss and loss adjustment expense ratio
pts
Expense ratio
pts
Combined ratio:
pts
Prior years' reserve development (1)
pts
Catastrophe losses
pts
Underlying combined ratio*
pts
Property (excludes Other Liability)
Loss and loss adjustment expense ratio
pts
Expense ratio
pts
Combined ratio:
pts
Prior years' reserve development (1)
pts
Catastrophe losses
pts
Underlying combined ratio*
pts
Risks in force (in thousands)
Auto
Property
Total
(1) (Favorable) unfavorable.
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Annual Report on Form 10-K 51
Catastrophe losses incurred were as follows: (1)
($ in millions)
Year Ended December 31,
Three months ended
March 31st
June 30th
September 30th
December 31st
Total for year
(1) See Part I - Item 1 - Reporting Segments - Property & Casualty for further details regarding catastrophe losses for the past five years.
Including a profit of $37.3 million in the fourth quarter, the Property & Casualty segment’s net income for the full year 2025 reflected strong underlying results, lower catastrophe losses, and favorable prior year development. Property & Casualty net premiums written were up 6.5% for the year and segment net investment income was up 24.1% for the year.
On a reported basis, the 1.9 point decrease in the auto combined ratio in 2025 was mainly attributable to a 4.3 point decrease in the auto underlying loss ratio* partially offset by a 1.8 point increase due to a lower level of favorable prior year development. Favorable prior years' auto reserve development of $7.0 million was reported in 2025, reflecting the impact of lower than expected severity.
The reported property combined ratio decreased 18.1 points in 2025 primarily due to a 14.7 point decrease in the catastrophe ratio and a 5.6 point decrease in property underlying ratio*. Favorable prior years' property reserve development of $11.8 million was reported in 2025, reflecting the impact of lower than expected severity.
In 2025, total Property & Casualty net premiums written* increased $50.9 million as rate actions and inflation adjustments to coverage values for property more than offset declines in risks in force. Retention remained strong with auto at 83.7% and property at 88.4%.
In 2025, auto net premiums written* increased $11.3 million, primarily due to rate actions partially offset by the continuing decline in auto risks in force. For 2025, average auto net premium written and average net premium earned increased 7.6% and 10.6%, respectively. Property and other net premiums written* increased $39.6 million due to increases in average net premium written and average net premium earned which increased 12.7% and 16.3% respectively, due to rate actions. The number of educator risks continues to be at or above 80% relative to overall risks in force.
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Life & Retirement
2025 net income reflected the following factors:
• Increase of 12 basis points in the annualized net interest spread due to improved net investment income
• Life Benefits decreased 4.8%
• Higher operating expenses due to investments in growth initiatives
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Annual Report on Form 10-K 53
The following table provides certain information for the Life & Retirement segment for the years indicated.
($ in millions)
Year Ended December 31,
Change %
Life & Retirement
Net premiums written and contract deposits*
Net premiums and contract charges earned
Net investment income (1)
Other income
Benefits and change in reserves
Interest credited
Operating expenses
DAC amortization expense
Intangible asset amortization expense
Income before income taxes
Income tax expense
Net income
Core earnings*
Life policies in force (in thousands)
Life insurance in force
Life persistency - LTM
pts
Annuity contracts in force (in thousands)
Horace Mann Retirement Advantage ® contracts in force (in thousands)
Cash value persistency - LTM
pts
(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 December 31, 2025 Form 10-K.
The Life & Retirement segment net income increased 0.9% in 2025. Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error disclosed in Note 1, net investment income increased $9.6 million for the full-year due to strong limited partnership returns and improved commercial loan results. The annualized net interest spread in our fixed annuity business was 184 basis points for the full year compared to 172 basis points in 2024, largely due to higher limited partnership and commercial mortgage loan funds income and lower credited rates on the FHLB funding agreement block. The net dollar contribution from our FHLB funding agreements increased $1.8 million compared with 2024, with FHLB interest expense reflected in interest credited.
For 2025, net annuity contract deposits* for variable and fixed annuities increased 6.7% for the year to $482.8 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 rose to 91.7%.
Life annualized sales* were $11.2 million for the year, which was an 7.7% increase over prior year. Life insurance in force rose to $21.5 billion at year-end.
Horace Mann currently has $5.9 billion in annuity assets under management, including $2.2 billion of fixed annuities, $3.4 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 8.8%, benefiting from the strong equity markets.
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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 $416.7 million of the Life & Retirement investment portfolio and related investable cash flows will be reinvested at current market rates.
Interest rates declined modestly in the second half of 2025. However, the risk of a deep recession or shock to the economy, such as a global pandemic, could result in further reductions in interest rates. The current environment of interest rates has 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.
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 $2.1 million in year one, reducing the annualized net interest spread by approximately 8 basis points, 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.
We reinsure a $2.3 billion block of in force fixed annuities with a minimum crediting rate of 4.5% which helps mitigate the risk of not being able to generate appropriate spreads on the annuity business. Information regarding the interest crediting rates and balances equal to the guaranteed minimum crediting rates for deferred annuity account values excluding the reinsured block is shown below.
($ in millions)
December 31, 2025
Total Deferred Annuities
Deferred Annuities at
Minimum Crediting Rate
Percent
of Total
Accumulated
Value (AV)
Percent of
Total Deferred
Annuities AV
Percent
of Total
Accumulated
Value
Guaranteed minimum crediting rates:
Less than 2%
Equal to 2% but less than 3%
Equal to 3% but less than 4%
Equal to 4% but less than 5%
5% or higher
Total
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Annual Report on Form 10-K 55
Supplemental & Group Benefits
2025 net income reflected the following factors:
• Higher premium earned reflecting investment to grow the book of business
• Higher benefits ratio in Group Benefits in-line with longer term expectation
• Higher operating expenses due to investment in growth
The following table provides certain information for Supplemental & Group Benefits for the years indicated.
($ in millions)
Year Ended December 31,
Change %
Supplemental & Group Benefits
Net premiums and contract charges earned
Net investment income (1)
Other income
Benefits, settlement expenses and change in reserves
Interest credited
Operating expenses (includes DAC unlocking
and amortization expense)
Intangible asset amortization expense
Income before income taxes
Net income
Core earnings*
Benefits ratio (2)
pts
Operating expense ratio (3)
pts
Pretax profit margin (4)
pts
Individual Supplemental products benefits ratio
pts
Individual Supplemental premium persistency (rolling 12 months)
pts
Group Benefits products benefits ratio
pts
(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 December 31, 2025 Form 10-K.
(2) Ratio of benefits to net premiums earned.
(3) Ratio of operating expenses to total revenues.
(4) Ratio of income before income taxes to total revenues.
2025 net income for the Supplemental & Group Benefits segment was $45.0 million. Segment net premiums earned increased $4.2 million for individual supplemental and $8.1 million for group benefits reflecting higher
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Horace Mann Educators Corporation
sales* driven by investment to grow the business. The full-year benefit ratio for the individual supplemental product line declined due to improved morbidity. The full-year benefit ratio for the group benefits product lines increased due to favorable impact in the prior year annual reserve assumption review, primarily related to favorable morbidity in our group long-term disability book.
Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error disclosed in Note 1, net investment income increased $2.2 million primarily due to stronger limited partnership returns. The non-cash impact of amortization of intangible assets under purchase accounting reduced 2025 earnings by $14.1 million, pretax, compared to $14.3 million in 2024.
Total segment sales* for the year were $35.2 million, up 37.5% from the prior year, with individual supplemental product sales* of $23.6 million and group benefits products of $11.6 million. Persistency remains strong at 89.3%.
Corporate & Other
The following table provides certain financial information for Corporate & Other for the years indicated.
($ in millions)
Year Ended December 31,
Change %
Total revenues
Legacy Commercial exposures
Interest expense
Other operating expenses
Net investment losses
Loss before income taxes
Net loss
Core loss*
For 2025, the net loss decreased $10.9 million, primarily due to recording $20.0 million of Commercial exposures in 2024. This was partially offset by higher operating expenses which increased due to a $7.1 million charge related to the termination of the Horace Mann Pension Plan and a $5.0 million donation to the Horace Mann Educators Foundation.
Investment Results
Total net investment income includes net investment income from our managed investment portfolio as well as accreted investment income from the deposit asset on reinsurance related to our reinsured block of approximately $2.3 billion of fixed annuity liabilities related to legacy individual annuities written in 2002 or earlier.
($ in millions)
Year Ended December 31,
Change %
Net investment income - investment portfolio
Investment income - deposit asset on reinsurance
Total net investment income (1)
Pretax net investment losses
Pretax net unrealized investment gains (losses) on fixed maturity securities
(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 2025 Form 10-K.
For the full year, total net investment income rose 4.2% and net investment income on the managed portfolio increased 6.4%. The full-year increase reflected the benefit from higher interest rates in the fixed-income portfolios. Excluding the reduction in net investment income due to an immaterial out-of-period correction of an error disclosed in Note 1, total net investment income increased $28.8 million, 6.5%. Investment yield on the
Horace Mann Educators Corporation
Annual Report on Form 10-K 57
portfolio excluding limited partnership interests was 4.6%, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.
For 2025, pretax net investment losses decreased $4.3 million primarily due to changes in fair values of equity securities and normal portfolio management activity. Pretax net unrealized investment losses on fixed maturity securities as of December 31, 2025 were $312.1 million compared to pretax net unrealized investment losses of $454.5 million as of December 31, 2024, reflecting lower interest rates, driven primarily by a decrease in the 10-year U.S. Treasury yield, which ended the year lower by 40 basis points.
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Fixed Maturity and Equity Securities Portfolios
The table below presents our fixed maturity and equity securities portfolio by major asset class, including the 10 largest sectors of our corporate bond holdings (based on fair value).
($ in millions)
December 31, 2025
Number of
Issuers
Fair
Value
Amortized
Cost or
Cost
Pretax Net
Unrealized
Loss
Fixed maturity securities
Corporate bonds
Banking & Finance
Utilities
Energy
HealthCare,Pharmacy
Insurance
Real Estate
Consumer Products
Transportation
Technology
Natural Gas
All other corporates (1)
Total corporate bonds
Mortgage-backed securities
U.S. Government and federally sponsored agencies
Commercial (2)
Other
Municipal bonds (3)
Government bonds
Foreign
Collateralized loan obligations (4)
Asset-backed securities
Total fixed maturity securities
Equity securities
Non-redeemable preferred stocks
Common stocks
Total equity securities
Total
(1) The All other corporates category contains 21 additional industry sectors. Food and beverage, telecommunications, industry-manufacturing, retail, and leisure-entertainment represented $188.8 million of fair value at December 31, 2025, with the remaining 17 sectors each representing less than $29.8 million.
(2) As of December 31, 2025, 100% were investment grade, with an overall credit rating of AA, and the positions were well diversified by property type, geography and sponsor.
(3) Holdings are geographically diversified , 41.6% ar e tax-exempt and 77.5% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- as of December 31, 2025.
(4) Based on fair value, 99.9% of the collateralized loan obligation securities were rated investment grade based on ratings assigned by a nationally recognized statistical ratings organization (NRSRO - S&P, Moody's, Fitch, DBRS, Egan Jones and Kroll).
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Annual Report on Form 10-K 59
As of December 31, 2025, our diversified fixed maturity securities portfolio consisted of 4,002 investment positions, issued by 2,652 entities, and totaled approximately $5.7 billion in fair value. This portfolio was 97.6% investment grade, based on fair value, with an average credit quality rating of A+. Our investment guidelines target single corporate issuer concentrations to 0.5% of invested assets for AA or AAA rated securities, 0.35% of invested assets for A or BBB rated securities, and $5.0 million for non-investment grade securities.
Rating of Fixed Maturity Securities and Equity Securities (1)
The following table presents the composition and fair value of our fixed maturity and equity securities portfolios by rating category. As of December 31, 2025, 96.2% of these combined portfolios were investment grade, based on fair value, with an overall average credit quality rating of A+. We have classified the entire fixed maturity securities portfolio as available for sale, which is carried at fair value.
($ in millions)
December 31, 2025
Percent
of Total
Fair
Value
Fair
Value
Amortized
Cost, net
Fixed maturity securities
AAA
BBB
CCC or lower
Not rated (3)
Total fixed maturity securities
Equity securities
AAA
BBB
CCC or lower
Not rated
Total equity securities
Total
(1) Ratings are as assigned by a NRSRO when available. If no rating is available from a NRSRO, then a rating provided by the investment manager is used. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.
(2) As of December 31, 2025, the AA rated fair value amount included $357.6 million of U.S. Government and federally sponsored agency securities and $744.5 million of mortgage-backed and other asset-backed securities issued by U.S. Government and federally sponsored agencies.
(3) This category primarily represents private placement and municipal securities not rated by a NRSO.
As of December 31, 2025, the fixed maturity securities portfolio had $386.2 million of pretax gross unrealized investment losses on $3,279.4 million of fair value related to 2,115 positions. Of the investment positions with gross unrealized investment losses, there were 355 securities trading below 80.0% of the carrying amount as of December 31, 2025. See Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.
Lower interest rates, driven by lower US Treasury yields, have been the main driver of the reduction in unrealized losses in the fixed maturity securities portfolio, with the 10-year declining 40 basis points in 2025. Credit spreads were slightly tighter during the same time period, with investment grade and high yield tighter by 2 and 21 basis
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Horace Mann Educators Corporation
points, respectively. Investment grade and high yield total returns for the year ended December 31, 2025 were up 7.77% and 8.62%, respectively. During the same time period, the Bloomberg Barclays Index Yield-to-Worst for Investment Grade declined 52 basis points, ending at 4.81%, while the High Yield Index fell 96 basis points to 6.53%.
Liquidity and Capital Resources
Our liquidity and access to capital were not materially impacted by inflation or changes in interest rates during the year ended December 31, 2025. For further discussion regarding the potential future impacts of inflation and changes in interest rates, see Part I – Item 1A - Risk Factors and Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Effects of Inflation and Changes in Interest Rates of this Annual Report on Form 10-K.
Investments
Information regarding our investment portfolio, which is comprised primarily of investment grade, fixed maturity securities, is presented in Part II - Item 7, Results of Operations by Segment, Part I - Item 1, Investments and in Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Cash Flow
Our short-term liquidity requirements, within a 12 month operating cycle, are for the timely payment of claims and benefits to policyholders, operating expenses, interest payments and federal income taxes. Cash flow generated from operations has been, and is expected to be, adequate to meet our operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth and acquisitions, pay dividends to shareholders and repurchase shares of our common stock. Long-term liquidity requirements, beyond one year, are principally for the payment of future insurance and annuity policy claims and benefits, as well as retirement of debt. The following table summarizes our consolidated cash flows activity for the periods indicated
($ in millions)
Year Ended December 31,
Change %
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year
Operating Activities
As a holding company, we conduct our principal operations in the personal lines portion of the property and casualty, supplemental and life insurance industries through our subsidiaries. Our insurance subsidiaries generate cash flow from premium and investment income, generally well in excess of their immediate needs for policy obligations, operating expenses and other cash requirements. Cash provided by operating activities primarily reflects net cash flows generated by the insurance subsidiaries.
For 2025, net cash provided by operating activities increased $101.1 million. Fluctuations in net cash provided by operating activities are primarily due to timing of premium and investment income collections and benefits and claims payments.
Investing Activities
Our insurance subsidiaries maintain significant investments in fixed maturity securities to meet future contractual obligations to policyholders. In conjunction with our management of liquidity and other asset/liability management objectives, we, from time to time, will sell fixed maturity securities prior to maturity, and reinvest the proceeds into other investments with different interest rates, maturities or credit characteristics. Accordingly, we have classified the entire fixed maturity securities portfolio as available for sale.
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Annual Report on Form 10-K 61
Financing Activities
Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, issuances and repurchases of our common stock, finance-type reinsurance agreements, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
For 2025, cash outflows for financing activities were $3.8 million higher. The higher cash outflows were due to lower net cash inflows from FHLB funding agreements of $35.0 million and higher net cash outflow for reverse repurchase agreements of $24.0 million, partially offset by a $45.2 million increase related to the change in Senior Notes described below.
On September 26, 2025, we issued $300.0 million aggregate principal amount of 4.70% Senior Notes due October 1, 2030 and used the net proceeds to fully repay the $250.0 million aggregate principal amount of 4.50% Senior Notes and accrued interest and the remaining net proceeds are available for general corporate purposes.
The following table shows activity from FHLB funding agreements for the periods indicated.
($ in millions)
Year Ended December 31,
Change $
Change %
Balance at beginning of the year
Advances received from FHLB funding agreements
Principal repayment on FHLB funding agreements
Balance at end of the year
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Horace Mann Educators Corporation
Liquidity Sources and Uses
Our potential sources and uses of funds principally include the following activities:
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Corporate & Other
Activities for potential sources of funds
Receipt of insurance premiums, contractholder charges and fees
Recurring service fees, commissions and overrides
Contractholder fund deposits
Reinsurance and indemnification
program recoveries
Receipts of principal, interest and
dividends on investments
Proceeds from sales of investments
Proceeds from FHLB borrowing and funding agreements
Proceeds from reverse repurchase agreements
Intercompany loans
Capital contributions from parent
Dividends or return of capital from subsidiaries
Tax refunds/settlements
Proceeds from periodic issuance of
additional securities
Proceeds from debt issuances
Proceeds from revolving credit facility
Receipt of intercompany settlements
related to employee benefit plans
Activities for potential uses of funds
Payment of claims and related expenses
Payment of contract benefits,
surrenders and withdrawals
Reinsurance cessions and
indemnification program payments
Payment of operating costs and expenses
Payments to purchase investments
Repayment of FHLB borrowing and funding agreements
Repayment of reverse repurchase agreements
Payment or repayment of intercompany loans
Capital contributions to subsidiaries
Dividends or return of capital to
shareholders/parent company
Tax payments/settlements
Common share repurchases
Debt service expenses and repayments
Repayment on revolving credit facility
Payments related to employee benefit plans
Payments for business acquisitions
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We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across HMEC and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across HMEC to enhance flexibility.
As of December 31, 2025, we held $1.1 billion of cash, U.S. government and agency fixed maturity securities and public equity securities (excluding non-redeemable preferred stocks and foreign equity securities) which, under normal market conditions, could be rapidly liquidated.
Certain remote events and circumstances could constrain our liquidity. Those events and circumstances include, for example, a catastrophe resulting in extraordinary losses, a downgrade of our Senior Notes rating to non-investment grade status or a downgrade in our insurance subsidiaries' financial strength ratings. The rating agencies also consider the interdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the ratings of other related entities.
Capital Resources
We have determined the amount of capital which is needed to adequately fund and support business growth, primarily based on risk-based capital formulas including those developed by the NAIC. Historically, our insurance subsidiaries have generated capital in excess of such needed levels. These excess amounts have been paid to us through dividends. We have then utilized these dividends and our access to the capital markets to service and retire debt, pay dividends to our shareholders, fund growth initiatives, repurchase shares of our common stock and for other corporate purposes. If necessary, we also have other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, which include our Revolving Credit Facility, as well as issuances of various securities. The insurance subsidiaries are subject to various regulatory restrictions which limit the amount of annual dividends or other distributions, including loans or cash advances, available to us without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 2026 from all of our insurance subsidiaries without prior regulatory approval is approximately $148.8 million, excluding the impact and timing of prior year dividends, of which $115.0 million was paid during the year ended December 31, 2025. We anticipate that our sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments, shareholder dividends and our share repurchase program. Additional information is contained in Part II - Item 8, Note 13 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Total capital was $2,076.1 million as of December 31, 2025, including $593.4 million of long-term debt. Total debt represented 28.6% of total capital including net unrealized investment losses on fixed maturity securities (26.6% of total capital excluding net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates*) as of December 31, 2025, which remains generally consistent with the Company's long-term capital management objectives.
Shareholders' equity was $1,482.7 million as of December 31, 2025, including net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates. The market value of our common stock and the market value per share were $1,877.7 million and $46.18, respectively, at December 31, 2025. Book value per share was $36.47 as of December 31, 2025 ($40.21 excluding net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates*).
Additional information regarding net unrealized investment gains (losses) on fixed maturity securities as of December 31, 2025 is included in Part II - Item 7, Results of Operations by Segment and Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Total shareholder dividends paid were $57.1 million for the year ended December 31, 2025. In 2025, the Board declared regular quarterly dividends of $0.35 per share. Compared to the full year per share dividends paid in 2024 of $1.36, the total 2025 dividends paid per share of $1.40 represented an increase of 2.9%.
On May 13, 2025, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (2025 Program) to begin following the completion of the $50 million repurchase plan that was authorized on May 25, 2022 (2022 Program). Both Programs authorize the repurchase of our common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The Programs do not have expiration dates and may be limited or terminated at any time without notice. During
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Horace Mann Educators Corporation
2025, we repurchased 497,226 shares of our common stock at an average price per share of $41.85 under the 2022 Programs. In total and through December 31, 2025, 1,192,420 shares have been repurchased under the 2022 Program at an average price of $37.31 per share. The repurchase of shares was funded through use of cash. As of December 31, 2025, $55.5 million remained authorized for future share repurchases under the 2025 and 2022 Programs.
The following table summarizes our debt obligations.
($ in millions)
Interest
Rates
Final
Maturity
December 31,
Short-term debt
Revolving Credit Facility
Variable
Long-term debt (1)
4.70% 2025 Senior Notes, Aggregate principal amount of $300.0 less unaccrued discount of $1.5 and $0.0 and unamortized debt issuance costs of $3.1 and $0.0
7.25% 2023 Senior Notes, Aggregate principal amount of $300.0 less unaccrued discount of $0.3 and $0.4 and unamortized debt issuance costs of $1.7 and $2.3
4.50% 2015 Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.0 and $0.1 and unamortized debt issuance costs of $0.0 and $0.2
Total
(1) We designate our debt obligations as "long-term" based on maturity date at issuance.
On September 26, 2025, we issued $300.0 million aggregate principal amount of 4.70% senior notes (2025 Senior Notes), which will mature on October 1, 2030, issued at a discount resulting in an effective yield of 4.82%. Interest on the 2025 Senior Notes is payable semi-annually at a rate of 4.70%. The 2025 Senior Notes are redeemable in whole or in part, at any time, at our option, at a redemption price equal to the greater of (1) 100% of the principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted, on a semi-annual basis, at the Treasury yield (as defined in the indenture) plus 20 basis points, plus, in either of the above cases, accrued interest up to, but not including the date of redemption. The 2025 Senior Notes are traded in the open market (HMN 4.70).
On September 29, 2025, we issued a notice of redemption for all of the outstanding 4.50% Senior Notes due 2025. The redemption occurred on October 14, 2025 utilizing the proceeds from the 2025 Senior Notes.
On September 15, 2023, we issued $300.0 million aggregate principal amount of 7.25% senior notes (2023 Senior Notes), which will mature on September 15, 2028, issued at a discount resulting in an effective yield of 7.29%. Interest on the 2023 Senior Notes is payable semi-annually at a rate of 7.25%. The 2023 Senior Notes are redeemable in whole or in part, at any time, at our option, at a redemption price equal to the greater of (1) 100% of the principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted, on a semi-annual basis, at the Treasury yield (as defined in the indenture) plus 45 basis points, plus, in either of the above cases, accrued interest to the date of redemption. The 2023 Senior Notes are traded in the open market (HMN 7.25).
As of May 19, 2025, we as borrower, entered into a Fourth Amendment to our Amended and Restated Credit Agreement dated June 21, 2019, as amended (the Credit Agreement), with PNC Bank, National Association as administrative agent, and the lenders party thereto (the Fourth Amendment). The Fourth Amendment, among other things, extends the commitment termination date to May 19, 2030 from the previous termination date of July 12, 2026 and replaces the Eurodollar-based interest rate benchmark included in the Credit Agreement with a Term SOFR Rate (as defined in the Credit Agreement) as an interest rate benchmark. As of December 31, 2025, we had $325.0 million available on the Revolving Credit Facility, with an interest rate based on SOFR plus 115 basis points plus the applicable benchmark adjustment spread. The unused portion of the Revolving Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis as of December 31, 2025.
As of December 31, 2025, we had no borrowings outstanding with FHLB. The Board has authorized a maximum amount equal to 15% of net aggregate admitted assets less separate account assets of the insurance
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Annual Report on Form 10-K 65
subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing capacity.
We had no obligation for securities sold under reverse repurchase agreements at December 31, 2025 compared to $12.0 million as of December 31, 2024.
To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form S-3 with the Securities and Exchange Commissions (SEC) on March 8, 2024. The registration statement, which registered the offer and sale from time to time of an indeterminate amount of various securities, which may include debt securities, common stock, preferred stock, depositary shares, warrants, delayed delivery contracts and/or units that include any of these securities, was automatically effective on March 8, 2024. Unless withdrawn by us earlier, this registration statement will remain effective through March 8, 2027. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K.
On March 13, 2018, we filed a "shelf" registration statement on Form S-4 with the SEC which became effective on May 2, 2018. Under this registration statement, we may from time to time offer and issue up to 5,000,000 shares of our common stock in connection with future acquisitions of other businesses, assets or securities. Unless withdrawn by us, this registration statement remains effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K.
Financial Ratings
Our principal insurance subsidiaries are rated by A.M. Best Company, Inc. (A.M. Best), Fitch, Moody's, and S&P. These rating agencies have also assigned ratings to our Senior Notes. The ratings that are assigned by these agencies, which are subject to change, can impact, among other things, our access to sources of capital, cost of capital, and competitive position. These ratings are not a recommendation to buy or hold any of our securities.
All four agencies currently have assigned the same insurance financial strength ratings to our Property & Casualty and Life insurance subsidiaries. Only A.M. Best currently rates our Supplemental & Group Benefits subsidiaries, with an assigned rating of A (Excellent). Assigned ratings and respective affirmation/review dates as of February 16, 2026 were as follows:
Insurance Financial
Affirmed/
Strength Ratings (Outlook)
Debt Ratings (Outlook)
Reviewed
A.M. Best
HMEC (parent company)
bbb
(stable)
HMEC's Life & Retirement subsidiaries
(stable)
HMEC's Property & Casualty subsidiaries
(stable)
HMEC's Supplemental & Group Benefits
subsidiaries
Madison National Life Insurance Company
(stable)
National Teachers Associates Life
Insurance Company
(stable)
Fitch
HMEC (parent company)
BBB
(stable)
HMEC's Life Group
(stable)
HMEC's P&C Group
(stable)
Moody's
HMEC (parent company)
Baa2
(stable)
HMEC's Life Group
(stable)
HMEC's P&C Group
(stable)
(stable)
BBB
(stable)
Reinsurance Programs
Information regarding the reinsurance programs for our Property & Casualty, Life & Retirement and Supplemental & Group Benefits segments is located in Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K.
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Horace Mann Educators Corporation
Future Adoption of New Accounting Standards
We have not yet adopted Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement because the adoption dates have not occurred. For a discussion of these new accounting standards, see Part II - Item 8, Note 1 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Effects of Inflation and Changes in Interest Rates
Our operating results are affected significantly in at least three ways by changes in interest rates and inflation, which has come down from recent higher levels but continues to be above the Federal Reserve's target rate. First, inflation directly affects Property & Casualty claims costs. Second, the investment income earned on our investment portfolio and the fair value of the investment portfolio are related to the yields available in the fixed income markets. An increase in interest rates will decrease the fair value of the investment portfolio, but will increase investment income as investments mature and proceeds are reinvested at higher rates. Third, as interest rates increase, competitors will typically increase crediting rates on annuity contracts and life insurance products with account values, and may lower premium rates on property and casualty lines to reflect the higher yields available in the market. The risk of inflation on Property & Casualty claim costs is managed through pricing and rate. The risk of interest rate fluctuation is managed through asset/liability management techniques, including cash flow analysis. In addition, an annuity reinsurance agreement we entered which reinsures a $2.3 billion block of in force fixed annuities with a minimum crediting rate of 4.5%, helps mitigate the risk of not being able to generate appropriate spreads on the annuity business.
For further discussion regarding the potential future impacts of inflation and changes in interest rates, see Part I – Item 1A - Risk Factors.
ITEM 7A. I Quantitative and Qualitative Disclosures about Market Risk
Market value risk, our primary market risk exposure, is the risk that our invested assets will decrease in value. This decrease in value may be due to (1) a change in the yields realized on our assets and prevailing market yields for similar assets, (2) an unfavorable change in the liquidity of an investment, (3) an unfavorable change in the financial prospects of the issuer of an investment, or (4) a downgrade in the credit rating of the issuer of an investment. Also, see Part II - Item 7, Results of Operations by Segment of this Annual Report on Form 10-K regarding net investment gains (losses).
Significant changes in interest rates expose us to the risk of experiencing losses or earning a reduced level of investment income based on the difference between the interest rates earned on our investments and the credited interest rates on our insurance liabilities. Also, see Part II - Item 7, Results of Operations by Segment of this Annual Report on Form 10-K regarding interest credited to policyholders.
We seek to manage our market value risk by coordinating the projected cash inflows of assets with the projected cash outflows of liabilities. For all our assets and liabilities, we seek to maintain reasonable durations, consistent with the maximization of income without sacrificing investment quality, while providing for liquidity and diversification. The investment risk associated with variable annuity deposits and the underlying mutual funds is assumed by our contractholders, and not by us. Certain fees that we earn from variable annuity deposits are based on the market value of the funds deposited.
Through active investment management, we invest available funds with the objective of funding future obligations to policyholders, subject to appropriate risk considerations, and maximizing shareholder value. This objective is met through investments that (1) have similar characteristics to the liabilities they support, (2) are diversified among industries, issuers and geographic locations, and (3) are predominantly investment-grade fixed maturity securities classified as available for sale. As of the time of issuance of this Annual Report on Form 10-K, derivatives are only used to manage the interest crediting rate risk within our FIA and IUL products. As of December 31, 2025, approximately 15.7% of the fixed maturity securities portfolio supported Property & Casualty, 72.2% supported Life & Retirement, and 11.8% supported Supplemental & Group Benefits. For
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Annual Report on Form 10-K 67
discussions regarding our investments see Part II - Item 7, Results of Operations by Segment of this report regarding net investment gains (losses) and Part I - Item 1, Investments of this Annual Report on Form 10-K.
Our Life & Retirement earnings are affected by the spreads between investment yields and rates credited or accruing on fixed annuity and life insurance liabilities with account values. Although credited rates on fixed annuities may be changed annually (subject to minimum guaranteed rates), competitive pricing and other factors, including the impact on the level of surrenders and withdrawals, may limit our ability to adjust or maintain crediting rates at levels necessary to avoid narrowing of spreads under certain market conditions. However, because of the annuity reinsurance transaction, the spread in our retained annuity business is achieving our targeted returns; new business returns fluctuate as rates move but we expect to achieve our targeted returns over time. Also, see Part II - Item 7, Results of Operations by Segment of this Annual Report on Form 10-K regarding interest credited to policyholders.
Using financial modeling and other techniques, we regularly evaluate the appropriateness of investments relative to the characteristics of the liabilities that they support. Simulations of cash flows generated from existing business under various interest rate scenarios measure the potential gain or loss in fair value of interest rate sensitive assets and liabilities. Such estimates are used to closely match the duration of assets to the duration of liabilities. The overall duration of liabilities of our multiline insurance operations combines the characteristics of our long duration annuity and interest rate sensitive life liabilities with our short duration non-interest rate sensitive Property & Casualty liabilities. Overall, as of December 31, 2025, the duration of the fixed maturity securities portfolio was estimated to be approximately 6.0 years and the duration of our insurance liabilities and debt was estimated to be approximately 6.5 years.
Life & Retirement operations participate in the cash flow testing procedures imposed by statutory insurance regulations, the purpose of which is to ensure that such liabilities are adequate to meet our obligations under a variety of interest rate scenarios. Based on these procedures, our assets and the investment income expected to be received on such assets are adequate to meet the insurance policy obligations and expenses of our insurance activities in all but the most extreme circumstances.
We periodically evaluate our sensitivity to interest rate risk. Based on commonly used models, we project the impact of interest rate changes, assuming a wide range of factors, including duration and prepayment, on the fair value of assets and liabilities. Fair value is estimated based on the net present value of cash flows or duration estimates. Based on the most recent study, assuming an immediate decrease of 100 basis points in interest rates, the fair value of our assets and liabilities would both increase, the net of which would result in an increase in shareholders' equity of approximately $66.3 million after tax, or 4.5%. Assuming an immediate increase of 100 basis points in interest rates, the fair value of our assets and liabilities would both decrease, the net of which would result in a decrease in shareholders' equity of approximately $42.6 million after tax, or 2.9%. In each case, these changes in interest rates assume a parallel shift in the yield curve. While we believe that these assumed market rate changes are reasonably possible, actual results may differ, particularly as a result of any actions that we would take to attempt to mitigate such hypothetical losses in fair value of shareholders' equity.
As a general guideline, we estimate that pretax net income in 2026 would decrease by approximately $2.9 million for each 100 basis point decline in reinvestment rates, before assuming any reduction in annuity crediting rates on in force contracts. In addition, declining interest rates also could negatively impact the recoverability of goodwill and certain intangible assets, due to the impacts on the estimated fair value of our reporting units.
We have been and continue to be proactive in our investment strategies, product designs and crediting rate strategies to mitigate the risk of unfavorable consequences in this type of interest rate environment without venturing into asset classes or individual securities that would be inconsistent with our investment guidelines. Lowering interest crediting rates on annuity contracts and cap and participation rates on fixed indexed annuity contracts can help offset decreases in investment margins on some products. Our ability to lower interest crediting rates could be limited by competition, regulatory approval or contractual guarantees of minimum rates and may not match the timing or magnitude of changes in investment yields.
Based on our overall exposure to interest rate risk, we believe that these changes in interest rates would not materially affect our consolidated near-term financial position, results of operations or cash flows.
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Horace Mann Educators Corporation
ITEM 8. I Financial Statements and Supplementary Data
HORACE MANN EDUCATORS CORPORATION
INDEX TO FINANCIAL INFORMATION
Page
Report of Independent Registered Public Accounting Firm ( KPMG LLP , Columbus, OH , PCAOB ID 185 )
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
Note 2 - Investments
Note 3 - Fair Value of Financial Instruments
Note 4 - Derivatives
Note 5 - Short-Duration Insurance Contracts
Note 6 - Long-Duration Insurance Contracts
Note 7 - Reinsurance and Catastrophes
Note 8 - Deposit Asset on Reinsurance
Note 9 - Goodwill and Intangible Assets
Note 10 - Debt
Note 11 - Income Taxes
Note 12 - Shareholders' Equity and Share-Based Compensation
Note 13 - Statutory Information and Dividend Restrictions
Note 14 - Contingencies and Commitments
Note 15 - Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)
Note 16 - Supplemental Consolidated Cash and Cash Flow Information
Note 17 - Segment Information
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Annual Report on Form 10-K 69
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Horace Mann Educators Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Horace Mann Educators Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and financial statement schedules I to IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
70 Annual Report on Form 10-K
Horace Mann Educators Corporation
Fair value for hard-to-value fixed maturity securities
As discussed in Note 3 to the consolidated financial statements, as of December 31, 2025, the Company has recorded an estimated fair value for fixed maturity securities, of which a portion represents securities that are hard-to-value, which are primarily securities that use Level 3 (unobservable) inputs. The Company estimates the fair value of hard-to-value fixed maturity securities, which includes securities that do not have observable market-based inputs or prices or that trade in markets that are less liquid. The Company uses judgment to determine the appropriate inputs and assumptions used to estimate the fair value of these hard-to-value securities. As of December 31, 2025, the estimated fair value of fixed maturity securities was $5,714.6 million.
We identified the assessment of the Company’s estimate of the fair value of hard-to-value fixed maturity securities as a critical audit matter. Significant measurement uncertainty associated with the fair value of such securities existed because the markets for the hard-to-value securities are less liquid and there is a lack of observable marked-based inputs. As such, there was a high degree of subjectivity and judgment in evaluating the fair value and, specifically, the benchmark yield used in the valuation. Additionally, evaluation of the benchmark yield used in the estimation of fair value required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We, with involvement of valuation professionals with specialized skills and knowledge, evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to measure fair value of hard-to-value securities. This included controls related to the Company’s selection of pricing assumptions, including the benchmark yield used to value hard-to-value fixed maturity securities. We involved valuation professionals with specialized skills and knowledge, who assisted in:
• developing an independent range of fair value estimates using information from the Company, market data sources, models, and key assumptions derived by the valuation professional for a selection of securities.
• comparing the Company’s fair value estimates of hard-to-value securities to our independent range of fair value estimates for the same selection of securities.
Valuation of the liability for property and casualty unpaid claims and claim expense reserves
As discussed in Notes 1 and 5 of the consolidated financial statements, the Company employs actuarial techniques to estimate the liability for property and casualty unpaid claims and claim expense reserves (reserves). The Company develops reserves based on the application of actuarial methods and best estimate assumptions to historical claim experience. The reserves are continually updated by the Company as experience develops and new information becomes known. The Company recorded an estimated liability of $303.3 million for property and casualty unpaid claims and claim expense reserves as of December 31, 2025.
We identified the assessment of the estimate of reserves as a critical audit matter because it involved estimation uncertainty. Complex auditor judgment and specialized skills and knowledge were required in evaluating the selected methods and certain assumptions used to develop the estimate of reserves for certain lines of business representing higher estimation uncertainty, including the selection of development factors and changes in claim frequency and severity trends. Additionally, subjective auditor judgment was required to assess the selected assumptions as there exists a range of potential inputs and the assumptions are sensitive to variation, such that minor changes in the assumptions could affect the reserves recorded by the Company.
The following are the primary procedures we performed to address this critical audit matter. We, with involvement of actuarial professionals with specialized skills and knowledge, evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process for the development of the estimate of reserves. This included controls related to the methods and assumptions used for the Company’s best estimate. We also involved actuarial professionals with specialized skills and knowledge, who assisted in:
• evaluating the Company’s reserving methods, procedures, key assumptions, and judgments by comparing to actuarial standards of practice.
• developing an independent range of reserves for certain lines of business that were determined to represent higher estimation uncertainty based on actuarial methodologies and assumptions in order to evaluate the Company’s consolidated reserves.
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Annual Report on Form 10-K 71
• assessing movement of the Company’s recorded reserves within the range of independent reserves for certain lines of business.
• examining the Company's methods, certain assumptions, and results of their internal actuarial analyses for certain lines of business that were determined to represent higher estimation uncertainty in order to evaluate the Company's consolidated reserves.
/s/ KPMG LLP
We have served as the Company’s auditor since 1989.
Columbus, Ohio
February 27, 2026
72 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in millions, except share data)
December 31,
Assets
Investments
Fixed maturity securities, available for sale, at fair value
(amortized cost, net 2025, $ 6,026.7 ; 2024, $ 5,842.5 )
Equity securities at fair value, (cost $ 56.2 and $ 78.8 )
Limited partnership interests
(Carried under Fair Value Option, 2025 $ 0.0 and 2024, $ 28.9 )
Policy loans
Short-term and other investments
Total investments
Cash
Deferred policy acquisition costs
Reinsurance balances receivable
Deposit asset on reinsurance
Intangible assets
Goodwill
Other assets
Separate Account variable annuity assets
Total assets
Liabilities and Shareholders' Equity
Policy liabilities
Future policy benefit reserves
Policyholders' account balances
Unpaid claims and claim expenses
Unearned premiums
Total policy liabilities
Other policyholder funds
Other liabilities
Long-term debt
Separate Account variable annuity liabilities
Total liabilities
Preferred stock, $ 0.001 par value, authorized
1,000,000 shares; none issued
Common stock, $ 0.001 par value, authorized 75,000,000 shares;
issued, 2025, 67,323,929 ; 2024, 67,032,164
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net of tax:
Net unrealized investment losses on fixed maturity securities
Net reserve remeasurements attributable to discount rates
Net funded status of benefit plans
Treasury stock, at cost, 2025, 26,664,472 shares;
2024, 26,167,246 shares
Total shareholders' equity
Total liabilities and shareholders' equity
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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Annual Report on Form 10-K 73
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
($ in millions, except per share data)
Year Ended December 31,
Statements of Operations
Revenues
Net premiums and contract charges earned
Net investment income
Net investment (losses)
Other income
Total revenues
Benefits, losses and expenses
Benefits, claims and settlement expenses
(Reserve remeasurement (gains)/losses $ 6.0 , $ 1.6 , $( 1.6 ))
Interest credited
Operating expenses
DAC amortization expense
Intangible asset amortization expense
Interest expense
Total benefits, losses and expenses
Income before income taxes
Income tax expense
Net income
Net income per share
Basic
Diluted
Weighted average number of shares and equivalent shares
Basic
Diluted
Statements of Comprehensive Income (Loss)
Net income
Other comprehensive income (loss), net of tax:
Change in net unrealized investment gains
(losses) on fixed maturity securities
Change in net reserve remeasurements attributable to discount rates
Change in net funded status of benefit plans
Other comprehensive income
Comprehensive income
The accompanying Notes are an integral part of these Consolidated Financial Statements.
74 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($ in millions, except per share data)
Year Ended December 31,
Common stock, $ 0.001 par value
Beginning balance
Options exercised
Conversion of common stock units
Conversion of restricted common stock units
Ending balance
Additional paid-in capital
Beginning balance
Options exercised and conversion of common
stock units and restricted stock units
Share-based compensation expense
Ending balance
Retained earnings
Beginning balance
Net income
Dividends, 2025, $ 1.40 per share; 2024, $ 1.36 per share;
2023, $ 1.32 per share
Ending balance
Accumulated other comprehensive income (loss), net of tax:
Beginning balance
Change in net unrealized investment gains (losses) on fixed maturity
securities
Change in net reserve remeasurements attributable to discount rates
Change in net funded status of benefit plans
Ending balance
Treasury stock, at cost
Beginning balance
Treasury stock acquired - share repurchase authorization
Ending balance
Shareholders' equity at end of year
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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Annual Report on Form 10-K 75
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Year Ended December 31,
Cash flows - operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Net investment losses
Depreciation and intangible asset amortization
Share-based compensation expense
Loss (gain) from equity method investments, net of dividends or distributions
Changes in:
Insurance liabilities
Amounts due under reinsurance agreements
Income tax liabilities
Other operating assets and liabilities
Contributions to defined benefit plan
Other, net
Net cash provided by operating activities
Cash flows - investing activities
Fixed maturity securities purchases
Fixed maturity securities sales
Fixed maturity securities maturities, paydowns, calls and redemptions
Equity securities purchases
Equity securities sales, calls, and repayments
Limited partnership interests purchases
Limited partnership interests sales
Change in short-term and other investments, net
Other, net
Net cash used in investing activities
Cash flows - financing activities
Dividends paid to shareholders
Proceeds from issuance of Senior Notes
Principal repayment on Senior Notes
Principal repayment on Revolving Credit Facility
Treasury stock acquired
Proceeds from exercise of stock options
Withholding tax payments on RSUs tendered
Annuity contracts: variable, fixed and FHLB funding agreements
Deposits
Benefits, withdrawals and net transfers to Separate Account
variable annuity assets
Repayment of FHLB funding agreements
Life policy accounts deposits, withdrawals, and surrenders
Change in deposit asset on reinsurance
Net increase (decrease) in reverse repurchase agreements
Change in book overdrafts
Net cash used in financing activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year
The accompanying Notes are an integral part of these Consolidated Financial Statements.
76 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025, 2024 and 2023
($ in millions, except per share data, unless otherwise stated)
NOTE 1 - Basis of Presentation and Significant Accounting Policies
Business
Horace Mann Educators Corporation is a holding company for insurance subsidiaries that market and underwrite personal lines of property and casualty insurance products (primarily personal lines of auto and property insurance), life insurance products, retirement products (primarily tax-qualified fixed and variable annuities), individual supplemental insurance products (primarily accident, cancer, critical illness, hospital, and supplemental disability), and group benefit products (primarily group disability, group life, and group supplemental health coverages), primarily to K-12 teachers, administrators and other employees of public schools and their families (collectively, HMEC, the Company or Horace Mann).
The Company conducts and manages its business in four reporting segments: (1) Property & Casualty, (2) Life & Retirement, (3) Supplemental & Group Benefits and (4) Corporate & Other.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC).
In the quarter ended June 30, 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error related to private debt securities associated with the Company's limited partnership investments. The $ 8.1 million after tax ($ 10.2 million pre-tax) adjustment decreased net income for the following segments: Life & Retirement $ 5.3 million; and Supplemental & Group Benefits, $ 2.8 million. The out-of-period correction would have resulted in a decrease of net income for year ended December 31, 2024 and 2023 by $ 4.4 million and $ 1.3 million, respectively.
The Company has reclassified the presentation of certain prior period information to conform to the current year's presentation.
Consolidation
All intercompany transactions and balances between HMEC and its subsidiaries and affiliates have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the reporting date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The most significant critical accounting estimates include valuation of hard-to-value fixed maturity securities, evaluation of credit loss impairments for fixed maturity securities, valuation of future policy benefit reserves, and valuation of liabilities for property and casualty unpaid claims and claim expense reserves.
Investments
Fixed Maturity Securities
The Company invests predominantly in fixed maturity securities. Fixed maturity securities include bonds, asset-backed securities (ABS), mortgage-backed securities (MBS), other structured securities and redeemable preferred stocks. MBS includes residential and commercial mortgage-backed securities. Fixed maturity securities, which may be sold prior to their contractual maturity, are designated as available for sale (AFS) and are carried at fair value of which a portion represent securities that are hard-to-value. See Note 3 – Fair Value of
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Annual Report on Form 10-K 77
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Financial Instruments – for a detailed description of how the Company estimates fair value for its fixed maturity securities portfolio including hard-to-value securities. An adjustment for net unrealized investment gains (losses) on all fixed maturity securities available for sale and carried at fair value, is recognized as a separate component of accumulated other comprehensive income (loss) (i.e., AOCI) within shareholders’ equity, net of applicable deferred taxes. The Company excludes accrued interest receivable from the amortized cost basis of its AFS fixed maturity securities.
Equity Securities
Equity securities primarily include common stocks, exchange traded mutual funds and non-redeemable preferred stocks. Certain exchange traded mutual funds have fixed maturity securities as their underlying investments. Equity securities are carried at fair value and typically have readily determinable fair values.
Limited Partnership Interests
Investments in limited partnership interests are predominately accounted for using the equity method of accounting (EMA) and include interests in commercial mortgage loan funds, real estate equity funds, private equity funds, infrastructure debt funds, infrastructure equity funds and other funds. The Company has one investment in a Voya commercial mortgage loan fund totaling $ 234.2 million and $ 241.6 million as of December 31, 2025 and 2024, respectively.
Policy Loans
Policy loans are carried at unpaid principal balances.
Short-Term and Other Investments
Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at amortized cost, which approximates fair value. Other investments primarily consist of Federal Home Loan Bank of Chicago (FHLB) common stock, mortgage loans and derivatives. FHLB common stock is carried at cost. Mortgage loans are carried at amortized cost, net, which represent the amount expected to be collected. Derivatives are carried at fair value.
Variable Interest Entities (VIEs)
The Company invests in fixed maturity securities and alternative investment funds that could qualify as variable interests in VIEs. Such variable interests in VIEs have been reviewed and the Company determined that those VIEs are not subject to consolidation as the Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact those VIEs' economic performance.
Net Investment Income
Net investment income primarily consists of interest, dividends and income from fixed maturity securities. Interest is recognized on an accrual basis using the effective yield method and dividends are recorded at the ex-dividend date. ABS and MBS interest income is determined considering estimated pay-downs, including prepayments, obtained from third-party data sources and internal estimates. Actual prepayment experience is periodically reviewed, and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. For ABS and MBS of high credit quality with fixed interest rates, the effective yield is recalculated on a retrospective basis. For all others, the effective yield is generally recalculated on a prospective basis. Net investment income for AFS fixed maturity securities includes the impact of accreting the credit loss allowance for the time value of money. Accrual of income is suspended for fixed maturity securities when the timing and amount of cash flows expected to be received is not reasonably estimable. Accrual of income is suspended for commercial mortgage loans that are in default or when full and timely collection of principal and interest payments is not probable. Accrued investment income receivables are monitored for recoverability and when not expected to be collected, are written-off through net investment income. Cash receipts on investments on non-accrual status are generally recorded as a reduction of amortized cost or principal. Income from limited partnership interests is generally recognized following the equity method of accounting, where changes in fair value of the investee’s equity primarily determined using its net asset value and is generally recognized on a three month due to the availability of the related financial statements of the investee. In addition, the Company had two limited partnership investments that were accounted for using the Fair Value Option (FVO) where changes in the fair value of the limited partnership investment were recognized in income and were sold in 2025.
78 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
The Company reports accrued investment income within other assets in the Consolidated Balance Sheets separately from AFS fixed maturity securities and has elected not to measure an allowance for credit losses for accrued investment income. Accrued investment income is written-off and recognized as a net investment loss at the time the issuer of the security defaults or is expected to default on payments.
Net Investment Gains (Losses)
Net investment gains (losses) include gains and losses on investment sales, changes in the credit loss allowances related to fixed maturity securities and mortgage loans, impairments, valuation changes of equity securities and periodic changes in fair value and settlements of derivatives. Net investment gains (losses) on investment sales are determined on a specific identification basis and are net of credit losses already recognized through an allowance.
Credit Loss Impairments for Fixed Maturity Securities
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 (as disclosed in Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K) 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 by two or more notches since acquisition; (3) has the security 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 assessment process.
For each fixed maturity security where fair value is below amortized cost, we assess whether management with the appropriate authority has made the decision to sell or whether it is more likely than not we will be required to sell the security before the anticipated recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance is written-off and the amortized cost basis of the security is written down to the fair value, with the losses recorded as a net investment loss.
If we have not made the decision to sell the fixed maturity security and it is not more likely than not we will be required to sell the fixed maturity security before the anticipated recovery of its amortized cost basis, we evaluate whether we expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. We estimate the anticipated recovery based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s effective interest rate and are compared to the amortized cost basis of the security. The determination of whether we expect to received cash flow sufficient to recover the entire amortized cost basis of the security is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. Our investment managers will calculate the anticipated recovery value of the security by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security at the time of purchase for fixed-rate securities. We will then review the assumptions/methodologies for reasonableness. The information reviewed generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected , expected recoveries, and the value of underlying collateral. Other information, such as industry analyst reports and forecasts, sector credit ratings, financial condition of the bond insurer for insured fixed maturity securities, and other market data relevant to the realizability of contractual cash flows, may also be considered.
If we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed maturity security, a credit loss allowance is recorded as a net investment loss for the shortfall in expected cash flows; however, the amortized cost basis, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If we determine that the fixed maturity security does not have sufficient cash flows or other information to estimate
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Annual Report on Form 10-K 79
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
the anticipated recovery value for the security, we may conclude that the entire decline in fair value is deemed to be credit related and the loss is recognized as a net investment loss. Subsequent changes in the anticipated recoveries, limited by the amount of previous taken credit allowances, are recorded through changes in the allowance for credit losses and recognized through net investment loss.
When a security is disposed or deemed uncollectible and written-off, we reverse amounts previously recognized in the credit loss allowance through net investment loss.
Deferred Policy Acquisition Costs and Deferred Sales Inducements
The Company's DAC by reporting segment was as follows:
($ in millions)
December 31,
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Total
DAC consists of costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts. Such costs include the incremental direct costs of contract acquisition, such as sales commissions; the portion of employees' total compensation and payroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing, and processing policies for contracts that have actually been acquired; and other costs related directly to acquisition activities that would not have been incurred if the contract had not been acquired. For property and casualty risks, DAC is amortized over the terms of the insurance policies ( 6 or 12 months). For supplemental and group benefit policies, DAC is amortized in proportion to anticipated premiums over the terms of the insurance policies (approximately 6 years, based on an estimated average duration across all supplemental and group benefit products).
Life contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. DAC is amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. For all life insurance products, the constant level basis used is face amount in force. For all deferred annuity products, the constant level basis used is the deposit amount in force. The constant level basis used for amortization is projected using mortality and lapse assumptions that are based on the Company's experience, industry data, and other factors and are consistent with those used for the liabilities for future policy benefits (LFPB). If those projected assumptions change in future periods, they will be reflected in the cohort level amortization basis at that time. Unexpected terminations, due to mortality and lapse experience higher than expected, are recognized in the current period as a reduction of the capitalized balances.
Amortization of DAC is recognized as DAC amortization expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). The DAC balance is reduced for actual experience in excess of expected experience. Changes in future estimates are recognized prospectively over the remaining expected contract term.
Deferred sales inducements (DSIs) are contract features that are intended to attract new customers or to persuade existing customers to keep their current policy. DSIs may be deferred if the Company can demonstrate that the deferred sales inducement amounts are both incremental to the amounts Company credits on similar contracts without sales inducements and the amounts are higher than the contract's expected ongoing crediting rates for periods after the inducement. Day-one bonuses and persistency bonuses generally meet the criteria to be deferred. DSIs are amortized using the same methodology and assumptions used to amortize DAC.
Intangible Assets, net
The value of business acquired (VOBA) associated with the acquisition of NTA Life Enterprises, LLC (NTA) represents the difference between the fair value of insurance contracts and insurance policy reserves measured in accordance with the Company's accounting policy for insurance contracts acquired. VOBA was based on an actuarial estimate of the present value of future distributable earnings for insurance in force on the acquisition date. VOBA net of accumulated amortization was $ 54.5 million as of December 31, 2025 and is being amortized by product based on the present value of future premiums to be received. The Company estimates that it will
80 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
recognize VOBA amortization of $ 4.7 million in 2026, $ 4.4 million in 2027, $ 4.1 million in 2028, $ 3.9 million in 2029, and $ 3.6 million in 2030.
The Company accounts for the value of distribution acquired (VODA) associated with the acquisition of NTA based on an actuarial estimate of the present value of future business to be written by the existing distribution channel. VODA net of accumulated amortization was $ 30.3 million as of December 31, 2025 and is being amortized on a straight-line basis. The Company estimates that it will recognize VODA amortization of $ 2.9 million in each of the years 2026 through 2030, respectively.
The Company accounts for the value of agency relationships based on the present value of commission overrides retained by NTA. Agency relationships net of accumulated amortization was $ 4.6 million as of December 31, 2025 and is being amortized based on the present value of future premiums to be received. The Company estimates that it will recognize agency relationships amortization of $ 1.0 million in 2026, $ 0.9 million in 2027, $ 0.8 million in 2028, $ 0.6 million in 2029 and $ 0.5 million in 2030.
The Company accounts for the value of customer relationships based on the present value of expected profits from existing Benefit Consultants Group, Inc. (BCG) and MNL customers in force at the date of acquisition. Customer relationships net of accumulated amortization was $ 38.3 million as of December 31, 2025 and is being amortized based on the present value of future profits to be received for BCG and based on the present value of future premiums for MNL. The Company estimates that it will recognize customer relationships amortization of $ 5.5 million in 2026, $ 5.9 million in 2027, $ 6.3 million in 2028, $ 6.5 million in 2029 and $ 6.9 million in 2030.
The trade names intangible asset represents the present value of future savings accruing to NTA, BCG and BCGS by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. The state licenses intangible asset represents the regulatory licenses held by NTA and MNL that were valued using the cost approach. Both the trade names and state licenses are indefinite-lived intangible assets that are not subject to amortization.
Annually, the Company performs a VOBA analysis on supplemental insurance policies to assess whether a loss recognition event has occurred. This initially involves comparing the historical and expected future experience on the block to the assumptions embedded in the original VOBA intangible asset. If both the experience to date and current expected experience are consistently better than the initial VOBA assumptions, the remaining value in the block is sufficient to support the VOBA intangible asset and no loss recognition is necessary. If the historical and current expected assumptions are not uniformly better than the initial VOBA assumptions, a gross premium valuation (GPV) is performed to assess whether a loss recognition event has occurred. This involves discounting expected future benefits and expenses less expected future premiums. To the extent that this amount is greater than the liability for future benefits less the VOBA intangible asset, in aggregate for the supplemental insurance block, a loss would be recognized by first writing-off the VOBA and then increasing the liability. Currently, a GPV is not required for the acquired supplemental block. No such costs were deemed during the year ended December 31, 2025.
Amortizing intangible assets (i.e., VODA, agency relationships and customer relationships) are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of an amortizing intangible asset is not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is not recoverable from undiscounted cash flows, the impairment is measured as the difference between the carrying amount and fair value.
Intangible assets that are not subject to amortization (i.e., trade names and state licenses) are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. As of October 1, 2025, October 1, 2024 and October 1, 2023, the Company performed qualitative assessments to determine whether it was necessary to perform quantitative intangible asset impairment tests. Based on the assessment of qualitative factors, there were no events or circumstances that led to a determination that it is more likely than not that the fair value of an intangible asset is less than its carrying amount.
Goodwill
When the Company was acquired from CIGNA Corporation by HME Holdings, Inc. in 1989, goodwill was recognized in the application of purchase accounting. In 1994, goodwill was recognized with respect to the acquisition of Horace Mann Property & Casualty Insurance Company. In 2019, goodwill was recognized with
Horace Mann Educators Corporation
Annual Report on Form 10-K 81
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
respect to the acquisitions of BCG, BCGS and NTA. In 2022, goodwill was recognized with respect to the acquisition of MNL.
Goodwill represents the excess of the amounts paid to acquire a business over the fair value of its net assets at the date of acquisition. Goodwill is not amortized, but is tested for impairment at the reporting unit level at least annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A reporting unit is defined as an operating segment or a business unit one level below an operating segment, if separate financial information is prepared and regularly reviewed by management at that level. The Company's reporting units, for which goodwill has been allocated, are Property & Casualty, Life, BCG, BCGS, NTA, and MNL. Refer to Note 9 for the allocation of goodwill by reporting segment as of December 31, 2025.
The goodwill impairment test, as defined in GAAP, allows an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the entity performs a quantitative goodwill impairment test by comparing the fair value of a reporting unit to its carrying amount for purposes of confirming and measuring an impairment. Goodwill impairment is the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. Any amount of goodwill determined to be impaired is recognized as an expense in the period in which the impairment determination is made.
At October 1, 2025, October 1, 2024 and October 1, 2023, the Company performed a qualitative goodwill impairment test. Based on the results of the tests, there were no events or circumstances that led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
During each year from 2023 through 2025, the Company completed the required annual goodwill impairment testing. With exception to the goodwill impairment charges described in Note 9, no other goodwill impairment charges were necessary as a result of such assessments. The assessment of goodwill recoverability requires significant judgment and is subject to inherent uncertainty. The use of different assumptions, within a reasonable range, could cause the fair value of a reporting unit to fall below its carrying amount. Subsequent goodwill assessments could result in impairment, particularly for any reporting unit with at-risk goodwill, due to the impact of a volatile financial market on earnings, discount rate assumptions, liquidity and market capitalization.
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation, which is calculated using the straight-line method and based on the estimated useful lives of the assets. The estimated life for real estate is identified by specific property and ranges from 20 to 45 years. The estimated useful lives of leasehold improvements and other property and equipment, including capitalized software, generally range from 3 to 10 years. The following amounts are included in Other assets in the Consolidated Balance Sheets:
($ in millions)
December 31,
Property and equipment
Less: accumulated depreciation
Total
Separate Account Variable Annuity Assets and Liabilities
Separate Account variable annuity assets represent contractholder funds invested in various mutual funds. The Separate Account variable annuity assets comprise actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access. Net asset values for the actively traded mutual funds in which the Separate Account variable annuity assets are invested are obtained daily from the fund managers. Separate Account variable annuity liabilities are equal to the estimated fair value of Separate Account variable annuity assets. The investment income, gains and losses of these accounts accrue directly to the contractholders and are not included in the results of operations of the Company. The activity of the Separate Accounts is not reflected in the Consolidated Statements of Operations and Comprehensive Income (Loss) except for (1) contract charges earned and (2) the activity related to contract guarantees, which
82 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
are benefits on existing variable annuity contracts. The Company's contract charges earned include fees charged to the Separate Accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges.
Future Policy Benefits Reserves
Liability for Future Policy Benefits
LFPB, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue is recognized. The liability is estimated using current assumptions that include discount rate, mortality, lapses, and expenses. These current assumptions are based on judgments that consider the Company's historical experience, industry data, and other factors.
For traditional, limited-payment and supplemental health contracts, such contracts are grouped into cohorts by contract type and issue year. The liability is adjusted for differences between actual and expected experience. With the exception of the expense assumption, the Company reviews its historical and future cash flow assumptions at least annually and updates the net premium ratio used to calculate the liability each time the assumptions are changed. The Company has elected to use expense assumptions that are locked-in at contract inception and are not subsequently reviewed or updated. At least annually, the Company updates its estimate of cash flows expected over the entire life of a group of contracts using actual historical experience and current future cash flow assumptions. These updated cash flows are used to calculate the revised net premiums and net premium ratio, which are used to derive an updated LFPB as of the beginning of the current reporting period, discounted at the original contract issuance discount rate. This amount is then compared to the carrying amount of the liability as of that same date, before updating cash flow assumptions, to determine the current period change in liability estimate. This current period change in liability estimate is the liability remeasurement gain or loss. The impact of updated cash flow assumptions as well as the periodic liability remeasurement gain or loss is recognized as Benefits, and settlement expenses in the Consolidated Statements of Operations and Comprehensive Income (). In subsequent periods, the revised net premiums are used to measure LFPB, subject to future revisions.
For traditional and limited-payment contracts, a standard discount rate is used to measure the liabilities that is equivalent to the yield from an A-rated bond. The discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income. For liability cash flows that are projected beyond the duration of market-observable A- rated bond, the Company uses the last market-observable yield level, and uses linear interpolation to determine yield assumptions for durations that do not have market-observable yields.
Deferred Profit Liability
For limited-payment products, gross premiums received in excess of net premiums are deferred at initial recognition as a DPL. Gross premiums are measured using assumptions consistent with those used in the measurement of LFPB, including discount rate, mortality, lapses, and expenses.
DPL is amortized and recognized as premium revenue in proportion to insurance in force for life insurance contracts and expected future benefit payments for annuity contracts. Interest is accreted on the balance of DPL using the discount rate determined at contract issuance. The Company reviews and updates its estimates of cash flows for DPL at the same time as the estimates of cash flows for the liability for future policy benefits. When cash flows are updated, the updated estimates are used to recalculate DPL at contract issuance. The recalculated DPL as of the beginning of the current reporting period is compared to the carrying amount of DPL as of the beginning of the current reporting period, and any difference is recognized as either a charge or credit to Net premiums and contract charges earned presented in the Consolidated Statements of Operations and Comprehensive Income (Loss).
DPL is recognized as a component of the Future policy benefit reserves presented in the Consolidated Balance Sheets.
Policyholders' Account Balances
Liabilities for future benefits on annuity contracts are carried at accumulated policyholder account values without reduction for potential surrender or withdrawal charges.
Horace Mann Educators Corporation
Annual Report on Form 10-K 83
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Reserves for Fixed Indexed Annuities and Indexed Universal Life Products
The Company offers fixed indexed annuity (FIA) products with interest crediting strategies linked to the Standard & Poor's (S&P) 500 Index and the Dow Jones Industrial Average (DJIA). The Company purchases call options on the applicable indices as an investment to provide the income needed to fund the annual index credits on the indexed products. These products are deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance and are considered hybrid financial instruments under GAAP.
The Company elected to not use hedge accounting for derivative transactions. As a result, the Company accounts for the purchased call options and the embedded derivative related to the provision of a contingent return at fair value, with changes in fair value recognized as Net investment gains (losses) in the Consolidated Statements of Operations and Comprehensive Income (Loss). The embedded derivative is bifurcated from the host contract and included in Policyholders' account balances in the Consolidated Balance Sheets. The host contract is accounted for as a debt instrument in accordance with GAAP and is included in Policyholders' account balances in the Consolidated Balance Sheets with any discount to the minimum account value being accreted using the effective yield method. In the Consolidated Statements of Operations and Comprehensive Income (Loss), accreted interest for FIA products and benefit claims on these products incurred during the reporting period are included in Benefits, claims and settlement expenses.
The Company offers indexed universal life (IUL) products as part of its product portfolio with interest crediting strategies linked to the S&P 500 Index and the DJIA as well as a fixed option. The Company purchases call options monthly to economically hedge the potential liabilities arising in IUL accounts. As a result, the Company records the purchased call options and the embedded derivative related to the provision of a contingent return at fair value, with changes in fair value reported in Net investment gains (losses) in the Consolidated Statements of Operations and Comprehensive Income (Loss). IUL policies with a balance in one or more indexed accounts are considered to have an embedded derivative. The benefit reserve for the host contract is measured using the retrospective deposit method, which for Horace Mann's IUL product is equal to the account balance. The embedded derivative is bifurcated from the host contract, carried at fair value, and included in Policyholders' account balances in the Consolidated Balance Sheets.
See Note 3 for more information regarding the determination of fair value for derivatives embedded in FIA and IUL and purchased call options.
Market Risk Benefits
MRBs are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. MRBs include guaranteed minimum death benefits on variable annuity products. MRBs are measured at fair value using a non-option-based valuation model based on current net amounts at risk, market data, Company experience, and other factors. Changes in fair value of MRBs are recognized as a component of Benefits, claims and settlement expenses presented in the Consolidated Statements of Operations and Comprehensive Income (Loss) each period with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in other comprehensive income.
MRBs are recognized as a component of Policyholders' account balances reserves presented in the Consolidated Balance Sheets.
Short-Duration Insurance Contracts
Liabilities for property & casualty unpaid claims and claim expense reserves (reserves) include provisions for payments to be made on reported claims, claims incurred but not yet reported (IBNR) and associated settlement expenses. All of the Company's reserves for property & casualty unpaid claims and claim expenses are carried at the full value of estimated liabilities and are not discounted for interest expected to be earned on the reserves. Estimated amounts of salvage and subrogation on unpaid property & casualty claims are deducted from the liability for unpaid claims. Starting in 2024, property and casualty unpaid claims and claim expense reserves include legacy commercial line exposures as more fully discussed in Note 5.
Liabilities for Group Benefits unpaid claims and claim expense reserves (reserves) represent management's best estimate of ultimate unpaid costs of losses and settlement expenses for reported claims and claims that are IBNR. All of the Company's reserves for Group Benefits unpaid claims and claim expenses are carried at the full
84 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
value of estimated liabilities (i.e., undiscounted) with exception to certain case reserves in the group disability line of business for which those reserves are carried on a discounted basis. The Company calculates and records a single best estimate of the reserve as of each reporting date in conformity with actuarial standards of practice.
The Company does not consider anticipated investment income in premium deficiency testing under ASC 944-60-50-1.
Other Policyholder Funds
Other policyholder funds includes primarily balances outstanding under funding agreements with the FHLB as well as dividend accumulations, carried at cost. Amounts received and repaid under FHLB funding agreements are classified as financing activities in the Company's Consolidated Statements of Cash Flows.
FHLB Funding Agreements
HMLIC (since 2013), NTA (since 2019), and MNL (since 2023), are all members of FHLB, which provides the subsidiaries with access to collateralized borrowings and other FHLB products. Any borrowing from FHLB requires the purchase of FHLB activity-based common stock in an amount equal to 4.5 % of the borrowing, or a lower percentage — such as 2.0 % based on the Reduced Capitalization Advance Program. In 2021, HMEC's Board of Directors (Board) authorized a maximum amount equal to 25 % of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB advances and funding agreements combined. In 2025, HMLIC, MNL, and NTA collectively received $ 559.5 million from FHLB funding agreements and repaid $ 509.5 million on FHLB funding agreements. Outstanding advances under FHLB funding agreements are reported as Other policyholder funds in the Consolidated Balance Sheets and totaled $ 1,039.5 million and $ 989.5 million as of December 31, 2025 and 2024, respectively. Interest on the funding agreements accrues at their contractual interest rates.
Horace Mann Educators Corporation
Annual Report on Form 10-K 85
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
As of December 31, 2025, scheduled maturity dates for outstanding FHLB funding agreements were as follows:
($ in millions)
Amount
Interest Rate
Maturity Date
January 13, 2027
December 11, 2026
November 20, 2026
September 11, 2026
September 09, 2026
August 26, 2026
August 26, 2026
August 05, 2026
August 05, 2026
August 05, 2026
June 26, 2026
May 20, 2026
May 20, 2026
April 22, 2026
April 01, 2026
April 01, 2026
February 27, 2026
February 27, 2026
February 13, 2026
February 13, 2026
February 13, 2026
February 06, 2026
February 06, 2026
January 16, 2026
January 09, 2026
January 09, 2026
Total
Reverse Repurchase Agreements
Beginning in the second quarter of 2022, the Company entered into reverse repurchase agreements to sell securities for cash. Such reverse repurchase agreements are primarily used as a financing tool for general corporate purposes and may be used as a tool to enhance yield on the investment portfolio.
A reverse repurchase agreement is a transaction in which one party (transferor) agrees to sell securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities (or substantially the same securities) at a specified price on a specified date. These transactions are generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value.
Reinsurance
The Company enters into reinsurance arrangements pursuant to which it cedes certain insurance risks to unaffiliated reinsurers. Cessions under reinsurance agreements do not discharge the Company's obligations as the primary insurer. The accounting for reinsurance arrangements depends on whether the arrangement provides indemnification against loss or liability relating to insurance risk in accordance with GAAP.
If the Company determines that a reinsurance agreement exposes the reinsurer to a reasonable possibility of a significant loss from insurance risk, the ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of its legal liability to its policyholders. See Note 7 for further details.
86 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company recognizes the reinsurance agreement using the deposit method of accounting. The assets transferred to the reinsurer as consideration paid is reported as a Deposit asset on reinsurance on the Company's Consolidated Balance Sheets. As amounts are received or paid or received, consistent with the underlying reinsured contracts, the Deposit asset on reinsurance is adjusted. The Deposit asset on reinsurance is accreted to the estimated ultimate cash flows using the interest method and the adjustment is reported as Net investment income. See Note 8 for further details.
Insurance Premiums and Contract Charges Earned
Property & Casualty insurance premiums are recognized as revenue ratably over the related contract periods in proportion to the risks insured. The unexpired portions of these Property & Casualty premiums are recorded as unearned premiums, using the monthly pro rata method.
Premiums and contract charges for life insurance contracts with account values and annuity contracts consist of charges for the cost of insurance, policy administration and withdrawals. Premiums for traditional life and supplemental and group policies are recognized as revenues when due over the premium-paying period. Contract deposits to annuity contracts and life insurance contracts with account values represent funds deposited by policyholders and are not included in the Company's premiums or contract charges earned.
Share-Based Compensation
The Company grants stock options and both service-based and performance-based restricted common stock units (RSUs) to executive officers, other employees and Directors in an effort to attract and retain individuals while also aligning compensation with the interests of the Company's shareholders. Additional information regarding the Company's share-based compensation plans is contained in Note 12.
Stock options are accounted for under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. The fair value of RSUs is measured at the market price of the Company's common stock on the date of grant, with the exception of market-based performance awards, for which the Company uses a Monte Carlo simulation model to determine fair value for purposes of measuring RSU expense. For the years ended December 31, 2025, 2024 and 2023, the Company recognized $ 1.5 million , $ 1.6 million, and $ 1.4 million, respectively, of stock option expense as a result of stock options that vested during the respective periods. For the years ended December 31, 2025, 2024 and 2023, the Company recogniz ed $ 8.7 million , $ 7.8 million and $ 7.5 million, respectively, in RSU expense as a result of the performance and/or vesting of RSUs during the respective periods.
In 2025, 2024 and 2023, the Company granted stock options as quantified in the table below, which also provides the weighted average grant date fair value for stock options granted in each year. The fair value of stock options granted was estimated on the respective dates of grant using the Black-Scholes option pricing model with the weighted average assumptions shown in the following table.
Year Ended December 31,
Number of stock options granted
Weighted average grant date fair value of stock options granted
Weighted average assumptions:
Risk-free interest rate
Expected dividend yield
Expected life, in years
Expected volatility (based on historical volatility)
The weighted average fair value of nonvested stock options outstanding on December 31, 2025 was $ 8.80 . Total unrecognized compensation expense relating to the nonvested stock options outstanding as of December 31, 2025 was approximately $ 2.3 million. This amount will be recognized as expense over the remainder of the vesting period, which is scheduled to be 2026 through 2029. Expense is recognized on a straight-line basis over the vesting period for the entire award. Forfeitures of unvested amounts due to terminations and/or early retirements are recognized as a reduction to the related expenses.
Horace Mann Educators Corporation
Annual Report on Form 10-K 87
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Total unrecognized compensation expense relating to RSUs outstanding as of December 31, 2025 was approximately $ 10.1 million. This amount will be recognized as expense over the remainder of the performance and/or vesting period, which is scheduled to be 2026 through 2028 . Expense is recognized on a straight-line basis from the date of grant through the end of the performance and/or vesting period for the entire award. Forfeitures of unvested amounts due to terminations are recognized as a reduction to the related expenses.
Retirement Plans
As of December 31, 2024, the Company sponsored a qualified defined benefit plan. The qualified defined benefit plan has been frozen since 2002. All participants in the frozen plan are 100% vested in their accrued benefit. On September 3, 2025, the Company’s Board of Directors approved a plan to effect the termination of the Horace Mann Pension Plan (the Plan). This termination became effective on November 30, 2025. This termination was completed on December 11, 2025, by meeting the following criteria: (1) an irrevocable action to terminate the Plan had occurred, (2) the Company was relieved of the primary responsibility of the Plan, and (3) the significant risks related to the obligations of the Plan and the assets used to effect the settlement were eliminated for the Company.
In December 2025, the Company made a cash contribution of $ 3.0 million to the Plan. This contribution, along with the liquidation of the Plan assets, was used to purchase annuities from an insurance company to settle the liabilities of the Plan on December 11, 2025.
In connection with the termination process, the Company recorded a pre-tax settlement charge of $ 7.1 million within operating expenses in the consolidated statements of operations, which represents the acceleration of deferred charges previously included within accumulated other comprehensive loss and the impact of remeasuring the plan assets and obligations at termination.
The Company sponsors a 401(k) plan, two non-qualified supplemental defined benefit plans, and a non-qualified defined contribution plan. The two non-qualified supplemental defined benefit plans have been frozen since 2002. All participants in the frozen plans are 100% vested in their accrued benefit and are receiving payments.
All employees participate in the 401(k) plan and receive a 100% vested 3 % "safe harbor" company contribution based on employees' eligible earnings. The Company matches each dollar of employee contributions up to a 5 % maximum — in addition to maintaining the automatic 3 % "safe harbor" contribution. The matching company contribution vests after 5 years of service. The 401(k) plan is fully funded.
Both the non-qualified frozen supplemental defined benefit plans and the non-qualified contribution plan are unfunded plans with the Company's contributions made at the time payments are made to participants.
For the qualified plans, all assets are held in their respective plan trusts. The assets and projected benefit obligation at the end of the year are as follows:
($ in millions)
Year Ended December 31,
401(k) plan assets
Defined benefit plan assets
Projected benefit obligation
Income Taxes
The Company uses the asset and liability method for calculating deferred federal income taxes. Income tax provisions are generally based on income reported for financial statement purposes. The provisions for federal income taxes for the years ended December 31, 2025, 2024 and 2023 included amounts currently payable and deferred income taxes resulting from the cumulative differences in the Company's assets and liabilities, determined on a tax return versus financial statement basis.
Deferred tax assets and liabilities include provisions for net unrealized investment gains (losses) on fixed maturity securities as well as the net funded status of benefit plans with the changes for each period included in the respective components of AOCI within shareholders' equity.
88 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Earnings Per Share
Basic earnings per share is computed based on the weighted average number of common shares outstanding plus the weighted average number of fully vested RSUs and common stock units (CSUs) payable as shares of HMEC common stock. Diluted earnings per share is computed based on the weighted average number of common shares and common stock equivalents outstanding, to the extent dilutive. The Company's common stock equivalents relate to outstanding common stock options, deferred compensation CSUs and incentive compensation RSUs, which are described in Note 12.
The computations of net income (loss) per share on both basic and diluted bases, including reconciliations of the numerators and denominators, were as follows:
($ in millions)
Year Ended December 31,
Basic:
Net income for the period
Weighted average number of common shares
during the period (in millions)
Net income per share - basic
Diluted:
Net income for the period
Weighted average number of common shares
during the period (in millions)
Weighted average number of common equivalent shares to reflect the
dilutive effect of common stock equivalent securities (in millions):
Stock options
CSUs related to deferred compensation for employees
RSUs related to incentive compensation
Total common and common equivalent shares adjusted
to calculate diluted earnings per share (in millions)
Net income per share - diluted
Options to purchase 420,553 shares of common stock at $ 35.39 to $ 42.95 per share were granted in 2018, 2022, 2023, 2024 and 2025 but were not included in the computation of 2025 diluted net income (loss) per share because of their anti-dilutive effect. These options, which expire in 2028, 2032, 2033, 2034, and 2035 were still outstanding at December 31, 2025.
Consolidated Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, cash constitutes cash on deposit at banks as well as restricted cash. See Note 16 for further information.
Recent Adoption of New Accounting Standards
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update will improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures.
Effective for the year ended December 31, 2025, the Company adopted disclosure guidance for income tax disclosures on a retrospective basis. The guidance had no net impact on the Company's consolidated financial position, results of operations, or cash flows. See Note 11 for further information.
Horace Mann Educators Corporation
Annual Report on Form 10-K 89
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Future Adoption of New Accounting Standards
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-04, 03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance will improve the disclosures regarding a public business entity’s expenses by requiring (1) disclosure of the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption, (2) inclusion of certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements, (3) disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and (4) disclosure of the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.
The amendments in this guidance will be effective for the Company for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The guidance will have no net impact on the Company's consolidated financial position, results of operations, or cash flows.
Subsequent Events
Subsequent to year-end, certain employees elected to participate in an early retirement program for which the corresponding expense will be recorded ratably over the remaining service period in 2026.
NOTE 2 - Investments
Net Investment Income
The components of net investment income for the following periods were as follows:
($ in millions)
Year Ended December 31,
Fixed maturity securities
Equity securities
Limited partnership interests (1)
Short-term and other investments
Investment expenses
Net investment income - investment portfolio
Investment income - deposit asset on reinsurance
Total net investment income (2)
(1) Income related to Voya CML Fund was $ 13.3 million for 2025 and $ 19.2 million for 2024.
(2) 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 December 31, 2025 Form 10-K.
Net Investment Losses
Net investment losses for the following periods were as follows:
($ in millions)
Year Ended December 31,
Fixed maturity securities
Equity securities
Short-term investments and other
Net investment losses
The Company, from time to time, sells fixed maturity securities subsequent to the reporting date but prior to the issuance of the financial statements that were in an unrealized loss position but no credit loss was recognized and there was no intent to sell the securities at the reporting date. Such sales are due to issuer-specific events
90 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 2 - Investments (continued)
occurring subsequent to the reporting date that result in a change in the Company's intent to sell a fixed maturity security. The types of events that may result in a sale include significant changes in the economic facts and circumstances related to the invested asset, significant unforeseen changes in liquidity needs, or changes in the Company's investment strategy.
Net Investment Losses by Transaction Type
The breakdown of net investment gains (losses) by transaction type for the following periods were as follows:
($ in millions)
Year Ended December 31,
Credit loss impairments
Intent-to-sell impairments
Total impairments
Sales and other, net
Change in fair value - equity securities
Change in fair value and losses realized
on settlements - derivatives
Net investment losses
Allowance for Credit Loss Impairments on Fixed Maturity Securities
The following table presents changes in the allowance for credit loss impairments on fixed maturity securities classified as available for sale for the category of other asset-backed securities (no other categories of fixed maturity securities have an allowance for credit loss impairments):
($ in millions)
Year Ended December 31,
Beginning balance
Credit losses on fixed maturity securities for which credit losses were not previously reported
Net increases (decreases) related to credit losses previously reported
Reduction of credit allowances related to sales
Write-offs
Ending balance
Horace Mann Educators Corporation
Annual Report on Form 10-K 91
NOTE 2 - Investments (continued)
Fixed Maturity Securities
The Company's investment portfolio is comprised primarily of fixed maturity securities. Amortized cost, net, gross unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in millions)
Amortized
Cost, net
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2025
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
Other, including U.S. Treasury securities
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
Totals
December 31, 2024
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
Other, including U.S. Treasury securities
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
Totals
92 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 2 - Investments (continued)
The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position as of December 31, 2025 and 2024. The Company views the decrease in fair value of all fixed maturity securities with unrealized losses as of December 31, 2025 as due to factors other than a credit loss. As of December 31, 2025, the Company has not made the decision to sell and it is more likely than not the Company will not be required to sell the fixed maturity securities with unrealized losses before a recovery of the amortized cost basis. In reaching our conclusion that an allowance for credit is unnecessary, we considered the factors described in the Application of Critical Accounting Estimates - Evaluation of Credit Loss Impairments for Fixed Maturity Securities. The performance of fixed maturity securities has been impacted by the change in interest rates, specifically interest rates being at relatively high levels compared to interest rates at the time of acquisition of the securities. In consideration of the factors, we expect to receive cash flows sufficient to recover the entire amortized cost basis of the securities in the following table.
($ in millions)
12 months or less
More than 12 months
Total
Fair Value
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
December 31, 2025
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
Other
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
Total
Number of positions with a
gross unrealized loss
Fair value as a percentage of total fixed
maturities securities fair value
December 31, 2024
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
Other
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
Total
Number of positions with a
gross unrealized loss
Fair value as a percentage of total fixed
maturities securities fair value
Horace Mann Educators Corporation
Annual Report on Form 10-K 93
NOTE 2 - Investments (continued)
With regards to fixed maturity securities that had gross unrealized losses more than 12 months, the number of positions by their respective credit ratings was as follows:
Number of Positions
December 31,
Credit Rating
AAA
BBB
Total investment grade
CCC or lower
Total below investment grade
Not rated
Totals:
Fixed maturity securities with an investment grade rating represented 98.0 % of the gross unrealized losses as of December 31, 2025. For the same reasons discussed above, we expect to receive cash flows sufficient to recover the entire amortized cost basis of the securities in the previous table.
Maturities of Fixed Maturity Securities
The following table presents the distribution of the Company's fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in millions)
December 31, 2025
Amortized
Cost, net
Fair
Value
Percent of
Total Fair
Value
Estimated expected maturity:
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years through 20 years
Due after 20 years
Total
94 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 2 - Investments (continued)
Sales of Fixed Maturity and Equity Securities
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each year were as follows:
($ in millions)
Year Ended December 31,
Fixed maturity securities
Proceeds received
Gross gains realized
Gross losses realized
Equity securities
Proceeds received
Gross gains realized
Gross losses realized
Net Unrealized Investment Gains (Losses) on Fixed Maturity Securities
The following table reconciles the net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in AOCI:
($ in millions)
Year Ended December 31,
Net unrealized investment gains (losses)
on fixed maturity securities, net of tax
Beginning of period
Change in net unrealized investment gains
(losses) on fixed maturity securities
Reclassification of net investment (gains) losses
on fixed maturity securities to net income
End of period
Limited Partnership Interests
Investments in limited partnership interests are predominately accounted for using the equity method of accounting (EMA) and include interests in commercial mortgage loan funds, real estate equity funds, private equity funds, infrastructure equity funds, infrastructure debt funds and other funds. In addition, we had two limited partnership investments accounted for at fair value using the fair value option (FVO) as of December 31, 2024. The two investments using FVO at December 31, 2024 were sold in 2025. Principal factors influencing carrying amount appreciation or depreciation include operating performance, comparable public company earnings multiples, capitalization rates and the economic environment. The carrying amounts of EMA limited partnership interests were as follows:
($ in millions)
December 31,
Commercial mortgage loan funds
Real estate equity funds
Private equity funds
Infrastructure equity funds
Infrastructure debt funds
Other funds (1)
Total
(1) Other funds consist primarily of limited partnership interests in corporate mezzanine, venture capital, and private credit funds.
The carrying value of the EMA limited partnerships is impaired to fair value when a decline in value is considered to be other-than-temporary. For the years ended December 31, 2025 and 2024, no other-than-temporary impairments were recognized for EMA limited partnerships.
Horace Mann Educators Corporation
Annual Report on Form 10-K 95
NOTE 2 - Investments (continued)
Offsetting of Assets and Liabilities
The Company's derivatives are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement provides that the Company will receive or pledge financial collateral in the event minimum thresholds have been reached. The Company’s reverse repurchase agreements are also subject to enforceable master netting arrangements but there was no offsetting in their presentation in the Company’s Consolidated Balance Sheets. The following table presents instruments that were subject to a master netting arrangement for the Company.
($ in millions)
Gross
Amounts
Offset in the Consolidated
Balance
Sheets
Net Amounts
of Assets/
Liabilities
Presented
in the Consolidated
Balance
Sheets
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
Gross
Amounts
Financial
Instruments
Cash
Collateral
Received
Net
Amount
December 31, 2025
Asset derivatives
Free-standing derivatives
December 31, 2024
Asset derivatives
Free-standing derivatives
Reverse Repurchase Agreements
In connection with reverse repurchase agreements, the Company transfers primarily U.S. government, government agency and corporate securities and receives cash. For reverse repurchase agreements, the Company receives cash in an amount equal to at least 95 % of the fair value of the securities transferred, and the agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The Company accounts for reverse repurchase agreements as secured borrowings. The securities transferred under reverse repurchase agreements are included in Fixed maturity securities with the obligation to repurchase those securities reported in Other liabilities on the Company's Consolidated Balance Sheets. The fair value of the securities transferred was $ 0.0 million as of December 31, 2025 and $ 12.4 million as of December 31, 2024. The obligation for securities sold under reverse repurchase agreements was a net amount of $ 0.0 million as of December 31, 2025 and $ 12.0 million December 31, 2024.
Deposits
At December 31, 2025 and 2024, fixed maturity securities with a fair value of $ 26.3 million and $ 27.1 million, respectively, were on deposit with governmental agencies as required by law in various states for which the insurance subsidiaries of the Company conduct business. In addition, as of December 31, 2025 and 2024, fixed maturity securities with a fair value of $ 1,107.1 million and $ 1,072.2 million, respectively, were on deposit with FHLB as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $ 1,039.5 million and $ 989.5 million at the respective dates. The deposited securities are reported as Fixed maturity securities in the Company's Consolidated Balance Sheets.
NOTE 3 - Fair Value of Financial Instruments
The Company is required to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values for the Company's insurance contracts other than annuity contracts (which are investment contracts) and equity method limited partnership interests are not required to be disclosed in fair value hierarchy. The estimated fair values of liabilities under all insurance contracts are taken into consideration in the Company's overall management of interest rate risk through the matching of investment maturities with amounts due under insurance contracts.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between knowledgeable, unrelated and willing market participants on the measurement date. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company categorizes the fair value of its financial and nonfinancial assets and
96 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 3 - Fair Value of Financial Instruments (continued)
liabilities into a three-level hierarchy based on the priority of inputs to the valuation technique. The three levels of inputs that may be used to measure fair value are:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include certain fixed maturity and equity securities that are traded in an active exchange market, as well as U.S. Treasury securities.
Level 2
Unadjusted observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for the assets or liabilities. Level 2 assets and liabilities include fixed maturity securities (1) with quoted prices that are traded less frequently than exchange-traded instruments or (2) values based on discounted cash flows with observable inputs. This category generally includes certain U.S. Government and agency mortgage-backed securities, non-agency structured securities, corporate fixed maturity securities, preferred stocks, derivatives and embedded derivatives.
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, certain discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation and for which the significant inputs are unobservable. This category generally includes certain private debt and equity instruments, as well as embedded derivatives and limited partnerships accounted for under the fair value option.
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. As a result, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) and unobservable (Level 3). Net transfers into or out of each of the three levels are reported as having occurred at the end of the reporting period in which the transfers were determined.
The following discussion describes the valuation methodologies used for financial assets and financial liabilities measured at fair value. The techniques utilized in estimating fair value are affected by the assumptions used, including discount rates and estimates of the amount and timing of expected future cash flows. The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's financial assets and liabilities. Judgment is exercised in deriving conclusions about the Company's business, its value or financial position based on the fair value information of financial assets and liabilities presented below.
Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial asset or financial liability, including estimates of both the timing and amount of expected future cash flows and the credit standing of the issuer. In some cases, fair value estimates cannot be substantiated by comparison to independent markets. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial asset or financial liability. The disclosed fair values do not reflect any premium or discount that could result from offering for sale at one time an entire holding of a particular financial asset or financial liability. In periods of market disruption, the ability to observe prices and inputs may be reduced for many financial instruments. This condition could cause a financial instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3. Potential taxes and other expenses that would be incurred in an actual sale or settlement are not reflected in the fair value amounts disclosed.
Investments
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
Horace Mann Educators Corporation
Annual Report on Form 10-K 97
NOTE 3 - Fair Value of Financial Instruments (continued)
portfolio to be priced through pricing services using observable inputs. Approximately 92.1 % and 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, 2025 and 2024, respectively. The remainder of the fixed maturity securities portfolio was priced by broker quotes, modeled prices by our investment managers or pricing models that use unobservable inputs. Non-binding broker quotes are generally classified as Level 3, unless the quotes can be corroborated by comparison to other valuation service provider prices or observable pricing models or analyses, whereby they could be classified as Level 2. There were no significant changes to the valuation process during 2025.
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-based 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. When the pricing sources cannot provide fair value determinations, the investment managers obtain non-binding price quotes from brokers. For those securities where the investment manager cannot obtain broker quotes, they will model the security, generally using estimated cash flows of the underlying collateral. Brokers' 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 includes: benchmark yield, liquidity premium, estimated cash flows, prepayment speeds and default rates, spreads, weighted average life, and credit rating. 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. For some securities, additional inputs may be necessary.
To determine the fair value of equity securities, the Company uses its third-party valuation service providers, investment managers or its custodian bank to obtain fair value prices from independent third-party valuation service providers.
In summary, the following financial assets and financial liabilities are carried at fair value on a recurring basis:
Financial assets
• Fixed maturity securities, including hard-to-value fixed maturity securities, as described above.
• Equity securities, as described above.
• Limited Partnership Interests accounted for under Fair Value Option (FVO), as described above.
• Short-term investments — Because of the nature of these assets, carrying amounts are amortized cost which approximate fair values.
• Other investments — Other investments include derivatives. Fair values of derivatives are based on the amount of cash expected to be received to settle each derivative on the reporting date. These amounts are obtained from each of the counterparties using industry accepted valuation models and observable inputs. Significant inputs include contractual terms, underlying index prices, market volatilities, interest rates and dividend yields.
Financial liabilities
• The fair value of derivatives embedded in IUL contracts is set equal to the fair value of the outstanding call options.
• The fair value of derivatives embedded in FIA contracts is determined using the option budget method for each premium received (i.e., the option budget method is used as the future account growth rate). With this method, future excess cash flows (defined as benefits in excess of required non-forfeiture benefits) are discounted at the risk-free rate and adjusted for non-performance, to determine the fair value of the embedded derivatives.
• MRBs are measured at fair value using a non-option-based valuation model based on current net amounts at risk, market data, Company experience, and other factors.
98 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 3 - Fair Value of Financial Instruments (continued)
Financial Instruments Measured and Carried at Fair Value on a Recurring Basis
The following table presents the Company's fair value hierarchy for financial assets and financial liabilities measured and carried at fair value on a recurring basis. As of December 31, 2025, Level 3 investments comprised approximately 7.8 % of the Company's total investment portfolio at fair value.
($ in millions)
Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
Level 1
Level 2
Level 3
December 31, 2025
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
Other, including U.S. Treasury securities
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
Total fixed maturity securities
Equity securities
Short-term investments
Other investments
Totals
Separate Account variable annuity assets (1)
Financial Liabilities (2)
December 31, 2024
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
Other, including U.S. Treasury securities
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
Total fixed maturity securities
Equity securities
Limited partnership interests (3)
Short-term investments
Other investments
Totals
Separate Account variable annuity assets (1)
Financial Liabilities (2)
(1) Separate Account variable annuity assets represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access. Separate Account variable annuity liabilities are equal to the estimated fair value of Separate Account variable annuity assets.
(2) Represents embedded derivatives related to fixed indexed annuity and indexed universal life products as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.
(3) The Company held two limited partnership investments accounted for at fair value using the fair value option (FVO) at December 31, 2024 which were sold in 2025.
Horace Mann Educators Corporation
Annual Report on Form 10-K 99
NOTE 3 - Fair Value of Financial Instruments (continued)
Changes in Level 3 Fair Value Measurements
The Company did not have any transfers between Levels 1 and 2 during 2025 and 2024. The following tables present reconciliations for the periods indicated for all Level 3 financial assets and financial liabilities measured at fair value on a recurring basis.
($ in millions)
Financial Assets
Financial
Liabilities (1)
Municipal
Bonds
Corporate
Bonds
Mortgage-Backed
and Other Asset-
Backed
Securities (2)
Total
Fixed
Maturity
Securities
Equity
Securities & Limited Partnership Interests
Total
Beginning balance, January 1, 2025
Transfers into Level 3 (3)
Transfers out of Level 3 (3)
Total gains or losses
Net investment gains (losses)
included in net income
Net investment (gains) losses
included in net income related
to financial liabilities
Net unrealized investment gains
(losses) included in OCI
Purchases
Issuances
Sales
Settlements
Paydowns, maturities and distributions
Ending balance, December 31, 2025
Beginning balance, January 1, 2024
Transfers into Level 3 (3)
Transfers out of Level 3 (3)
Total gains or losses
Net investment gains (losses)
included in net income
Net investment (gains) losses
included in net income related
to financial liabilities
Net unrealized investment gains
(losses) included in OCI
Purchases
Issuances
Sales
Settlements
Paydowns, maturities and distributions
Ending balance, December 31, 2024
(1) Represents embedded derivatives, all related to the Company's FIA products, as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.
(2) Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.
(3) Transfers into and out of Level 3 during the years ended December 31, 2025 and 2024 were attributable to changes in the availability of observable market information for individual fixed maturity securities, limited partnerships and short-term investments. In addition, during the fourth quarter of 2024, the Company transferred in two limited partnership investments that are carried at fair value using fair value option accounting. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
As of December 31, 2025, the Company had a $ 1.5 million net investment loss on Level 3 financial assets that was included in net income. As of December 31, 2024 the Company had a $ 0.9 million net investment gain on Level 3 financial assets that was included in net income. For the years ended December 31, 2025 and 2024, net investment losses of $ 10.8 million and $ 5.4 million, respectively, were included in net income that were attributable to changes in the fair value of Level 3 financial liabilities.
100 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 3 - Fair Value of Financial Instruments (continued)
Level 3 Assets and Liabilities by Price Source
The table below presents the balances of Level 3 assets and liabilities measured at fair value with their corresponding pricing sources:
($ in millions)
Total
Internal
External
December 31, 2025
Financial Assets
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities
Municipal bonds
Corporate bonds
Other asset-backed securities
Total fixed maturity securities
Equity securities
Totals
Financial Liabilities (1)
December 31, 2024
Financial Assets
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities
Municipal bonds
Corporate bonds
Other asset-backed securities
Total fixed maturity securities
Equity securities
Limited partnership interests
Totals
Financial Liabilities (1)
(1) Represents embedded derivatives, all related to the Company's FIA products, as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.
External pricing sources for securities represent prices from prior transactions or unadjusted third-party pricing information where pricing inputs are not readily available. For the year ended December 31, 2025, the Company engaged an independent third-party valuation specialist to assist in the pricing of certain Level 3 corporate bonds. As a result, the majority of securities that were internally priced as of December 31, 2024 are externally priced as of December 31, 2025.
Horace Mann Educators Corporation
Annual Report on Form 10-K 101
NOTE 3 - Fair Value of Financial Instruments (continued)
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized within Level 3.
($ in millions)
Fair Value at
December 31, 2025
Valuation Techniques
Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate (1)
Impact of Increase in Input on Fair Value
Financial Liabilities
Derivatives embedded in fixed indexed annuity products
discounted cash flow
lapse rate
Decrease
mortality multiplier (2)
Decrease
option budget
Increase
non-performance adjustment (3)
Decrease
Net MRBs
discounted cash flow
lapse rate
Decrease
mortality multiplier (2)
Increase
(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
(2) Mortality multiplier is applied to the Annuity 2000 table.
(3) Determined as a percentage of the risk-free rate.
($ in millions)
Fair Value at
December 31, 2024
Valuation Techniques
Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate (1)
Impact of Increase in Input on Fair Value
Financial Assets
Corporate bonds
discounted cash flow
yield
Decrease
option adjusted spread
242 bps - 768 bps
Decrease
Financial Liabilities
Derivatives embedded in fixed indexed annuity products
discounted cash flow
lapse rate
Decrease
mortality multiplier (2)
Decrease
option budget
Increase
non-performance adjustment (3)
Decrease
Net MRBs
discounted cash flow
lapse rate
Decrease
mortality multiplier (2)
Increase
(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
(2) Mortality multiplier is applied to the Annuity 2000 table.
(3) Determined as a percentage of the risk-free rate.
The valuation techniques and significant unobservable inputs used in the fair value measurement for financial assets and financial liabilities classified as Level 3 are subject to the processes as previously described in this Note. Generally, valuation techniques for corporate bonds include using discounted cash flow techniques where the unobservable input is the yield. The yield used for the valuation of these fixed maturity securities is less observable than securities classified as Level 2.
102 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 3 - Fair Value of Financial Instruments (continued)
Financial Instruments Not Carried at Fair Value
The following table presents the carrying amount and fair value of the Company’s financial assets and financial liabilities not carried at fair value and the level within the fair value hierarchy at which such financial assets and liabilities are categorized.
($ in millions)
Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
Level 1
Level 2
Level 3
December 31, 2025
Financial Assets
Other investments
Deposit asset on reinsurance
Financial Liabilities
Policyholders' account balances
Other policyholder funds
Long-term debt
December 31, 2024
Financial Assets
Other investments
Deposit asset on reinsurance
Financial Liabilities
Policyholders' account balances
Other policyholder funds
Reverse repurchase agreement
Long-term debt
Other Investments
Other investments includes policy loans, mortgage loans and FHLB common stock. For policy loans, fair value is based on estimates using discounted cash flow analysis and current interest rates being offered for new loans. For mortgage loans, fair value is estimated by discounting the expected future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and similar remaining maturities. For FHLB common stock, fair value is the redemption value, which is the same as the carrying amount and par value.
Deposit Asset on Reinsurance
The fair value of the deposit asset on reinsurance is estimated by discounting the future cash flows that are expected to arise out of the annuity reinsurance transaction. The Treasury yield curve, plus an assumed credit spread, is used to determine the appropriate discount rate.
Policyholders' Account Balances
Policyholder’s account balances include fixed annuity contract liabilities, policyholder account balances on life contracts, supplementary contracts without life contingencies and retained asset accounts. The fair values of fixed annuity contract liabilities and policyholder account balances on life contracts are equal to the discounted estimated future cash flows (using the Company's current interest rates for similar products including consideration of minimum guaranteed interest rates). The Company carries these financial liabilities at cost. Liabilities related to supplementary contracts without life contingencies and retained asset accounts are carried at cost, which management believes is a reasonable estimate of fair value due to the relatively short duration of these items, based on the Company's past experience.
Also, included in Policyholder's account balances are embedded derivatives related to the Company's IUL and FIA account balances and net MRBs which are carried at fair value.
Horace Mann Educators Corporation
Annual Report on Form 10-K 103
NOTE 3 - Fair Value of Financial Instruments (continued)
Other Policyholder Funds
Other policyholder funds includes balances outstanding under funding agreements with the FHLB and dividend accumulations. These components are carried at cost, which management believes is a reasonable estimate of fair value due to the relatively short duration of these items, based on the Company's past experience.
Reverse Repurchase Agreements
Reverse repurchase agreements are transactions in which the Company (transferor) transfers fixed maturity securities to another party (transferee) and receives cash (or securities), with a simultaneous agreement to repurchase the same securities (or substantially the same securities) at a specified price on a specified date. These transactions are generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value.
The Company accounts for reverse repurchase agreements as secured borrowings. This means that the fixed maturity securities transferred under reverse repurchase agreements are included in Fixed maturity securities with the obligation to repurchase those securities reported in Other liabilities on the Company's Consolidated Balance Sheets. The carrying amount of the Company's obligation under reverse repurchase agreements is equal to the amount of cash it received on the date of transfer and the fair value of the Company's obligation under reverse repurchase agreements is equal to the-then current fair value of the fixed maturity securities transferred as of the reporting date.
Long-term Debt
The Company carries long-term debt at amortized cost. The fair value of long-term debt is estimated based on unadjusted quoted market prices of the Company's securities or unadjusted market prices based on similar publicly traded issues when trading activity for the Company's securities is not sufficient to provide a market price.
NOTE 4 - Derivatives
The Company offers FIA products, which are deferred fixed annuities that guarantee the return of principal to the contractholder and credits interest based on a percentage of the gain in a specified market index. The Company also offers IUL products which credits interest based on a percentage of the gain in a specified market index. When deposits are received for FIA and IUL contracts, a portion is used to purchase derivatives consisting of call options on the applicable market indices to fund the index credits due to FIA and IUL policyholders. For the Company, substantially all such call options are one-year options purchased to match the funding requirements of the underlying contracts.
The change in fair value of derivatives includes the gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open positions. Call options are not purchased to fund the index liabilities that may arise after the next deposit anniversary date. On the respective anniversary dates of the indexed deposits, the index used to compute the annual index credit is reset and new one-year call options are purchased to fund the next annual index credit. The cost of these purchases is managed through the terms of the FIA and IUL contracts, which permit changes to index return caps, participation rates and/or asset fees, subject to guaranteed minimums on each contract's anniversary date. By adjusting the index return caps, participation rates or asset fees, crediting rates generally can be managed except in cases where the contractual features would prevent further modifications.
The future annual index credits on FIA are accounted for as a "series of embedded derivatives" over the expected life of the applicable contract with a corresponding reserve recognized. For IUL, the embedded derivative represents a single-year liability for the index return.
The Company carries all derivatives at fair value in the Consolidated Balance Sheets. The Company elected to not use hedge accounting for derivative transactions related to the FIA and IUL products. As a result, the Company recognizes the purchased call options and the embedded derivatives related to the provision of a contingent return at fair value, with changes in the fair value of the derivatives recognized immediately as Net investment gains (losses) in the Consolidated Statements of Operations and Comprehensive Income (Loss). The fair values of derivatives, including derivatives embedded in FIA and IUL contracts, are presented in the Consolidated Balance Sheets as follows:
104 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 4 - Derivatives (continued)
($ in millions)
December 31,
Assets
Derivatives, reported in Short-term and other investments
Liabilities
FIA - embedded derivatives, reported in Policyholders'
account balances
IUL - embedded derivatives, reported in
Policyholders' account balances
In general, the change in the fair value of the embedded derivatives related to FIA will not correspond to the change in fair value of the purchased call options because the purchased call options are one-year options while the fair value of the embedded derivatives represent the rights of the policyholder to receive index credits over the entire period the FIA contracts are expected to be in force, which typically exceeds 10 years. The changes in fair value of derivatives included in the Consolidated Statements of Operations and Comprehensive Income (Loss) were as follows:
($ in millions)
Years Ended December 31,
Change in fair value of derivatives: (1)
Net investment gains (losses)
Change in fair value of embedded derivatives:
Net investment gains (losses)
(1) Includes gains (losses) recognized at option expiration or early termination and changes in fair value for open positions.
The Company's strategy attempts to mitigate potential risk of loss under these agreements through a regular monitoring process, which evaluates the program's effectiveness. The Company is exposed to risk of loss in the event of nonperformance by the counterparties and, accordingly, option contracts are purchased from multiple counterparties, which are evaluated for creditworthiness prior to purchase of the contracts. All of these options have been purchased from nationally recognized financial institutions with a S&P/Moody's Investors Service, Inc. (Moody's) long-term credit rating of "BBB+/A3" or higher at the time of purchase and the maximum credit exposure to any single counterparty is subject to concentration limits. The Company also obtains credit support agreements that allow it to request the counterparty to provide collateral when the fair value of the exposure to the counterparty exceeds specified amounts.
The notional amount and fair value of call options by counterparty and each counterparty's long-term credit ratings were as follows:
($ in millions)
December 31, 2025
December 31, 2024
Credit Rating
Notional
Fair
Notional
Fair
Counterparty
Moody's
Amount
Value
Amount
Value
Bank of America, N.A.
Goldman Sachs
BBB+
BNP Paribas
Barclays Bank PLC
BBB+
Baa1
Total
As of December 31, 2025 and 2024, the Company held $ 23.8 million and $ 20.4 million, respectively, of cash and financial instruments received from counterparties for derivative collateral, which is included in Other liabilities on the Consolidated Balance Sheets. This derivative collateral limits the Company's maximum amount of economic loss due to credit risk that would be incurred if parties to the call options failed completely to perform according to the terms of the contracts to $ 0.3 million per counterparty .
Horace Mann Educators Corporation
Annual Report on Form 10-K 105
NOTE 5 - Short-Duration Insurance Contracts
Property & casualty Unpaid Claims and Claim Expense Reserves
The following table is a summary reconciliation of the beginning and ending property & casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after reinsurance) basis. The total net property & casualty insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations and Comprehensive Income (Loss). The end of the year gross reserve (before reinsurance balances and reinsurance recoverable balances) are reflected on a gross basis in the Consolidated Balance Sheets. Also included in property & casualty claims and claim expense reserves are legacy commercial line exposures, which are included in the Corporate & Other segment for segment reporting purposes.
($ in millions)
Years Ended December 31,
Property & Casualty
Gross reserves, beginning of year
Less: reinsurance recoverables
Net reserves, beginning of year (1)
Incurred claims and claim expenses:
Claims occurring in the current year
Increase (decrease) in estimated reserves for claims occurring in prior years (2)
Total claims and claim expenses incurred
Claims and claim expense payments for claims occurring during:
Current year
Prior years
Total claims and claim expense payments
Net reserves, end of year
Plus: reinsurance recoverables
Gross reserves, end of year
(1) Reserves are net of anticipated reinsurance recoverables. Starting in 2024, includes reserves for legacy commercial lines.
(2) Shows the amounts by which the Company increased (decreased) its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs. Also, refer to the paragraphs below for additional information regarding prior years' reserve development recognized in 2025, 2024 and 2023.
Underwriting results for Property & Casualty are significantly influenced by estimates of the Company's ultimate liability for insured events. There is a high degree of uncertainty inherent in the estimates of ultimate losses underlying the liability for unpaid claims and claim settlement expenses. This inherent uncertainty is particularly significant for liability-related exposures due to the extended period, often many years, which transpires between a loss event, receipt of related claims data from policyholders and ultimate settlement of the claim. Reserves for Property & Casualty claims include provisions for payments to be made on reported claims (case reserves), IBNR claims and associated settlement expenses (together, loss reserves). The process by which these loss reserves are established requires reliance upon estimates based on known facts and on interpretations of circumstances, including the Company's experience with similar cases and historical trends involving claim payments and related patterns, pending levels of and product mix, as well as other factors including court decisions, economic conditions, public attitudes and medical costs.
The Company believes the property & casualty loss reserves are appropriately established based on available facts, laws, and regulations. The Company calculates and recognizes a single best estimate of the reserve as of each reporting date, for each line of business and its coverages for reported losses and for IBNR losses and as a result, the Company believes no other estimate is better than the recognized amount. Due to uncertainties involved, the ultimate cost of losses may vary materially from recognized amounts.
The Company continually updates loss estimates using both quantitative and qualitative information from its reserving actuaries and information derived from other sources, including available industry information. Adjustments may be required as information develops which varies from experience, or, in some cases, augments data which previously was not considered sufficient for use in determining liabilities. The effects of these adjustments may be significant and are charged or credited to income in the period in which the adjustments are made.
106 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
Numerous risk factors will affect more than one product line. One of these factors is changes in claim department practices, including claim closure rates, number of claims closed without payment, the use of third-party claim adjusters and the level of needed case reserve estimated by the adjuster. Other risk factors include changes in claim frequency, changes in claim severity, regulatory and legislative actions, court actions, changes in economic conditions and trends (e.g., medical costs, labor rates and the cost of materials), the occurrence of unusually large or frequent catastrophic loss events, timeliness of claim reporting, the state in which the claim occurred and degree of claimant fraud. The extent of the impact of a risk factor will also vary by coverages within a product line. Individual risk factors are also subject to interactions with other risk factors within product line coverages.
While all product lines are exposed to these risks, there are some loss types or product lines for which the financial effect will be more significant. For instance, given the relatively large proportion (approximately 72.0 % as of December 31, 2025) of the Company's reserves that are in the longer-tail auto liability coverages, regulatory and court actions, changes in economic conditions and trends, and medical costs could be expected to impact this product line more extensively than others.
For auto, homeowners and umbrella lines of business, reserves are established for claims as they occur for each line of business based on estimates of the ultimate cost to settle the claims. The actual loss results are compared to prior estimates and differences are recorded as re-estimates. The primary actuarial techniques (development of paid loss dollars, development of reported loss dollars, methods based on expected loss ratios and methods utilizing frequency and severity of claims) used to estimate reserves and provide for losses are applied to actual paid losses and reported losses (paid losses plus individual case reserves set by claim adjusters) for an accident year to create an estimate of how losses are likely to develop over time.
In all of the loss estimation techniques referred to above, a ratio (development factor) is calculated which compares current results to results in the prior period for each accident year. Various development factors, based on historical results, are multiplied by the current experience to estimate the development of losses of each accident year from the current time period into the next time period. The development factors for the next time period for each accident year are compounded over the remaining calendar years to calculate an estimate of ultimate losses for each accident year. Occasionally, unusual aberrations in loss patterns are caused by factors such as changes in claim reporting, settlement patterns, unusually large losses, process changes, legal or regulatory environment changes, and other influences. In these instances, analyses of alternate development factor selections are performed to evaluate the effect of these factors and judgment is applied to make appropriate development factor assumptions needed to develop a estimate of ultimate . Paid are then subtracted from estimated ultimate to determine the indicated reserves. The difference between indicated reserves and recorded reserves is the amount of reserve re-estimate.
Reserves for auto, property and umbrella lines of business are re-estimated quarterly. When new development factors are calculated from actual losses that differ from estimated development factors used in previous reserve estimates, assumptions about losses and required reserves are revised based on the new development factors. Changes to reserves are recognized in the period in which development factor changes result in reserve re-estimates.
Claim count estimates are also established for claims as they occur for each line of business based on estimates of the ultimate claim counts. These counts are derived by counting the number of claimants by insurance coverage. The primary actuarial techniques (development of paid claim counts and development of reported claim counts) used to estimate ultimate claim counts are applied to actual paid claim counts and reported claim counts (paid claims plus individual unpaid claims set by claim adjusters) for an accident year to create an estimate of how claims are likely to develop over time. An accident year refers to classifying claims based on the year in which the claim occurred. The ultimate claim count generally gives equal consideration to the results of the two actuarial techniques described.
Occasionally, unusual aberrations in claim reporting patterns or claim payment patterns may occur. In these instances, analyses of alternate development factor selections are performed to evaluate the effect of these factors and judgment is applied to make appropriate development factor assumptions needed to develop a best estimate of ultimate claims.
In addition to auto, property and umbrella lines, starting in 2024 property & casualty loss and loss adjustment reserves and IBNR included legacy commercial claims. These claims related to legacy, long-tail commercial lines claims, including asbestos, environmental, and sexual molestation claims.
Horace Mann Educators Corporation
Annual Report on Form 10-K 107
NOTE 5 - Short-Duration Insurance Contracts (continued)
Legacy commercial line reserves are analyzed based on industry information for asbestos and environmental liabilities. This information includes industry source information regarding incurred losses, paid losses and industry implied survival ratios.
See tables on the following pages of Note 5 for details of the average annual percentage payout of auto and property incurred claims by age, also referred to as a history of claims duration and tables illustrating the incurred and paid claims development information by accident year on a net basis for the lines of homeowners, auto liability, and auto physical damage, which represents 95 % of the Company's property & casualty incurred losses for 2025.
Numerous actuarial estimates of the types described above are prepared each quarter to monitor losses for each line of business, including the line's individual coverages, for reported losses and IBNR. Often, several different estimates are prepared for each detailed coverage, incorporating alternative analyses of changing claim settlement patterns and other influences on losses, from which the Company selects the best estimate for each coverage, occasionally incorporating additional analyses and judgment, as described above. These estimates also incorporate the historical impact of inflation into reserve estimates, the implicit assumption being that a multi-year average development factor represents an adequate provision. Based on the Company's review of these estimates, as well as the review of independent reserve studies, the best estimate of required reserves for each line of business, including the line's individual coverages, is determined by management and is recognized for each accident year, then the required reserves for each coverage are summed to create the reserve balances carried on the Company's Consolidated Balance Sheets.
Based on the Company's products and coverages, historical experience, and various actuarial methodologies used to develop reserve estimates, the Company estimates that the potential variability of the Property & Casualty loss reserves within a reasonable probability of other possible outcomes may be different than expected. A change in claim severity or claim frequency of approximately plus or minus 1 % of reserves equates to plus or minus approximately $ 2.9 million of net income as of December 31, 2025. Although this evaluation reflects the most likely outcomes, it is possible the final outcome may fall below or above these estimates.
Net favorable (unfavorable) development of total reserves for property & casualty claims occurring in prior years was $ 18.8 million in 2025 and $ 11.8 million in 2024. In 2025, property & casualty had favorable prior years' auto reserve development of $ 7.0 million, as well as favorable prior years' property reserve development of $ 11.8 million as a result of favorable loss trends for accident years 2024 and prior. In 2024, the Company had favorable development of $ 29.5 million as a result of favorable loss trends in auto and property for accident years 2023 and prior. This was partially offset by $ 17.7 million in recognition of loss reserves for legacy commercial lines.
The Company completes a detailed study of property & casualty reserves based on information available at the end of each quarter and year. Trends of reported losses (paid amounts and case reserves on claims reported to the Company) for each accident year are reviewed and ultimate loss costs for those accident years are estimated. The Company engages an independent property and casualty actuarial consulting firm to prepare an independent study of the Company's property & casualty reserves as of December 31 st of each year. The result of the independent actuarial study as of December 31, 2025 was consistent with management's analysis and selected estimates and did not result in any adjustments to the Company's property & casualty reserves recognized.
At the time each of the reserve analyses was performed, the Company believed that each estimate was based upon sound methodology and such methodologies were appropriately applied and that there were no trends which indicated the likelihood of future loss reserve development. The financial impact of net reserve development was therefore accounted for in the period that the development was determined.
No other adjustments were made in the determination of the liabilities during the periods covered by these consolidated financial statements. Management believes that, based on data currently available, it has reasonably estimated the Company's ultimate losses.
Below is the average annual percentage payout of incurred claims by age, also referred to as a history of claims duration:
108 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years
Homeowners
Auto liability
Auto physical damage
The following tables illustrate the incurred and paid claims development by accident year on a net basis for the lines of homeowners, auto liability and auto physical damage. Conditions and trends that have affected the development of these reserves in the past will not necessarily reoccur in the future. It may not be appropriate to use this cumulative history in the projection of future performance.
The information about incurred and paid claims development for the years ended December 31, 2016 to 2024 is presented as unaudited supplementary information.
($ in millions)
Homeowners
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
As of December 31, 2025
Total of Incurred-
But-Not-Reported
Liabilities Plus
Expected Development
on Reported Claims
Cumulative
Number of
Reported Claims
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
(Actual)
Total
($ in millions)
Homeowners
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
Total
Outstanding prior to 2016
Prior years paid
Liabilities for claims and claim adjustment expenses, net of reinsurance
Horace Mann Educators Corporation
Annual Report on Form 10-K 109
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Automobile Liability
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
As of December 31, 2025
Total of Incurred-
But-Not-Reported
Liabilities Plus
Expected Development
on Reported Claims
Cumulative
Number of
Reported Claims
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
(Actual)
Total
($ in millions)
Automobile Liability
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
Total
Outstanding prior to 2016
Prior years paid
Liabilities for claims and claim adjustment expenses, net of reinsurance
110 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Automobile Physical Damage
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
As of December 31, 2025
Total of Incurred-
But-Not-Reported
Liabilities Plus
Expected Development
on Reported Claims
Cumulative
Number of
Reported Claims
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
(Actual)
Total
($ in millions)
Automobile Physical Damage
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
Total
Outstanding prior to 2016
Prior years paid
Liabilities for claims and claim adjustment expenses, net of reinsurance
Horace Mann Educators Corporation
Annual Report on Form 10-K 111
NOTE 5 - Short-Duration Insurance Contracts (continued)
Group Benefits Unpaid Claims and Claim Expense Reserves
The following table is a summary reconciliation of the beginning and ending Group Benefits unpaid claims and claim expense reserves for the year ended December 31, 2025. The table presents reserves on both a gross and net (after reinsurance) basis. The total net Group Benefits insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations and Comprehensive Income (Loss). The end of the year gross reserve (before reinsurance balances and reinsurance recoverable balances) are reflected on a gross basis in the Consolidated Balance Sheets.
Year Ended December 31,
Group Benefits
Gross reserves, beginning of year
Less: reinsurance recoverables
Net reserves, beginning of year (1)
Incurred claims and claim expenses:
Claims occurring in the current year
Increase (decrease) in estimated reserves for claims occurring in prior years (2)
Total claims and claim expenses incurred
Claims and claim expense payments for claims occurring during:
Current year
Prior years
Total claims and claim expense payments
Net reserves, end of year
Plus: reinsurance recoverables
Gross reserves, end of year
(1) Reserves are net of anticipated reinsurance recoverables.
(2) Shows the amounts by which the Company increased (decreased) its reserves for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs. Also, refer to the paragraphs below for additional information regarding prior years' reserve development recognized in 2025.
The Company's Group Benefits has short-duration contracts that are generated from specialty health and group disability lines of business, and are accounted for based on actuarial estimates of the amount of loss inherent in that period’s claims, including losses incurred for which claims have not been reported. Short-duration contract loss estimates rely on actuarial observations of ultimate loss experience for similar historical events.
The Company maintains loss reserves for these lines of business to cover its estimated liability for unpaid losses and loss adjustment expenses, where material, (including legal, other fees, and costs not associated with specific claims but related to the claims payment function) for reported and unreported claims incurred as of the end of each accounting period. These loss reserves are based on actuarial assumptions. Many factors could affect these reserves, including economic and social conditions, frequency and severity of claims, medical trends resulting from the influences of underlying cost inflation, changes in utilization and demand for medical services, and changes in doctrines of legal liability and damage awards in litigation. Therefore, the Company’s reserves are necessarily based on estimates, assumptions and analysis of historical experience. The Company’s results depend upon the variation between actual experience and the assumptions used in determining reserves and pricing products. Reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. The Company cannot determine with precision the ultimate amounts that will be paid for actual or the timing of those payments. The Company's estimate of represents management's estimate of the Company's liability at the reporting date.
The Company believes that its liability for policy benefits and claims is reasonable and adequate to satisfy its ultimate liability. The Company primarily uses its own loss development experience, but will also supplement that with data from its outside actuaries, reinsurers and industry loss experience as warranted. To illustrate the impact that loss ratios have on the Company’s loss reserves and related expenses, each hypothetical 1 % change in the loss ratio for the health business (i.e., the ratio of insurance benefits, claims and settlement expenses to earned health premiums) for the year ended December 31, 2025, would increase reserves (in the
112 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
case of a higher ratio) or decrease reserves (in the case of a lower ratio) by approximately $ 0.8 million pretax with a corresponding increase or decrease to Benefits, claims and settlement expenses in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss).
For the specialty health line of business, IBNR claims liabilities plus expected development on reported claims are calculated using standard actuarial methods and practices. The “primary” assumption in the determination of specialty health reserves is that historical claim development patterns are representative of future claim development patterns. Factors that may affect this assumption include changes in claim payment processing times and procedures, changes in time delay in submission of claims, and the incidence of unusually large claims. Liabilities for claims for specialty health coverages are computed using completion factors and expected net loss ratios derived from actual historical premium and claim data. The reserving analysis includes a review of claim processing statistical measures and large claim early notifications; the potential impacts of any changes in these factors are not material. The Company has business that is serviced by third-party administrators. From time to time, there are changes in the timing of claims processing due to any number of factors including, but not limited to, system conversions and staffing changes during the year. These changes are monitored by the Company and the effects of these changes are taken into consideration during the claim reserving process. While these calculations are based on standard methodologies, they are estimates based on historical patterns. To the extent that actual claim payment patterns differ from historical patterns, such estimated reserves may be redundant or . The effects of such are evaluated by considering claim backlog statistics and reviewing the reasonableness of projected claim ratios. Other factors which may affect the accuracy of policy benefits and claim estimates include the proportion of large which may take longer to adjudicate, changes in billing patterns by providers and changes in claim management practices such as hospital bill audits. Since the Company's analysis considers a variety of outcomes related to these factors, the Company does not believe that any reasonably likely change in these factors will have a material effect.
With regards to the Company’s group disability line of business, the two “primary” assumptions on which disability policy benefits and claims are based are: (i) morbidity levels; and (ii) recovery rates. If morbidity levels increase, for example due to an epidemic or a recessionary environment, the Company would increase reserves because there would be more new claims than expected. With regards to the assumed recovery rate, if disabled lives recover more quickly than anticipated then the existing claims reserves would be reduced; if less quickly, the existing claims reserves would be increased. Advancements in medical treatments could affect future recovery, termination, and mortality rates.
In 2025, Group Benefits had net favorable prior years' reserve development of $ 5.0 million which was primarily the result of favorable loss trends in specialty health and group disability for loss years 2024 and prior. In 2024, Group Benefits had net favorable prior years' reserve development of $ 14.5 million which was primarily the result of favorable loss trends in specialty health and group disability for loss years 2023 and prior.
Below is the average annual percentage payout of incurred claims by age for Group Benefits, also referred to as a history of claims duration:
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years
Specialty health
Group disability
The following tables illustrate the incurred and paid claims development by accident year on a net basis for the lines of specialty health and group disability. Conditions and trends that have affected the development of these reserves in the past will not necessarily reoccur in the future. It may not be appropriate to use this cumulative history in the projection of future performance.
The information about incurred and paid claims development for the years ended December 31, 2016 to 2024 is presented as unaudited supplementary information.
Horace Mann Educators Corporation
Annual Report on Form 10-K 113
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Specialty Health
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
As of December 31, 2025
Total of Incurred-
But-Not-Reported
Liabilities Plus
Expected Development
on Reported Claims
Cumulative
Number of
Reported Claims
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
(Actual)
Total
($ in millions)
Specialty Health
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
Total
Outstanding prior to 2016
Prior years paid
Liabilities for claims and claim adjustment expenses, net of reinsurance
114 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Group Disability
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
As of December 31, 2025
Total of Incurred-
But-Not-Reported
Liabilities Plus
Expected Development
on Reported Claims
Cumulative
Number of
Reported Claims
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
(Actual)
Total
($ in millions)
Group Disability
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
Total
Outstanding prior to 2016
Prior years paid
Liabilities for claims and claim adjustment expenses, net of reinsurance
Effect of discounting
Discounted net reserves
Horace Mann Educators Corporation
Annual Report on Form 10-K 115
NOTE 5 - Short-Duration Insurance Contracts (continued)
Reconciliation of Net Incurred and Paid Claims Development Tables for Property & Casualty and Group Benefits to Unpaid Claims and Claim Expense Reserves in the Consolidated Balance Sheet
($ in millions)
Year Ended December 31,
Property & Casualty and Group Benefits
Net reserves
Homeowners
Auto liability
Auto physical damage
Specialty health
Group disability
Other than short duration lines
Legacy commercial exposures
Total net reserves for unpaid claims and claim adjustment expenses, net of reinsurance
Reinsurance recoverable on unpaid claims
Homeowners
Auto liability
Specialty health
Group disability
Other short duration lines
Total reinsurance recoverable on unpaid claims
Insurance lines other than short duration (1)
Unallocated claims adjustment expenses
Total other than short duration and unallocated claims adjustment expenses
Gross reserves, end of year (1)
(1) This line includes Life & Retirement and Supplemental reserves included in the Consolidated Balance Sheet.
NOTE 6 - Long-Duration Insurance Contracts
Liability for Future Policy Benefits
In 2025, the Company revised the timing of its annual comprehensive assumption review, moving it from the fourth quarter to the third quarter to better align with industry practice. Accordingly, future cash flow assumptions were reviewed and updated in the third quarter of 2025. In the prior years, assumptions were reviewed and updated in the fourth quarter of 2024 and 2023.
116 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following tables summarize balances and changes in LFPB for traditional and limited-payment contracts.
The balances of and changes in LFPB as of and for the year ended December 31, 2025 were as follows:
($ in millions)
Whole Life
Term Life
Experience
Life (1)
Limited-Pay Whole Life
Supplemental
Health (2)
SPIA (life contingent)
Present value of expected net premiums:
Balance at January 1, 2025
January 1, 2025 balance at original discount rate
Effect of:
Change in cash flow assumptions
Actual variances from expected experience
Adjusted balance at January 1, 2025
Issuances (3)
Interest accruals (4)
Net premiums collected (5)
December 31, 2025 balance at original discount rate
Effect of changes in discount rate assumptions
Balance at December 31, 2025
Present value of expected future policy benefits:
Balance at January 1, 2025
January 1, 2025 balance at original discount rate
Effect of:
Changes in cash flow assumptions
Actual variances from expected experience
Adjusted balance at January 1, 2025
Issuances
Interest accruals
Benefit payments (6)
December 31, 2025 balance at original discount rate
Effect of changes in discount rate assumptions
Balance at December 31, 2025
Net liability for future policy benefits
Less: Reinsurance recoverable
Net liability for future policy benefits, after reinsurance recoverable
Impact of flooring on net liability for future policy benefits
Net liability for future policy benefits at December 31, 2025
(1) Experience Life contains both whole life and term elements.
(2) As of December, 2025, the net LFPB for Supplemental Health was $ 66.0 million for cancer, $ 17.9 million for accident, $ 21.3 million for disability and $ 81.5 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal and maturity payments based on revised expected assumptions.
Horace Mann Educators Corporation
Annual Report on Form 10-K 117
NOTE 6 - Long-Duration Insurance Contracts (continued)
The balances of and changes in LFPB as of and for the year ended December 31, 2024 were as follows:
($ in millions)
Whole Life
Term Life
Experience
Life (1)
Limited-Pay Whole Life
Supplemental
Health (2)
SPIA (life contingent)
Present value of expected net premiums:
Balance at January 1, 2024
January 1, 2024 balance at original discount rate
Effect of:
Change in cash flow assumptions
Actual variances from expected experience
Adjusted balance at January 1, 2024
Issuances (3)
Interest accruals (4)
Net premiums collected (5)
December 31, 2024 balance at original discount rate
Effect of changes in discount rate assumptions
Balance at December 31, 2024
Present value of expected future policy benefits:
Balance at January 1, 2024
January 1, 2024 balance at original discount rate
Effect of:
Changes in cash flow assumptions
Actual variances from expected experience
Adjusted balance at January 1, 2024
Issuances
Interest accruals
Benefit payments (6)
December 31, 2024 balance at original discount rate
Effect of changes in discount rate assumptions
Balance at December 31, 2024
Net liability for future policy benefits
Less: Reinsurance recoverable
Net liability for future policy benefits, after reinsurance recoverable
Impact of flooring on net liability for future policy benefits
Net liability for future policy benefits at December 31, 2024
(1) Experience Life contains both whole life and term elements.
(2) As of December 31, 2024, the net LFPB for Supplemental Health was $ 72.2 million for cancer, $ 18.8 million for accident, $ 21.4 million for disability and $ 86.4 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal and maturity payments based on revised expected assumptions.
118 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
The balances of and changes in LFPB as of and for the year ended December 31, 2023 were as follows:
($ in millions)
Whole Life
Term Life
Experience
Life (1)
Limited-Pay Whole Life
Supplemental Health (2)
SPIA (life contingent)
Present Value of Expected Net Premiums
Balance at January 1, 2023 (7)
January 1, 2023 balance at original discount rate (7)
Effect of:
Change in cash flow assumptions
Actual variances from expected experience
Adjusted balance at January 1, 2023
Issuances (3)
Interest accruals (4)
Net premiums collected (5)
December 31, 2023 balance at original discount rate
Effect of changes in discount rate assumptions
Balance at December 31, 2023
Present Value of Expected Future Policy Benefits
Balance at January 1, 2023 (7)
January 1, 2023 balance at original discount rate (7)
Effect of:
Changes in cash flow assumptions
Actual variances from expected experience
Adjusted balance at January 1, 2023
Issuances
Interest accruals
Benefit payments (6)
December 31, 2023 balance at original discount rate
Effect of changes in discount rate assumptions
Balance at December 31, 2023
Net liability for future policy benefits
Less: Reinsurance recoverable
Net liability for future policy benefits, after reinsurance recoverable
Impact of flooring on net liability for future policy benefits
Net liability for future policy benefits at December 31, 2023
(1) Experience Life contains both whole life and term elements.
(2) As of December 31, 2023, the net LFPB for Supplemental Health was $ 92.7 million for cancer, $ 21.4 million for accident, $ 23.5 million for disability and $ 104.0 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal and maturity payments based on revised expected assumptions.
(7) Whole Life, Term Life, and Supplemental Health beginning balance at January 1, 2022 includes reserves acquired from Madison National Life Insurance Company, Inc. on January 1, 2022.
Horace Mann Educators Corporation
Annual Report on Form 10-K 119
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table reconciles the net LFPB to LFPB in the Consolidated Balance Sheets. DPL for single premium and immediate annuity products is presented together with LFPB in the Consolidated Balance Sheets:
($ in millions)
December 31, 2025
December 31, 2024
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
Limited-pay whole life DPL
SPIA (life contingent) DPL
Reconciling items (1)
Total
(1) Reconciling items primarily relate to products not in scope of ASU 2018-12 and return of premium reserves.
The following tables summarize the amount of revenue from gross premiums or assessment and interest expense related to traditional and limited-payment contracts recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss):
($ in millions)
Gross premiums or assessments
Year Ended December 31,
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
Total
($ in millions)
Interest expense
Year Ended December 31,
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
Total
120 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for traditional and limited-payment contracts:
($ in millions)
December 31, 2025
December 31, 2024
Undiscounted
Discounted
Undiscounted
Discounted
Whole life
Expected future gross premiums
Expected future benefits and expenses
Term life
Expected future gross premiums
Expected future benefits and expenses
Experience Life
Expected future gross premiums
Expected future benefits and expenses
Limited-pay whole life
Expected future gross premiums
Expected future benefits and expenses
Supplemental health
Expected future gross premiums
Expected future benefits and expenses
SPIA (life contingent)
Expected future gross premiums
Expected future benefits and expenses
For the year ended December 31, 2025 and 2024, net premiums exceeded gross premiums for several cohorts in the Whole Life and Term Life product lines. This resulted in an immaterial change to current period benefit expense for both years.
The following table summarizes the ranges of actual experience and expected experience for mortality and lapses of LFPB:
December 31, 2025
Whole Life
Term Life
Experience Life
Limited-Pay Whole Life
Supplemental Health
SPIA (life contingent)
Mortality / Morbidity
Actual experience
Expected experience
Lapses
Actual experience
Expected experience
December 31, 2024
Whole Life
Term Life
Experience Life
Limited-Pay Whole Life
Supplemental Health
SPIA (life contingent)
Mortality / Morbidity
Actual experience
Expected experience
Lapses
Actual experience
Expected experience
Horace Mann Educators Corporation
Annual Report on Form 10-K 121
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table provides the weighted-average durations of LFPB, in years:
As of December 31,
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
The following table provides ranges of the weighted-average interest rates for LFPB:
As of December 31,
Whole life
Interest accretion rate
Current discount rate
Term life
Interest accretion rate
Current discount rate
Experience life
Interest accretion rate
Current discount rate
Limited-pay whole life
Interest accretion rate
Current discount rate
Supplemental health
Interest accretion rate
Current discount rate
SPIA (life contingent)
Interest accretion rate
Current discount rate
122 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
Liability for Policyholders' Account Balances
The Company recognizes a liability for policyholders' account balances. The following tables summarize balances of and changes in policyholders' account balances:
($ in millions)
Year Ended December 31, 2025
Indexed Universal Life
Experience Life
Fixed Account Annuities
Fixed Indexed Account Annuities
SPIA (non-life contingent)
Balance at January 1, 2025
Premiums received (1)
Surrenders and withdrawals (2)
Benefit payments (3)
Net transfers from (to) separate account
Interest credited (4)
Other
Balance at December 31, 2025
Weighted-average crediting rate
Net amount at risk (5)
Cash surrender value
($ in millions)
Year Ended December 31, 2024
Indexed Universal Life
Experience Life
Fixed Account Annuities
Fixed Indexed Account Annuities
SPIA (non-life contingent)
Balance at January 1, 2024
Premiums received (1)
Surrenders and withdrawals (2)
Benefit payments (3)
Net transfers from (to) separate account
Interest credited (4)
Other
Balance at December 31, 2024
Weighted-average crediting rate
Net amount at risk (5)
Cash surrender value
(1) Premiums received represents premiums collected from policyholder during the period of in force business
(2) Surrenders and withdrawals represent reductions to the policyholders' account balance due to policyholders surrendering the policy or withdrawing funds from the account balance.
(3) Benefit payments represent benefits due under contract that were paid to a policyholder during the periods.
(4) Interest credited represents interest earned and credited to policyholders' account balance during the periods.
(5) Net amount at risk represents guaranteed benefit amounts less current policyholders' account balance at the reporting date.
Horace Mann Educators Corporation
Annual Report on Form 10-K 123
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table reconciles policyholders' account balances to the policyholders' account balance liability in the Consolidated Balances Sheets:
($ in millions)
December 31, 2025
December 31, 2024
Indexed universal life
Experience Life
Fixed account annuities
Fixed indexed account annuities
SPIA (non-life contingent)
Reconciling items (1)
Total
(1) Reconciling items primarily relate to FIA reserves net of account balances, miscellaneous fixed annuity reserves, personal promise accounts and MRBs.
The following tables present the gross account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums:
($ in millions)
December 31, 2025
At Guaranteed Minimum
1 - 50 Basis Points Above
51 - 150 Basis Points Above
Greater Than 150 Basis Points Above
Total (1)
Guaranteed minimum crediting rates:
Less than 2 %
Equal to 2 % but less than 3 %
Equal to 3 % but less than 4 %
Equal to 4 % but less than 5 %
5 % or higher
Total
($ in millions)
December 31, 2024
At Guaranteed Minimum
1 - 50 Basis Points Above
51 - 150 Basis Points Above
Greater Than 150 Basis Points Above
Total (1)
Guaranteed minimum crediting rates:
Less than 2 %
Equal to 2 % but less than 3 %
Equal to 3 % but less than 4 %
Equal to 4 % but less than 5 %
5 % or higher
Total
(1) Excludes products not containing a fixed guaranteed minimum crediting rate.
Separate Account Liabilities
Separate account assets and liabilities consist of investment accounts established and maintained by the Company for certain variable contracts. Some of these variable contracts include minimum guarantees such as GMDBs that guarantee a minimum payment to the policyholder in the event of death.
The assets that support variable contracts are measured at fair value and are reported as separate account assets on the Consolidated Balance Sheets. An equivalent amount is reported as separate account liabilities. MRB assets and liabilities for minimum guarantees are valued and presented separately from separate account assets and separate account liabilities. MRBs are discussed further in the market risk benefits section of this Note to the Consolidated Financial Statements. Policy charges assessed against the policyholders for mortality,
124 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
administration and other services are included in the life premiums and contract charges line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).
The following table presents the balances of and changes in the Separate Account variable annuity liabilities presented in the Consolidated Balance Sheets (1) :
($ in millions)
Retirement Services
Variable Account Annuities
December 31, 2025
December 31, 2024
Balance, beginning of year
Deposits
Withdrawals
Net transfers
Fees and charges
Market appreciation (depreciation)
Other
Balance, end of period
(1) The Separate Account variable annuity liabilities are backed by, and are equal to, the Separate Account variable annuity assets that represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access.
Market Risk Benefits
The following table presents the balances of and changes in MRBs associated with deferred variable annuities as of and for the year ended December 31, 2025 and 2024, respectively:
($ in millions)
Year Ended
December 31,
Balance, beginning of period
Balance, beginning of period, before effects of changes in the instrument-specific credit risk
Changes in market risk benefits (1)
Balance, end of period (2)
Effect of changes in the instrument-specific credit risk
Balance, end of period
Net amount at risk (3)
Weighted-average attained age of contract holders
(1) Reflects interest accruals and effect of changes in interest rates, equity markets, equity index volatility and future assumptions.
(2) Balance, end of period, before the effect of changes in the instrument-specific credit risk.
(3) Net amount at risk represents the current guaranteed benefit less current account balance at the reporting date.
The following table presents MRBs by amounts in an asset position and amounts in a liability position. The net liabilities (assets) are included in Policyholders' account balances presented in the Consolidated Balance Sheets.
($ in millions)
As of December 31, 2025
As of December 31, 2024
(Asset)
Liability
Net
(Asset)
Liability
Net
Deferred variable annuities
Horace Mann Educators Corporation
Annual Report on Form 10-K 125
NOTE 6 - Long-Duration Insurance Contracts (continued)
DAC and Deferred Sales Inducements
The following tables roll-forward DAC for the periods indicated:
($ in millions)
Year Ended December 31, 2025
Whole Life
Term Life
Experience Life
Limited-Pay Whole Life
Indexed Universal Life
Supplemental Health
Total Annuities
Balance, beginning of period
Capitalizations
Amortization expense
Experience adjustment
Balance, end of period
($ in millions)
Year Ended December 31, 2024
Whole Life
Term Life
Experience Life
Limited-Pay Whole Life
Indexed Universal Life
Supplemental Health
Total Annuities
Balance, beginning of period
Capitalizations
Amortization expense
Experience adjustment
Balance, end of period
($ in millions)
Year Ended December 31, 2023
Whole Life
Term Life
Experience Life
Limited-Pay Whole Life
Indexed Universal Life
Supplemental Health
Total Annuities
Balance, beginning of year
Capitalizations
Amortization expense
Experience adjustment
Balance, end of year
126 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table presents a reconciliation of DAC to the Consolidated Balance Sheets:
($ in millions)
December 31, 2025
December 31, 2024
Whole life
Term life
Experience life
Limited pay whole life
Indexed universal life
Supplemental health
Total annuities
Reconciling item (1)
Total
(1) Reconciling item relates to DAC associated with the Property & Casualty reporting segment.
The assumptions used to amortize DAC were consistent with the assumptions used to estimate LFPB for traditional and limited-payment contracts. The underlying assumptions for DAC and LFPB were updated at the same time.
The following table rolls-forward the deferred sales inducements balance as of and for the years ended December 31, 2025 and 2024:
($ in millions)
Year Ended December 31, 2025
Year Ended December 31, 2024
Balance, beginning of period
Capitalizations
Amortization expense
Experience adjustment
Balance, end of period
Deferred sales inducements is included in Other assets in the Consolidated Balance Sheets.
NOTE 7 - Reinsurance and Catastrophes
In the normal course of business, the Company's insurance subsidiaries assume and cede reinsurance with other insurers. Reinsurance is ceded primarily to limit losses from large events and to permit recovery of a portion of direct losses; however, such a transfer does not relieve the originating insurance company of primary liability.
The Company is a national underwriter and therefore has exposure to catastrophic losses in certain coastal states and other regions throughout the U.S. Catastrophes can be caused by various events including hurricanes, windstorms, hail, severe winter weather, wildfires and earthquakes, and the frequency and severity of catastrophes are inherently unpredictable. The financial impact from catastrophic losses results from both the total amount of insured exposure in the area affected by the catastrophe as well as the severity of the event. The Company seeks to reduce its exposure to catastrophe losses through the geographic diversification of its insurance coverage, deductibles, maximum coverage limits and the purchase of catastrophe reinsurance.
The Company's catastrophe losses incurred were approximately $ 61.7 million, $ 94.9 million and $ 97.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. For 2025, catastrophe losses included winter storm, wind, hail, and tornado events.
The total amounts of reinsurance recoverable on unpaid insurance reserves classified as assets and included in the amounts being reported as Reinsurance balances receivable in the Consolidated Balance Sheets were as follows:
Horace Mann Educators Corporation
Annual Report on Form 10-K 127
NOTE 7 - Reinsurance and Catastrophes (continued)
($ in millions)
December 31,
Reinsurance recoverables on reserves and unpaid claims
Property & Casualty
Reinsurance companies
State insurance facilities
Group benefits
Life and health
Total
As of December 31, 2025, the Company had a reinsurance recoverable in the amount of $ 167.1 million from National Guardian Life Insurance Company (NGL) that exceeded 10.0 % of consolidated shareholders' equity as of the reporting date. NGL currently has an assigned credit rating of A by A.M. Best.
The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, IBNR claims and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:
($ in millions)
Direct
Amount (1)
Ceded to
Other
Companies
Assumed
from Other
Companies
Net
Amount
Year Ended December 31, 2025
Net premiums written and contract deposits (2)
Net premiums and contract charges earned
Benefits, claims and settlement expenses (3)
Year Ended December 31, 2024
Net premiums written and contract deposits (2)
Net premiums and contract charges earned
Benefits, claims and settlement expenses (3)
Year Ended December 31, 2023
Net premiums written and contract deposits (2)
Net premiums and contract charges earned
Benefits, claims and settlement expenses
(1) Direct amount is net of the annuity reinsurance agreement accounted for using the deposit method that is discussed in Note 8.
(2) This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as an exhibit in the Company's reports filed with the SEC.
(3) Includes assumed commercial liability exposures beginning in 2024.
There were no losses from uncollectible reinsurance recoverables in the three years ended December 31, 2025. Past due reinsurance recoverables as of December 31, 2025 were not material.
The Company maintains property and casualty catastrophe excess of loss reinsurance coverage. For 2025, the Company's catastrophe excess of loss coverage consisted of one contract in addition to a minimal amount of coverage by the Florida Hurricane Catastrophe Fund (FHCF). For 2025, the catastrophe excess of loss contract consisted of three layers of which provided for one mandatory reinstatement. The coverage provided was 95 % for the layer of $ 25.0 million excess of $ 35.0 million, 95 % coverage for the layer of $ 35.0 million excess of $ 60.0 million and 95 % coverage for the layer of $ 90 million excess of $ 95 million. For 2026, our coverage will provide 95 % coverage for the layer of $ 25.0 million excess of $ 35.0 million, 95 % coverage for the layer of $ 35.0 million excess of $ 60.0 million, 95 % coverage for the layer of $ 90.0 million excess of $ 95.0 million and 95 % coverage for the layer of $ 55.0 million excess of $ 185 million.
128 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 7 - Reinsurance and Catastrophes (continued)
For liability coverages, in 2025, the Company reinsured each loss above a retention of $ 5.0 million per occurrence up to $ 20.0 million in a clash event. A clash cover is a reinsurance casualty excess contract requiring two or more casualty coverages or policies issued by the Company to be involved in the same loss occurrence for coverage to apply.
For umbrella coverage, in 2025, we reinsured risks on a quota share basis of losses for 50 %, including allocated loss adjustment expenses and premiums for all states. Policies written in 2026 will be subject to a 55 % quota share.
The maximum individual life insurance risk retained by the Company is $ 0.5 million on any individual life. Excess amounts are reinsured. The Company also maintains a life catastrophe reinsurance program. For 2025, the Company reinsured 100 % of the catastrophe risk in excess of $ 1.0 million up to $ 35.0 million per occurrence, with one reinstatement. The Company's life catastrophe risk reinsurance program covers acts of terrorism and includes nuclear, biological and chemical explosions but excludes other acts of war.
With regards to individual supplemental insurance products, the Company retains all of the risk on its supplemental health product lines, including accidental death risk embedded within certain products. However, the Company’s other accidental death and dismemberment risk issued through all other policies and riders are ceded 100 %.
With regards to group benefits products, the Company has retained approximately 73.1 % of gross and assumed group disability and specialty health benefits in 2025. The Company has a block of individual life and annuity benefits that is effectively 100 % ceded. The Company purchases quota share reinsurance and excess reinsurance in amounts deemed appropriate by its risk committee. The Company monitors its retention amounts by product line and has the ability to adjust retention as appropriate.
NOTE 8 - Deposit Asset on Reinsurance
The Company reinsures a $ 3.1 billion block of in force fixed and variable annuity business with a minimum crediting rate of 4.5 %. The reinsured fixed business represents approximately 50 % of the Company’s in force fixed annuity account balances. The arrangement contains investment guidelines and a trust to help meet the Company’s risk management objectives.
Under the annuity reinsurance agreement, approximately $ 2.3 billion of fixed annuity reserves are reinsured on a coinsurance basis. The separate account assets and liabilities of approximately $ 0.8 billion are reinsured on a modified coinsurance basis and thus, remain on the Company's consolidated financial statements, but the related results of operations are fully reinsured.
The annuity reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk. Therefore, the Company recognizes the annuity reinsurance agreement using the deposit method of accounting. The assets transferred to the reinsurer as consideration paid is reported as a Deposit asset on reinsurance on the Company's Consolidated Balance Sheets. As amounts are received or paid, consistent with the underlying reinsured contracts, the Deposit asset on reinsurance is adjusted. The Deposit asset on reinsurance is accreted to the estimated ultimate cash flows using the interest method and the adjustment is reported as Net investment income. Interest accreted on the Deposit asset on reinsurance was $ 98.1 million and $ 101.4 million for the years ended December 31, 2025 and 2024, respectively.
NOTE 9 - Goodwill and Intangible Assets
The Company conducts goodwill impairment testing at the reporting unit level at least annually or more frequently if events occur or circumstances change that indicate that the carrying amount may not be recoverable. See Note 1 for further description of impairment testing.
At October 1, 2025, October 1, 2024 and October 1, 2023, the Company performed a qualitative goodwill impairment test. Based on the results of the tests, there were no events or circumstances that led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Horace Mann Educators Corporation
Annual Report on Form 10-K 129
NOTE 9 - Goodwill and Intangible Assets (continued)
The changes in the carrying amount of goodwill by reporting segment for the year ended December 31, 2025 were as follows:
($ in millions)
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Total
Balance as of January 1, 2023
Goodwill
Accumulated impairment losses
Total goodwill, net
Acquisitions
Impairments
Balance as of December 31, 2023
Goodwill
Accumulated impairment losses
Total goodwill, net
Acquisitions
Impairments
Balance as of December 31, 2024
Goodwill
Accumulated impairment losses
Total goodwill, net
Acquisitions
Impairments
Balance as of December 31, 2025
Goodwill
Accumulated impairment losses
Total goodwill, net
As of December 31, 2025, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of BCG, BCGS and NTA during 2019 as well as the acquisition of MNL during 2022. The acquisitions of BCG, BCGS, NTA and MNL resulted in initial recognition of definite-lived intangible assets subject to amortization in the amounts of $ 9.1 million, $ 5.0 million, $ 160.4 million and $ 56.5 million, respectively. As of December 31, 2025 the outstanding amounts of definite-lived intangible assets subject to amortization were as follows:
($ in millions)
Weighted Average
Useful Life (in Years)
At inception:
Value of business acquired
Value of distribution acquired
Value of agency relationships
Value of customer relationships
Total
Accumulated amortization and impairments:
Value of business acquired
Value of distribution acquired
Value of agency relationships
Value of customer relationships
Total
Net intangible assets subject to amortization:
With regards to the definite-lived intangible assets in the table above, the VOBA intangible asset represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The VODA intangible asset represents the present value of future business to be written by the existing agency force. The value of agency relationships intangible asset represents the present value of the commission overrides
130 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 9 - Goodwill and Intangible Assets (continued)
retained by NTA. The value of customer relationships intangible asset represents the present value of the expected profits from existing BCG and MNL customers in force at the date of acquisition. All of the aforementioned definite-lived intangible assets were valued using the income approach.
Estimated future amortization of the Company's definite-lived intangible assets were as follows:
($ in millions)
Year Ending December 31,
Thereafter
Total
The VOBA intangible asset is being amortized by product based on the present value of future premiums to be received. The VODA intangible asset with respect to the acquisition of NTA is being amortized on a straight-line basis. The VODA intangible asset with respect to the acquisition of BCGS is being amortized on a straight-line basis subsequent to the reporting date. The value of agency relationships intangible asset is being amortized based on the present value of future premiums to be received. The value of customer relationships intangible assets are being amortized based on the present value of future profits to be received for BCG and based on the present value of future premiums for MNL.
Indefinite-lived intangible assets (not subject to amortization) as of December 31, 2025 were as follows:
($ in millions)
Trade Names
State Licenses
Total
Balance as of January 1, 2023
Impairments
Acquisitions
Balance as of December 31, 2023
Impairments
Acquisitions
Balance as of December 31, 2024
Impairments
Acquisitions
Balance as of December 31, 2025
The trade names intangible asset represents the present value of future savings accruing to NTA, BCG and BCGS by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. The state licenses intangible asset represents the regulatory licenses held by NTA and MNL that were valued using the cost approach.
The Company conducts intangible asset impairment testing at least annually, or more often if events, changes or circumstances indicate that the carrying amounts may not be recoverable. See Note 1 for further description of impairment testing.
At October 1, 2025, October 1, 2024 and October 1, 2023, the Company performed a qualitative assessment to determine whether it was necessary to perform quantitative intangible asset impairment tests. Based on the assessment of qualitative factors, there were no events or circumstances that led to a determination that it is more likely than not that the fair value of an intangible asset is less than its carrying amount.
Horace Mann Educators Corporation
Annual Report on Form 10-K 131
NOTE 10 - Debt
Indebtedness and scheduled maturities consisted of the following:
($ in millions)
Interest
Rates
Final
Maturity
December 31,
Short-term debt
Revolving Credit Facility
Variable
Long-term debt (1)
4.70 % 2025 Senior Notes, Aggregate principal amount of $ 300.0 less unaccrued discount of $ 1.5 and $ 0.0 and unamortized debt issuance costs of $ 3.1 and $ 0.0
7.25 % 2023 Senior Notes, Aggregate principal amount of $ 300.0 less unaccrued discount of $ 0.3 and $ 0.4 and unamortized debt issuance costs of $ 1.7 and $ 2.3
4.50 % 2015 Senior Notes, Aggregate principal amount of $ 250.0 less unaccrued discount of $ 0.0 and $ 0.1 and unamortized debt issuance costs of $ 0.0 and $ 0.2
Total
(1) The Company designates debt obligations as "long-term" based on maturity date at issuance.
2025 Senior Notes
On September 26, 2025, the Company issued $ 300.0 million aggregate principal amount of 4.70 % senior notes (2025 Senior Notes), which will mature on October 1, 2030, issued at a discount resulting in an effective yield of 4.82 %. Interest on the 2025 Senior Notes is payable semi-annually at a rate of 4.70 %. The 2025 Senior Notes are redeemable in whole or in part, at any time, at the Company's option, at a redemption price equal to the greater of (1) 100 % of the principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted, on a semi-annual basis, at the Treasury yield (as defined in the indenture) plus 20 basis points, plus, in either of the above cases, accrued interest up to, but not including the date of redemption. The 2025 Senior Notes are traded in the open market (HMN 4.70).
The net proceeds from the sale of the 2025 Senior Notes were used to fully repay the $ 250.0 million balance of the 4.50 % 2015 Senior Notes due 2025 and the accrued and unpaid interest of $ 4.2 million. The redemption occurred on October 14, 2025 with the remaining net proceeds from the sale to be used for general corporate purposes.
2023 Senior Notes
On September 15, 2023, the Company issued $ 300.0 million aggregate principal amount of 7.25 % senior notes (2023 Senior Notes), which will mature on September 15, 2028, issued at a discount resulting in an effective yield of 7.29 %. Interest on the 2023 Senior Notes is payable semi-annually at a rate of 7.25 %. The 2023 Senior Notes are redeemable in whole or in part, at any time, at the Company's option, at a redemption price equal to the greater of (1) 100 % of the principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted, on a semi-annual basis, at the Treasury yield (as defined in the indenture) plus 45 basis points, plus, in either of the above cases, accrued interest to the date of redemption. The 2023 Senior Notes are traded in the open market (HMN 7.25).
Credit Agreement with Financial Institutions (Revolving Credit Facility)
In 2025, the Company, as borrower, amended its Credit Agreement (Revolving Credit Facility). The amended Revolving Credit Facility extended the commitment termination date to May 19, 2030 and replaced the Eurodollar-based interest rate benchmark with a Term SOFR Rate as an interest rate benchmark. Terms and conditions of the amended Revolving Credit Facility are substantially consistent with the prior agreement, with an interest rate based on SOFR plus 115 basis points. The amount available on the senior revolving credit facility is $ 325.0 million. The unused portion of the Revolving Credit Facility is subject to a variable commitment fee, which was 0.15 % on an annual basis as of December 31, 2025. There were no amounts outstanding on the credit agreement as of December 31, 2025 or 2024.
132 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 10 - Debt (continued)
Federal Home Loan Bank Borrowings
As of December 31, 2025, the Company had no borrowing outstanding with FHLB. The Board has authorized a maximum amount equal to 15 % of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing capacity.
Covenants
The Company is in compliance with all of the financial covenants contained in the 2025 Senior Notes indenture, the 2023 Senior Notes indenture and the Revolving Credit Facility agreement, consisting primarily of relationships of (1) debt to capital, (2) net worth, as defined in the financial covenants, (3) insurance subsidiaries' risk-based capital and (4) securities subject to funding agreements and repurchase agreements.
NOTE 11 - Income Taxes
The Company is subject to U.S. federal and various state and local income taxes. The Company has no foreign operations, and therefore no foreign income tax expense. The income tax provision reflects management's best estimate of current and deferred tax expense, based on enacted tax laws and regulations, taxable income, and other factors.
The income tax assets and liabilities included in Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheets were as follows:
($ in millions)
December 31,
Income tax (asset) liability
Current
Deferred
Horace Mann Educators Corporation
Annual Report on Form 10-K 133
NOTE 11 - Income Taxes (continued)
Deferred tax assets and liabilities are recognized for all future tax consequences attributable to "temporary differences" between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. There are no deferred tax liabilities that have not been recognized. The "temporary differences" that gave rise to the deferred tax balances were as follows:
($ in millions)
December 31,
Deferred tax assets
Other comprehensive income - net unrealized losses on securities
Unearned premium reserve reduction
Compensation accruals
Impaired securities
Other comprehensive income - net funded status of benefit plans
Discounting of unpaid claims and claim expense tax reserves
Capital loss carryforward
Net operating loss carryforward
Postretirement benefits other than pensions
Other comprehensive income - net reserve remeasurements
Total gross deferred tax assets
Deferred tax liabilities
Deferred policy acquisition costs
Life insurance future policy benefit reserve
Life insurance future policy benefit reserve (transitional rule)
Discounting of unpaid claims and claim expense tax reserves
(transitional rule)
Investment related adjustments
Intangibles
Other comprehensive income - net reserve remeasurements
Other, net
Total gross deferred tax liabilities
Net deferred tax liability
The Company evaluated sources and character of income, including historical earnings, loss carryback potential, taxable income from future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, and taxable income from prudent and feasible tax planning strategies. Although realization of deferred tax assets is not assured, the Company believes it is more likely than not that gross deferred tax assets will be fully realized and that a valuation allowance with respect to the realization of the total gross deferred tax assets was not necessary as of December 31, 2025 and 2024.
At December 31, 2025, the Company had no available tax carryforwards or credits.
Income from continuing operations before income taxes for the years ended December 31, 2025, 2024, and 2023 was entirely domestic as follows:
($ in millions)
Years Ended December 31,
Domestic
Foreign
Total income tax expense (benefit)
134 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 11 - Income Taxes (continued)
Income tax expense (benefit) for the following periods relates solely to U.S. federal, state, and local taxing jurisdictions.
($ in millions)
Years Ended December 31,
Current Tax Expense (Benefit)
Federal
State and Local
Total Current Tax Expense (Benefit)
Deferred Tax Expense (Benefit)
Federal
State and Local
Total Deferred Tax Expense (Benefit)
Total Income Tax Expense (Benefit)
Federal
State and Local
Total Income Tax Expense (Benefit)
Income tax expense for the following periods differed from the expected tax computed by applying the federal corporate tax rate of 21% for 2025, 2024 and 2023 to income before income taxes as follows:
($ in millions)
Years Ended December 31,
Amount
% of Pretax Income
Amount
% of Pretax Income
Amount
% of Pretax Income
U.S. Federal Statutory Tax Rate (21%)
State and Local Income Taxes, Net of Federal Income Tax Effect (1)
Tax Credits
Nontaxable or Nondeductible Items
Compensation Deduction Limitation
Dividend Received Deduction
Prior Year Adjustments
Research and Development Reserve
Share-Based Payment Awards
Tax-Exempt Interest Income
Other
Effective Tax Rate
(1) State and local income taxes in the above reconciliation primarily relate to operations in Illinois, Florida, and Wisconsin, which together represent over half of the Company's total state income tax expense for each year. No single state is individually significant to the Company’s tax expense.
Cash income taxes paid, net of refunds received, for the periods presented consisted entirely of U.S. federal, state, and local income taxes, and no income taxes were paid to foreign jurisdictions.
($ in millions)
Years Ended December 31,
Federal
State and Local
Total
The Company's federal income tax returns for years prior to 2022 are no longer subject to examination by the Internal Revenue Service (IRS).
Horace Mann Educators Corporation
Annual Report on Form 10-K 135
NOTE 11 - Income Taxes (continued)
The Company recognizes tax benefits from tax return positions only if it is more likely than not the position will be sustainable, upon examination, on its technical merits and any relevant administrative practices or precedents. As a result, the Company applies a more likely than not recognition threshold for all tax uncertainties.
The Company records 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 upon changes in facts or law. The Company has no unrecorded liabilities from uncertain tax filing positions.
Unrecognized tax benefits were immaterial in each of the years ended December 31, 2025, 2024 and 2023. The Company classifies all tax related interest and penalties as income tax expense. Interest and penalties were both immaterial in each of the years ended December 31, 2025, 2024 and 2023.
During the year ended December 31, 2025, the Company entered into agreements to purchase federal transferable income tax credits. As of December 31, 2025, the Company had outstanding commitments of approximately $ 11.0 million related to the future purchase of such tax credits. These commitments are expected to be settled upon the completion of required transfer and certification procedures in accordance with applicable federal tax regulations. This was the first year the Company engaged in transactions involving the purchase of federal transferable tax credits.
HMEC and its subsidiaries file a consolidated federal income tax return. The federal income tax sharing agreements between HMEC and its subsidiaries, as approved by the Board, provide that tax on income is charged to each subsidiary as if it were filing a separate tax return with the limitation that each subsidiary will receive the benefit of any losses or tax credits to the extent utilized in the consolidated tax return. Intercompany balances are settled quarterly with a final settlement after filing the consolidated federal income tax return with the IRS. National Teachers Associates Life Insurance Company and NTA Life Insurance Company of New York have previously filed separate federal income tax returns and will participate in HMEC's consolidated federal income tax return for the first time in 2025.
136 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 12 - Shareholders' Equity and Share-Based Compensation
Share Repurchase Program and Treasury Shares
On May 13, 2025, the Board of Directors authorized a share repurchase program allowing repurchases of up to $ 50 million (i.e., the 2025 Program) to begin following the completion of the $ 50 million repurchase plan which was authorized on May 25, 2022 (i.e., the 2022 Program). Both Programs authorize the repurchase of the Company's common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The Programs do not have expiration dates and may be limited or terminated at any time without notice.
During 2025, the Company repurchased 497,226 shares of its common stock, or 1.2 % of the shares outstanding as of December 31, 2024, at an aggregate cost of $ 20.8 million, or an average price of $ 41.85 per share. During 2024, the Company repurchased 256,159 shares of its common stock, or 0.6 % of the shares outstanding as of December 31, 2023, at an aggregate cost of $ 8.5 million, or an average price of $ 33.33 per share. In total and through December 31, 2025, 1,192,420 shares were repurchased under the 2022 Program at an average price of $ 37.31 per share. The repurchase of shares was funded through use of cash. As of December 31, 2025, $ 55.5 million remained authorized for future share repurchases under the 2022 and 2025 Programs.
As of December 31, 2025, the Company held 26,664,472 shares in treasury.
Authorization of Preferred Stock
In 1996, the shareholders of HMEC approved authorization of 1,000,000 shares of 0.001 par value preferred stock. The Board is authorized to (1) direct the issuance of the preferred stock in one or more series, (2) fix the dividend rate, conversion or exchange rights, redemption price and liquidation preference, of any series of the preferred stock, (3) fix the number of shares for any series and (4) increase or decrease the number of shares of any series. No shares of preferred stock were issued or outstanding as of December 31, 2025 and 2024.
2010 Comprehensive Executive Compensation Plan
In 2010, the shareholders of HMEC approved the 2010 Comprehensive Executive Compensation Plan (the Comprehensive Plan). The purpose of the Comprehensive Plan is to aid the Company in attracting, retaining, motivating and rewarding employees and non-employee Directors; to provide for equitable and competitive compensation opportunities, including deferral opportunities; to encourage long-term service; to recognize individual contributions and reward achievement of Company goals; and to promote the creation of long-term value for the Company's shareholders by closely aligning the interests of plan participants with those of shareholders. The Comprehensive Plan authorizes share-based and cash-based incentives for plan participants. In 2012, the shareholders of HMEC approved the implementation of a fungible share pool under which grants of full value shares will count against the share limit as two and one half shares for every share subject to a full value award. In May 2024, the shareholders of HMEC approved an amendment and restatement of the Comprehensive Plan which included an increase of 3,000,000 in the number of shares of common stock reserved for issuance under the Comprehensive Plan. As of December 31, 2025, approximately 2,674,563 shares were available for grant under the Comprehensive Plan. Shares of common stock issued under the Comprehensive Plan may be either authorized and unissued shares of HMEC or shares that have been reacquired by HMEC; however, new shares have been issued historically.
As further described in the paragraphs below, CSUs, stock options and RSUs under the Comprehensive Plan were as follows:
December 31,
CSUs related to deferred compensation for Directors
CSUs related to deferred compensation for employees
Stock options
RSUs related to incentive compensation
Total
Horace Mann Educators Corporation
Annual Report on Form 10-K 137
NOTE 12 - Shareholders' Equity and Share-Based Compensation (continued)
Director Common Stock Units
Deferred compensation for Directors is in the form of CSUs, which represent an equal number of common shares to be issued in the future. The outstanding units of Directors serving on the Board accrue dividends at the same rate as dividends paid to HMEC's shareholders. These dividends are reinvested into additional CSUs.
Employee Common Stock Units
Deferred compensation for employees is in the form of CSUs, which represent an equal number of common shares to be issued in the future. Distributions of employee deferred compensation are allowed to be either in common shares or cash. Through December 31, 2025, all distributions have been in cash. The outstanding units accrue dividends at the same rate as dividends paid to HMEC's shareholders. These dividends are reinvested into additional CSUs.
Stock Options
Options to purchase shares of HMEC common stock may be granted to executive officers, other employees and Directors. The options become exercisable in installments based on service generally beginning in the first year from the date of grant and generally become fully vested 4 years from the date of grant. The options generally expire 10 years from the date of grant. The exercise price of the option is equal to the market price of HMEC's common stock on the date of grant resulting in a grant date intrinsic value of $ 0 .
Changes in outstanding options were as follows:
Weighted Average
Option Price
per Share
Range of
Option Prices
per Share
Options
Outstanding
Vested and
Exercisable
December 31, 2024
Granted
Vested
Exercised
Forfeited
Expired
December 31, 2025
Option information segregated by ranges of exercise prices were as follows:
December 31, 2025
Total Outstanding Options
Vested and Exercisable Options
Range of
Option Prices
per Share
Options
Weighted
Average
Option Price
per Share
Weighted
Average
Remaining
Term
Options
Weighted
Average
Option Price
per Share
Weighted
Average
Remaining
Term
Total
The weighted average exercise prices of vested and exercisable options as of December 31, 2024 and 2023 were $ 40.78 and $ 38.98 , respectively.
As of December 31, 2025, based on a closing stock price of $ 46.18 per share, the aggregate intrinsic (in-the-money) values of vested options and all options outstanding were $ 8.8 million and $ 5.5 million, respectively.
138 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 12 - Shareholders' Equity and Share-Based Compensation (continued)
Restricted Stock Units
RSUs may be granted to executive officers, other employees and Directors and represent an equal number of common shares to be issued in the future. The RSUs vest in installments based on service or attainment of performance criteria generally beginning in the first year from the date of grant and generally become fully vested 1 to 3 years from the date of grant. The outstanding units accrue dividends at the same rate as dividends paid to HMEC's shareholders. These dividends are reinvested into additional RSUs.
Changes in outstanding RSUs were as follows:
Total Outstanding Units
Vested Units
Units
Weighted Average
Grant Date Fair
Value per Unit
Units
Weighted Average
Grant Date Fair
Value per Unit
December 31, 2024
Granted (1)
Adjustment for performance achievement
Vested
Forfeited
Distributed (2)
December 31, 2025
(1) Includes dividends reinvested into additional RSUs.
(2) Includes distributed units which were utilized to satisfy withholding taxes due on the distribution.
NOTE 13 - Statutory Information and Dividend Restrictions
The insurance departments of various states in which the insurance subsidiaries of HMEC are domiciled recognize as net income and surplus those amounts determined in conformity with statutory accounting principles prescribed or permitted by the insurance departments, which differ in certain respects from GAAP.
HMEC has principal insurance subsidiaries domiciled in Illinois, Wisconsin, Texas, and New York. The statutory financial statements of these subsidiaries are prepared in accordance with accounting principles prescribed or permitted by the Illinois Department of Insurance, the Wisconsin Office of the Commissioner of Insurance, the Texas Department of Insurance, and the New York Department of Financial Services, as applicable. Prescribed statutory accounting principles include a variety of publications of the NAIC, as well as state laws, regulations and general administrative rules.
In converting from statutory to GAAP, typical adjustments include DAC, certain reinsurance transactions, the inclusion of statutory non-admitted assets, the inclusion of net unrealized investment gains or losses in shareholders' equity relating to fixed maturity securities and establishing life reserves using different actuarial assumptions.
The following table includes selected information for HMEC's insurance subsidiaries:
($ in millions)
Year Ended December 31,
Consolidated net income, statutory basis
Consolidated capital and surplus, statutory basis (1)
(1) Subject to regulatory restrictions.
The NAIC has risk-based capital guidelines to evaluate the adequacy of statutory capital and surplus in relation to risks assumed in investments, reserving policies, and volume and types of insurance business written. As of December 31, 2025 and 2024, the minimum statutory-basis capital and surplus required to be maintained by HMEC's insurance subsidiaries was $ 141.8 million and $ 136.9 million, respectively. As of December 31, 2025 and 2024, statutory capital and surplus of each of the Company's insurance subsidiaries was above required levels. The restricted net assets of HMEC's insurance subsidiaries wer e $ 26.3 million and $ 27.1 million as of
Horace Mann Educators Corporation
Annual Report on Form 10-K 139
NOTE 13 - Statutory Information and Dividend Restrictions (continued)
December 31, 2025 and 2024, respectively. The minimum statutory basis capital and surplus amount at each date is the total estimated authorized control level risk-based capital for all of HMEC's insurance subsidiaries combined. Authorized control level risk-based capital represents the minimum level of statutory basis capital and surplus necessary before the insurance commissioner in the respective state of domicile is authorized to take whatever regulatory actions considered necessary to protect the best interests of the policyholders and creditors of the insurer. The amount of restricted net assets represents the combined fair value of securities on deposit with governmental agencies for the insurance subsidiaries as required by law in various states in which the insurance subsidiaries of HMEC conduct business.
HMEC relies largely on dividends from its insurance subsidiaries to meet its obligations for payment of principal and interest on debt, dividends to shareholders and parent company operating expenses, including tax payments pursuant to tax sharing agreements. Payments for share repurchase programs also have this dependency. HMEC's insurance subsidiaries are subject to various regulatory restrictions which limit the amount of annual dividends or other distributions, including loans or cash advances, available to HMEC without prior approval of the insurance regulatory authorities. As a result, HMEC may not be able to receive dividends from such subsidiaries at times and in amounts necessary to pay desired dividends to shareholders.
NOTE 14 - Contingencies and Commitments
Lawsuits and Legal Proceedings
Companies in the insurance industry have been subject to substantial litigation resulting from claims, disputes and other matters. For instance, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies.
At the time of issuance of this Annual Report on Form 10-K, the Company does not have pending litigation from which there is a reasonable possibility of material loss.
Assessments for Insolvencies of Unaffiliated Insurance Companies
The Company is contingently liable for possible assessments under regulatory requirements pertaining to potential insolvencies of unaffiliated insurance companies. Liabilities, which are established based upon regulatory guidance, have generally been immaterial.
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $ 380.5 million and $ 449.9 million for the years ended December 31, 2025 and 2024, respectively.
140 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 15 - Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) represents the change in shareholders' equity during a reporting period from transactions and other events and circumstances from non-shareholder sources. For the Company, comprehensive income (loss) is equal to net income plus or minus the after tax change in net unrealized investment gains (losses) on fixed maturity securities, the after tax change in net reserve remeasurements attributable to discount rates, and the after tax change in net funded status of benefit plans for the periods as shown in the Consolidated Statements of Changes in Shareholders' Equity. AOCI represents the accumulated change in shareholders' equity from these transactions and other events and circumstances from non-shareholder sources as shown in the Consolidated Balance Sheets.
In the Consolidated Balance Sheets, the Company recognizes the net funded status of benefit plans as a component of AOCI, net of tax.
Comprehensive Income (Loss)
The components of comprehensive income (loss) were as follows (in millions):
($ in millions)
Year Ended December 31,
Net income
Other comprehensive income (loss):
Change in net unrealized investment gains (losses) on fixed maturity
securities:
Net unrealized investment gains (losses) on securities arising
during the period
Less: reclassification adjustment for net investment gains (losses)
included in income before income tax
Total, before tax
Income tax expense (benefit)
Total, net of tax
Change in net reserve remeasurements attributable to discount rates:
Total, before tax
Income tax expense (benefit)
Total, net of tax
Change in net funded status of benefit plans:
Total, before tax
Income tax expense (benefit)
Total, net of tax
Total comprehensive income (loss)
Horace Mann Educators Corporation
Annual Report on Form 10-K 141
NOTE 15 - Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) (continued)
Accumulated Other Comprehensive Income (Loss)
The following table reconciles the components of AOCI for the periods indicated
($ in millions)
Net Unrealized
Investment Gains (Losses) on
Securities (1)(2)
Net Reserve Remeasurements Attributable to Discount Rates (1)
Net Funded
Status of
Benefit Plans (1)
Total (1)
Beginning balance, January 1, 2025
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)
Ending balance, December 31, 2025
Beginning balance, January 1, 2024
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)
Ending balance, December 31, 2024
Beginning balance, January 1, 2023
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)
Ending balance, December 31, 2023
(1) All amounts are net of tax.
(2) The pretax amounts reclassified from AOCI, $( 6.6 ) million, $( 21.1 ) million and $( 20.3 ) million, are included in net investment gains (losses) and the related income tax expense (benefit), $( 1.4 ) million, $( 4.4 ) million and $( 4.3 ) million, are included in income tax expense (benefit) in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2025, 2024 and 2023, respectively.
Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is located in Note 3.
142 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 16 - Supplemental Consolidated Cash and Cash Flow Information
($ in millions)
Years Ended December 31,
Cash
Restricted cash
Total cash and restricted cash shown in the Consolidated
Statements of Cash Flows
Cash paid during the year for:
Interest
Income taxes
During the year ended 2024, the Company exchanged $ 44.5 million of Fixed maturity securities for Limited partnership interests. This transaction did not result in cash flows and is therefore excluded from the consolidated statement of cash flows. Non-cash investing activities with respect to modifications or exchanges of fixed maturity securities as well as paid-in-kind activity for policy loans were insignificant for the years ended December 31, 2025 and 2023, respectively.
NOTE 17 - Segment Information
The Company conducts and manages its business through 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). The Company does 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 reporting segments, but classifies 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.
The accounting policies of the reporting segments are the same as those described in Note 1-Basis of Presentation and Significant Accounting Policies. Expense allocations are based on certain assumptions and estimates primarily related to direct cost, revenue and activity; methodologies are applied consistently. Stated segment operating results would change if different methods were applied.
The Company’s Chief Executive Officer is the chief operating decision maker (CODM), responsible for reviewing financial performance and making decisions regarding the allocation of resources for the reporting segments. The Company measures and analyzes segment performance based on core earnings which differs from total income as presented in our consolidated statements of operations due to excluding the after-tax impact of net investment gains (losses), discontinued operations, the after-tax impact of goodwill and intangible asset impairments, other non-recurring or infrequent items, the cumulative effect of changes in accounting principles when applicable, and for the period ended December 31, 2025, the impacts of the immaterial correction of the prior period error discussed in Note 1. We believe core earnings is a better performance measure and indicator of the profitability and underlying trends in our business. The CODM considers actual-to-budget variances in core earnings on a monthly basis when making decisions about allocating capital and personnel to segments and evaluating product pricing.
Horace Mann Educators Corporation
Annual Report on Form 10-K 143
NOTE 17 - Segment Information (continued)
Disaggregated financial information for these segments, as regularly provided to the CODM, is as follows:
December 31, 2025
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Corporate & Other*
Totals
($ in millions)
Net premiums and contract charges earned
Net investment income (1)
Other segment income
Total segment revenues
Benefits and claims expenses
(excluding catastrophe losses)
Catastrophe losses
Loss adjustment expenses
Interest credited
Operating & admin expenses
Commissions expense
Taxes, licenses and fees
Deferred policy acquisition costs
Deferred policy acquisition
cost amortization
Interest expense
Total segment expenses
Pretax profit (loss)
Income tax expense
Segment profit (loss) (Core earnings)
Net investment losses (after-tax)
Non-core income adjustment (after-tax)
Net income
(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 December 31, 2025 Form 10-K.
144 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 17 - Segment Information (continued)
December 31, 2024
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Corporate & Other*
Totals
($ in millions)
Net premiums and contract charges earned
Net investment income
Other segment income
Total segment revenues
Benefits and claims expenses
(excluding catastrophe losses)
Catastrophe losses
Loss adjustment expenses
Interest credited
Operating & admin expenses
Commissions expense
Taxes, licenses and fees
Deferred policy acquisition costs
Deferred policy acquisition
cost amortization
Interest expense
Total segment expenses
Pretax profit (loss)
Income tax expense
Segment profit (loss) (Core earnings)
Net investment losses (after-tax)
Non-core income adjustments (after-tax)
Net income
Horace Mann Educators Corporation
Annual Report on Form 10-K 145
NOTE 17 - Segment Information (continued)
December 31, 2023
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Corporate & Other*
Totals
($ in millions)
Net premiums and contract charges earned
Net investment income
Other segment income
Total segment revenues
Benefits and claims expenses
(excluding catastrophe losses)
Catastrophe losses
Loss adjustment expenses
Interest credited
Operating & admin expenses
Commissions expense
Taxes, licenses and fees
Deferred policy acquisition costs
Deferred policy acquisition
cost amortization
Interest expense
Total segment expenses
Pretax profit (loss)
Income tax expense
Segment profit (loss) (Core earnings)
Net investment losses (after-tax)
Non-core income adjustments (after-tax)
Net income
*-Corporate & Other is net of intersegment eliminations.
($ in millions)
December 31,
Assets
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Corporate & Other
Intersegment eliminations
Total
146 Annual Report on Form 10-K
Horace Mann Educators Corporation
ITEM 9. I Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. I Controls and Procedures
Management's Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) of the Securities and Exchange Act of 1934 as amended (Exchange Act) as of December 31, 2024. Based on this evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2025, the end of the period covered by this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management's Annual Report on Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Our accounting policies and internal controls over financial reporting, established and maintained by management, are under the general oversight of our Audit Committee.
Our internal control over financial reporting includes those policies and procedures that:
• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We have assessed our internal control over financial reporting as of December 31, 2025. The standard measures adopted by management in making its evaluation are the measures in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Horace Mann Educators Corporation
Annual Report on Form 10-K 147
Based on our assessment, we concluded that our internal control over financial reporting was effective at December 31, 2025, and that there were no material weaknesses in our internal control over financial reporting as of that date.
KPMG LLP, an independent registered public accounting firm, which has audited and reported on the Consolidated Financial Statements contained in this inter-document reference, has issued its report on the effectiveness of our internal control over financial reporting which follows this report.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Horace Mann Educators Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Horace Mann Educators Corporation and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and financial statement schedules I to IV (collectively, the consolidated financial statements), and our report dated February 27, 2026 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
148 Annual Report on Form 10-K
Horace Mann Educators Corporation
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Columbus, Ohio
February 27, 2026
Horace Mann Educators Corporation
Annual Report on Form 10-K 149
ITEM 9B. I Other Information
Securities Trading Plans of Executive Officers and Directors
Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in Company securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our executive officers and directors to enter into trading plans designed to comply with Rule 10b5-1.
During the three months ended December 31, 2025, Marita Zuraitis , President and CEO , adopted a new 10b5-1 plan. The Plan was adopted on December 23, 2025 . The Plan expires on the earlier of March 31, 2027 , or upon execution of all trades or expiration of all orders relating to such trades. The Plan allows for the sale of up to 75,000 shares and the exercise of up to 141,956 vested options.
During the three months ended December 31, 2025, no other director or officer of the Company who is required to file reports under Section 16 of the Exchange Act adopted , modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C. I Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Our Proxy Statement will be filed with the SEC no later than April 10, 2026 in preparation for our 2026 Annual Meeting of Shareholders. As permitted in Paragraph G(3) of the General Instructions for Form 10-K, we are incorporating by reference, to that Proxy Statement, portions of the information required by Part III as noted in Item 10 through Item 14 below.
ITEM 10. I Directors, Executive Officers and Corporate Governance
(a) The following sections of our Proxy Statement for our 2026 Annual Meeting of Shareholders, are incorporated herein by reference: "Board of Directors and Committees," "Executive Officers," "Corporate Governance," and "Insider Trading Policy".
(b) We have adopted a code of ethics and conduct, referred to as the code of conduct, that applies to our principal executive officer, principal financial officer, principal accounting officer and all other employees. In addition, the Board has adopted the code of conduct for our Board members as it applies to each Board member's business conduct on behalf of us. The code of conduct is posted on our website, www.horacemann.com, under Investors — Governance — Governance Documents. In addition, amendments to the code of conduct or waivers of the code of conduct granted to executive officers and directors requiring disclosure under applicable SEC rules will be posted on our website within four days after such amendment or grant of waiver rather than by filing a Current Report on Form 8-K.
ITEM 11. I Executive Compensation
The following sections of our Proxy Statement for our 2026 Annual Meeting of Shareholders, are incorporated herein by reference: "Director Compensation" and "Compensation Discussion and Analysis" including "Pay
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Horace Mann Educators Corporation
Governance," "Executive Compensation Program," "Additional Pay Practices," "Compensation Tables," "Compensation Committee Report," and "Equity Compensation Plan Information".
ITEM 12. I Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
(a) The "Security Ownership of Certain Beneficial Owners and Management" section of our Proxy Statement for our 2026 Annual Meeting of Shareholders, is incorporated herein by reference.
(b) The "Equity Compensation Plan Information" section of our Proxy Statement for our 2026 Annual Meeting of Shareholders, is incorporated herein by reference. Additional information on share-based compensation under our equity compensation plans is available in Part II - Item 8, Note 12 of the Consolidated Financial Statements.
ITEM 13. I Certain Relationships and Related Transactions and Director Independence
The following sections of our Proxy Statement for our 2026 Annual Meeting of Shareholders, are incorporated by reference: "Corporate Governance - Director Independence", and "Corporate Governance - Related Person Transactions".
ITEM 14. I Principal Accountant Fees and Services
Information required for this Item 14 is incorporated herein by reference, to our Proxy Statement for our 2026 Annual Meeting of Shareholders in the section "Proposal No. 3 - Ratification of Independent Registered Public Accounting Firm".
PART IV
ITEM 15. I Exhibits and Financial Statement Schedules
(a)(1) (a)(1) The following consolidated financial statements of the Company are contained in Part II - Item 8 of this report, Page 73 to Page 146
(a)(2) Financial statement schedules
Schedule I - Summary of Investments - Other than Investments in Related Parties, Page 152
Schedule II - Condensed Financial Information of Registrant, Page 153
Schedule III - Supplementary Insurance Information, Page 157
Schedule IV - Reinsurance, Page 158
Horace Mann Educators Corporation
Annual Report on Form 10-K 151
SCHEDULE I
HORACE MANN EDUCATORS CORPORATION
SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2025
($ in millions)
Type of Investments
Cost or
amortized cost, net
Fair
Value
Balance
Sheet
Fixed maturity securities
U.S. Government and federally sponsored agency obligations
States, municipalities and political subdivisions
Foreign government bonds
Public utilities
All other corporate bonds
Asset-backed securities
Residential mortgage-backed securities (non-agency)
Commercial mortgage-backed securities
Redeemable preferred stocks
Total fixed maturity securities
Equity securities
Banking & finance and insurance companies
Non-redeemable preferred stocks
Total equity securities
Limited partnership interests
XXX
Short-term investments
XXX
Policy loans
XXX
Derivatives
Mortgage loans
XXX
Other
XXX
Total investments
XXX
See accompanying Report of Independent Registered Public Accounting Firm.
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SCHEDULE II
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS
As of December 31, 2025 and 2024
($ in millions, except share data)
December 31,
ASSETS
Investments and cash
Investments in subsidiaries
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt
Long-term debt
Other liabilities
Total liabilities
Preferred stock, $ 0.001 par value, authorized 1,000,000 shares;
none issued
Common stock, $ 0.001 par value, authorized 75,000,000 shares;
issued, 2025, 67,323,929 ; 2024, 67,032,164
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net of taxes:
Net unrealized investment gains (losses) on fixed maturity securities
Net reserve remeasurements attributable to discount rates
Net funded status of benefit plans
Treasury stock, at cost, 2025, 26,664,472 shares;
2024, 26,167,246 shares
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.
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Annual Report on Form 10-K 153
SCHEDULE II (continued)
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS
($ in millions)
Year Ended December 31,
Revenues
Net investment income
Realized investment gains
Total revenues
Expenses
Interest expense
Other
Total expenses
Loss before income tax benefit and equity in net earnings of subsidiaries
Income tax benefit
Loss before equity in net earnings of subsidiaries
Equity in net earnings of subsidiaries
Net income
See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.
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SCHEDULE II (continued)
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS
($ in millions)
Year Ended December 31,
Cash flows from operating activities
Net income
Realized gains
Equity in net income of subsidiaries
Dividends received from subsidiaries
Changes in:
Income taxes
Operating assets and liabilities
Other
Net cash provided by operating activities
Cash flows from investing activities
Purchase of fixed maturity securities
Purchase of equity securities
Purchase of limited partnership interests
Sale of limited partnership interests
Net increase (decrease) in short-term investments
Capital contributions to subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to shareholders
Proceeds from issuance of Senior Notes
Principal repayment on revolving credit facility
Principal repayment on senior notes
Acquisition of treasury stock
Proceeds from exercise of stock options
Withholding tax payments on RSUs tendered
Proceeds for Share-based compensation
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash at beginning of period
Cash at end of period
See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.
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Annual Report on Form 10-K 155
SCHEDULE II (continued)
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE TO CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes thereto presented in Part II - Item 8 of this Annual Report on Form 10-K.
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SCHEDULE III
HORACE MANN EDUCATORS CORPORATION
SCHEDULE III: SUPPLEMENTARY INSURANCE INFORMATION
($ in millions)
Deferred
policy acquisition
costs
Future policy
benefits, claims and claim expenses
Unearned
premiums
Other
policy
claims and
benefits
payable
Premium
revenue/
premium
earned
Net investment
income
Benefits,
claims
and
settlement
expenses
Amortization
of deferred
policy
acquisition
costs
Other
operating
expenses
Net premiums written (excluding life)
Segment
Year Ended December 31, 2025
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Other, including consolidating
eliminations
Total
Year Ended December 31, 2024
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Other, including consolidating
eliminations
Total
Year Ended December 31, 2023
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Other, including consolidating
eliminations
Total
N/A - Not applicable.
See accompanying Report of Independent Registered Public Accounting Firm.
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Annual Report on Form 10-K 157
SCHEDULE IV
HORACE MANN EDUCATORS CORPORATION
REINSURANCE
($ in millions)
Column A
Column B
Column C
Column D
Column E
Column F
Direct (1)
Amount
Ceded to
Other
Companies
Assumed
from Other
Companies
Net
Amount
Percentage
of Amount
Assumed to Net
Year Ended December 31, 2025
Life insurance in force
Premiums
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Total premiums
Year Ended December 31, 2024
Life insurance in force
Premiums
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Total premiums
Year Ended December 31, 2023
Life insurance in force
Premiums
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Total premiums
Note: Premiums above include insurance premiums earned and contract charges earned.
(1) Direct amount is net of the annuity reinsurance agreement accounted for using the deposit method that is discussed in Note 8.
See accompanying Report of Independent Registered Public Accounting Firm.
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(a)(3) The following items are filed as Exhibits. Management contracts and compensatory plans are indicated by an asterisk (*).
Exhibit
Description
(3) Articles of incorporation and bylaws:
Restated Certificate of Incorporation of HMEC, filed with the Delaware Secretary of State on June 24, 2003, incorporated by reference to Exhibit 3.1 to HMEC's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the Securities and Exchange Commission (the "SEC") on August 14, 2003.
2024 Amended and Restated Bylaws of HMEC, incorporated by reference to Exhibit 3.1 to HMEC’s 8-K filing filed with the SEC on September 23, 2024.
(4) Instruments defining the rights of security holders, including indentures:
Indenture, dated as of November 23, 2015, by and between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to HMEC's Current Report on Form 8-K dated November 18, 2015, filed with the SEC on November 23, 2015.
Form of HMEC 7.25% Senior Notes due 2028, incorporated by reference to Exhibit 4.2 to HMEC's Current Report on Form 8-K dated September 12, 2023, filed with the SEC on September 15, 2023.
Form of HMEC 4. 7 00% Senior Notes due 20 30 , incorporated by reference to Exhibit 4.2 to HMEC's Current Report on Form 8-K dated September 23 , 20 2 5, filed with the SEC on September 26 , 20 2 5.
Certificate of Designations for HMEC Series A Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4.3 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
Description of Securities, incorporated by reference to Exhibit 4.3 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020.
(10) Material contracts:
Credit Agreement dated as of June 21, 2019 among HMEC, certain financial institutions named therein and PNC Bank, N.A., as administrative agent, incorporated by reference to Exhibit 10.1 to HMEC’s Current Report on Form 8-K dated June 24, 2019, filed with the SEC on June 24, 2019.
First Amendment to Credit Agreement dated as of June 21, 2019 among HMEC, certain financial institutions named therein and PNC Bank, N.A., as administrative agent, incorporated by reference to Exhibit 10.1(a) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020.
Second Amendment to Credit Agreement dated as of July 12, 2021, among HMEC, as borrower, PNC Bank, National Association, as administrative agent, and certain lenders party thereto, incorporated by reference to Exhibit 10.1(b) to HMEC's Current Report on Form 8-K dated July 14, 2021, filed with the SEC on July 14, 2021.
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Annual Report on Form 10-K 159
Fourth Amendment to Credit Agreement dated as of May 19, 2025, among HMEC, as borrower, PNC Bank, National Association, as administrative agent, and certain lenders party thereto, incorporated by reference to Exhibit 10.1 to HMEC's Current Report on Form 8-K dated May 19, 2025, filed with the SEC on May 22, 2025.
Horace Mann Educators Corporation Amended and Restated 2002 Incentive Compensation Plan ("2002 Incentive Compensation Plan"), incorporated by reference to Exhibit 10.2 to HMEC's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed with the SEC on August 9, 2005.
Revised Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(b) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(d) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
Revised Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(e) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
Revised Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(h) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective March 3, 2021), incorporated by reference to Exhibit 1 (beginning on page 59) to HMEC’s Proxy Statement, filed with the SEC on April 8, 2021.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Section 16 Officer) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Section 16 Officer) Non-Qualified Stock Option Agreement - Employee Grantee (with Retirement Provision), incorporated by reference to Exhibit 10.3(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 10, 2023.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(c) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-based Restricted Stock Units Agreement - Employee Grantee (with Retirement Provision), incorporated by reference to Exhibit 10.3(d) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 10, 2023.
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HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(d) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 9, 2022.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee (with Retirement Provision), incorporated by reference to Exhibit 10.3(f) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 10, 2023.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee (with Retirement Provision and ESG Modifier), incorporated by reference to Exhibit 10.3(g) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 10, 2023.
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee (One-Time Grant Service), incorporated by reference to Exhibit 10.3(e) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
Specimen Employee Performance-Based Restricted Stock Units Agreement - Key Strategic Grantee under the HMEC 2010 Comprehensive Executive Compensation Plan incorporated by reference to Exhibit 10.3(e) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 6, 2016.
Specimen Non-employee Director Restricted Stock Unit Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.17(a) to HMEC’s Current Report on Form 8-K dated May 27, 2010, filed with the SEC on June 2, 2010.
Horace Mann Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.1 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.
Horace Mann Executive Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.2 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.
Amended and Restated Horace Mann Nonqualified Supplemental Money Purchase Pension Plan, incorporated by reference to Exhibit 10.9 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
Summary of HMEC Non-employee Director Compensation, incorporated by reference to HMEC's 2025 Proxy Statement, filed with the SEC on April 2, 2025.
Summary of HMEC Named Executive Officer Annualized Salaries, incorporated by reference to Exhibit 10.8 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025.
Form of Severance Agreement between HMEC, Horace Mann Service Corporation ("HMSC") and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.13 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 28, 2013.
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Annual Report on Form 10-K 161
HMSC Executive Change in Control Plan, incorporated by reference to Exhibit 10.15 to HMEC's Current Report on Form 8-K dated February 15, 2012, filed with the SEC on February 22, 2012.
HMSC Executive Change in Control Plan Schedule A Plan Participants, incorporated by reference to Exhibit 10.10(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025.
HMSC Executive Severance Plan, incorporated by reference to Exhibit 10.16 to HMEC's Current Report on Form 8-K dated March 7, 2012, filed with the SEC on March 13, 2012.
First Amendment to the HMSC Executive Severance Plan, incorporated by reference to Exhibit 10.16(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed with the SEC on August 9, 2012.
HMSC Executive Severance Plan Schedule A Participants, incorporated by reference to Exhibit 10.11(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025.
Stock Purchase Agreement Among Horace Mann Educators Corporation, and Robert Paglione, Paglione Family Irrevocable Trust F/B/O Adam Paglione, Paglione Family Irrevocable Trust F/B/O Lisa and Jorge Arroyo, Beau Adams and Benefit Consultants Group, Inc. dated as of October 30, 2018, incorporated by reference to Exhibit 10.12 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019.
Purchase Agreement By and Among Ellard Family Holdings, Inc., Brian M. Ellard, The JCE Exempt Trust and Horace Mann Educators Corporation dated as of December 10, 2018, incorporated by reference to Exhibit 10.13 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019.
Stock Purchase Agreement for Madison National Life, incorporated by reference to Exhibit 10.14 to HMEC's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed with the SEC on November 5, 2021.
Executive employment offer letter to Stephen J. McAnena, Chief Operating Officer, dated April 4, 2023, incorporated by reference to Exhibit 10.15 to HMEC's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 8, 2023.
HMEC Insider Trading Policy, incorporated by reference to Exhibit 19 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025.
Subsidiaries of HMEC.
Consent of KPMG LLP.
(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:
Certification by Marita Zuraitis, Chief Executive Officer of HMEC.
Certification by Ryan E. Greenier, Chief Financial Officer of HMEC.
(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
Certification by Marita Zuraitis, Chief Executive Officer of HMEC.
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Certification by Ryan E. Greenier, Chief Financial Officer of HMEC.
Horace Mann Educators Corporation Clawback Policy, incorporated by reference to Exhibit 97.1 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.
(99) Additional exhibits:
Glossary of Selected Terms.
(101) Interactive Data File:
The following information from Horace Mann Educators Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025 formatted in Inline XBRL: (i) Consolidated Balance Sheets as of December 31, 2025 and 2024 (ii) Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2025, 2024 and 2023; (iii) Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2025, 2024 and 2023; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023; (v) Notes to Consolidated Financial Statements; (vi) Financial Statement Schedules; and (vii) the cover page.
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101.1).
ITEM 16. I Form 10-K Summary
None.
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Annual Report on Form 10-K 163
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Horace Mann Educators Corporation has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
HORACE MANN EDUCATORS CORPORATION
/s/ Marita Zuraitis
President and Chief Executive Officer
February 27, 2026
Marita Zuraitis
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of Horace Mann Educators Corporation and in the capacities and on the date indicated.
Signature
Title
Date
/s/ Marita Zuraitis
President, Chief Executive Officer and Director
February 27, 2026
Marita Zuraitis
(Principal Executive Officer)
/s/ Ryan E. Greenier
Executive Vice President and Chief Financial Officer
February 27, 2026
Ryan E. Greenier
(Principal Financial Officer)
/s/ Maureen Temchuk
Vice President and Controller
February 27, 2026
Maureen Temchuk
(Principal Accounting Officer)
/s/ H. Wade Reece
Chairman of the Board of Directors
February 27, 2026
H. Wade Reece
/s/ Thomas A. Bradley
Director
February 27, 2026
Thomas A. Bradley
/s/ Victor P. Fetter
Director
February 27, 2026
Victor P. Fetter
/s/ Perry G. Hines
Director
February 27, 2026
Perry G. Hines
/s/ Mark E. Konen
Director
February 27, 2026
Mark E. Konen
/s/ Beverly J. McClure
Director
February 27, 2026
Beverly J. McClure
/s/ Aaliyah A. Samuel
Director
February 27, 2026
Aaliyah A. Samuel
/s/ Elaine A. Sarsynski
Director
February 27, 2026
Elaine A. Sarsynski
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