Horace Mann Educators Corporation
2023 Annual Report
on Form 10-K
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.
Financially strong and stable
• $14.0 billion in assets and $1.2 billion in total
• 15 consecutive years of cash dividend increases
shareholders’ equity (1)
with current yield of 3.6% (2)
• $1.5 billion in net premium and contract deposits
• Highly rated by all four major rating agencies
for 2023, up 6% over the prior year
• $1.5 billion market capitalization (2)
Business diversification supports value creation
• K-12 educator market offers substantial growth
potential with additional opportunities in adjacent
markets of others who serve their communities
• Diversification expands customer reach through
retail and worksite channels
– Three organizations with decades of
commitment to educators and others who serve
their communities, enhancing reputation and
brand recognition of “Horace Mann Companies”
– Expanded product set aligns with customer
needs throughout life stages and supports
recruitment and retention for employer
customers
• Positive growth trend with more than 1 million
total households across market footprint
• Homogeneous customer set with preferred risk
profile and strong policyholder retention
• Positioned for significant cross-sell opportunities
– Expanded distribution capabilities allow
over time between product lines
customers to engage with Horace Mann the
way they choose
(1) As of Dec. 31, 2023
(2) As of February 29, 2024
Filed with the SEC on February 27, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 1-10890
HORACE MANN EDUCATORS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
37-0911756
(I.R.S. Employer Identification No.)
1 Horace Mann Plaza, Springfield, Illinois 62715-0001
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 217-789-2500
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.001 per share
Trading Symbol(s)
HMN
Name of each exchange on
which registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filling reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant based on the closing price of the registrant's Common Stock on the New
York Stock Exchange and the shares outstanding on June 30, 2023, was $1,167.8 million.
As of February 16, 2024, the registrant had 40,878,764 shares of Common Stock, par value $0.001 per share, outstanding.
Documents Incorporated by Reference
Certain portions of the registrant's Proxy Statement for the 2024 Annual Meeting of Shareholders are incorporated by reference into Part III Items 10, 11, 12, 13 and 14 of
this Form 10-K as specified in those Items and will be filed with the Securities and Exchange Commission within 120 days after December 31, 2023.
HORACE MANN EDUCATORS CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 2023
INDEX
Part
I
Item
1.
Business
Introduction
Forward-looking Information
Overview, History and Available Information
Corporate Strategy
Human Capital Resources
Reporting Segments
Investments
Cash Flow
Regulation
Changing Climate Conditions
Enterprise Risk Management
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 2024
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
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters
1A.
1B.
1C.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
10.
11.
12.
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
13.
14.
15.
16.
Signatures
II
III
IV
Page
1
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19
20
21
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23
35
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37
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40
41
42
44
45
50
57
60
66
66
66
68
153
153
156
156
156
156
156
157
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157
169
170
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 2023 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) taxqualified
retirement annuities in 1961 and homeowners insurance in 1965. Over those first 30 years, the Company also
pursued business activities outside the scope of today’s focus on educators and others who serve their
communities.
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 December 23, 1963. The present name, Horace Mann Insurance
Company, was adopted on November 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.
Horace Mann Educators Corporation
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. (Madison National) from its former parent, Independence Holding Company (IHC).
Today, we reach educators and others who serve their communities through two divisions: Retail and Worksite.
The Retail Division focuses on providing individual insurance and financial products directly to educators and
others who serve the community. It includes both the Property & Casualty and Life & Retirement reporting
segments. The Worksite Division provides benefits to educators and others who serve the community through
their employers as well as supplemental products distributed through the worksite channel. This division
represents the Supplemental & Group Benefits reporting segment, which includes the results of NTA and
Madison National.
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 ESG commitments 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 environmental, social and governance reporting is available through the corporate social responsibility
section of our website, csr.horacemann.com.
On June 15, 2023, 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, 2022, 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 focus
The U.S. Department of Education estimates that there are approximately 7.5 million K-12 school teachers,
administrators and support staff nationwide. Horace Mann serves approximately 1 million of these households.
Our customer base is about 80% educators. (The remaining 20% are generally in other public sector
occupations such as firefighters.) The niche educator market has similar characteristics and preferred risk
profiles, which allows for more precise underwriting processes and more targeted marketing operations.
A major motivator for people choosing careers in education is its intangible rewards: The ability to make a
difference in students’ lives and contribute to the greater good and as the U.S. population increases, the need
for educator positions grows proportionally. However, 86% of U.S. K-12 public schools reported challenges
hiring teachers for the 2023-24 school year, according to data from the National Center for Education Statistics
(NCES), the statistical center of the U.S. Department of Education's Institute of Education Sciences (IES).
2 Annual Report on Form 10-K
Horace Mann Educators Corporation
The NCES reported that the biggest barriers to hiring teachers were too few candidates applying for open
positions (cited by 70 percent of public schools) and a lack of qualified applicants applying for open positions
(cited by 66 percent). Horace Mann research also indicates challenges to hiring and retention that include the
burden of financial stress, heavier workloads due to the current U.S. educator shortage, and conflicting
expectations of parents, administrators and lawmakers are driving more professionals out of the job they love.
Horace Mann's research indicated that more than a quarter of educators would be more likely to stay in their job
if they felt more financially secure. Horace Mann's Worksite Division provides solutions that help administrators
attract and retain employees by adding or improving benefit packages. Our Retail Division is focused on
providing products and services that educators generally purchase directly, designed to protect what they have
today or prepare for a successful future.
Our partnerships with a diverse group of national, state and local education associations also supports recruiting
and retention. Working closely with the educational community helps us to identify emerging educator financial
wellness issues and build solutions to address them.
We believe our niche market strategy, combined with our Company's more than 75-year history serving the
education market, helps us succeed in a highly competitive environment. The insurance industry consists of a
large number of companies, some of which have substantially greater financial resources, widespread
advertising campaigns, more diversified product lines, greater economies of scale and/or lower-cost marketing
approaches compared to us.
Our solutions orientation for both educator and school district customers focuses on products, distribution and
infrastructure (PDI):
•
Protection and savings products, as well as financial wellness resources and programs, designed to
meet K-12 educators’ unique needs.
• Knowledgeable, trusted distribution tailored to educator preferences. In our Retail Division, the
solutions are delivered directly to educators. In our Worksite Division, our solutions are often delivered
as employee benefits or as part of an annual enrollment process.
• Modern, scalable infrastructure that is easy to do business with.
Retail Division strategy
We provide protection and savings products directly to educators through local, trusted agents or by centralized
phone and online options. These products include auto insurance, property insurance, liability insurance, 403(b)
retirement plans, mutual funds and individual life insurance tailored to meet the needs of educators.
Horace Mann is focused on meeting educators where they want to engage with us while leveraging the value of
our exclusive agency force to address educator needs. Our agents partner with their local educational
community as a trusted advisor in financial wellness. Educators have specific financial challenges, such as
navigating individual state teacher retirement systems, student loan debt, and personal spend on classroom
supplies. Horace Mann shares financial education resources and specific programs to help educators address
these challenges. This trusted adviser model builds particularly strong brand loyalty and affinity.
One example is Horace Mann's Student Loan Solutions program. For many educators — particularly those new
to the profession — student loan debt is often substantial. Among other challenges, that debt may preclude
early in career saving for retirement at the point when those savings would have the most time to grow and make
a significant impact at retirement age. We offer complimentary online student loan management accounts for all
educators nationwide, which includes guidance on how to successfully qualify for federal student loan
forgiveness available to public sector employees.
Industry studies indicate that consumers gather information and shop for insurance using multiple sales outlets.
In fact, only 20% shop solely through an agent; however, 60% of sales end with agent involvement. Our
strengthened direct capabilities, available by phone or online, allow us to respond to questions or bind coverage
when customers prefer that interaction. Customers can also secure auto, property and life quotes and coverage
comparisons online.
We continuously improve the infrastructure that supports our Retail Division. In particular, we are enhancing our
digital capabilities to ensure our operation runs efficiently and educators can connect with us in the manner they
Horace Mann Educators Corporation
Annual Report on Form 10-K 3
prefer. Key projects include the Guidewire property and casualty platform, which increases customer
convenience through improved digital capabilities, e-signatures, real-time policy issuance and changes,
coverage comparison features and consolidated billing; and the LifePro administration system for our life,
retirement, annuity and supplemental products, which offers substantial benefits in terms of customer
experience and operating efficiencies.
Worksite Division strategy
We provide protection products through the workplace as employee benefits or directly. The product set
includes life insurance, group long- and short-term disability, supplemental cancer, supplemental heart,
supplemental disability, supplemental accident and supplemental hospital indemnity. Group products may be
paid for by the employer, or provided as optional benefits for employee purchase. Individual products provide
the opportunity for a school, district or association to make valuable financial protection benefits directly
available to employees. The Division also reaches adjacent public sector markets, including firefighters and
municipal employers that had been served for decades by NTA and Madison National.
Our core worksite distribution strategy is to market through the benefit brokers and others that bring employer-
sponsored solutions for educators and others who serve their communities directly to employer-decision makers
as part of the benefit design process. Our benefit enrollment teams can support the roll out of group solutions or
manage the enrollment process for individual products.
Our understanding of the educational market and specialized solutions package allows us to help these brokers
design custom solutions that support recruitment and retention. For example, we can package our student loan
solutions offering with other worksite benefits.
Following the integration of NTA and Madison National, we are focused on ensuring the infrastructure for our
Worksite Division is responsive to the needs of our distribution partners, employers, educators and others who
serve their communities. In 2023, one area of focus was enhancing the platforms used by marketing partners.
Human Capital Resources
Horace Mann has approximately 1,700 employees that work in four offices across the United States, including
Springfield, Ill., Dallas, Tx., Madison, Wisc., and Cherry Hill, N.J., and throughout the country as part of our
remote workforce.
Human Capital Oversight
We maintain policies and practices to attract top talent, maintain high levels of employee engagement, and
increase retention. A few of our key organizational policies include our Code of Conduct, Diversity, Equity, and
Inclusion (DEI) Strategy Statement, and Human Rights Statement.
The Board of Directors' Compensation Committee oversees human capital management and DEI strategies. Our
Chief Human Resources Officer (CHRO) is the Executive Officer directly responsible for Human Capital
Management. The CHRO regularly engages with senior management and the Board of Directors to discuss
topics involving talent acquisition, employee retention, employee engagement, total rewards, and development.
Our Culture
Horace Mann fosters an inclusive organizational culture for all our employees by focusing on talent attraction
and retention, employee engagement, DEI education and cultural competence, community connections, and
workforce development.
Talent Attraction and Retention
Our talent sourcing strategies, community partnerships, and campus outreach are strategically designed to build
diverse pipelines of qualified candidate pools to meet our current and future workforce needs. We take a
proactive approach to identifying, assessing, and engaging with candidates that have the potential to fill current
and future roles within our organization.
4 Annual Report on Form 10-K
Horace Mann Educators Corporation
Employee Engagement
We complete full, biennial employee engagement surveys as well as pulse surveys during the year to gauge
employee feedback on our Total Rewards package, company culture, DEI, and organizational goals. We take
appropriate actions to respond to the feedback collected. In 2022, 74% of employees participated in our
employee engagement survey. Employees identified manager support and effectiveness, department
collaboration, work flexibility, and inclusion as strengths. Areas where employees encouraged additional focus
were total rewards enhancements, ensuring understanding and connection to our vision and strategy, and
systems and change management processes. Our team designed action plans for each of these areas and
activities continue toward improvement.
DEI Education
Our cross-functional DEI Council has two executive sponsors: our CHRO, and our Executive Vice President and
General Counsel. The DEI Council efforts are led by our Vice President of Talent and Culture, who is guided by
our DEI Strategy Statement and supported by our Code of Conduct, and Human Rights Statement.
Horace Mann maintains three employee resources groups, including Women’s Professional Network, Men’s
Professional Network, and Allyship, our LGBTQA+ community and their allies. These groups focus on
mentorship, inclusion, community support, and awareness.
For the past four years, Horace Mann was named to the Bloomberg Gender-Equality Index, which recognizes
corporate commitment to transparency in gender reporting and advancing women’s equality. Employee
demographic information is available in the Corporate Social Responsibility section of the Horace Mann website.
Community Connections
Many of our employees are active in their communities and are committed to charitable causes. To support
employees and the causes important to them, the Horace Mann Educators Foundation matches employee
donations up to $1,000 to qualified nonprofits annually.
Workforce Development
Employee training and development programs consist of instructor-led classes, peer-to-peer learning
opportunities, and support for self-directed learning. We offer an intensive Emerging Leaders program to identify
and develop future leaders. We also have a self-directed learning library of over 100 courses that employees can
access to build their skills in customer service, performance improvement, leadership, and awareness of
unconscious bias.
Employees and leaders follow a standard performance calendar that calls for quarterly discussions to
benchmark progress and identify developmental opportunities and potential career paths.
Total Rewards Strategy
Our Total Rewards strategy is based on providing competitive compensation, comprehensive benefits, work/life
flexibility, and robust employee training and development opportunities. All full- and part-time employees and
employee agents who work a minimum of 20 hours per week are eligible for benefits, with no waiting period to
access benefits. We continually evaluate our offerings against industry benchmarks and best practices to ensure
our Total Rewards package helps to drive employee attraction and retention. We have no collective bargaining
agreements with any employees.
Competitive Compensation
Horace Mann offers competitive salary and compensation packages. Every Horace Mann employee in good
standing is eligible for an annual, company performance-based bonus and annual individual performance merit
increases. We contribute three percent of every employee’s eligible earnings to their 401(k), regardless of their
contribution status. We then match up to an additional five percent of each employee’s eligible earnings
annually.
Comprehensive Benefits
We offer major medical coverage, group life and disability insurance, dental and vision insurance, and contribute
up to $1,000 to employee health savings accounts annually.
Horace Mann Educators Corporation
Annual Report on Form 10-K 5
Horace Mann provides mental and physical health resources and incentives to help support employee wellness,
including wellness reimbursement. Employees can also reference additional free resources to support mental
and physical well-being in the Wellness HUB on the Wellness page of our intranet.
Work/Life Flexibility
Under our hybrid workforce model, more than 70% of our employees have the opportunity to work remotely for
all or a portion of their work week. This provides employees with increased flexibility to balance their personal
and professional lives without sacrificing their productivity at work.
Reporting Segments
In 2023, we conducted our business in two divisions. The Retail Division is made up of the Property & Casualty
and Life & Retirement reporting segments, while the Worksite Division consists entirely of the Supplemental &
Group Benefits reporting segment. The Corporate & Other reporting segment includes capital-raising activities
and corporate-level transactions.
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.
6 Annual Report on Form 10-K
Horace Mann Educators Corporation
358,215 auto risks in force and
168,219 property risks in force at December 31, 2023.
Property & Casualty segment
Within the Retail Division, 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 vendor products in many areas to meet
additional educator needs such as coverage for
small business owners or classic/collector autos.
Geographic distribution
Our Property & Casualty business is geographically
diversified. For the year ended December 31, 2023,
based on direct premiums for all product lines, the
top five states and their portion of total direct
insurance premiums were California, 12.2%; Texas,
8.9%; North Carolina, 7.9%; Minnesota, 6.1%; and
Georgia, 4.8%.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 7
$650.4 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 48 states and the District of Columbia.
2023 Property & Casualty Net Premiums Earned of $646 millionAuto64%Property andother liability 36%Property & Casualty segment geographic distributionCA12.2%TX8.9%NC7.9%MN6.1%GA4.8%SC4.7%LA4.5%PA3.6%ME3.3%IL2.9%All other states41.1% Catastrophe Losses (Pretax)(1)
The number of catastrophe events and the level of catastrophe losses can fluctuate significantly from year to
year. Our catastrophe losses for the last five years are shown in the following table ($ in millions).
Month
Event Description
States/Region
Total
$
97.6
Year
2023
2022
2021
2020
March
Wind and Thunderstorm
May
June
June
Wind and Thunderstorm
Wind and Thunderstorm
Wind and Thunderstorm
Other single events less than $5.0 million
AL, GA, IN, KY, MS, NC, OH, OK, PA, TN,
TX, VA
CO, FL, GA, KS, MO, NC, ND, OK, SC, TN,
TX, VA
AL, AR, CO, FL, GA, KY, LA, MS, OK, SC,
TN, TX
AR, CO, GA, IA, IN, KY, MD, MI, NC, NE,
NH, NY, PA,TN, TX, VA, WY
May
May
May
December Winter Storm Elliott
Wind and Thunderstorm
Wind and Thunderstorm
Wind and Thunderstorm
MN, WI
MN, NE, SD, WI
MI, MN, NJ, OH, PA, TX, WI
Northern Plains, Midwest and North East
Other single events less than $5.0 million
February
Winter Storm Viola
August
December Wildfire Marshall
Hurricane Ida
AR, IL, LA, MO, OK, TN. TX
AL, AK, CT, DE, DC, FL, GA, KY, LA, MD,
MA, MS, NJ, NU, NC, PA, RI, TN, VI, WV
CO
Other single events less than $5.0 million
August
August
October
October
Derecho
Hurricane Laura
Hurricane Delta
Hurricane Zeta
Other single events less than $5.0 million
IA, IL, IN, KS, MI, MN, MO, NE, OH, SD, WI
AR, LA, MS, TN, TX
AL, AR, GA, LA, MS, NC, SC, TX
AL, GA, LA, MS, NC, SC
5.8
5.2
5.1
7.6
73.9
80.0
5.5
7.0
7.4
8.1
52.0
78.2
5.1
24.0
5.3
43.8
84.4
6.5
9.5
3.3
2.7
62.4
52.0
5.5
46.5
$
$
$
$
2019
May
Wind and Hail
Other single events less than $5.0 million
CO, IA, IL, IN, KS, MO, NE, OH, OK, PA, WY
(1) Net of reinsurance and before income tax benefits. Includes allocated loss adjustment expenses.
Fluctuations in catastrophe losses impact a property and casualty insurance company's claims and claim
adjustment expenses incurred.
8 Annual Report on Form 10-K
Horace Mann Educators Corporation
Claims and Claim Expenses Incurred(1), 2021 - 2023 ($ 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, 2023, see Part I - Item 1A - Risk Factors - "Our
property and casualty loss reserves may not be adequate", Part II - Item 7, Application of Critical 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, 2023 were not material.
We maintain catastrophe excess of loss reinsurance coverage. For 2023, 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 2023, the catastrophe excess of loss reinsurance contract consisted of three
layers, each of which provided for one mandatory reinstatement. The coverage provided was 57% for the layer
of $20.0 million excess of $30.0 million, 92% coverage for the layer of $40.0 million excess of $50.0 million and
95% coverage for the layer of $85.0 million excess of $90.0 million. For 2024, our retention will increase to $35.0
million and the catastrophe excess of loss reinsurance coverage will provide 89% coverage for the layer of $25.0
million excess of $35.0 million, 90% coverage for the layer of $35.0 million excess of $60.0 million, and 92%
coverage for the layer of $90.0 million excess of $95.0 million.
Horace Mann Educators Corporation
Annual Report on Form 10-K 9
$448$534$557$370$454$459$78$80$98Non-catastropheCatastrophe202120222023 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, 2024. No other single reinsurer's
percentage participation in 2024 or 2023 exceeds 5%. We monitor reinsurers' financial strength by reviewing
A.M. Best and S&P ratings.
A.M.
Best
Rating
S&P
Rating
A+
AA-
A++
A+
A+
A
A+
A++
NR
A+
A
Reinsurer
Parent
Lloyd's of London Syndicates
2024
2023
16.8 % 15.5 %
Swiss Re Underwriters Agency, Inc.
Swiss Reinsurance Company, Ltd.
12.0 % 10.6 %
Transatlantic Reinsurance Company
Transatlantic Holdings, Inc.
R+V Versicherung AG
DZ BANK AG
Everest Reinsurance Company
Everest Re Group, Ltd.
AA+
SCOR Global P&C SE
SCOR SE
11.1 %
9.0 %
8.9 %
9.0 %
7.5 % 10.0 %
6.5 %
6.5 %
NR - Not rated.
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 2023, 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 2024.
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 2023, we reinsured these risks on a
quota share basis with General Reinsurance Corporation who assumes 95% of losses, including allocated loss
adjustment expenses and premiums for all states except Massachusetts and Rhode Island. For business written
in Massachusetts and Rhode Island, the quota share portion is 75%. For 2024, the 95% quota share with
General Reinsurance Corporation will be in run-off. Policies written in 2024 will be subject to a 25% quota share
with Renaissance Reinsurance.
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 2023, 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.
10 Annual Report on Form 10-K
Horace Mann Educators Corporation
Life & Retirement segment
Within the Retail Division, 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 2023, 45.2% of net annuity contract deposits* were for 403(b) tax-qualified annuities. At year-end 2023,
56.1% of accumulated annuity value on deposit was 403(b) tax-qualified. To further assist registered
representatives in delivering our value proposition, we have entered into third-party vendor agreements 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
expanded product offerings, new marketing support tools continue to be introduced 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 2023, the average face amount of individual life insurance policies issued by us was approximately
$209,000 and the average face amount of individual life insurance policies in force at December 31, 2023 was
approximately $127,000. Life insurance in force rose to $20.5 billion at year-end.
Horace Mann Educators Corporation
Annual Report on Form 10-K 11
2023 Life & Retirement Net Premiums and Contract Charges Earned of $152 millionRetirement29%Life71% 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, 2023 was $5.2 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.
223,118 annuity contracts in force at December 31, 2023.
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, 2023, we had 118 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. Consistent across all of these products is the elimination of
any surrender charges for early withdrawal.
We also have funding agreements as part of our participation in the 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 $1.1 billion of
recordkeeping assets under administration as of December 31, 2023.
12 Annual Report on Form 10-K
Horace Mann Educators Corporation
Retirement Assets Under Management of $5.2 billion Fixed annuities42%FIA8%Variable annuities50% Retirement Assets Under Administration, 2021 - 2023 ($ in billions)
Geographic distribution
Our Life & Retirement business is geographically
diversified. For the year ended December 31, 2023,
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 10.3%; Minnesota, 6.3%; North
Carolina 5.8%; Virginia, 5.4%; and Indiana, 5.3%.
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.
$610.7 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 has been 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 has 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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 13
$12.7$11.3$11.8$5.3$4.9$5.2$2.6$2.1$2.4$1.6$1.2$1.1$3.2$3.1$3.1Annuity AUMBrokerage and advisory AUARecordkeeping AUAReinsured annuity block202120222023Life & Retirement segment geographic distributionPA10.3%MN6.3%NC5.8%VA5.4%IN5.3%CA5.0%TX4.8%ME4.4%FL4.0%SC3.7%All other states45.0% 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 $2.4 billion of fixed annuity reserves are
reinsured on a coinsurance basis. The separate account assets and liabilities of approximately $0.7 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 2023, we reinsured 100% of the catastrophe
risk in excess of $1.0 million up to $35.0 million per occurrence, with one reinstatement. For 2024, 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
Within the Worksite Division, the Supplemental &
Group Benefits segment offers employer-sponsored
products including accident, critical illness, limited-
benefit fixed indemnity insurance, term life, short-
term disability and long-term disability, as well as
worksite direct products including supplemental
heart, supplemental cancer, supplemental disability
and supplemental 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.
Our product line 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.
269,337 total worksite direct policies in force and 826,447 total
employer-sponsored covered lives at December 31, 2023
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 expand the coverage with simplified
underwriting at an additional expense. 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.
14 Annual Report on Form 10-K
Horace Mann Educators Corporation
2023 Supplemental & Group Benefits Net Premiums Earned of $260 millionWorksite direct46%Employer-sponsored54% Our typical worksite direct 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 worksite direct supplemental products can be made
directly to Horace Mann via recurring bank draft or credit card payments or through 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 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.
$153.9 million in direct premiums, defined as premiums earned
before reinsurance as determined under statutory accounting
principles. Our principal employer-sponsored insurance subsidiary is
licensed to write business in 49 states, the U.S. Virgin Islands and
the District of Columbia.
$120.1 million in direct premiums, defined as premiums earned
before reinsurance as determined under statutory accounting
principles. Our principal worksite direct insurance subsidiary is
licensed to write business in all 50 states, the U.S. Virgin Islands
and the District of Columbia.
Geographic distribution of business
Our employer-sponsored line of business is concentrated in the Upper Midwest, while our worksite direct
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, 2023, based on direct premiums and contract deposits
for all product lines, the top five states and their portion of total direct insurance premiums and contract deposits
for the worksite direct business were California, 28.7%; Texas, 13.1%; Florida, 6.7%; North Carolina, 5.7%; and
Louisiana, 5.5%. The top five states for the employer-sponsored business were Minnesota, 16.0%; Wisconsin,
13.1%; Indiana, 9.0%; Pennsylvania, 8.8%; and Michigan, 8.1%.
Competition
Competition in this market for employee benefit products is from a number of national and regional providers of
disability, accident, and health insurance, including Aflac, American Fidelity, Colonial (a subsidiary of Unum),
Horace Mann Educators Corporation
Annual Report on Form 10-K 15
Employer-sponsored geographic distributionMN16.0%WI13.1%IN9.0%PA8.8%MI8.1%IA7.7%NE6.5%TX4.5%FL3.1%CA2.3%All other states20.9%Worksite direct geographic distributionCA28.7%TX13.1%FL6.7%NC5.7%LA5.5%SC5.2%VA4.5%TN4.0%MD3.3%AL3.1%All other states20.2% Reliance Standard, The Standard, Trustmark, and Washington National (a subsidiary of 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 this market.
In our target market, we believe that our principal competitive advantages in the sale of supplemental and
employer-sponsored products are overall service, product features, school and union partnerships, price, and
name recognition.
Employer-Sponsored Reserves
Employer-sponsored 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 IBNR. We
calculate and record a single best estimate of the reserve as of each reporting date in conformity with actuarial
standards of practice. For additional information regarding the process used to estimate employer-sponsored
reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending
employer-sponsored insurance claims and claim expense reserves and prior years' reserve development
recorded for the year ended December 31, 2023, 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.
Employer-Sponsored Reinsurance
We retained approximately 73.5% of gross and assumed group disability and specialty health benefits in 2023.
We have legacy blocks of individual life, annuity and long term care benefits that are effectively 100% ceded and
are in run off. 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.
Reinsurance is used to 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. By using reinsurance, we are able to
write policies in amounts larger than we could otherwise accept. The amount reinsured is the portion of each
policy in excess of the retention limit on a particular policy.
The following reinsurers represent approximately 98.0% of total ceded premium for the year ended
December 31, 2023:
A.M.
Best
Rating
A
A-
A+
Reinsurer
National Guardian Life Insurance Company
Clear Spring Life and Annuity Company
RGA Reinsurance Company
Total:
% of
Ceded Premiums
59.0 %
26.0 %
13.0 %
98.0 %
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.
Worksite Direct Reserves
Worksite direct 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, supplemental 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 worksite direct reserves and the risk factors
involved, 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 6 of the Consolidated Financial
Statements of this Annual Report on Form 10-K.
16 Annual Report on Form 10-K
Horace Mann Educators Corporation
Worksite Direct Reinsurance
We retain all of the risk on our supplemental health product lines, including accidental death risk embedded
within certain products. However, our other accidental death and dismemberment risks issued through all other
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. 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.
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 in limited partnership interests that are managed
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 Federal Home
Loan Bank of Chicago (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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 17
Investment Portfolio as of December 31, 2023
($ in millions)
Publicly Traded Fixed Maturity Securities, Equity
Securities and Short-term Investments:
U.S. Government and agency obligations:(1)
% of
Total
Fair
Value
Fair Value
Total
Life &
Retirement
Supplemental
& Group
Benefits
Property &
Casualty(7)
Amortized
Cost, net
Mortgage-backed securities
9.6 % $ 653.2 $
457.3 $
104.8 $
91.1 $
Other, including U.S. Treasury securities
5.7
388.7
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
Closed-end fund
Short-term investments(4)
17.1
1,168.6
1.3
91.7
17.6
1,202.7
0.4
29.8
15.8
1,080.1
0.3
0.3
0.1
0.8
0.2
—
0.2
1.9
18.3
22.0
15.4
54.5
13.9
1.1
16.5
132.9
320.3
828.8
68.0
847.4
18.3
853.9
18.1
22.0
14.6
49.4
12.1
1.1
—
36.4
Total publicly traded securities
71.6
4,889.4
3,547.7
Other Invested Assets:
Investment grade private placements
Non-investment grade private placements(2)
Mortgage loans(5)
Policy loans(5)
Limited partnership interests(8)
Other
Total other invested assets
Total investments(6)
7.4
0.8
0.6
2.1
503.9
61.2
43.2
141.4
16.7
1,138.8
0.8
52.6
461.0
51.0
39.3
140.5
816.1
47.3
28.4
1,941.1
1,555.2
35.8
178.7
6.7
115.1
2.7
136.1
0.2
—
0.8
5.1
0.8
—
—
45.3
632.1
42.9
10.2
3.9
0.9
122.1
4.3
184.3
32.6
713.4
452.0
161.1
1,298.3
17.0
240.2
8.8
95.2
1,267.0
31.1
90.1
1,112.1
—
—
—
—
1.0
—
16.5
51.2
16.8
23.1
16.3
54.5
13.9
1.1
16.5
132.9
709.6
5,244.2
—
—
—
—
200.6
1.0
201.6
556.4
71.4
43.2
141.4
1,138.8
42.7
1,993.9
100.0 % $ 6,830.5 $
5,102.9 $
816.4 $
911.2 $
7,238.1
(1) All investment grade that includes $341.3 million fair value of investments guaranteed by the full faith and credit of the U.S. Government and
$700.7 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.
Includes commercial mortgage-backed securities, asset-backed securities, other mortgage-backed securities and collateralized loan
obligations.
(3)
(4) Short-term investments mature within one year of being acquired and are carried at cost, which approximates fair value. Short-term investments
of $132.9 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) Approximately 7.3% of our investment portfolio, having a carrying amount of $479.4 million as of December 31, 2023, consisted of securities
with some form of credit support, such as insurance. Of the securities with credit support. municipal bonds represented $339.5 million of the
carrying amount.
Includes $0.2 million of fixed maturity securities, $1.0 million of equity securities and $2.1 million of short-term investments held in Corporate &
Other.
(7)
(8) Limited partnership interests are accounted for using the equity method of accounting.
18 Annual Report on Form 10-K
Horace Mann Educators Corporation
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, 2023
Investment grade
Non-investment grade
Average credit quality
Average option-adjusted duration (years)
Percent maturing in next 5 years
Cash Flow
% of Fixed Maturity
Securities Portfolio
% of Total
Investment Portfolio
92.6 %
7.4 %
A+
6.0
33.0 %
71.0 %
6.0 %
A+
6.4
25.3 %
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 2024
from all of our insurance subsidiaries without prior regulatory approval is approximately $112.3 million, excluding
the impact and timing of prior year dividends, of which $127.5 million was paid during the year ended December
31, 2023.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 19
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,
New York, Wisconsin and Texas and are overseen by the Illinois Department of Insurance, the New York
Department of Financial Services, the Wisconsin Office of the Commissioner of Insurance and the Texas
Department of Insurance. 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, 2023 and 2022, statutory
capital and surplus of each of our insurance subsidiaries were above required levels. States have also adopted
the NAIC's U.S. Own Risk and Solvency Assessment which requires insurance companies to submit their own
assessment of their current and future risks and provide a consolidated group-level perspective on risk and
capital formulated through an internal risk self-assessment process.
Regulation of insurance continues to evolve. Some changes arise as a result of economic developments, such
as changes in investment laws made to recognize new investment products or to respond to perceived
investment risks, while others reflect concerns about insurance availability, prices, enterprise risk management
guidelines, allegations of unfair-discriminatory pricing, underwriting practices, or solvency concerns. For
example, many states impose restrictions on the ability of an insurer to withdraw from certain lines of business.
Over the past several years, legislation, regulatory measures, and voter initiatives have been introduced, and in
some cases adopted, which deal with use of non-public consumer information, use of credit information in
underwriting and rating, insurance rate development, rate of return limitations, and the ability of insurers to
cancel or non-renew insurance policies.
Regulation at Federal Level
Although the federal government generally does not directly regulate the insurance industry, federal initiatives
often impact the insurance business. Current and proposed federal measures which may significantly affect
insurance and retirement business include employee benefits regulation, standards applied to employer
sponsored retirement plans, standards applied to broker-dealers and investment advisers, controls on the costs
of medical care, medical entitlement programs such as Medicare, structure of retirement plans and accounts,
changes to the insurance industry antitrust exemption, and minimum solvency requirements. Also, see Part I -
Item 1A of this Annual Report on Form 10-K. In 2022, the SEC proposed a new disclosure rule that would require
public companies to disclose on several climate-related factors, including climate-related risk management and
greenhouse gas emissions, among others. This rule is expected to be finalized in 2024. Other federal regulations
such as the Patient Protection and Affordable Care Act, Fair Credit Reporting Act, Gramm-Leach-Bliley Act and
USA PATRIOT Act, including its anti-money laundering regulations, also impact our business.
The variable annuities underwritten by Horace Mann Life Insurance Company (HMLIC) are regulated by the SEC.
Horace Mann Investors, Inc., and BCG Securities, Inc. (BCGS), our broker-dealer and Registered Investment
Adviser subsidiaries, are also regulated by the SEC, the Financial Industry Regulatory Authority, Inc. (FINRA), the
Municipal Securities Rule-making Board and various state securities regulators.
Changes in federal income taxation of the build-up of cash value within a life insurance policy or an annuity
contract could have a materially adverse impact on our ability to market and sell such products. Various
legislation to this effect has been proposed in the past, but has not been enacted. Although no such legislative
proposals are known to exist at this time, such proposals may be made again in the future. Changes in other
20 Annual Report on Form 10-K
Horace Mann Educators Corporation
federal and state laws and regulations could also affect the relative tax and other advantages of our annuity and
life products.
Financial Regulation Legislation
In addition, from time to time, the United States Congress and certain federal agencies investigate the current
condition of the insurance industry to determine whether federal regulation is necessary. For example, the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) created the Federal Insurance Office (FIO)
within the U.S. Department of the Treasury. FIO studies the current insurance regulatory system and is charged
with monitoring and providing specific reports on various aspects of the insurance industry, including the
collection of information about the insurance industry and monitoring the industry for systemic risk. However,
FIO does not have general supervisory or regulatory authority over the insurance business.
Privacy and Cybersecurity
We are subject to various federal and state laws and regulations with respect to privacy, data protection and
cybersecurity. Some states have adopted NAIC’s Insurance Data Security Model Law, which establishes
standards for data security and the investigation and notification of cybersecurity events. In 2023, the SEC
adopted a new cybersecurity disclosure rule for public companies. This rule requires that public companies
report material cybersecurity incidents on a Form 8-K within four business days of the materiality determination.
In addition, state privacy laws continue to evolve. The California Consumer Privacy Act went into effect in
January 2020, and provides additional privacy rights for California residents by enacting the California Privacy
Rights Act, which became effective January 1, 2023. Colorado, Connecticut, Utah and Virginia have enacted
similar privacy laws, all of which became effective in 2023. Federal and state regulators are expected to continue
to enact legislation related to privacy and cybersecurity, which may require additional compliance efforts and
changes to policies, procedures and operations.
Changing Climate Conditions
Horace Mann continually works to better understand and manage climate risks that directly affect our
stakeholders. This is an important issue for the insurance industry. We recognize climate change is a growing
concern, and continually work to better understand and manage climate risks that directly affect our customers,
insurance products and investment portfolio. Our Board formally recognizes the importance of carbon neutrality.
Our Board oversees our Enterprise Risk Management Committee’s 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 likely to be affected by climate risk. We also have in place a conservative
reinsurance program as an additional layer of protection against large property and casualty catastrophe losses.
Our 2024 coverage for $30 million to $175 million of losses shares the risk with other insurance companies.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 21
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.
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 Enterprise Risk Management (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:
22 Annual Report on Form 10-K
Horace Mann Educators Corporation
•
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.
ITEM 1A. I Risk Factors
Index to Risk Factors
Introduction
Risks Related to Economic Conditions, Market Conditions and Investments
Strategic Risks
Operational Risks
Financial Strength, Credit and Counterparty Risks
Regulatory and Legal Risks
Introduction
Page
23
24
25
27
32
33
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 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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 23
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 claims, adverse utilization of benefits
relative to our best estimate assumptions, and increased lapses or surrenders of policies. Such adverse changes
in the economy could negatively affect our earnings and have a material adverse 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.
Recent increases in interest rates have increased our 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.
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
24 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 decline 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
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 25
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 inability of our insurance subsidiaries to effectively anticipate the impact
of these issues on our business and compete successfully in the property and casualty business could adversely
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.
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 independent
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 expand to
additional distribution partners, our sales could be adversely impacted.
In addition, a failure to effectively develop new methods of reaching consumers or realize cost efficiencies could
impact our ability to grow our business and generate revenues as 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 worksite direct 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.
26 Annual Report on Form 10-K
Horace Mann Educators Corporation
We accounted for the NTA and Madison National 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, 2023, the Company's Consolidated Balance Sheet reflected goodwill of $34.9 million and
intangible assets of $156.9 million 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.
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:
•
•
•
•
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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 2023 direct premiums earned, 58.9% 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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 27
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
claims are reported and settled.
The rise in inflation in recent periods 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 unexpected changes in behavior of claimants and
policyholders, including an increase in fraudulent reporting of exposures and/or losses, reduced maintenance of
insured properties, increased frequency of small claims or delays in the reporting or adjudication of claims, 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.
Actual experience differing significantly from our life pricing and reserving assumptions could
negatively affect our results of operations and financial condition.
The profitability of our supplemental insurance, 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.
28 Annual Report on Form 10-K
Horace Mann Educators Corporation
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
and results of operations. Impacts to our business have been and could continue to be widespread and may
result in the following:
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•
•
•
•
•
•
•
•
•
•
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 susceptible to wildfires or hail and wind activity, particularly
in jurisdictions that restrict pricing and underwriting flexibility. The threat of rising sea levels or other catastrophe
losses 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,
Horace Mann Educators Corporation
Annual Report on Form 10-K 29
industries or markets may be materially and adversely affected, nor is it possible to foresee the magnitude of
such effect.
Further, it is also possible that the legal, regulatory and social responses to climate change could have an
adverse effect on our financial condition, results of operations and cash flows. In 2022, the SEC proposed a new
disclosure rule that would require public companies to disclose on several climate-related factors, including
climate-related risk management and greenhouse gas emissions, among others. This rule is expected to be
finalized in 2024. 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. Any cybersecurity
incident, including system failure, cyber-attacks, security breaches, disruption by malware or other damage, with
respect to our or our service providers’ information technology systems, could interrupt or delay our operations,
result in a violation of applicable cybersecurity, privacy, data protection or other laws, regulations, rules,
standards or contractual obligations, damage our reputation, cause a loss of customers or expose sensitive
customer data, give rise to civil litigation, injunctions, damages, monetary fines or other penalties, subject us to
additional regulatory scrutiny or notification obligations, and/or increase our compliance costs, any of which
could adversely 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. 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 incident 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
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
30 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 is critical 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:
•
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•
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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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 31
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 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
32 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 adverse 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 administration could result in initiatives at the federal level increasing the federal corporate income
tax from the current rate of 21%. Any future legislative action could increase our costs, the impact of which
could be significant. We are unable to predict the outcome or effects of any of these potential actions or any
other legislative or regulatory proposals as they relate to our businesses.
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.
Horace Mann Educators Corporation
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
34 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 adverse 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 damage our market position and reputation.
ITEM 1B. I Unresolved Staff Comments
None.
Horace Mann Educators Corporation
Annual Report on Form 10-K 35
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. Despite security and controls design, such information technology
systems could become subject to cyberattacks. Network, system, application, and data breaches could result in
operational disruptions or information misappropriation, which could have a material adverse effect on our
business, results of operations and financial condition. Unauthorized access to or unintentional dissemination of
confidential, highly-sensitive customer, employee, or company data through breach in 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.
To address cybersecurity risk, we maintain a cybersecurity risk management program that is overseen by the
Chief Information Security Officer (CISO). The CISO is responsible for developing, maintaining, and enforcing
cybersecurity and cyber risk-related policies; ensuring the Company and its subsidiaries satisfy requirements of
relevant regulations and third-party risk assessments; identifying and keeping abreast of developing security
threats; as well as overseeing and implementing regular security awareness training of all employees on
cybersecurity. In leading the cybersecurity risk management program, the CISO regularly works with other
divisions of the company, including legal, compliance, IT, 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. 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 both mature the cybersecurity
program and 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 regular reports on 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.
The CISO is responsible for identifying and reporting any cybersecurity incidents 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 designated subgroup would review
known information and develop an action plan, which would include Board outreach, expert retention, insurance
notification, communication plans, and a materiality assessment.
Although we believe we and our IT providers employ appropriate security technologies (including data
encryption processes, intrusion detection systems), and conduct comprehensive risk assessments and other
internal control procedures to assure the security of our and our customers' data, we can provide only
reasonable, not absolute, 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 significant and comprehensive 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, 2023, 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.
36 Annual Report on Form 10-K
Horace Mann Educators Corporation
ITEM 3. I Legal Proceedings
For a description of noteworthy litigation, see Part II - Item 8, Note 14 of the Consolidated Financial Statements
of this Annual Report on Form 10-K.
ITEM 4. I Mine Safety Disclosures
Not applicable.
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.
Fiscal Period
2023:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2022:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Market Price
High
Low
Dividends
Paid
$
33.79 $
28.67 $
30.12
33.85
38.10
27.94
29.04
32.33
$
40.13 $
35.01 $
39.51
42.62
42.95
32.60
34.22
36.58
0.33
0.33
0.33
0.33
0.32
0.32
0.32
0.32
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 37
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, 2018. 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. 2018 Dec. 2019
Dec. 2020
Dec. 2021 Dec. 2022 Dec. 2023
HMEC
$
100 $
120 $
119 $
113 $
113 $
S&P 500 Insurance Index
S&P 500 Index
100
100
129
126
129
156
169
200
186
164
103
203
207
Holders and Shares Issued
As of February 16, 2024, the number of holders of our common stock was approximately 32,000.
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 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to
$50 million (2022 Program) to begin following the completion of the $50 million repurchase plan which was
authorized on September 30, 2015 (2015 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
the three months ended September 30, 2022, the 2015 Program was completed and we began repurchasing
shares under the 2022 Program.
38 Annual Report on Form 10-K
Horace Mann Educators Corporation
HMECS&P 500 Insurance IndexS&P 500 IndexDec. 2018Dec. 2019Dec. 2020Dec. 2021Dec. 2022Dec. 2023$75$100$125$150$175$200$225
For the quarterly periods ended 2023 and 2022, we repurchased shares of our common stock under the
Programs as follows:
Period
2023:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2022:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
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
— $
33,000 $
35,394 $
128,540 $
— $
295,445 $
315,625 $
59,746 $
—
28.73
32.47
34.01
—
33.87
37.40
37.14
—
33,000
35,394
128,540
—
295,445
315,625
59,746
$34.9 million
$34.9 million
$35.8 million
$36.9 million
$41.3 million
$41.3 million
$1.3 million
$13.1 million
ITEM 6. I [Reserved]
Horace Mann Educators Corporation
Annual Report on Form 10-K 39
ITEM 7. I Management's Discussion and Analysis of Financial
Condition and Results of Operations (MD&A)
($ 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 2023 Investor Supplement.
Increases or decreases in this MD&A that are not meaningful are marked "N.M.".
This MD&A covers the following:
Introduction
Consolidated Financial Highlights
Consolidated Results of Operations
Outlook for 2024
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
Page
40
41
42
44
45
50
50
53
56
57
57
60
66
66
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, 2023 compared to the year ended December 31, 2022. For a
discussion of the results of operations for the year ended December 31, 2022 compared to the year ended
December 31, 2021, 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,
2022, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2023.
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 and whole life insurance products
40 Annual Report on Form 10-K
Horace Mann Educators Corporation
• worksite direct insurance products, including cancer, heart, hospital, supplemental disability and
accident
•
employer-sponsored insurance products, primarily long-term disability and short-term disability
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.
Effective January 1, 2022, we acquired all the equity interests in Madison National Life Insurance Company, Inc.,
an insurance company organized under the laws of the State of Wisconsin (Madison National), for $172.3 million
which added employer-sponsored products. As a result of the acquisition, Madison National became a wholly
owned subsidiary of HMEC.
We conduct and manage our business in four reporting segments. The three reporting segments representing
the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance
products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance
products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability,
accident, short-term and long-term group disability, and group term life coverages). We do not allocate the
impact of corporate-level transactions to these reporting segments, consistent with the basis for management's
evaluation of the results of those segments, but classify those items in the fourth reporting segment, Corporate &
Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and
certain public company expenses, such items also have included corporate debt retirement costs, when
applicable. See Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form
10-K for more information.
Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services – Insurance (Topic 944):
Targeted Improvements to the Accounting for Long-Duration Contracts on a modified retrospective basis. Prior
year balances were recast in this Annual Report on Form 10-K to conform to ASU 2018-12 effective January 1,
2021. See Part II - Item 8, Note 1, Note 6, and Note 18 of the Consolidated Financial Statements in this Annual
Report on Form 10-K for more information.
Consolidated Financial Highlights
($ in millions)
Total revenues
Net income (loss)
Per diluted share:
Net income (loss)
Net investment losses, after tax
Book value per share
Year Ended December 31,
2023-2022
2023
2022
Change %
$
1,491.9
$
1,381.6
45.0
19.8
8.0%
127.3%
1.09
(0.45)
28.78
0.47
(1.07)
26.85
131.9%
N.M.
7.2%
2.4 pts
Net income return on equity - last twelve months
4.0%
1.6%
For 2023, net income increased $25.2 million compared the prior year primarily due to lower net investment
losses and higher net investment income partially offset by higher interest credited, higher DAC amortization and
a higher effective tax rate.
Horace Mann Educators Corporation
Annual Report on Form 10-K 41
Consolidated Results of Operations
($ in millions)
Year Ended December 31,
2023-2022
2023
2022
Change %
Net premiums and contract charges earned
$
1,057.1 $
1,027.7
Net investment income
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
Other expense - goodwill and intangible asset impairments
444.8
(24.0)
14.0
400.9
(56.5)
9.5
1,491.9
1,381.6
769.1
205.7
318.1
101.2
14.8
29.7
—
747.0
173.4
315.5
88.2
16.8
19.4
4.8
Total benefits, losses and expenses
1,438.6
1,365.1
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
53.3
8.3
$
45.0 $
16.5
(3.3)
19.8
2.9 %
11.0 %
N.M.
47.4 %
8.0 %
3.0 %
18.6 %
0.8 %
14.7 %
-11.9 %
53.1 %
N.M.
5.4 %
N.M.
N.M.
127.3 %
Net Premiums and Contract Charges Earned
For 2023, net premiums and contract charges earned increased $29.4 million as the Property & Casualty
segment continues to implement rate and inflation adjustments to coverage values continue to take effect.
Net Investment Income
Total net investment income in 2023 increased $43.9 million, primarily due to higher returns on floating rate fixed
maturity securities including commercial mortgage loan funds partially offset by lower returns on limited
partnership interests in various equity funds. The annualized investment yield on the portfolio excluding limited
partnership interests* was as follows:
Investment yield, excluding limited partnership interests, pretax - annualized*
Investment yield, excluding limited partnership interests, after tax - annualized*
Year Ended December 31,
2023
4.7%
3.8%
2022
4.3%
3.4%
During 2023, we continued to identify and purchase investments, including alternative investments, with
attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual
securities that would be inconsistent with our overall investment guidelines for the core portfolio. We also funded
commercial mortgage loan funds and limited partnership interests in line with our intended allocation to this
portion of our portfolio to increase yields while balancing protection and risk.
42 Annual Report on Form 10-K
Horace Mann Educators Corporation
Net Investment Losses
For 2023, net investment losses decreased $32.5 million. The breakdown of net investment gains (losses) by
transaction type were as follows:
($ in millions)
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
Year Ended December 31,
2023
2022
$
$
(7.1) $
(25.0)
7.9
0.2
(24.0) $
(10.7)
(17.8)
(33.2)
5.2
(56.5)
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 2023, other income increased $4.5 million primarily due to an indemnification agreement associated with the
employer-sponsored business line.
Benefits, Claims and Settlement Expenses
For 2023, benefits, claims and settlement expenses increased 3% as higher catastrophe losses and non-
catastrophe weather losses in the current year offset unfavorable prior year development recorded in 2022 in the
Property & Casualty segment.
Interest Credited
For 2023, interest credited increased $32.3 million, driven primarily by higher interest rates on advances received
from the Federal Home Loan Bank of Chicago (FHLB). The net dollar contribution from FHLB advances remained
stable year over year as the higher interest credited rates are offset by higher earnings from the floating rate
securities backing the program, although the net interest spread percentage declined slightly.
Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be
reported. The average deferred annuity credited rate, excluding the reinsured annuity block, was 2.9% for 2023
and 2.5% for 2022.
Operating Expenses
For 2023, operating expenses increased $2.6 million as the impacts of inflation were partially offset by reduced
expenses on a run-off block.
DAC Unlocking and Amortization Expense
For 2023, DAC unlocking and amortization expense increased $13.0 million, due to premium increases in the
Property & Casualty segment driving higher DAC asset levels as well as write-offs of DAC in the Life &
Retirement segment related to declines in annuity persistency.
Intangible Asset Amortization Expense
For 2023, intangible asset amortization expense decreased $2.0 million.
Interest Expense
For 2023, interest expense increased $10.3 million, primarily due to an increase in floating interest rates on the
Revolving Credit Facility in the first nine months of the year and interest expense on the 2023 Senior Notes
issued in September 2023.
Other Expense - Goodwill and Intangible Asset Impairments
The prior year had other expense representing goodwill and intangible asset impairment charges with regards to
Benefit Consultants Group, Inc. (BCG), a reporting unit within the Retirement operating segment. See Part II -
Horace Mann Educators Corporation
Annual Report on Form 10-K 43
Item 8, Note 9 of the Consolidated Financial Statements in this Annual Report on Form 10-K for further
information.
Income Tax Expense (Benefit)
The effective income tax rate on our pretax income, including net investment gains (losses) was 15.6% and
(20.0)% for the years ended December 31, 2023 and 2022, respectively. Income from investments in tax-
advantaged securities decreased the effective income tax rates by 7.5 and 39.2 percentage points for 2023 and
2022, respectively. The goodwill and intangible asset impairment charges in the Life & Retirement segment
decreased the effective income tax rate by 9.3 percentage points as of December 31, 2022.
In August 2022, the Inflation Reduction Act of 2022 (IRA) was passed by the U.S. Congress and signed into law
by the Executive Branch. The IRA includes a new Federal alternative minimum tax (AMT), effective in 2023, that
is based on the adjusted financial statement income (AFSI) set forth on the applicable financial statement (AFS)
of an applicable corporation. A corporation is an applicable corporation if its rolling average pre-tax AFSI over
three prior years (starting with years 2020 - 2022) is greater than $1.0 billion. For a group of related entities, the
$1.0 billion threshold is determined on a group basis, and the group’s AFSI is generally treated as the AFSI for all
separate taxpayers in the group. Except under limited circumstances, once a corporation is an applicable
corporation, it is an applicable corporation in all future years.
An applicable corporation is not automatically subject to an AMT liability. The corporation’s tentative AMT
liability is equal to 15.0% of its adjusted AFSI, and AMT is payable to the extent the tentative AMT liability
exceeds regular corporate income tax. However, any AMT paid would be indefinitely available as a credit
carryover that could reduce future regular tax in excess of AMT.
HMEC and its controlled group of corporations have determined that it is not an applicable corporation in 2023.
In making such determination, the group has relied upon guidance issued by the U.S Treasury Department
during 2023.
We record liabilities for uncertain tax filing positions where it is more likely than not that the position will not be
sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted
appropriately based on changes in facts or law. We have no unrecorded liabilities from uncertain tax filing
positions.
As of December 31, 2023, our federal income tax returns for years prior to 2020 are no longer subject to
examination by the Internal Revenue Service. We do not anticipate any assessments for tax years that remain
subject to examination to have a material effect on our financial position or results of operations. 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 2024
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 2024 full year net income will be
within a range of $3.00 to $3.30 per diluted share, generating a core return on equity* near 9%. These results
anticipate the following:
•
8% to 9% increase in Net premiums and contract charges earned driven by Property & Casualty rate
actions
• Between $465 million and $475 million of Net investment income, including approximately $105 million
of accreted investment income on the deposit asset on reinsurance in the Life & Retirement segment.
This anticipates strong returns from our commercial mortgage loan portfolio as well as returns for our
limited partnerships moving toward their historic averages
•
•
Approximately 5.5% increase in total Operating expense
Approximately $35 million in corporate Interest expense included in results for the Corporate & Other
segment
44 Annual Report on Form 10-K
Horace Mann Educators Corporation
Property & Casualty Segment
In 2024, net income for Property & Casualty is anticipated to be in the range of $36 million to $41 million. Our
outlook anticipates:
• Combined ratio near 100%
• Catastrophe loss assumption of approximately $80 million or around 11% of net earned premiums – in
line with five-year average and consistent with historical frequencies and current severities applied to
modeled exposures
We anticipate achieving our longer-term Property & Casualty combined ratio target of 95-96% in 2025.
Life & Retirement Segment
In 2024, net income for Life & Retirement is anticipated to be in the range of $77 million to $81 million. Our
outlook anticipates:
•
Spread on the fixed annuity business above the target range of 220 to 230 basis points
• Mortality modestly higher than 2023
Supplemental & Group Benefits Segment
In 2024, net income for Supplemental & Group Benefits is anticipated to be in the range of $47 million to $50
million. Our outlook anticipates:
• Claims utilization for supplemental and disability products returning to near pre-pandemic levels, leading
to a segment benefit ratio closer to longer-term target of 43%
•
Pretax profit on revenue of between 20% and 21%
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 due 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.
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 our 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 to 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.
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
Horace Mann Educators Corporation
Annual Report on Form 10-K 45
•
•
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 87.7% of the fixed
maturity securities portfolio, based on fair value, was priced through valuation services or priced using
observable inputs as of December 31, 2023.
The valuation of hard-to-value fixed maturity securities (generally 75 - 125 securities) is more subjective because
the markets are less liquid and there is a lack of observable market inputs. This may increase the potential that
the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur
at the measurement date. When the valuation service providers cannot provide prices, the investment managers
obtain price quotes from brokers, which may be binding or non-binding price quotes. For those securities where
the investment manager cannot obtain broker quotes, they will model the security, generally using cash flows
discounted at the appropriate current market rate. Valuation service provides' valuation methodologies, as well
as investment managers’ modeling methodologies, are sometimes matrix-based, using indicative evaluation
measures and adjustments for specific security characteristics and market sentiment. The selection of the
market inputs and assumptions used to estimate the fair value of hard-to-value fixed maturity securities requires
judgment and may include: benchmark yield, liquidity premium, prepayment speeds and default rates, spreads,
weighted average life and credit rating. The cash flows are based on the contractual terms of the individual
security and are adjusted for the inputs and assumptions as appropriate, and the cash flows are then discounted
by the yield as determined by the assumptions. The extent of the use of each market input depends on the
market sector and market conditions. Depending on the security, the priority of the use of inputs may change or
some market inputs may not be relevant or additional inputs may be necessary.
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 broker
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 a 6% decrease in the fair value of fixed maturity securities. As of December 31, 2023, Level 3 invested assets
comprised 9.5% of our total investment portfolio based on fair value. Invested assets are classified as Level 3
when fair value is determined based on unobservable inputs and those inputs are significant to the determination
of fair value.
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
46 Annual Report on Form 10-K
Horace Mann Educators Corporation
the consummation of a transaction with an unrelated third party or when a credit loss allowance transaction is
recorded. We evaluate fixed maturity securities where fair value is below amortized cost on a quarterly basis to
determine if a credit loss allowance is necessary. These reviews, in conjunction with our investment managers’
quarterly credit reports and relevant factors such as (1) has the security missed any scheduled principal or
interest payments in the current quarter; (2) has the security been downgraded to below investment grade by
rating agencies or if the security was below investment grade at time of purchase, has the security been
downgraded by two or more notches since acquisition; (3) has the security declined in value by more than 10%
compared to the prior quarter; (4) has the market yield changed by more than 50 basis points; are all considered
in the impairment assessment process.
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 defaults, 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.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 47
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, 2023 would result in an increase to the liability for future policy benefits of
approximately $100 million and the potential effect of an increase of 50 basis points in the discount rate would
result in a decrease to the liability for future policy benefits of approximately $90 million.
Cash flow assumptions are reviewed and updated, as needed, at least annually. Mortality, morbidity, lapse, and
expense assumptions used in cash flow modeling are based on judgments that consider our historical
experience, industry data, and other factors. On a quarterly basis, cohort level cash flow measures are updated
based on the emergence of actual experience. The updated cash flows, based on experience emergence and
any assumption updates, are used to determine the updated net premiums, the portion of the gross premium
required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be
charged to expense as incurred. The updated net premium ratio is used to calculate the updated liability for
future policy benefits as of the beginning of the quarter, at the original discount rate. To the extent the present
value of future benefits and expenses exceeds the present value of future gross premiums, an immediate charge
is recognized in net income, such that net premiums are set equal to gross premiums. The potential impact of
increasing (decreasing) our long-term mortality assumption by 5% is an increase (decrease) to the LFPB of
approximately $8 million. The potential impact of increasing (decreasing) our long-term lapse assumption by
10% is a decrease (increase) to the LFPB of approximately $1 million. The potential impact of increasing
(decreasing) our long-term morbidity assumption by 5% in an increase (decrease) to the LFPB of approximately
$4 million.
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.
Reserves are re-estimated quarterly. Changes to reserves are recorded in the period in which development
factor changes result in reserve re-estimates. A detailed discussion of the process utilized to estimate loss
reserves, risk factors considered and the impact of adjustments recorded during recent years is included in Part
II - Item 8, Note 5 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
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 $6.3 million for long-tail liability related exposures
48 Annual Report on Form 10-K
Horace Mann Educators Corporation
(auto liability coverages) and approximately $2.0 million for short-tail liability related exposures (property and
auto physical damage coverages). Actual results may differ, depending on the magnitude and direction of the
deviation.
Our actuaries discuss their loss and loss adjustment expense actuarial analysis with management. As part of this
discussion, the indicated point estimate of the IBNR loss reserve by line of business (coverage) is reviewed. Our
actuaries also discuss any indicated changes to the underlying assumptions used to calculate the indicated
point estimate. Any variance between the indicated reserves from these changes in assumptions and the
previously carried reserves is reviewed. After discussion of these analyses and all relevant risk factors,
management determines whether the reserve balances require adjustment. Our best estimate of loss reserves
may change depending on a revision in the underlying assumptions.
Our liabilities for unpaid claims and claim expense reserves for Property & Casualty were as follows:
($ in millions)
December 31, 2023
December 31, 2022
Auto liability
Auto other
Property
All other
Total
Case
Reserves
IBNR
Reserves
Total(1)
Case
Reserves
IBNR
Reserves
Total(1)
$
99.5 $
210.7 $
310.2 $
105.6 $
197.5 $
303.1
16.8
23.7
1.2
(1.4)
61.5
4.8
15.4
85.2
6.0
17.7
25.2
2.8
(4.8)
38.9
5.8
12.9
64.1
8.6
$
141.2 $
275.6 $
416.8 $
151.3 $
237.4 $
388.7
(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, 2023, the impact of a reserve re-
estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.5 million in net
income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by
approximately $2.5 million.
No prior years' reserve development was recorded in 2023. Unfavorable prior years' reserve re-estimates
decreased net income in 2022 by approximately $22.0 million pretax, primarily the result of unfavorable loss
trends in auto for accident years 2021 and prior.
Horace Mann Educators Corporation
Annual Report on Form 10-K 49
Results of Operations by Segment
Consolidated financial results primarily reflect the results of Property & Casualty, Life & Retirement, and
Supplemental & Group Benefits reporting segments as noted in the Introduction section of this MD&A, as well
as the Corporate & Other reporting segment. These segments are defined based on financial information
management uses to evaluate performance and to determine the allocation of resources.
The determination of segment data is described in more detail in Part II - Item 8, Note 17 of the Consolidated
Financial Statements in this Annual Report on Form 10-K. The following sections provide analysis and
discussion of results of operations for each of the reporting segments as well as investment results.
Property & Casualty
2023 net loss reflected the following factors:
•
Increases in average written premium per policy
• Higher net investment income on limited
partnership portfolio
• Higher catastrophe losses
• No prior years' reserve development in the
current year
• Continued elevated underlying auto and
property loss ratios* due to non-catastrophe
weather
50 Annual Report on Form 10-K
Horace Mann Educators Corporation
Net Premiums Written* and Underlying Combined Ratio* ($ in millions)$617.5$684.498.7%98.2%20222023 The following table provides certain financial information for Property & Casualty for the years indicated.
($ in millions, unless otherwise indicated)
Year Ended December 31,
2023-2022
2023
2022
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
Expense ratio
Combined ratio:
Prior years' reserve development(1)
Catastrophe losses
Underlying combined ratio*
Property
Loss and loss adjustment expense ratio
Expense ratio
Combined ratio:
Prior years' reserve development(1)
Catastrophe losses
Underlying combined ratio*
Risks in force (in thousands)
Auto(2)
Property
Total
(1) (Favorable) unfavorable.
(2) Includes assumed risks in force of 4.
$
439.1
$
245.3
684.4
(38.8)
645.6
557.0
—
557.0
174.6
(86.0)
37.9
(45.3)
(35.5)
(35.5)
84.4 %
27.3 %
111.7 %
— %
2.7 %
394.0
223.5
617.5
(9.3)
608.2
512.3
22.0
534.3
166.9
(93.0)
31.4
(58.2)
(44.4)
(44.4)
91.8 %
27.2 %
119.0 %
7.2 %
1.8 %
109.0 %
110.0 %
89.5 %
26.6 %
116.1 %
— %
37.3 %
78.8 %
358
168
526
80.7 %
28.1 %
108.8 %
-2.8 %
33.4 %
78.2 %
367
171
538
11.4%
9.8%
10.8%
N.M.
6.1%
8.7%
N.M.
4.2%
4.6%
7.5%
20.7%
22.2%
20.0%
20.0%
-7.4 pts
0.1 pts
-7.3 pts
-7.2 pts
0.9 pts
-1.0pts
8.8 pts
-1.5 pts
7.3 pts
2.8 pts
3.9 pts
0.6 pts
-2.5%
-1.8%
-2.2%
Horace Mann Educators Corporation
Annual Report on Form 10-K 51
Catastrophe losses incurred were as follows:(1)
($ in millions)
Three months ended
March 31st
June 30th
September 30th
December 31st
Total for year
Year Ended December 31,
2023
2022
$
$
22.4 $
41.5
28.7
5.0
97.6 $
7.3
45.7
14.6
12.4
80.0
(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 $8.8 million in the fourth quarter, the Property & Casualty segment’s net loss for the full year
2023 reflected elevated catastrophe and non-catastrophe weather activity for much of the year. Property &
Casualty net premiums written were up 10.8% for the year and segment net investment income was up 20.7%
for the year.
On a reported basis, the 7.3 point decrease in the auto combined ratio in 2023 was mainly attributable to a 1.1
point decrease in the auto underlying loss ratio* and an 7.2 point decrease in prior years' reserve development.
Unfavorable prior years' auto reserve development of $28.0 million was reported in 2022, reflecting the impact
on severity of overall inflation, including higher medical costs, increased usage of medical services and the
current judicial environment.
The reported property combined ratio increased 7.3 points in 2023, partially driven by catastrophe and non-
catastrophe weather activity. In addition, favorable prior years' reserve development of $6.0 million benefited the
prior year reported property combined ratio by 2.8 points.
In 2023, total Property & Casualty net premiums written* increased $66.9 million as rate actions and inflation
adjustments to coverage values for property more that offset declines in risks in force. Retention remains strong.
In 2023, auto net premiums written* increased $45.1 million, primarily due to rate actions partially offset by the
continuing decline in auto risks in force. For 2023, average auto net premium written and average net premium
earned increased 13.1% and 8.2%, respectively. Property and other net premiums written* increased $21.8
million due to increases in average net premium written and average net premium earned which increased
11.5% and 9.9% respectively, as rate actions and inflation adjustments to coverage values continue to take
effect. The number of educator risks has been at or above 80% relative to overall risks in force over the past two
years.
We continue to evaluate and implement actions to further mitigate our risk exposure. Such actions could include,
but are not limited to, non-renewal of property risks, restricted agent geographic placement, limitations on agent
new business sales, further tightening of underwriting standards and increased utilization of third-party vendor
products.
52 Annual Report on Form 10-K
Horace Mann Educators Corporation
Life & Retirement
2023 net income reflected the following factors:
•
9.3% increase in net investment income due to
higher returns on floating rate securities
• Decline of 28 basis points in the annualized net
interest spread due to lower returns on the
limited partnership fund investments and lower
spread on the FHLB funding agreements year
over year
• Higher DAC amortization due to write-offs
related to declines in annuity persistency
•
Flat mortality costs
Horace Mann Educators Corporation
Annual Report on Form 10-K 53
Annuity Assets Under Management ($ in millions) and Annualized Net Interest Spread on Fixed Annuities (in basis points)$4,837.9$5,186.924621820222023Life Insurance In Force and Life Mortality Costs($ in millions)$20,030$20,476$68.6$69.420222023 The following table provides certain information for the Life & Retirement segment for the years indicated.
($ in millions)
Life & Retirement
Year Ended December 31,
2023-2022
2023
2022
Change %
Net premiums written and contract deposits*
$
573.3
$
544.8
5.2 %
Net premiums and contract charges earned
Net investment income
Other income
Life mortality costs
Interest credited
Change in reserves
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
151.7
369.9
17.0
69.4
201.8
53.8
98.7
28.1
0.2
86.6
15.1
71.5
71.5
144.0
338.3
17.0
68.6
172.1
52.9
102.4
23.0
1.1
74.4
10.6
63.8
67.6
162
162
$
20,476
$
20,030
95.7 %
96.0 %
Annuity contracts in force (in thousands)
Horace Mann Retirement Advantage® contracts in force (in thousands)
Cash value persistency - LTM
223
19
228
17
91.5 %
93.7 %
5.3%
9.3%
—%
1.2%
17.3%
1.7%
-3.6%
22.2%
-81.8%
16.4%
42.5%
12.1%
5.8%
—%
2.2%
-0.3pts
-2.2%
11.8%
-2.3%
The Life & Retirement segment net income rose 12.1% in 2023 reflecting higher net investment income. Net
investment income rose 9.3% for the full-year as higher returns on floating rate securities more than offset lower
returns from limited partnerships. The annualized net interest spread in our fixed annuity business was 218 basis
points for the full year compared to 246 basis points in 2022, largely due to lower limited partnership returns as
well as higher FHLB borrowing costs as credit spreads tightened year over year. The net dollar contribution
from our FHLB funding agreements remained stable compared with 2022, with FHLB interest expense reflected
in interest credited. In addition, 2022 net income reflected an after-tax impairment charge of $3.8 million for
goodwill and intangible assets due to lower than anticipated revenues associated with the BCG business of the
Retirement operating segment.
For 2023, net annuity contract deposits* for variable and fixed annuities increased 6.2% for the year to $455.9
million. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings
products, including the company’s attractive annuity products, which provide encouraging cross-sell
opportunities. Cash value persistency remained strong at 91.5%.
Life annualized sales were $9.3 million for the year. Life insurance in force rose to $20.5 billion at year-end.
Horace Mann currently has $5.2 billion in annuity assets under management, including $2.2 billion of fixed
annuities, $2.6 billion of variable annuities and $0.4 billion of fixed indexed annuities. Assets under
administration, which includes Horace Mann Retirement Advantage® and other advisory and recordkeeping
assets, were up 7.0%, benefiting from the strong equity markets.
54 Annual Report on Form 10-K
Horace Mann Educators Corporation
We actively manage our interest rate risk exposure, considering a variety of factors, including earned interest
rates, credited interest rates and the relationship between the expected durations of assets and liabilities. We
estimate that over the next 12 months approximately $494.2 million of the Life & Retirement investment portfolio
and related investable cash flows will be reinvested at current market rates.
Interest rates remained high throughout 2023. However, the risk of a deep recession or shock to the economy,
such as a global pandemic, could result in a return to historically low interest rates. The current environment of
higher interest rates have afforded us the opportunity to invest new insurance cash flows and reinvested cash
flows at higher yields, which should be a benefit to net investment income, but the higher interest rates have
caused net unrealized investment losses in the portfolios.
As a general guideline, based on our existing policies and investment portfolio, the impact from a 100 basis point
decline in the average reinvestment rate would reduce Life & Retirement net investment income by
approximately $1.9 million in year one and $5.7 million in year two, reducing the annualized net interest spread
by approximately 7 basis points and 20 basis points in the respective periods, compared to the current period
annualized net interest spread. We could also consider potential changes in rates credited to policyholders,
tempered by any restrictions on the ability to adjust policyholder rates due to minimum guaranteed crediting
rates.
We reinsure a $2.4 billion block of in force fixed annuities with a minimum crediting rate of 4.5% which helps
mitigate the risk of not being able to generate appropriate spreads on the annuity business. Information
regarding the interest crediting rates and balances equal to the guaranteed minimum crediting rates for deferred
annuity account values excluding the reinsured block is shown below.
($ in millions)
December 31, 2023
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%
54.4 % $
1,341.1
35.4 %
36.3 % $
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
14.8
22.6
6.4
1.8
364.3
556.3
158.1
44.7
30.7
93.5
100.0
100.0
8.5
39.7
12.1
3.4
100.0 % $
2,464.5
53.1 %
100.0 % $
1,309.2
474.7
111.7
520.0
158.1
44.7
Horace Mann Educators Corporation
Annual Report on Form 10-K 55
Supplemental & Group Benefits
2023 net income reflected the following factors:
• Decline in premium due to run-off of an
indemnified block of employer-sponsored
products; net premiums earned increased 1.9%
excluding the run-off
• Higher net investment income
• Benefit ratios reflecting utilization closer to pre-
pandemic levels
•
Increased level of operating expenses reflecting
a higher allocation of corporate expenses
The following table provides certain information for Supplemental & Group Benefits for the years indicated.
($ in millions)
Supplemental & Group Benefits
Year Ended December 31,
2023-2022
2023
2022
Change %
Net premiums and contract charges earned
$
259.8
$
275.5
Net investment income
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(1)
Operating expense ratio(2)
Pretax profit margin(3)
Worksite direct products benefits ratio
Worksite direct premium persistency (rolling 12 months)
Employer-sponsored products benefits ratio
(1) Ratio of benefits to net premiums earned.
(2) Ratio of operating expenses to total revenues.
(3) Ratio of income before income taxes to total revenues.
38.9
(11.1)
88.9
3.9
33.3
(13.4)
91.2
1.3
110.5
103.2
14.6
69.7
54.9
54.9
35.7 %
38.4 %
24.3 %
29.1 %
91.4 %
41.4 %
15.7
84.0
65.9
65.9
33.5 %
35.0 %
28.5 %
23.0 %
90.4 %
41.8 %
-5.7%
16.8%
17.2%
-2.5%
N.M.
7.1%
-7.0%
-17.0%
-16.7%
-16.7%
2.2 pts
3.4 pts
-4.2 pts
6.1 pts
1.0 pts
-0.4 pts
2023 net income for the Supplemental & Group Benefits segment was $54.9 million. Segment net premiums
earned and benefits expense declined due to an indemnified block that is in run-off. The full-year benefit ratio for
the worksite direct product line continued to increase toward the longer-term target although utilization remains
below historical levels. The full-year benefit ratio for the employer-sponsored product lines was in line with the
prior year but also remains below the longer-term target. Segment net investment income rose 16.8% for the
56 Annual Report on Form 10-K
Horace Mann Educators Corporation
Net Premiums Written and Contract Deposits* and Benefits Ratio ($ in millions)$274.7$259.833.5%35.7%20222023
full-year reflecting higher returns on floating rate securities. The non-cash impact of amortization of intangible
assets under purchase accounting reduced full-year 2023 core earnings by $14.6 million, pretax, compared to
$15.7 million in 2022.
Total segment sales for the year were $26.2 million, up 62.7% over the prior year, with worksite direct
supplemental product sales of $15.1 million and employer-sponsored products of $11.1 million. Persistency
remains relatively stable for the segment.
Corporate & Other
The following table provides certain financial information for Corporate & Other for the years indicated.
($ in millions)
Interest expense
Net investment losses, pretax
Other operating expenses, net investment income and other income
Net investment losses, after tax
Net loss
Core loss*
Year Ended December 31,
2023-2022
2023
2022
Change %
$
29.7 $
(24.0)
(4.0)
(18.8)
(45.9)
(27.1)
19.4
(56.5)
(7.8)
(44.5)
(65.5)
(21.0)
53.1%
N.M.
-147.4%
N.M.
-29.9%
-29.0%
For 2023, the net loss decreased $19.6 million, primarily due to lower net investment losses partially offset by an
increase in interest expense on the Revolving Credit Facility and the 2023 Senior Notes. The outstanding
balance on the Revolving Credit Facility was fully paid off on September 15, 2023 following the issuance of the
2023 Senior Notes.
Investment Results
Total net investment income includes net investment income from our investment portfolio as well as accreted
investment income from the deposit asset on reinsurance related to our reinsured block of approximately $2.4
billion of fixed annuity liabilities related to legacy individual annuities written in 2002 or earlier.
($ in millions)
Year Ended December 31,
2023
2022
2023-2022
Change %
Net investment income - investment portfolio
$
339.9 $
Investment income - deposit asset on reinsurance
Total net investment income
Pretax net investment losses
104.9
444.8
(24.0)
297.4
103.5
400.9
(56.5)
14.3 %
1.4 %
11.0 %
N.M.
Pretax net unrealized investment gains (losses) on fixed maturity
securities
(417.6)
(571.9)
N.M.
For the full year, total net investment income rose 11.0% and net investment income on the managed portfolio
increased 14.3%. The full-year increase reflected the benefit of the higher interest rate environment on floating
rate investments. Investment yield on the portfolio excluding limited partnership interests was 4.9%, with new
money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.
For 2023, pretax net investment losses decreased $32.5 million primarily due to changes in fair values of equity
securities. Pretax net unrealized investment losses on fixed maturity securities as of December 31, 2023 were
$417.6 million compared to pretax net unrealized investment losses of $571.9 million as of December 31, 2022,
reflecting much tighter credit spreads across most asset classes, as the 10-year U.S. Treasury yield ended
mostly flat, up only 1 basis point.
Horace Mann Educators Corporation
Annual Report on Form 10-K 57
Fixed Maturity and Equity Securities Portfolios
The table below presents our fixed maturity and equity securities portfolio by major asset class, including the 10
largest sectors of our corporate bond holdings (based on fair value).
($ in millions)
December 31, 2023
Number of
Issuers
Fair
Value
Amortized
Cost or
Cost
Pretax Net
Unrealized
Loss
Fixed maturity securities
Corporate bonds
Banking & Finance
Misc.
Insurance
Energy
HealthCare,Pharmacy
Utilities
Real Estate
Transportation
Consumer Products
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
U.S.
Foreign
Collateralized loan obligations(4)
Asset-backed securities
148 $
408.2 $
458.7 $
38
54
78
70
68
35
42
51
14
282
880
236
160
28
600
45
4
254
133
191.0
160.7
124.6
107.1
100.3
86.6
70.6
68.8
52.2
200.0
173.6
135.9
125.8
116.9
94.5
78.2
81.4
58.3
402.7
1,772.8
446.5
1,969.8
430.4
317.8
12.9
472.9
342.9
13.9
1,270.1
1,333.4
388.8
22.0
740.0
280.5
452.0
23.1
751.1
293.8
(50.5)
(9.0)
(12.9)
(11.3)
(18.7)
(16.6)
(7.9)
(7.6)
(12.6)
(6.1)
(43.8)
(197.0)
(42.5)
(25.1)
(1.0)
(63.3)
(63.2)
(1.1)
(11.1)
(13.3)
Total fixed maturity securities
2,340 $
5,235.3 $
5,652.9 $
(417.6)
Equity securities
Non-redeemable preferred stocks
Common stocks
Closed-end fund
Total equity securities
20 $
4
1
25 $
68.3
1.4
16.5
86.2
Total
2,365 $
5,321.5
(1) The All other corporates category contains 18 additional industry sectors. Food and beverage, broadcasting and media, telecommunications,
technology and retail represented $212.7 million of fair value at December 31, 2023, with the remaining 13 sectors each representing less than
$34.9 million.
(2) As of December 31, 2023, 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, 43.3% are tax-exempt and 75.8% 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, 2023.
(4) Based on fair value, 92.3% 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, A.M. Best, Egan Jones and Kroll).
58 Annual Report on Form 10-K
Horace Mann Educators Corporation
As of December 31, 2023, our diversified fixed maturity securities portfolio consisted of 3,587 investment
positions, issued by 2,340 entities, and totaled approximately $5.2 billion in fair value. This portfolio was 92.6%
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 $5.0 million for non-investment grade securities.
Rating of Fixed Maturity Securities and Equity Securities (1)
The following table presents the composition and fair value of our fixed maturity and equity securities portfolios
by rating category. As of December 31, 2023, 92.1% of these combined portfolios were investment grade,
based on fair value, with an overall average credit quality rating of A+. We have classified the entire fixed
maturity securities portfolio as available for sale, which is carried at fair value.
($ in millions)
December 31, 2023
Fixed maturity securities
AAA
AA(2)
A
BBB
BB
B
CCC or lower
Not rated(3)
Total fixed maturity securities
Equity securities
AAA
AA
A
BBB
BB
B
CCC or lower
Not rated
Total equity securities
Percent
of Total
Fair
Value
Fair
Value
Amortized
Cost, net
11.2 % $
585.4 $
42.1
17.7
21.6
1.2
0.7
0.1
5.4
2,202.4
926.5
1,132.4
64.8
36.4
3.5
283.9
609.6
2,419.8
976.4
1,237.7
69.1
37.8
4.1
298.4
100.0 % $
5,235.3 $
5,652.9
—
—
—
63.2 % $
12.4
—
—
24.4
100.0 % $
—
—
—
54.5
10.7
—
—
21.0
86.2
Total
$
5,321.5
(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, 2023, the AA rated fair value amount included $388.8 million of U.S. Government and federally sponsored agency
securities and $639.6 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, 2023, the fixed maturity securities portfolio had $480.5 million of pretax gross unrealized
investment losses on $3,894.7 million of fair value related to 2,500 positions. Of the investment positions with
gross unrealized investment losses, there were 405 securities trading below 80.0% of the carrying amount as of
December 31, 2023. See Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report
on Form 10-K for more information.
There has been a significant increase in interest rates since December 31, 2021, driven mostly by a rise in U.S.
Treasury rates. Credit spreads have been volatile over the same time period, widening by over 60 basis points in
October 2022, but only 6 basis points over the two-year period. The 10-year U.S. Treasury yield increased by
Horace Mann Educators Corporation
Annual Report on Form 10-K 59
one basis point at December 31, 2023 compared to December 31, 2022. Additionally, credit spreads tightened
during the same time period, with investment grade and high yield tighter by 32 and 146 basis points,
respectively. The stability in Treasury yields allowed the significantly tighter credit spreads to drive positive
performance across most asset classes. Investment grade and high yield total returns for the year ended
December 31, 2023 were up 8.52% and 13.44%, respectively. During the same time period, the Bloomberg
Barclays Index Yield-to-Worst for Investment Grade fell 36 basis points, ending at 5.06%, while the High Yield
Index fell 137 basis points to 7.59%. The Company's portfolios generated a reduction in net unrealized
investment losses as the result of tighter credit spreads.
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, 2023. 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)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year
Year Ended December 31,
2023-2022
2023
2022
Change %
$
302.1 $
(107.4)
(207.8)
(13.1)
42.8
$
29.7 $
171.5
(214.6)
(47.8)
(90.9)
133.7
42.8
76.2%
-50.0%
334.7%
N.M.
N.M.
-30.6%
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 2023, net cash provided by operating activities increased $130.6 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
60 Annual Report on Form 10-K
Horace Mann Educators Corporation
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.
Investing activities includes our acquisition of Madison National in 2022.
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 2023, net cash used in financing activities increased $160.0 million, primarily due to a $70.2 million cash
outflow for reverse repurchase agreements compared to a $70.2 million cash inflow in the prior year. An increase
in the net cash inflows from FHLB funding agreements was offset by an increase in net cash outflows on annuity
contracts.
On September 15, 2023, we issued $300.0 million aggregate principal amount of 7.25% Senior Notes due
September 15, 2028 (2023 Senior Notes) and used the net proceeds to fully repay the $249.0 million of
outstanding borrowings under our Revolving Credit Facility. The remaining net proceeds from the issuance of the
2023 Senior Notes were available for general corporate purposes.
The following table shows activity from FHLB funding agreements for the periods indicated.
($ in millions)
Year Ended December 31,
2023-2022
2023-2022
2023
2022
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
$
$
792.5 $
782.5 $
301.5
(189.5)
159.0
(149.0)
904.5 $
792.5 $
10.0
142.5
(40.5)
112.0
1.3%
89.6%
27.2%
14.1%
Horace Mann Educators Corporation
Annual Report on Form 10-K 61
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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62 Annual Report on Form 10-K
Horace Mann Educators Corporation
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, 2023, 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 2024 from all of our insurance subsidiaries without prior
regulatory approval is approximately $112.3 million, excluding the impact and timing of prior year dividends, of
which $127.5 million was paid during the year ended December 31, 2023. 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 $1,721.3 million as of December 31, 2023, including $546.0 million of long-term debt. Total
debt represented 31.7% of total capital including net unrealized investment losses on fixed maturity securities
(26.9% of total capital excluding net unrealized investment losses on fixed maturity securities and net reserve
remeasurements attributed to discount rates*) as of December 31, 2023, which was slightly above our long-term
target of 25.0%.
Shareholders' equity was $1,175.3 million as of December 31, 2023, 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 $1,335.4 million and $32.70, respectively, at
December 31, 2023. Book value per share was $28.78 as of December 31, 2023 ($36.29 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, 2023 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 $53.9 million for the year ended December 31, 2023. In 2023, the Board
declared regular quarterly dividends of $0.33 per share. Compared to the full year per share dividends paid in
2022 of $1.28, the total 2023 dividends paid per share of $1.32 represented an increase of 3.1%.
On May 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to
$50 million (2022 Program) to begin following the completion of the $50 million repurchase plan that was
authorized on September 30, 2015 (2015 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
Horace Mann Educators Corporation
Annual Report on Form 10-K 63
the third quarter of 2022, the 2015 Program was completed and we began repurchasing shares under the 2022
Program. During 2023, we repurchased 196,934 shares of our common stock at an average price per share of
$32.85 under the Programs. In total and through December 31, 2023, 1,907,976 shares have been repurchased
under the 2015 and 2022 Programs at an average price of $34.49 per share. The repurchase of shares was
funded through use of cash. As of December 31, 2023, $34.9 million remained authorized for future share
repurchases under the 2022 Program.
The following table summarizes our debt obligations.
($ in millions)
Short-term debt
Revolving Credit Facility
Long-term debt(1)
Interest
Rates
Final
Maturity
December 31,
2023
2022
Variable
2026
$
— $
249.0
7.25% 2023 Senior Notes, Aggregate principal amount
of $300.0 less unaccrued discount of $0.5 and $0.0
and unamortized debt issuance costs of $2.8 and $0.0
4.50% 2015 Senior Notes, Aggregate principal amount
of $250.0 less unaccrued discount of $0.2 and $0.2
and unamortized debt issuance costs of $0.5 and $0.8
Total
7.25%
2028
296.7
—
4.50%
2025
249.3
$
546.0 $
249.0
498.0
(1) We designate our debt obligations as "long-term" based on maturity date at issuance.
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).
The net proceeds from the sale of the 2023 Senior Notes were used to fully repay the $249.0 million balance on
the Revolving Credit Facility with remaining net proceeds from the sale to be used for general corporate
purposes.
As of December 31, 2023, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes
(2015 Senior Notes), which will mature on December 1, 2025, issued at a discount resulting in an effective yield
of 4.53%. Interest on the 2015 Senior Notes is payable semi-annually at a rate of 4.50%. Detailed information
regarding the redemption terms of the 2015 Senior Notes is contained in the Part II - Item 8, Note 10 of the
Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.
The 2015 Senior Notes are traded in the open market (HMN 4.50).
As of December 31, 2023, 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
subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing
capacity.
Effective July 12, 2021, we, as borrower, amended our Credit Agreement (Revolving Credit Facility). The
amended Revolving Credit Facility increased the amount available on the senior revolving credit facility from
$225.0 million to $325.0 million. 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 plus the
applicable benchmark adjustment spread. The amended Revolving Credit Facility expires on July 12, 2026.
As of December 31, 2023 we had no borrowings outstanding on the Revolving Credit Facility. 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, 2023.
We had no obligation for securities sold under reverse repurchase agreements at December 31, 2023 compared
to $70.2 million as of December 31, 2022.
64 Annual Report on Form 10-K
Horace Mann Educators Corporation
To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form
S-3 with the SEC on March 10, 2021. 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 10, 2021. Unless withdrawn by us earlier, this registration
statement will remain effective through March 10, 2024 and no securities associated with the registration
statement have been issued. At the time of issuance of this Annual Report on Form 10-K, we expect to file
another "universal shelf" registration statement on Form S-3 with the SEC in March 2024.
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 17, 2024 were as follows:
Insurance Financial
Strength Ratings (Outlook) Debt Ratings (Outlook)
Affirmed/
Reviewed
A.M. Best
HMEC (parent company)
N.A.
HMEC's Life & Retirement subsidiaries
HMEC's Property & Casualty subsidiaries
HMEC's Supplemental & Group Benefits
subsidiaries
Madison National Life Insurance Company
National Teachers Associates Life
Insurance Company
Fitch
HMEC (parent company)
HMEC's Life Group
HMEC's P&C Group
Moody's
HMEC (parent company)
HMEC's Life Group
HMEC's P&C Group
S&P
Reinsurance Programs
A
A
A
A
A
A
A2
A2
A
(stable)
(stable)
(stable)
(stable)
(stable)
(negative)
(negative)
(negative)
(stable)
bbb
N.A.
N.A.
N.A.
N.A.
(stable)
8/10/2023
8/10/2023
8/10/2023
8/10/2023
8/10/2023
BBB
(stable)
8/17/2023
8/17/2023
8/17/2023
Baa2
(negative)
7/28/2023
5/31/2023
7/28/2023
BBB
(stable)
1/30/2024
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 65
Future Adoption of New Accounting Standards
We have not yet adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures or ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures 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
and the recent elevated inflation levels we are experiencing are likely to persist for some time. 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 $2.4 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, 2023, approximately 12.2% of the fixed maturity securities portfolio supported Property &
Casualty, 75.7% supported Life & Retirement, and 12.1% supported Supplemental & Group Benefits. For
66 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 and new business is priced to do so as well. 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, 2023, 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 a increase in
shareholders' equity of approximately $79.0 million after tax, or 6.5%. 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 $57.7 million after tax, or 4.8%. 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.
Interest rates rose swiftly throughout 2022. However, the risk of a deep recession or shock to the economy, such
as a global pandemic, could result in a return to historically low interest rates. The current environment of higher
interest rates have afforded us the opportunity to invest insurance cash flows and reinvested cash flows at
higher yields, which could be a benefit to net investment income, but the higher interest rates have caused an
increase to both realized investment losses when existing securities are sold, and to net unrealized investment
losses in the remaining portfolios.
As a general guideline, we estimate that pretax net income in 2024 and 2025 would decrease by approximately
$7.1 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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 67
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.
ITEM 8. I Financial Statements and Supplementary Data
HORACE MANN EDUCATORS CORPORATION
INDEX TO FINANCIAL INFORMATION
Report of Independent Registered Public Accounting Firm (KPMG LLP, Chicago, IL, PCOAB 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
Note 18 - Prior Period Consolidated Financial Statements
Page
69
72
73
74
75
76
76
91
97
105
106
117
128
130
130
134
135
137
139
140
141
142
143
144
68 Annual Report on Form 10-K
Horace Mann Educators Corporation
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, 2023 and 2022, 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, 2023, 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, 2023
and 2022, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2023, 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, 2023,
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, 2024 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of
accounting for the Liability for Future Policy Benefits, Deferred Acquisition Costs, and Market Risk Benefits
effective January 1, 2023, with a transition date of January 1, 2021, due to the adoption of Accounting Standard
Update (ASU) No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the
Accounting for Long-Duration Contracts (ASU No. 2018-12).
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 69
Fair value for hard-to-value fixed maturity securities
As discussed in Note 3 to the consolidated financial statements, as of December 31, 2023, 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, 2023, the estimated fair value of fixed maturity securities was $5,235.3 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 $312.8 million
for property and casualty unpaid claims and claim expense reserves as of December 31, 2023.
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.
70 Annual Report on Form 10-K
Horace Mann Educators Corporation
•
•
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.
We have served as the Company’s auditor since 1989.
/s/ KPMG LLP
Chicago, Illinois
February 27, 2024
Horace Mann Educators Corporation
Annual Report on Form 10-K 71
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in millions, except share data)
December 31,
2023
2022(1)
Assets
Investments
Fixed maturity securities, available for sale, at fair value
(amortized cost, net 2023, $5,652.9; 2022, $5,756.9)
Equity securities at fair value, (cost $86.2 and $99.6)
Limited partnership interests
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
Short-term debt
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, 2023, 66,747,821; 2022, 66,618,465
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, 2023, 25,911,087 shares;
2022, 25,714,153 shares
Total shareholders' equity
Total liabilities and shareholders' equity
$
(1) Recast for the adoption of ASU 2018-12. See Note 1 of the Consolidated Financial Statements
5,235.3 $
86.2
1,138.8
141.4
228.8
6,830.5
29.7
336.3
480.5
2,496.6
170.3
54.3
357.6
3,294.1
14,049.9 $
1,761.8 $
5,187.0
581.7
300.9
7,831.4
916.0
287.1
—
546.0
3,294.1
12,874.6
—
0.1
510.9
1,502.2
(328.3)
21.9
(7.6)
(523.9)
1,175.3
14,049.9 $
5,185.0
99.6
983.7
139.3
180.0
6,587.6
42.8
330.6
468.0
2,516.6
185.2
54.3
328.7
2,792.3
13,306.1
1,718.0
5,260.6
564.0
266.1
7,808.7
809.3
299.5
249.0
249.0
2,792.3
12,207.8
—
0.1
502.6
1,512.4
(449.6)
59.0
(8.8)
(517.4)
1,098.3
13,306.1
The accompanying Notes are an integral part of these Consolidated Financial Statements.
72 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
($ in millions, except per share data)
Statements of Operations
Revenues
Net premiums and contract charges earned
Net investment income
Net investment losses
Other income
Year Ended December 31,
2023
2022(1)
2021(1)
$
1,057.1 $
444.8
(24.0)
14.0
1,027.7 $
400.9
(56.5)
9.5
888.8
422.5
(11.0)
29.0
Total revenues
1,491.9
1,381.6
1,329.3
Benefits, losses and expenses
Benefits, claims and settlement expenses
Interest credited
Operating expenses
DAC amortization expense
Intangible asset amortization expense
Interest expense
Other expense - goodwill and intangible asset impairments
769.1
205.7
318.1
101.2
14.8
29.7
—
747.0
173.4
315.5
88.2
16.8
19.4
4.8
590.7
160.0
251.0
90.6
13.0
13.9
—
Total benefits, losses and expenses
1,438.6
1,365.1
1,119.2
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:
Effect of adopting ASU 2018-12
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 (loss)
Comprehensive income (loss)
$
$
$
53.3
8.3
16.5
(3.3)
210.1
39.7
45.0 $
19.8 $
170.4
1.09 $
1.09 $
0.48 $
0.47 $
41.3
41.4
41.6
41.8
4.06
4.04
42.0
42.2
$
45.0 $
19.8 $
170.4
—
—
(426.6)
121.3
(37.1)
1.2
85.4
$
130.4 $
(796.7)
445.9
1.4
(349.4)
(329.6) $
(90.3)
110.8
1.0
(405.1)
(234.7)
(1) Recast for the adoption of ASU 2018-12. See Note 1 of the Consolidated Financial Statements
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation
Annual Report on Form 10-K 73
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($ in millions, except per share data)
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 (loss)
Dividends, 2023, $1.32 per share; 2022, $1.28 per share;
2021, $1.24 per share
Effect of adopting ASU 2018-12
Ending balance
Accumulated other comprehensive income (loss), net of tax:
Beginning balance
Effect of adopting ASU 2018-12
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
Year Ended December 31,
2023
2022(1)
2021(1)
$
0.1 $
0.1 $
—
—
—
0.1
—
—
—
0.1
0.1
—
—
—
0.1
502.6
495.3
488.3
(0.5)
(0.9)
8.8
510.9
8.2
502.6
(0.7)
7.7
495.3
1,512.4
45.0
1,547.0
19.8
1,434.6
170.4
(55.2)
—
(53.7)
(0.7)
(52.5)
(5.5)
1,502.2
1,512.4
1,547.0
(399.4)
(50.0)
—
—
121.3
(37.1)
1.2
(796.7)
445.9
1.4
(314.0)
(399.4)
(517.4)
(6.5)
(523.9)
(493.4)
(24.0)
(517.4)
355.1
(426.6)
(90.3)
110.8
1.0
(50.0)
(488.1)
(5.3)
(493.4)
$
1,175.3 $
1,098.3 $
1,499.0
(1) Recast for the adoption of ASU 2018-12. See Note 1 of the Consolidated Financial Statements
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 CASH FLOWS
($ in millions)
Year Ended December 31,
2022(1)
2021(1)
2023
Cash flows - operating activities
Net income (loss)
Adjustments to reconcile net income (loss) 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
Other expense - goodwill impairments
Changes in:
Insurance liabilities
Amounts due under reinsurance agreements
Income tax liabilities
Other operating assets and liabilities
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 and repayments
Limited partnership interests purchases
Limited partnership interests sales
Change in short-term and other investments, net
Acquisition of business, net of cash acquired
Other, net
Net cash used in investing activities
Cash flows - financing activities
Dividends paid to shareholders
Proceeds from issuance of 2023 Senior Notes due 2028
Principal borrowings on Revolving Credit Facility
FHLB borrowings
Principal repayment on Revolving Credit Facility
Principal repayment on FHLB borrowings
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 provided by (used in) financing activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year
$
45.0 $
19.8 $
170.4
24.0
26.2
9.5
(14.5)
—
186.7
(12.5)
(15.0)
53.9
(1.2)
302.1
(596.7)
377.6
291.9
(2.5)
18.7
(207.2)
41.4
(39.8)
—
9.2
(107.4)
(53.9)
297.7
—
—
(249.0)
—
(6.5)
—
(1.8)
56.5
27.6
8.9
18.2
4.8
334.2
(309.8)
110.5
(109.4)
10.2
171.5
11.0
18.4
8.4
(41.5)
—
114.5
7.4
(91.2)
4.5
3.0
204.9
(1,046.4)
(1,459.0)
752.0
496.8
(5.2)
12.0
(356.4)
66.6
40.0
(164.4)
(9.6)
(214.6)
(52.6)
—
—
—
—
(5.0)
(24.0)
—
(2.4)
578.2
873.3
(46.1)
4.7
(320.6)
86.5
(8.8)
—
(10.2)
(302.0)
(51.4)
—
114.0
5.0
—
(54.0)
(5.3)
0.3
(2.0)
787.6
636.5
1,060.4
(604.7)
(189.5)
8.6
(123.6)
(70.2)
(2.5)
(207.8)
(13.1)
42.8
(472.2)
(149.0)
7.8
(67.0)
70.2
9.9
(47.8)
(90.9)
133.7
$
29.7 $
42.8 $
(462.7)
(362.0)
5.1
(39.2)
—
0.3
208.5
111.4
22.3
133.7
(1) Recast for the adoption of ASU 2018-12. See Note 1 of the Consolidated Financial Statements
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Horace Mann Educators Corporation
Annual Report on Form 10-K 75
HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
($ 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), worksite direct insurance products (primarily cancer, heart, hospital, supplemental disability and
accident coverages), and employer-sponsored group benefit products (primarily short-term and long-term
group disability, and group term life 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).
The Company adopted ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the
Accounting for Long-Duration Contracts effective January 1, 2023, on a modified retrospective basis. Prior year
balances were recast in this Annual Report on Form 10-K to conform to ASU 2018-12 on January 1, 2021. For
further details, see Note 1 - Recent Adoption of New Accounting Standards, Note 6 - Long-Duration Contracts,
and Note 18 - Prior Period Consolidated Financial Statements.
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
Financial Instruments – Investments for a detailed description of how the Company estimates fair value for its
76 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 and mutual funds and non-redeemable
preferred stocks. Certain exchange traded and mutual funds have fixed maturity securities as their underlying
investments. Equity securities are carried at fair value and have readily determinable fair values.
Limited Partnership Interests
Investments in limited partnership interests are accounted for using the equity method of accounting (EMA) and
include interests in commercial mortgage loan funds, private equity funds, infrastructure equity funds, real estate
equity funds, infrastructure debt funds and other funds.
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 limited partnership interests.
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 recognized based upon the
changes in fair value of the investee’s equity primarily determined using its net asset value and is generally
recognized on a three month delay due to the availability of the related financial statements of the investee.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 77
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 Part II - Item 8, 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 determined if a credit loss allowance is necessary. These reviews, in conjunction with our
investment managers’ quarterly credit reports and relevant factors such as (1) has the security missed any
scheduled principal or interest payments in the current quarter; (2) has the security been downgraded to below
investment grade by rating agencies or if the security was below investment grade at time of purchase, has the
security been downgraded by two or more notches since acquisition; (3) has the security declined in value by
more than 10% compared to the prior quarter; (4) has the market yield changed by more than 50 basis points;
are all considered in the impairment assessment process.
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 defaults, 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.
78 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 (2022 recast for the adoption of LDTI):
($ in millions)
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Total
December 31,
2023
2022
$
$
29.3 $
297.7
9.3
336.3 $
24.5
299.5
6.6
330.6
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 presented 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 $64.8 million as of December 31, 2023 and is being amortized
by product based on the present value of future premiums to be received. The Company estimates that it will
recognize VOBA amortization of $5.4 million in 2024, $5.1 million in 2025, $4.7 million in 2026, $4.4 million in
2027 and $4.1 million in 2028.
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
Horace Mann Educators Corporation
Annual Report on Form 10-K 79
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
channel. VODA net of accumulated amortization was $36.0 million as of December 31, 2023 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 2024 through 2028, 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 $7.2 million as of
December 31, 2023 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 $1.4 million in 2024, $1.2 million in
2025, $1.0 million in 2026, $0.9 million in 2027 and $0.8 million in 2028.
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 Madison National customers in force at the date of
acquisition. Customer relationships net of accumulated amortization was $48.4 million as of December 31, 2023
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 Madison National. The Company estimates that it will recognize customer
relationships amortization of $4.8 million in 2024, $5.1 million in 2025, $5.5 million in 2026, $5.9 million in 2027
and $6.3 million in 2028.
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 Madison
National 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 unrecoverable during the year
ended December 31, 2023.
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, 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.
As of October 1, 2022, 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 with the exception of lower than anticipated BCG revenues.
As of October 1, 2021, the Company performed both qualitative assessments and quantitative impairment tests
for intangible assets and concluded that no impairments were warranted.
80 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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
respect to the acquisitions of BCG, BCGS and NTA. In 2022, goodwill was recognized with respect to the
acquisition of Madison National.
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 Madison National. Refer to Note 9 for the allocation of
goodwill by reporting segment as of December 31, 2023.
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.
As of October 1, 2023, the Company performed a qualitative goodwill impairment test. Based on the results of
the test, 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.
The Company performed quantitative goodwill impairment tests as of October 1, 2022 and 2021, and concluded
no material adjustments were necessary to goodwill.
During each year from 2021 through 2023, 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)
Property and equipment
Less: accumulated depreciation
Total
December 31,
2023
2022
$
$
129.4 $
60.8
68.6 $
148.3
79.0
69.3
Horace Mann Educators Corporation
Annual Report on Form 10-K 81
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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
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, claims and settlement expenses in the Consolidated Statements of Operations and
Comprehensive Income (Loss). 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
82 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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.
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 Investment contract
and life policy reserves 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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 83
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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.
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
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.
Other Policyholder Funds
Other policyholder funds includes primarily balances outstanding under funding agreements with the Federal
Home Loan Bank of Chicago (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
2023, HMLIC and NTA collectively received $301.5 million from FHLB funding agreements and repaid
$189.5 million on FHLB funding agreements. Outstanding advances under FHLB funding agreements are
reported as Other policyholder funds in the Consolidated Balance Sheets and totaled $904.5 million and $792.5
million as of December 31, 2023 and 2022, respectively. Interest on the funding agreements accrues at their
contractual interest rates.
84 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
As of December 31, 2023, scheduled maturity dates for outstanding FHLB funding agreements were as follows:
($ in millions)
$
Total $
Reverse Repurchase Agreements
Amount
Interest Rate
Maturity Date
25.0
50.0
10.0
200.0
125.0
12.5
30.0
10.0
10.0
40.0
31.0
60.0
25.0
6.0
100.0
5.0
10.0
50.0
10.0
20.0
25.0
50.0
904.5
5.6%
5.7%
5.7%
5.6%
0.6%
0.7%
5.7%
5.7%
0.5%
5.7%
5.7%
5.8%
5.8 %
5.8 %
5.6 %
5.7 %
5.7 %
5.7%
5.7%
5.7%
5.7%
5.8%
September 09, 2026
February 13, 2026
February 13, 2026
January 16, 2026
September 11, 2025
June 26, 2025
February 28, 2025
February 28, 2025
February 14, 2025
February 07, 2025
February 07, 2025
January 10, 2025
January 10, 2025
January 10, 2025
December 13, 2024
August 28, 2024
August 28, 2024
May 22, 2024
May 22, 2024
April 24, 2024
April 03, 2024
January 12, 2024
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.
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, 2023 and $73.9 million as
of December 31, 2022. The obligation for securities sold under reverse repurchase agreements was a net
amount of $0.0 million as of December 31, 2023 and $70.2 million as of December 31, 2022.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 85
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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.
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, 2023, 2022 and 2021, the Company recognized
$1.4 million, $1.2 million, and $1.2 million, respectively, of stock option expense as a result of stock options that
vested during the respective periods. For the years ended December 31, 2023, 2022 and 2021, the Company
recognized $7.5 million, $6.9 million and $6.6 million, respectively, in RSU expense as a result of the
performance and/or vesting of RSUs during the respective periods.
In 2023, 2022 and 2021, 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.
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)
Year Ended December 31,
2023
209,028
8.50
$
2022
162,224
8.51
$
2021
183,272
7.73
$
4.1%
3.6%
5.3
30.9%
1.9%
3.2%
5.2
30.2%
0.8%
3.0%
5.1
30.1%
86 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
The weighted average fair value of nonvested stock options outstanding on December 31, 2023 was $8.11. Total
unrecognized compensation expense relating to the nonvested stock options outstanding as of December 31,
2023 was approximately $2.6 million. This amount will be recognized as expense over the remainder of the
vesting period, which is scheduled to be 2024 through 2027. 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.
Total unrecognized compensation expense relating to RSUs outstanding as of December 31, 2023 was
approximately $8.9 million. This amount will be recognized as expense over the remainder of the performance
and/or vesting period, which is scheduled to be 2024 through 2026. Expense is recognized on a straight-line
basis from the date of grant through the end of the performance and/or vesting period for the entire award.
Forfeitures of unvested amounts due to terminations are recognized as a reduction to the related expenses.
Retirement Plans
The Company sponsors a 401(k) plan, a qualified defined benefit plan, two non-qualified supplemental defined
benefit plans, and a non-qualified defined contribution plan. Both the qualified defined benefit plan and the two
non-qualified supplemental defined benefit plans have been frozen since 2002. All participants in the frozen
plans are 100% vested in their accrued benefit and all non-qualified supplemental defined benefit plan
participants are receiving payments.
All employees participate in the 401(k) plan and receive a 100% vested 3% "safe harbor" company contribution
based on employees' eligible earnings. The Company matches each dollar of employee contributions up to a 5%
maximum — in addition to maintaining the automatic 3% "safe harbor" contribution. The matching company
contribution vests after 5 years of service. The 401(k) plan is fully funded.
The Company's policy for the frozen qualified defined benefit plan is to contribute to the plan amounts which are
actuarially determined to provide sufficient funding to meet future benefit payments as defined by federal laws
and regulations. Both the non-qualified frozen supplemental defined benefit plans and the non-qualified
contribution plan are unfunded plans with the Company's contributions made at the time payments are made to
participants.
For the two qualified plans, all assets are held in their respective plan trusts. The assets and projected benefit
obligation at the end of the year are as follows:
($ in millions)
401(k) plan assets
Defined benefit plan assets
Projected benefit obligation
Income Taxes
Year Ended December 31,
2023
2022
$
245.7 $
13.9
16.2
207.1
13.6
17.2
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, 2023, 2022 and 2021 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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 87
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 (2022 and 2021 recast for the adoption of LDTI):
($ in millions)
Basic:
Net income (loss) for the period
Weighted average number of common shares
during the period (in millions)
Net income (loss) per share - basic
Diluted:
Net income (loss) 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 (loss) per share - diluted
Year Ended December 31,
2023
2022
2021
45.0 $
19.8 $
170.4
41.3
1.09 $
41.6
0.48 $
42.0
4.06
45.0 $
19.8 $
170.4
41.3
41.6
42.0
$
$
$
—
—
0.1
—
—
0.2
$
41.4
1.09 $
41.8
0.47 $
—
—
0.2
42.2
4.04
Options to purchase 1,243,169 shares of common stock at $32.13 to $42.95 per share were granted in 2015,
2017, 2018, 2019, 2020, 2021, 2022 and 2023 but were not included in the computation of 2023 diluted net
income (loss) per share because of their anti-dilutive effect. These options, which expire in 2025, 2027, 2028,
2029, 2030, 2031, 2032 and 2033 were still outstanding at December 31, 2023.
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
Accounting for Long-Duration Insurance Contracts
In August 2018, the FASB issued ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted
Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by (i) ASU 2019-09,
Financial Services - Insurance (Topic 944): Effective Date, and (ii) ASU 2020-11, Financial Services - Insurance
(Topic 944): Effective Date and Early Application (collectively referred to herein as ASU 2018-12). ASU 2018-12
changed existing recognition, measurement, presentation, and disclosure requirements for long-duration
contracts. ASU 2018-12 includes: (1) a requirement to review and, if there is a change, update cash flow
assumptions used to measure the liability for future policy benefits (LFPB) at least annually, and to update the
discount rate assumption quarterly, (2) a requirement to account for market risk benefits (MRBs) at fair value, (3)
simplified amortization for deferred policy acquisition costs (DAC), and (4) enhanced financial statement
presentation and disclosures. ASU 2018-12 became effective for the Company for interim and annual periods
beginning after December 15, 2022.
88 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
The Company adopted ASU 2018-12 for LFPB and DAC on a modified retrospective basis such that those
balances were adjusted to conform to ASU 2018-12 on January 1, 2021. The Company adopted ASU 2018-12
for MRBs on a full retrospective basis, using hindsight where necessary. For variable annuities, actuarial
assumptions (mortality, lapse, and premium payment patterns) used to measure MRBs were unobservable for
years prior to 2006 and thus, hindsight was used to determine relevant assumptions for transition purposes. The
factors used in applying hindsight included internal experience studies, the historical economic environment,
actual performance of the business, and relevant industry information.
The following table summarizes the balance of and changes in LFPB on January 1, 2021 due to adoption of ASU
2018-12. The impact of shifts between deferred profit liabilities (DPL) and LFPB for limited-payment products are
presented as offsetting line items in the effect of net premiums exceeding gross premiums and the effect of
decrease/increase of DPL.
($ in millions)
Balance, end of year
December 31, 2020
Change in discount rate
assumptions
Change in cash flow
assumptions, effect of
net premiums exceeding
gross premiums
Adjusted balance, beginning
of year January 1, 2021
Less: Reinsurance
recoverables, end of year
December 31, 2020
Less: Change in discount
rate assumptions
Adjusted balance, beginning
of year January 1, 2021,
net of reinsurance
Whole Life
Term Life
Experience
Life
Limited Pay
Whole Life
Supplemental
Health(1)
SPIA (life
contingent)
$
218.7 $
93.2 $
758.3 $
51.3 $
392.5 $
115.9
111.5
27.3 0
433.0
18.2
23.0
20.6
0.4
—
—
330.6
120.5
1,191.3
—
69.5
—
—
415.5
136.5
(0.1)
(5.4)
(1.3)
(0.1)
(0.2)
(0.9)
(0.7)
(0.1)
—
—
—
—
$
330.3 $
114.2 $
1,189.3 $
69.3 $
415.5 $
136.5
(1) As of January 1, 2021, the net LFPB for Supplemental Health was $163.5 million for cancer, $31.2 million for accident, $32.0 million for disability
and $188.8 million for other supplemental health policies.
The following table summarizes the balance of and changes in DAC on January 1, 2021 due to adoption of ASU
2018-12:
($ in millions)
Balance, end
of year
December
31, 2020
Adjustment
for removal
of related
balances in
AOCI
Adjusted
balance,
beginning of
year January
1, 2021
Whole Life
Term Life
Experience
Life
Limited-
Pay Whole
Life
Indexed
Universal
Life
Supplemental
Health
Total
Annuities
$
17.8 $
25.6 $
2.6 $
4.4 $
11.3 $
4.3 $
137.7
—
—
3.6
—
1.6
—
85.4
$
17.8 $
25.6 $
6.2 $
4.4 $
12.9 $
4.3 $
223.1
Horace Mann Educators Corporation
Annual Report on Form 10-K 89
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
The following table summarizes the balance of and changes in the net liability position of MRBs on January 1,
2021 due to adoption of ASU 2018-12:
($ in millions)
Balance, end of year December 31, 2020
Adjustment for the difference between carrying amount and fair value, except for the difference
due to instrument-specific credit risk
Adjustment for cumulative effect of changes in the instrument-specific credit risk at issuance
Total adjustment for the difference between carrying amount and fair value
Balance, beginning of year January 1, 2021
Less: Reinsurance recoverable
Balance, beginning of year January 1, 2021, net of reinsurance
$
$
0.1
6.8
1.7
8.5
8.6
—
8.6
The following table presents the effect of the after-tax transition adjustments on consolidated shareholders'
equity due to adoption of ASU 2018:
($ in millions)
Liability for future policy benefits
Deferred policy acquisition costs
Deferred sales inducements
Market risk benefits
Total
January 1, 2021
AOCI
Retained Earnings
$
$
(496.4) $
71.1
—
(1.3)
(426.6) $
(0.2)
—
—
(5.3)
(5.5)
For LFPB, the net transition adjustment is related to the difference in the discount rate used pre-transition and
the discount rate at January 1, 2021. At transition, the Company had several instances, at the cohort level, where
net premiums exceeded gross premiums which were recorded as an adjustment to retained earnings. For DAC,
the Company removed shadow adjustments previously recorded in accumulated other comprehensive income
(loss) (i.e., AOCI) for the impact of net unrealized investment gains (losses) that were included in the pre-ASU
2018-12 expected gross profits amortization calculation as of the transition date.
For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in the instrument-
specific credit risk between contract issue date and transition date. The remaining difference between the fair
value and carrying amount of MRBs at transition, excluding the amounts recorded in AOCI, was recorded as an
adjustment to retained earnings as of the transition date.
While the requirements of ASU 2018-12 represent a significant change from legacy GAAP, the adoption of ASU
2018-12 did not impact cash flows on the Company’s policies, or the underlying economics of the Company’s
business. The Company's insurance subsidiaries' risk-based capital amounts and ratios, and regulatory
dividends are not impacted as the NAIC rejected ASU 2018-12.
See Note 18 for summarization of the effects of adopting ASU 2018-12 on the Company's 2022 and 2021
Consolidated Financial Statements.
Future Adoption of New Accounting Standards
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures. This update will improve reportable segment disclosure requirements, primarily through
enhanced disclosures about significant segment expenses. ASU 2023-07 includes: 1) a requirement to disclose
significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and
included within each reported measure of segment profit or loss, 2) a requirement to disclose an amount for
other segment items by reportable segment and a description of its composition, 3) a requirement to disclose a
reportable segments profit or loss and assets currently required by Topic 280 in interim periods, 4) clarifies that
in addition to the measure that is most consistent with the measurement principles under generally accepted
accounting principles (GAAP), a public entity is not precluded from reporting additional measures of a segment's
90 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate
resources, and 5) a requirement to disclose the title and position of the CODM and an explanation of how the
CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding
how to allocate resources.
This guidance will be effective for the Company for annual periods beginning after December 15, 2023 and
interim periods beginning after December 15, 2024. Early adoption is permitted. The guidance will have no net
impact on the Company's consolidated financial position, results of operations, or cash flows.
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.
This guidance will be effective for the Company for annual periods beginning after December 15, 2024 and
interim periods beginning after December 15, 2025. Early adoption is permitted. The guidance will have no net
impact on the Company's consolidated financial position, results of operations, or cash flows.
NOTE 2 - Investments
Net Investment Income
The components of net investment income for the following periods were as follows:
($ in millions)
Fixed maturity securities
Equity securities
Limited partnership interests
Short-term and other investments
Investment expenses
Net investment income - investment portfolio
Investment income - deposit asset on reinsurance
Total net investment income
Net Investment Losses
Net investment losses for the following periods were as follows:
($ in millions)
Fixed maturity securities
Equity securities
Short-term investments and other
Net investment losses
Year Ended December 31,
2023
2022
2021
269.2 $
6.5
59.1
17.2
(12.1)
339.9
104.9
444.8 $
247.2 $
9.0
40.5
11.2
(10.5)
297.4
103.5
400.9 $
235.6
5.3
79.0
11.6
(10.1)
321.4
101.1
422.5
Year Ended December 31,
2023
2022
2021
(20.3) $
(3.9)
0.2
(24.0) $
(29.1) $
(32.6)
5.2
(56.5) $
(7.7)
(0.8)
(2.5)
(11.0)
$
$
$
$
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
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 91
NOTE 2 - Investments (continued)
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)
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
Year Ended December 31,
2022
2021
2023
$
(0.4) $
(6.7)
(7.1)
(25.0)
7.9
(3.1) $
(7.6)
(10.7)
(17.8)
(33.2)
0.2
5.2
$
(24.0) $
(56.5) $
(8.1)
(2.3)
(10.4)
4.3
(2.3)
(2.6)
(11.0)
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)
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
Year Ended December 31,
2023
2022
2021
$
1.2 $
7.7 $
—
—
—
—
$
1.2 $
—
3.1
(9.2)
(0.4)
1.2 $
—
8.1
—
—
(0.4)
7.7
92 Annual Report on Form 10-K
Horace Mann Educators Corporation
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)
December 31, 2023
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, 2022
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
Amortized
Cost, net
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
$
$
713.4 $
450.8
1,333.4
23.1
1,969.9
1,162.3
5,652.9 $
638.2 $
410.0
1,380.9
35.1
2,161.2
1,131.5
5,756.9 $
4.4 $
0.8
28.6
—
23.1
6.0
62.9 $
1.3 $
0.5
16.9
—
12.7
3.6
35.0 $
64.6 $
62.8
91.9
1.0
220.3
39.9
480.5 $
653.2
388.8
1,270.1
22.1
1,772.7
1,128.4
5,235.3
69.1 $
67.8
128.1
1.6
272.2
68.1
606.9 $
570.4
342.7
1,269.7
33.5
1,901.7
1,067.0
5,185.0
Horace Mann Educators Corporation
Annual Report on Form 10-K 93
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, 2023 and 2022. The Company views the decrease in fair value of all
fixed maturity securities with unrealized losses as of December 31, 2023 as due to factors other than a credit
loss. As of December 31, 2023, 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. Following significant increases in interest rates throughout 2022, driven mostly by
increases in risk-free rates, rates stabilized during 2023 but remain at elevated levels. 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, 2023
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
45.3
39.5
64.5
1.5
195.0
133.4
$
0.8 $
458.5
$
63.8 $
503.8
$
0.4
0.9
—
25.4
0.8
288.0
724.6
20.6
1,171.3
752.5
62.4
91.0
1.0
194.9
39.1
327.5
789.1
22.1
1,366.3
885.9
Total
$
479.2
$
28.3 $ 3,415.5
$
452.2 $ 3,894.7
$
Number of positions with a
gross unrealized loss
Fair value as a percentage of total fixed
maturities securities fair value
195
9.2 %
2,305
65.2 %
2,500
74.4 %
December 31, 2022
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities
$
458.3
$
54.4 $
Other
Municipal bonds
Foreign government bonds
Corporate bonds
Other asset-backed securities
242.7
911.6
32.7
1,345.0
543.4
34.1
113.7
1.4
221.1
37.1
52.6
65.8
42.2
0.4
148.9
424.3
$
14.7 $
510.9
$
33.7
14.4
0.2
51.1
31.0
308.5
953.8
33.1
1,493.9
967.7
Total
$ 3,533.7
$
461.8 $
734.2
$
145.1 $ 4,267.9
$
Number of positions with a
gross unrealized loss
Fair value as a percentage of total fixed
maturities securities fair value
2,515
68.2 %
587
14.2 %
3,102
82.4 %
64.6
62.8
91.9
1.0
220.3
39.9
480.5
69.1
67.8
128.1
1.6
272.2
68.1
606.9
94 Annual Report on Form 10-K
Horace Mann Educators Corporation
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:
Credit Rating
AAA
AA
A
BBB
Total investment grade
BB
B
CCC or lower
Total below investment grade
Not rated
Totals:
Number of Positions
December 31,
2023
2022
226
1,006
423
448
2,103
93
39
7
139
63
2,305
67
217
94
93
471
68
31
2
101
15
587
Fixed maturity securities with an investment grade rating represented 96.0% of the gross unrealized losses as of
December 31, 2023. 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)
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
December 31, 2023
Amortized
Cost, net
Fair
Value
Percent of
Total Fair
Value
$
298.6 $
1,482.4
1,435.1
1,426.3
1,010.5
5,652.9 $
$
294.1
1,435.5
1,371.5
1,282.6
851.6
5,235.3
5.6 %
27.4 %
26.2 %
24.5 %
16.3 %
100.0 %
Horace Mann Educators Corporation
Annual Report on Form 10-K 95
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)
Fixed maturity securities
Proceeds received
Gross gains realized
Gross losses realized
Equity securities
Proceeds received
Gross gains realized
Gross losses realized
Year Ended December 31,
2023
2022
2021
377.6 $
2.2
(14.0)
752.0 $
5.5
(23.7)
578.2
10.5
(7.7)
18.7 $
—
(11.8)
10.8 $
1.7
(1.0)
4.7
1.5
(0.1)
$
$
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)
Net unrealized investment gains (losses)
on fixed maturity securities, net of tax
Beginning of period
Effect of adopting ASU 2018-12
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
Year Ended December 31,
2023
2022
2021
$
(449.6) $
347.1 $
—
—
366.3
71.1
105.3
(819.7)
(96.4)
16.0
(328.3) $
23.0
(449.6) $
6.1
347.1
$
Investments in limited partnership interests are 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. 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)
Commercial mortgage loan funds
Real estate equity funds
Private equity funds
Infrastructure equity funds
Infrastructure debt funds
Other funds(1)
Total
December 31,
2023
2022
$
$
660.8 $
109.2
92.7
77.2
59.1
139.8
1,138.8 $
593.6
71.3
76.3
72.0
60.0
110.5
983.7
(1) Other funds consist primarily of limited partnership interests in corporate mezzanine, venture capital, and private credit funds.
96 Annual Report on Form 10-K
Horace Mann Educators Corporation
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)
December 31, 2023
Asset derivatives
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance
Sheets
Gross
Amounts
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
Financial
Instruments
Cash
Collateral
Received
Net
Amount
Free-standing derivatives
$
19.0 $
— $
19.0 $
— $
18.5 $
0.5
December 31, 2022
Asset derivatives
Free-standing derivatives
$
6.8 $
— $
6.8 $
— $
5.9 $
0.9
Deposits
At December 31, 2023 and 2022, fixed maturity securities with a fair value of $29.2 million and $28.6 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, 2023 and 2022, fixed
maturity securities with a fair value of $987.2 million and $860.4 million, respectively, were on deposit with FHLB
as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $904.5
million and $792.5 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
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:
Horace Mann Educators Corporation
Annual Report on Form 10-K 97
NOTE 3 - Fair Value of Financial Instruments (continued)
Level 1
Level 2
Level 3
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.
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.
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.
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
portfolio to be priced through pricing services using observable inputs. Approximately 87.7% and 88.6% of the
fixed maturity securities portfolio, based on fair value, was priced through valuation services or priced using
observable inputs as of December 31, 2023 and 2022, respectively. The remainder of the fixed maturity
98 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 3 - Fair Value of Financial Instruments (continued)
securities portfolio was priced by broker quotes, modeled prices by our investment managers or internal pricing
models. 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 2023.
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.
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 99
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, 2023, Level 3 investments
comprised approximately 9.5% of the Company's total investment portfolio at fair value.
($ in millions)
December 31, 2023
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
Level 1
Level 2
Level 3
Mortgage-backed securities
$
653.2 $
653.2 $
— $
653.2 $
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, 2022
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
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)
388.8
1,270.1
22.1
1,772.7
1,128.4
5,235.3
86.2
132.9
19.0
388.8
1,270.1
22.1
1,772.7
1,128.4
5,235.3
86.2
132.9
19.0
45.6
—
—
10.1
—
55.7
17.9
132.9
—
343.2
1,196.1
22.1
1,420.1
1,030.9
4,665.6
63.8
—
19.0
$
$
$
5,473.4 $
5,473.4 $
206.5 $
4,748.4 $
518.5
3,294.1 $
3,294.1 $
3,294.1 $
— $
—
86.0 $
86.0 $
— $
3.6 $
82.4
342.6
1,269.7
33.6
1,901.7
1,067.0
5,185.0
99.6
109.4
38.6
342.6
1,269.7
33.6
1,901.7
1,067.0
5,185.0
99.6
109.4
38.6
24.6
—
—
12.2
—
36.8
23.3
109.4
—
318.0
1,215.3
33.6
1,628.2
962.0
4,724.9
74.3
—
38.6
$
$
$
5,432.6 $
5,432.6 $
169.5 $
4,837.8 $
425.3
2,792.3 $
2,792.3 $
2,792.3 $
— $
—
92.5 $
92.5 $
— $
1.2 $
91.3
—
—
74.0
—
342.5
97.5
514.0
4.5
—
—
2.6
—
54.4
—
261.3
105.0
423.3
2.0
—
—
Mortgage-backed securities
$
570.4 $
570.4 $
— $
567.8 $
(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.
100 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 2023 and 2022. 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
Mortgage-
Backed
and Other
Asset-
Backed
Securities(2)
Total
Fixed
Maturity
Securities
Equity
Securities
Total
Municipal
Bonds
Corporate
Bonds
Financial
Liabilities(1)
Beginning balance, January 1, 2023
$
54.4 $
261.3 $
107.6 $
423.3 $
2.0 $
425.3 $
91.3
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
—
—
—
—
11.3
9.5
—
—
—
76.5
(3.7)
—
—
(17.1)
64.5
—
(7.7)
—
0.8
—
—
—
5.0
2.0
—
—
—
77.3
(3.7)
—
—
(0.8)
76.0
—
(7.7)
—
Paydowns, maturities and distributions
(1.2)
(31.3)
(17.9)
(50.4)
2.1
—
79.4
(3.7)
0.4
0.4
—
—
—
—
—
—
—
—
(0.8)
76.0
—
(7.7)
—
(50.4)
74.0 $
342.5 $
97.5 $
514.0 $
4.5 $
518.5 $
$
$
Ending balance, December 31, 2023
Beginning balance, January 1, 2022
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
60.8 $
210.3 $
98.9 $
370.0 $
1.4 $
371.4 $
111.4
0.6
(3.2)
157.9
(34.8)
34.5
(4.8)
193.0
(42.8)
0.8
—
193.8
(42.8)
—
—
(10.5)
0.2
—
—
—
6.5
—
—
(16.1)
20.2
—
—
—
(3.3)
(3.3)
(0.1)
(3.4)
—
(14.8)
—
—
(11.6)
12.8
—
(4.8)
—
(38.2)
33.2
—
(4.8)
—
—
—
—
—
—
—
(38.2)
33.2
—
(4.8)
—
(76.2)
(14.1)
(83.8)
(0.1)
(83.9)
Ending balance, December 31, 2022
$
54.4 $
261.3 $
107.6 $
423.3 $
2.0 $
425.3 $
(1) Represents embedded derivatives, all related to the Company's FIA products, 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, 2023 and 2022 were attributable to changes in the availability of
observable market information for individual fixed maturity securities and short-term investments. 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, 2023, the Company had a $0.4 million net investment gain on Level 3 financial assets that
was included in net income and was primarily attributable to credit loss impairments. As of December 31, 2022
the Company had a $3.4 million net investment loss on Level 3 financial assets that was included in net income.
For the years ended December 31, 2023 and 2022, a net investment loss of $1.3 million and a net investment
gain of $14.8 million, respectively, were included in net income that were attributable to changes in the fair value
of Level 3 financial liabilities.
Horace Mann Educators Corporation
Annual Report on Form 10-K 101
—
—
—
1.3
0.4
—
8.0
—
—
(18.6)
82.4
—
—
—
(2.6)
—
7.4
—
—
(10.1)
91.3
NOTE 3 - Fair Value of Financial Instruments (continued)
Level 3 Assets and Liabilities by Price Source
The table below presents the balances of Level 3 assets and liabilities measured at fair value with their
corresponding pricing sources (in millions, 2022 information recast for the adoption of LDTI):
($ in millions)
December 31, 2023
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, 2022
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)
Total
Internal
External
$
$
$
$
$
$
— $
74.0
342.5
97.5
514.0
4.5
518.5 $
— $
—
180.4
—
180.4
—
180.4 $
82.4 $
82.4 $
2.6 $
54.4
261.3
105.0
423.3
2.0
425.3 $
— $
—
9.5
—
9.5
—
9.5 $
91.3 $
91.3 $
—
74.0
162.1
97.5
333.6
4.5
338.1
—
2.6
54.4
251.8
105.0
413.8
2.0
415.8
—
(1) 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.
External pricing sources for securities represent prices from prior transactions or unadjusted third-party pricing
information where pricing inputs are not readily available.
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)
Financial Assets
Corporate bonds
Financial Liabilities
Derivatives embedded
in fixed indexed
annuity products
Net MRBs
Fair Value at
December 31,
2023
Valuation
Techniques
Unobservable
Inputs
Range
(Weighted Average)
and Single Point Best
Estimate(1)
Impact of
Increase in
Input on Fair
Value
$
$
$
180.4 discounted cash flow
yield
6.7% - 17.0%
Decrease
86.3 discounted cash flow
(3.9) discounted cash flow
lapse rate
mortality multiplier(2)
option budget
non-performance
adjustment(3)
lapse rate
mortality multiplier(2)
5.9%
69.4%
0.9% - 3.8%
5.0%
5.9%
67.8%
Decrease
Decrease
Increase
Decrease
Decrease
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.
102 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 3 - Fair Value of Financial Instruments (continued)
($ in millions)
Financial Assets
Corporate bonds
Financial Liabilities
Derivatives embedded
in fixed indexed
annuity products
Net MRBs
Fair Value at
December 31,
2022
Valuation
Techniques
Unobservable
Inputs
Range
(Weighted Average)
and Single Point Best
Estimate(1)
Impact of
Increase in
Input on Fair
Value
$
$
$
9.5 discounted cash flow
yield
6.8%
Decrease
91.0 discounted cash flow
0.3 discounted cash flow
lapse rate
mortality multiplier(2)
option budget
non-performance
adjustment(3)
lapse rate
mortality multiplier(2)
5.4%
67.8%
0.9% - 3.4%
5.0%
5.3%
67.8%
Decrease
Decrease
Increase
Decrease
Decrease
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.
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)
December 31, 2023
Financial Assets
Other investments
Deposit asset on reinsurance
Financial Liabilities
Policyholders' account balances
Other policyholder funds
Long-term debt
December 31, 2022
Financial Assets
Other investments
Deposit asset on reinsurance
Financial Liabilities
Policyholders' account balances
Other policyholder funds
Reverse repurchase agreements
Short-term debt
Long-term debt
Carrying
Amount
Fair
Value
Fair Value Measurements at
Reporting Date Using
Level 1
Level 2
Level 3
$
218.4 $
221.7 $
2,496.6
2,259.6
— $
—
33.8 $
—
187.9
2,259.6
4,996.3
916.0
546.0
4,861.8
916.0
571.4
—
—
—
—
908.7
571.4
4,861.8
7.3
—
$
167.4 $
170.9 $
2,516.6
2,207.2
— $
—
— $
—
170.9
2,207.2
5,039.7
863.0
70.2
249.0
249.0
4,940.3
863.0
73.9
249.0
240.5
—
—
—
—
—
—
810.7
73.9
—
240.5
4,940.3
52.3
—
249.0
—
Horace Mann Educators Corporation
Annual Report on Form 10-K 103
NOTE 3 - Fair Value of Financial Instruments (continued)
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.
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.
Short-term Debt
The Company carries short-term debt at amortized cost which approximates fair value.
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.
104 Annual Report on Form 10-K
Horace Mann Educators Corporation
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:
($ in millions)
Assets
December 31,
2023
2022
Derivatives, reported in Short-term and other investments
$
19.0 $
6.8
Liabilities
FIA - embedded derivatives, reported in Policyholders'
account balances
IUL - embedded derivatives, reported in
Policyholders' account balances
86.3
3.6
91.0
1.2
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)
Change in fair value of derivatives:(1)
Net investment gains (losses)
Change in fair value of embedded derivatives:
Net investment gains (losses)
Years Ended December 31,
2023
2022
2021
$
7.4 $
(9.7) $
8.7
(7.2)
14.9
(11.3)
(1) Includes gains (losses) recognized at option expiration or early termination and changes in fair value for open positions.
Horace Mann Educators Corporation
Annual Report on Form 10-K 105
NOTE 4 - Derivatives (continued)
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, 2023
Counterparty
Bank of America, N.A.
Credit Suisse International
Societe Generale
Barclays Bank PLC
Citigroup
Total
Credit Rating
S&P
A+
A+
A
A+
BBB+
Moody's
Aa1
A3*+
A1
A1
A3
Notional
Amount
Fair
Value
December 31, 2022
Notional
Amount
Fair
Value
$
$
270.2 $
—
—
89.2
—
359.4 $
15.5 $
—
—
3.5
—
19.0 $
245.5 $
—
—
67.5
—
313.0 $
6.5
—
—
0.3
—
6.8
As of December 31, 2023 and 2022, the Company held $18.5 million and $5.9 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 $0.3 million per counterparty
NOTE 5 - Short-Duration Insurance Contracts
Property & Casualty Unpaid Claims and Claim Expense Reserves
The following table is a summary reconciliation of the beginning and ending Property & Casualty unpaid claims
and claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after
reinsurance) basis. The total net Property & Casualty insurance claims and claim expense incurred amounts are
reflected in the Consolidated Statements of Operations and Comprehensive Income (Loss). The end of the year
gross reserve (before reinsurance balances and reinsurance recoverable balances) are reflected on a gross basis
in the Consolidated Balance Sheets.
106 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
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
Years Ended December 31,
2023
2022
2021
$
388.7 $
100.8
287.9
362.4 $
110.3
252.1
557.0
—
557.0
353.1
179.0
532.1
312.8
104.0
416.8 $
512.3
22.0
534.3
320.0
178.5
498.5
287.9
100.8
388.7 $
$
372.2
112.9
259.3
455.1
(7.2)
447.9
307.1
148.0
455.1
252.1
110.3
362.4
(1) Reserves are net of anticipated reinsurance recoverables.
(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 2023, 2022 and 2021.
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 unpaid claims 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. 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.
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 68% as
Horace Mann Educators Corporation
Annual Report on Form 10-K 107
NOTE 5 - Short-Duration Insurance Contracts (continued)
of December 31, 2023) 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.
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 best estimate of ultimate losses. Paid losses
are then subtracted from estimated ultimate losses to determine the indicated loss reserves. The difference
between indicated reserves and recorded reserves is the amount of reserve re-estimate.
Reserves 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.
See tables on the following pages of Note 5 for details of the average annual percentage payout of 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 99.7% of the Company's Property & Casualty incurred losses for 2023.
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 component, incorporating alternative analyses of changing
claim settlement patterns and other influences on losses, from which the Company selects the best estimate for
each component, 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 component are summed to create the
reserve balances carried on the Company's Consolidated Balance Sheets.
108 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
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 1.0% of reserves
equates to plus or minus approximately $2.5 million of net income as of December 31, 2023. 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 $0.0 million in 2023, $(22.0) million in 2022 and $7.2 million in 2021. In 2022, the Property & Casualty had
unfavorable prior years' auto reserve development of $28.0 million, reflecting the impact on severity of overall
inflation, higher medical costs, increased usage of medical services and the current judicial environment, as well
as favorable prior years' property reserve development of $6.0 million as a result of favorable loss trends for
accident years 2021 and prior. In 2021, the favorable development was the result of favorable loss trends in auto
and homeowners loss emergence for accident years 2020 and prior.
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 31st of each year. The result
of the independent actuarial study as of December 31, 2023 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:
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years
Homeowners
Auto liability
Auto physical damage
3
1
2
10
6
78.8 % 18.1 % 2.2 % 0.5 % 0.3 % —
0.1 % —
37.1 % 35.1 % 14.7 % 6.9 % 3.4 % 1.6 % 0.6 % 0.2 % 0.4 % —
—
94.7 % 5.3 %
8
—
7
—
4
5
—
—
—
—
—
—
—
9
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, 2014 to 2022 is
presented as unaudited supplementary information.
Horace Mann Educators Corporation
Annual Report on Form 10-K 109
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Homeowners
Years Ended December 31,
As of December 31, 2023
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total of
Incurred-
But-Not-
Reported
Liabilities Plus
Expected
Development
on Reported
Claims
Cumulative
Number of
Reported
Claims
(Actual)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$
111.6
$
113.5
$
109.1
$
106.8
$
106.6
$
106.6
$
106.4
$
106.4
$
106.4
$
106.4
$
111.7
115.1
115.9
114.4
118.6
126.3
114.1
117.0
129.8
166.8
115.1
117.9
132.7
157.4
130.4
114.9
117.9
130.7
158.9
129.9
155.7
114.9
117.9
130.8
158.1
132.1
151.9
150.2
114.9
118.1
130.8
157.2
130.9
145.4
150.7
162.2
114.9
118.1
131.3
156.0
131.1
146.9
154.3
156.2
183.1
Total
$ 1,398.3
—
—
—
0.3
0.5
0.3
0.7
1.9
8.4
38.8
19,777
19,745
19,662
19,741
20,296
18,114
18,906
18,056
15,036
14,655
($ 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
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$
83.3
$
103.0
$
105.7
$
106.1
$
106.3
$
106.4
$
106.4
$
106.4
$
106.4
$
106.4
90.7
109.3
95.8
111.9
113.2
106.8
113.3
115.1
128.5
130.5
114.6
117.5
129.8
152.4
103.8
114.9
117.7
130.0
157.0
126.2
106.8
114.7
117.8
130.5
157.4
129.1
138.7
114.9
114.7
118.0
130.7
157.2
130.0
144.0
146.3
108.3
Total
Outstanding prior to 2013
Prior years paid
Liabilities for claims and
claim adjustment
expenses, net of
reinsurance
114.9
118.1
131.2
156.2
130.4
145.6
151.0
144.8
126.3
1,324.9
—
—
$
73.4
110 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Automobile Liability
Years Ended December 31,
As of December 31, 2023
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total of
Incurred-
But-Not-
Reported
Liabilities Plus
Expected
Development
on Reported
Claims
Cumulative
Number of
Reported
Claims
(Actual)
2014
$
155.1
$
157.2
$
158.5
$
159.9
$
159.8
$
159.4
$
159.3
$
159.4
$
160.0
$
160.1
$
2015
2016
2017
2018
2019
2020
2021
2022
2023
165.5
172.6
180.4
177.0
184.4
188.0
178.3
184.6
188.8
200.3
178.7
186.6
188.6
195.3
181.1
179.2
188.1
189.1
192.9
180.1
137.0
178.9
189.2
191.7
189.8
176.7
134.9
142.2
178.8
189.6
192.9
192.0
181.5
136.3
157.8
165.6
178.9
189.5
192.5
192.3
181.2
137.3
156.7
166.1
176.4
Total
$ 1,731.0
—
—
0.1
0.3
1.1
3.0
4.7
11.5
26.9
70.0
64,648
68,626
70,684
68,371
35,394
61,879
46,934
45,005
46,104
42,198
($ 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
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2014
$
61.3
$
117.5
$
139.5
$
149.1
$
155.8
$
157.6
$
158.6
$
158.8
$
160.0
$
160.0
70.8
134.5
73.1
158.0
140.9
70.7
170.1
166.8
139.5
77.5
2015
2016
2017
2018
2019
2020
2021
2022
2023
174.5
177.8
166.6
141.5
69.7
176.7
184.5
179.8
168.6
129.1
51.5
177.7
188.1
185.8
180.7
155.5
94.0
52.9
178.3
189.0
190.8
188.0
170.9
118.2
112.5
55.8
Total
Outstanding prior to 2013
Prior years paid
Liabilities for claims and
claim adjustment
expenses, net of
reinsurance
178.6
189.4
191.8
190.6
176.2
129.2
136.5
116.7
62.2
1,531.2
1.1
—
$
200.9
Horace Mann Educators Corporation
Annual Report on Form 10-K 111
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Automobile Physical Damage
Years Ended December 31,
As of December 31, 2023
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total of
Incurred-
But-Not-
Reported
Liabilities Plus
Expected
Development
on Reported
Claims
Cumulative
Number of
Reported
Claims
(Actual)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$
95.6
$
95.6
$
95.4
$
95.2
$
95.2
$
95.2
$
95.2
$
95.2
$
95.2
$
95.2
$
99.3
98.0
112.4
97.6
109.5
115.5
97.5
109.3
111.8
109.0
97.6
109.6
110.5
108.9
111.6
97.6
109.6
110.6
108.3
110.5
87.0
97.6
109.5
110.5
108.3
110.0
86.9
105.0
97.6
109.5
110.6
108.2
110.0
87.1
105.7
125.7
97.6
109.6
110.6
108.3
109.9
87.0
105.1
125.5
132.4
Total
$ 1,081.2
—
—
—
—
—
(0.1)
(0.3)
(0.4)
0.9
(6.0)
68,139
70,685
74,209
73,998
72,833
73,128
62,044
58,080
59,353
58,167
($ in millions)
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Automobile Physical Damage
Years Ended December 31,
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2014
$
88.9
$
95.4
$
95.3
$
95.3
$
95.3
$
95.2
$
95.2
$
95.2
$
95.2
$
95.2
92.1
97.9
106.5
97.7
109.7
105.2
97.6
109.5
110.8
103.6
2015
2016
2017
2018
2019
2020
2021
2022
2023
97.6
109.6
110.7
109.1
106.2
97.6
109.6
110.6
108.3
110.7
84.1
97.6
109.6
110.6
108.3
110.1
87.6
97.3
97.6
109.5
110.6
108.2
110.1
87.4
105.8
114.6
Total
Outstanding prior to 2013
Prior years paid
Liabilities for claims and
claim adjustment
expenses, net of
reinsurance
97.6
109.5
110.6
108.2
110.1
87.3
105.4
124.3
122.0
1,070.2
—
—
$
11.0
112 Annual Report on Form 10-K
Horace Mann Educators Corporation
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, 2023 (2022 recast for adoption of LDTI). The table
presents reserves on both a gross and net (after reinsurance). 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.
($ in millions)
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
Year Ended December 31,
2023
2022
$
$
121.6 $
27.9
93.7
73.6
(13.9)
59.7
33.8
30.7
64.5
88.9
27.7
116.6 $
125.4
28.5
96.9
77.7
(10.9)
66.8
35.0
35.0
70.0
93.7
27.9
121.6
(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 2023.
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 claims 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 claims or the timing of those payments. The Company's estimate of loss represents management's best
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, 2023, would increase reserves (in the
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).
Horace Mann Educators Corporation
Annual Report on Form 10-K 113
NOTE 5 - Short-Duration Insurance Contracts (continued)
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 inadequate. The effects of such deviations 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 claims 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 2023, Group Benefits had net favorable prior years' reserve development of $13.9 million which was primarily
the result of favorable loss trends in specialty health and group disability for loss years 2022 and prior.
Below is the average annual percentage payout of incurred claims by age for Group Benefits, also referred to as
a history of claims duration:
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years
Specialty health
Group disability
1
2
7
4
74.1 % 24.5 % 0.9 % 0.2 % 0.2 % 0.1 % —
29.3 % 32.4 % 9.7 % 4.0 % 3.4 % 3.1 % 3.0 % 2.5 % 2.1 % 1.8 %
8
—
10
—
9
—
5
6
3
The following tables illustrate the incurred and paid claims development by accident year on a net basis for the
lines of specialty health and group disability. Conditions and trends that have affected the development of these
reserves in the past will not necessarily reoccur in the future. It may not be appropriate to use this cumulative
history in the projection of future performance.
The information about incurred and paid claims development for the years ended December 31, 2014 to 2022 is
presented as unaudited supplementary information.
114 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Specialty Health
Years Ended December 31,
As of December 31, 2023
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total of
Incurred-
But-Not-
Reported
Liabilities Plus
Expected
Development
on Reported
Claims
2014
$
59.6
$
56.3
$
55.9
$
56.0
$
56.0
$
56.0
$
56.0
$
56.0
$
56.0
$
56.0
$
2015
2016
2017
2018
2019
2020
2021
2022
2023
33.3
30.9
12.5
30.3
11.2
10.6
30.3
11.1
9.7
12.9
30.3
11.1
9.6
13.2
10.6
30.4
11.1
9.6
13.0
9.5
6.8
30.4
11.1
9.6
12.7
9.6
5.8
22.8
30.4
11.1
9.6
12.6
9.5
5.7
17.7
22.6
30.4
11.1
9.6
12.6
9.5
5.7
16.1
18.0
16.0
Total
$
185.0
—
—
—
—
—
—
—
2.4
1.3
7.1
Cumulative
Number of
Reported
Claims
(Actual)
337,987
183,433
67,274
63,492
95,218
72,754
43,609
72,407
120,965
79,654
($ 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
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2014
$
43.4
$
54.9
$
55.4
$
55.7
$
55.9
$
56.0
$
56.0
$
56.0
$
56.0
$
56.0
24.9
30.4
5.5
30.3
11.0
7.3
30.3
11.1
9.4
8.8
2015
2016
2017
2018
2019
2020
2021
2022
2023
30.3
11.1
9.6
12.1
7.5
30.4
11.1
9.6
12.5
9.3
4.2
30.4
11.1
9.6
12.6
9.5
5.6
2.9
30.4
11.1
9.6
12.6
9.5
5.7
12.9
10.5
Total
Outstanding prior to 2014
Prior years paid
Liabilities for claims and
claim adjustment
expenses, net of
reinsurance
30.4
11.1
9.6
12.6
9.5
5.7
13.7
16.7
8.8
174.1
—
—
$
10.9
Horace Mann Educators Corporation
Annual Report on Form 10-K 115
NOTE 5 - Short-Duration Insurance Contracts (continued)
($ in millions)
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Group Disability
Years Ended December 31,
As of December 31, 2023
Accident
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total of
Incurred-
But-Not-
Reported
Liabilities Plus
Expected
Development
on Reported
Claims
Cumulative
Number of
Reported
Claims
(Actual)
2014
$
16.3
$
13.3
$
14.8
$
14.4
$
14.3
$
14.5
$
14.7
$
14.3
$
14.6
$
14.5
$
2015
2016
2017
2018
2019
2020
2021
2022
2023
25.3
19.2
28.5
16.6
28.6
29.9
14.7
27.4
26.0
29.8
14.6
26.0
22.9
26.6
34.5
15.2
26.3
22.4
23.2
33.5
36.7
15.2
26.8
23.3
22.7
30.2
34.3
37.8
14.7
28.1
24.0
23.3
29.9
34.1
41.3
39.2
14.5
28.1
23.1
23.6
30.2
33.2
41.3
32.0
40.3
Total
$
280.8
—
—
0.7
0.1
0.3
0.5
0.6
2.0
(0.5)
13.2
2,863
3,347
3,618
3,904
4,171
4,549
4,343
5,109
4,349
3,510
($ 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
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2014
$
3.7
$
8.5
$
9.9
$
10.6
$
11.1
$
11.7
$
12.1
$
12.4
$
12.7
$
12.9
6.8
14.0
8.3
16.6
16.4
8.5
17.2
19.3
16.1
8.4
2015
2016
2017
2018
2019
2020
2021
2022
2023
17.6
20.3
17.9
16.1
11.8
18.1
21.1
18.3
18.0
22.8
12.4
18.6
21.8
18.9
18.9
24.3
22.7
11.8
18.9
22.4
19.4
19.6
24.7
25.5
24.0
11.7
Total
Outstanding prior to 2014
Prior years paid
Liabilities for claims and
claim adjustment
expenses, net of
reinsurance
19.1
22.9
19.7
20.1
25.2
26.4
26.7
21.4
12.2
206.6
9.0
100.3
$
83.2
Effect of discounting
(14.0)
Discounted net reserves
$
69.2
116 Annual Report on Form 10-K
Horace Mann Educators Corporation
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 (2022 recast
for the adoption of LDTI)
($ in millions)
Property & Casualty and Group Benefits
Net reserves
Homeowners
Auto liability
Auto physical damage
Specialty health
Group disability
Other than short duration lines
Year Ended December 31,
2023
2022
$
73.4 $
200.9
11.0
10.9
83.2
11.0
61.0
192.5
10.6
16.9
69.0
10.5
Total net reserves for unpaid claims and claim adjustment expenses, net of
reinsurance
390.4
360.5
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
2.2
96.6
0.2
25.0
14.9
138.9
41.1
11.3
52.4
(4.4)
97.6
0.2
25.6
20.0
139.0
43.5
21.0
64.5
Gross reserves, end of year(1)
$
581.7 $
564.0
(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
As of and for the years ended December 31, 2023, 2022, and 2021 the Company updated the net premium ratio
when updating for actual historical experience for each year; future cash flow assumptions were also reviewed
and updated.
Horace Mann Educators Corporation
Annual Report on Form 10-K 117
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, 2023 were as follows:
($ in millions)
Present value of expected net premiums:
Balance at January 1, 2023
January 1, 2023 balance at original
discount rate
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
Whole Life Term Life
Experience
Life(1)
Limited-Pay
Whole Life
Supplemental
Health(2)
SPIA (life
contingent)
$
215.1 $
234.7 $
68.3 $
29.7 $
167.4 $
245.9
265.4
—
—
3.8
249.7
10.8
7.2
—
(16.8)
(2.7)
245.9
25.2
10.3
65.5
—
3.7
0.7
69.9
—
3.7
32.4
—
(0.2)
1.0
33.2
4.3
1.2
205.1
—
6.5
(1.6)
210.0
19.4
6.0
(20.6)
(24.8)
(6.6)
(4.8)
(22.0)
247.1
256.6
(23.9)
(16.6)
223.2
240.0
67.0
4.7
71.7
33.9
213.4
(1.7)
32.2
(31.4)
182.0
—
—
—
—
—
—
5.6
—
(5.6)
—
—
—
Present value of expected future policy benefits:
Balance at January 1, 2023
493.6
347.0
867.5
January 1, 2023 balance at original
discount rate
Effect of:
581.9
401.0
805.2
Changes in cash flow assumptions
(0.6)
(16.7)
4.0
585.3
10.7
19.0
1.3
385.6
25.8
15.2
5.0
1.1
811.3
—
47.4
79.4
98.6
431.7
103.3
537.1
113.4
(0.2)
8.9
1.0
99.4
4.3
3.9
(2.4)
543.6
19.4
14.4
—
(0.8)
112.6
6.3
4.4
Less: Reinsurance recoverable
(64.3)
(19.1)
(1.0)
(1.2)
(4.0)
(22.9)
(21.2)
(61.2)
(2.0)
(59.5)
(11.9)
592.1
405.4
(70.1)
(35.3)
522.0
298.8
370.1
130.2
797.5
85.5
883.0
811.3
105.6
517.9
(16.0)
(90.3)
89.6
57.4
427.6
245.6
234.5
111.1
810.3
—
—
—
56.2
—
241.6
—
111.4
(7.2)
104.2
104.2
(3.6)
100.6
—
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
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
$
234.5 $
111.1 $
810.3 $
56.2 $
241.6 $
100.6
(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 $104.0 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits
related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy
benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in
force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death,
lapse/withdrawal and maturity payments based on revised expected assumptions.
118 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
The balances of and changes in LFPB as of and for the year ended December 31, 2022 were as follows:
($ in millions)
Present Value of Expected Net Premiums
Balance at January 1, 2022(7)
January 1, 2022 balance at original
discount rate(7)
Effect of:
Change in cash flow assumptions
Actual variances from expected
experience
Adjusted balance at January 1, 2022
Issuances(3)
Interest accruals(4)
Net premiums collected(5)
December 31, 2022 balance at original
discount rate
Effect of changes in discount rate
assumptions
Balance at December 31, 2022
Present Value of Expected Future Policy Benefits
Balance at January 1, 2022(7)
January 1, 2022 balance at original
discount rate(7)
Effect of:
Changes in cash flow assumptions
Actual variances from expected
experience
Adjusted balance at January 1, 2022
Issuances
Interest accruals
Benefit payments(6)
December 31, 2022 balance at original
discount rate
Effect of changes in discount rate
assumptions
Balance at December 31, 2022
Net liability for future policy benefits
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, 2022
Whole Life Term Life
Experience
Life(1)
Limited-Pay
Whole Life
Supplemental
Health(2)
SPIA (life
contingent)
$
260.7 $
264.4 $
74.6 $
29.7 $
226.7 $
239.3
235.4
55.9
5.2
7.2
251.7
12.5
6.7
18.7
(4.2)
249.9
28.0
9.0
9.1
3.0
68.0
—
3.3
27.2
2.0
1.6
30.8
6.3
1.1
223.1
12.2
(25.3)
210.0
12.0
5.9
(25.0)
(21.5)
(5.8)
(5.8)
(22.8)
245.9
265.4
(30.8)
(30.7)
215.1
234.7
65.5
2.8
68.3
32.4
205.1
(2.7)
29.7
(37.7)
167.4
660.4
411.5
1,172.7
566.1
360.0
802.6
5.2
7.7
579.0
12.4
18.0
21.5
(4.7)
376.8
28.3
14.4
11.0
3.6
817.2
—
47.4
102.9
86.6
2.0
1.4
90.0
6.4
3.4
590.6
584.2
13.8
(30.0)
568.0
12.0
15.0
581.9
401.0
805.2
98.6
537.1
(88.3)
(54.0)
493.6
278.4
347.0
112.2
62.3
867.5
799.3
215.3
96.9
798.5
1.1
0.2
—
(19.2)
(105.4)
79.4
49.6
—
49.6
—
431.7
264.4
(3.4)
261.0
—
—
—
—
—
—
5.3
—
(5.3)
—
—
—
129.1
115.7
—
0.4
116.1
5.3
4.3
113.4
(10.1)
103.3
103.3
(3.2)
100.1
—
(27.5)
(18.5)
(59.4)
(1.2)
(57.9)
(12.3)
Less: Reinsurance recoverable
(63.1)
(15.3)
(0.8)
$
216.4 $
97.1 $
798.5 $
49.6 $
261.0 $
100.1
(1) Experience Life contains both whole life and term elements.
(2) As of December 31, 2022, the net LFPB for Supplemental Health was $101.8 million for cancer, $21.8 million for accident, $23.1 million for
disability and $114.3 million for other supplemental health policies.
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits
related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy
benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in
force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death,
lapse/withdrawal and maturity payments based on revised expected assumptions.
(7) Whole Life, Term Life, and Supplemental Health beginning balance at January 1, 2022 includes reserves acquired from Madison National Life
Insurance Company, Inc. on January 1, 2022.
Horace Mann Educators Corporation
Annual Report on Form 10-K 119
NOTE 6 - Long-Duration Insurance Contracts (continued)
The balances of and changes in LFPB (including a summary of the balance and changes in the LFPB on January
1, 2021 due to adoption of ASU 2018-12) as of and for the year ended December 31, 2021 were as follows:
($ in millions)
Whole Life Term Life
Experience
Life(1)
Limited-Pay
Whole Life
Supplemental
Health(2)
SPIA (life
contingent)
Balance, end of year December 31, 2020
$
Change in discount rate assumptions
Change in cash flow assumptions,
effect of net premiums exceeding gross
premiums
Change in cash flow assumptions,
effect of decrease of the DPL
Adjustment for removal of related
balances in AOCI
Adjusted balance, beginning of year
January 1, 2021
Less: Reinsurance recoverables
Less: Change in discount rate
assumptions
Adjusted balance, beginning of year
January 1, 2021, net of reinsurance
Present Value of Expected Net Premiums
Balance at January 1, 2021
January 1, 2021 balance at original
discount rate
Effect of:
Change in cash flow assumptions
Actual variances from expected
experience
Adjusted balance at January 1, 2021
Issuances(3)
Interest accruals(4)
Net premiums collected(5)
December 31, 2021 balance at original
discount rate
Effect of changes in discount rate
assumptions
Balance at December 31, 2021
$
$
Present Value of Expected Future Policy Benefits
Balance at January 1, 2021
January 1, 2021 balance at original
discount rate
Effect of:
Changes in cash flow assumptions
Actual variances from expected
experience
Adjusted balance at January 1, 2021
Issuances
Interest accruals
Benefit payments(6)
December 31, 2021 balance at original
discount rate
Effect of changes in discount rate
assumptions
Balance at December 31, 2021
Net liability for future policy benefits
218.7 $
111.5
93.2 $
27.3
758.3 $
433.0
51.3 $
18.2
392.5 $
23.0
115.9
20.6
0.4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
330.6
120.5
1,191.3
(0.1)
(5.4)
(1.3)
69.5
(0.1)
(0.2)
(0.9)
(0.7)
(0.1)
415.5
136.5
—
—
—
—
330.3 $
114.2 $
1,189.3 $
69.3 $
415.5 $
136.5
176.5 $
244.1 $
78.0 $
25.4 $
233.0 $
143.5
200.8
55.2
2.4
8.8
154.7
13.3
6.2
(4.5)
(3.3)
6.9
203.2
29.8
7.9
6.3
58.2
—
3.2
22.0
—
1.0
23.0
10.2
0.8
218.2
(1.8)
6.3
222.7
13.0
5.9
(16.6)
(19.8)
(5.6)
(6.8)
(24.1)
157.6
221.1
25.4
183.0
32.0
253.1
55.8
18.8
74.6
507.1
364.7
1,269.3
362.5
294.0
813.5
2.8
8.7
374.0
13.3
17.1
(4.8)
(3.6)
7.2
296.4
29.8
12.0
6.6
816.5
—
47.9
27.2
2.5
29.7
95.0
73.4
—
1.1
74.5
10.2
2.9
386.3
319.5
802.5
114.4
500.7
317.7
51.1
370.6
117.6
370.2
1,172.7
1,098.1
86.6
16.3
102.9
73.2
(18.1)
(18.7)
(61.9)
(1.0)
(48.4)
(12.1)
—
—
—
—
—
3.7
—
(3.7)
—
—
—
136.5
115.9
217.5
4.0
221.5
626.9
589.1
(3.0)
—
6.2
592.3
13.0
15.7
(0.4)
115.5
3.7
4.5
572.6
8.0
580.6
359.1
—
111.6
13.1
124.7
124.7
—
Less: Reinsurance recoverable
(0.5)
(5.5)
(1.1)
(0.2)
Net liability for future policy benefits, after
reinsurance recoverable
$
317.2 $
112.1 $
1,097.0 $
73.0 $
359.1 $
124.7
(1) Experience Life contains both whole life and term elements.
(2) As of December 31, 2021, the net LFPB for Supplemental Health was $140.8 million for cancer, $28.7 million for accident, $29.3 million for
disability and $160.3 million for other supplemental health policies.
120 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits
related to new policies issued during the current period.
(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy
benefits using the original interest rate.
(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in
force business.
(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death,
lapse/withdrawal and maturity payments based on revised expected assumptions.
The following table reconciles the net LFPB to LFPB in the Consolidated Balance Sheets. DPL for single
premium and immediate annuity products is presented together with LFPB in the Consolidated Balance Sheets:
($ in millions)
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
December 31,
2023
December 31,
2022
$
$
298.8 $
130.2
811.3
57.4
245.6
104.2
4.1
1.3
108.9
1,761.8 $
279.5
112.4
799.3
49.6
264.4
103.3
3.2
0.8
105.5
1,718.0
(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)
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
Total
($ in millions)
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
Total
Gross premiums or assessments
Year Ended December 31,
2022
2023
$
$
$
28.1 $
45.2
32.1
7.2
120.3
6.1
239.0 $
Interest expense
Year Ended December 31,
2022
2023
11.8 $
4.8
43.7
2.6
8.4
4.4
$
75.7 $
25.9
42.4
33.5
8.1
121.2
5.7
236.8
11.3
4.4
44.2
2.4
9.1
4.4
75.8
Horace Mann Educators Corporation
Annual Report on Form 10-K 121
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)
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
As of
December 31, 2023
As of
December 31, 2022
Undiscounted
Discounted
Undiscounted
Discounted
$
478.8 $
1,152.8
689.0
682.7
530.0
1,703.1
64.7
244.9
1,624.1
719.4
—
156.1
325.0 $
592.1
469.0 $
1,121.4
449.4
405.4
296.1
797.5
49.1
105.6
1,192.5
517.9
—
111.4
739.3
678.0
569.6
1,755.4
60.8
226.8
1,640.5
730.7
—
157.7
322.5
580.4
464.2
401.0
315.5
805.2
46.5
98.6
1,214.9
537.1
—
113.4
For the year ended December 31, 2023 and 2022, 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:
Mortality
Actual experience
Expected experience
Lapses
Actual experience
Expected experience
Mortality
Actual experience
Expected experience
Lapses
Actual experience
Expected experience
Whole Life
Term Life
Experience
Life
Limited-Pay
Whole Life
SPIA (life
contingent)
December 31, 2023
0.7 %
0.7 %
0.1% - 0.7%
0.1% - 2.3%
3.4 % 5.3% - 13.0%
4.8 % 5.8% - 36.8%
1.6 %
1.6 %
3.2 %
3.1 %
0.2 %
0.3 %
4.2 %
5.4 %
N.M.
N.M.
N.M.
N.M.
Whole Life
Term Life
Experience
Life
Limited-Pay
Whole Life
SPIA (life
contingent)
December 31, 2022
0.7 %
0.7 %
0.1% - 0.3%
0.1% - 1.0%
3.2 % 5.7% - 58.1%
5.9 %
6.6% - 9.8%
1.6 %
1.4 %
3.3 %
3.2 %
0.3 %
0.2 %
3.8 %
7.6 %
N.M.
N.M.
N.M.
N.M.
122 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table provides the weighted-average durations of LFPB, in years:
Whole life
Term life
Experience life
Limited-pay whole life
Supplemental health
SPIA (life contingent)
As of December 31,
2023
2022
18.0
16.7
10.3
22.1
10.7
7.6
18.3
16.8
10.6
22.9
10.1
7.7
The following table provides ranges of the weighted-average interest rates for LFPB:
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
As of December 31,
2023
2022
1.7% - 4.9%
4.4% - 5.0%
4.2% - 4.3%
4.9% - 5.0%
6.1 %
5.0 %
4.0 %
5.1 %
1.7% - 2.7%
5.0% - 5.2%
1.7% - 4.1%
4.9% - 4.9%
1.7% - 4.9%
4.7% - 5.3%
4.1% -4.3%
5.3% - 5.3%
6.1 %
5.3 %
3.9 %
5.3 %
1.7% - 2.7%
5.3% - 5.5%
1.7% - 4.0%
5.2% - 5.2%
Horace Mann Educators Corporation
Annual Report on Form 10-K 123
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, 2023
Balance at January 1, 2023
Premiums received(1)
Surrenders and withdrawals(2)
Benefit payments(3)
Net transfers from (to) separate account
Interest credited(4)
Other
Balance at December 31, 2023
Weighted-average crediting rate
Net amount at risk(5)
Cash surrender value
Indexed
Universal
Life
Experience
Life
Fixed
Account
Annuities
Fixed
Indexed
Account
Annuities
SPIA (non-
life
contingent)
$
$
$
$
$
$
47.6
13.6
(1.1)
—
(0.6)
1.5
(3.2)
64.3
$ 4,591.1
(0.8)
(3.7)
(1.7)
—
3.1
—
$
236.3
(391.8)
(75.1)
23.7
162.0
9.8
$
$
510.3
20.1
(67.0)
(3.1)
(8.2)
5.3
(8.4)
34.4
3.4
(0.4)
(5.9)
—
1.0
0.1
$
57.8
$
61.2
$ 4,556.0
$
449.0
$
32.6
2.8 %
5.0 %
3.6 %
$
$
—
40.5
$
$
—
$
35.9
60.5
$ 4,507.5
1.1 %
—
439.9
$
$
3.1 %
$
$
—
32.3
($ in millions)
Year Ended December 31, 2022
Balance at January 1, 2022
Premiums received(1)
Surrenders and withdrawals(2)
Benefit payments(3)
Net transfers from (to) separate account
Interest credited(4)
Other
Balance at December 31, 2022
Weighted-average crediting rate
Net amount at risk(5)
Cash surrender value
Indexed
Universal
Life
Experience
Life
Fixed
Account
Annuities
Fixed
Indexed
Account
Annuities
SPIA (non-
life
contingent)
$
$
$
$
$
39.1
11.8
(1.0)
—
—
0.8
(3.1)
47.6
1.9 %
—
30.9
$
$
$
$
$
66.2
$ 4,532.7
(0.3)
(3.0)
(1.8)
—
3.2
—
64.3
$
209.4
(281.5)
(65.9)
40.5
156.0
(0.1)
$ 4,591.1
5.0 %
—
63.6
3.5 %
$
83.9
$ 4,535.2
$
$
$
$
$
522.6
32.4
(40.4)
(4.1)
(2.5)
3.3
(1.0)
510.3
0.6 %
—
496.3
$
$
$
$
$
37.7
2.4
(0.5)
(6.3)
—
1.1
—
34.4
3.0 %
—
34.1
(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.
124 Annual Report on Form 10-K
Horace Mann Educators Corporation
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)
Indexed universal life
Experience Life
Fixed account annuities
Fixed indexed account annuities
SPIA (non-life contingent)
Reconciling items(1)
Total
December 31,
2023
December 31,
2022
$
$
57.8 $
61.2
4,556.0
449.0
32.6
30.4
5,187.0 $
47.6
64.3
4,591.1
510.3
34.4
12.9
5,260.6
(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, 2023
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%
$
36.7 $
159.8 $
489.4 $
200.2 $
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)
162.9
571.3
2,670.5
86.9
77.9
36.9
—
—
65.8
0.7
—
—
76.1
—
—
—
886.1
382.7
609.0
2,670.5
86.9
$
3,528.3 $
274.6 $
555.9 $
276.3 $
4,635.2
December 31, 2022
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%
$
262.5 $
370.6 $
214.4 $
96.1 $
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
256.1
667.4
2,706.1
91.7
3,983.8 $
$
19.8
0.4
—
4.7
0.4
—
—
—
—
—
390.8 $
—
219.5 $
—
96.1 $
943.6
280.6
668.2
2,706.1
91.7
4,690.2
(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,
Horace Mann Educators Corporation
Annual Report on Form 10-K 125
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)
Balance, beginning of year
Deposits
Withdrawals
Net transfers
Fees and charges
Market appreciation (depreciation)
Other
Balance, end of period
Retirement Services
Variable Account Annuities
December 31,
2023
December 31,
2022
$
2,792.3 $
234.2
(213.4)
(15.5)
(37.6)
541.5
(7.4)
$
3,294.1 $
3,441.0
240.3
(186.8)
(38.1)
(36.8)
(619.7)
(7.6)
2,792.3
(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, 2023 and 2022, respectively:
($ in millions)
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
Year Ended
December 31,
2023
2022
$
0.3 $
—
(4.5)
(4.5) $
0.6
(3.9) $
20.5 $
62
$
$
$
4.8
2.0
(2.0)
—
0.3
0.3
55.3
61
(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, 2023
Liability
Net
(Asset)
As of December 31, 2022
Liability
Net
(Asset)
Deferred variable annuities
$
(6.7) $
2.8 $
(3.9) $
(4.4) $
4.7 $
0.3
126 Annual Report on Form 10-K
Horace Mann Educators Corporation
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, 2023
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)
Balance,
beginning of year
Capitalizations
Amortization
expense
Experience
adjustment
Balance, end of
year
($ in millions)
Balance, end of
year December
31, 2020
Adjustment for
removal of
related
balances in
AOCI
Adjusted balance,
beginning of year
January 1, 2021
Capitalizations
Amortization
expense
Experience
adjustment
Balance, end of
year December
31, 2021
$
20.9 $
30.0 $
2.7
(1.2)
(0.1)
5.8
(3.1)
(0.1)
5.8 $
0.3
(0.4)
—
6.7 $
1.1
(0.3)
(0.1)
15.4 $
2.5
(1.0)
(0.1)
6.2 $
2.9
(0.6)
(0.3)
221.1
15.0
(14.7)
(7.4)
$
22.3 $
32.6 $
5.7 $
7.4 $
16.8 $
8.2 $
214.0
Whole Life
Term Life
Experience
Life
Limited-Pay
Whole Life
Indexed
Universal
Life
Supplemental
Health
Total
Annuities
Year Ended December 31, 2022
$
19.1 $
27.5 $
3.0
5.0
6.0 $
0.2
5.6 $
1.4
13.7 $
2.5
(1.2)
(2.5)
(0.4)
(0.3)
(0.8)
—
—
—
—
—
4.9 $
1.8
(0.5)
—
223.3
15.5
(15.8)
(1.9)
$
20.9 $
30.0 $
5.8 $
6.7 $
15.4 $
6.2 $
221.1
Whole Life
Term Life
Experience
Life
Limited-Pay
Whole Life
Indexed
Universal
Life
Supplemental
Health
Total
Annuities
Year Ended December 31, 2021
$
17.8 $
25.6 $
2.6 $
4.4 $
11.3 $
4.3 $
137.7
—
—
3.6
—
1.6
—
85.4
$
17.8 $
25.6 $
2.4
4.2
6.2 $
0.2
4.4 $
1.5
(1.1)
(2.3)
(0.4)
(0.3)
—
—
—
—
12.9 $
1.7
(0.8)
(0.1)
4.3 $
1.1
(0.5)
—
223.1
17.3
(16.0)
(1.1)
$
19.1 $
27.5 $
6.0 $
5.6 $
13.7 $
4.9 $
223.3
Horace Mann Educators Corporation
Annual Report on Form 10-K 127
NOTE 6 - Long-Duration Insurance Contracts (continued)
The following table presents a reconciliation of DAC to the Consolidated Balance Sheets:
($ in millions)
Whole life
Term life
Experience life
Limited pay whole life
Indexed universal life
Supplemental health
Total annuities
Reconciling item(1)
Total
December 31,
2023
December 31,
2022
$
$
22.3 $
32.6
5.7
7.4
16.8
8.2
214.0
29.3
336.3 $
20.9
30.0
5.8
6.7
15.4
6.2
221.1
24.5
330.6
(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.
Quarterly, the Company conducts a review of all significant assumptions. In the third quarter of 2023, the annuity
lapse assumption was revised upward to reflect emerging experience. In the fourth quarter of 2023, the annuity
mortality and annuitization assumptions and the life insurance mortality and lapse assumptions were revised as
part of the annual assumption update process.
The following table rolls-forward the deferred sales inducements balance as of and for the years ended
December 31, 2023 and 2022:
($ in millions)
Balance, beginning of period
Capitalizations
Amortization expense
Experience adjustment
Balance, end of period
Year Ended
December 31, 2023
$
15.9 $
—
(1.0)
(0.8)
14.1 $
$
Year Ended
December 31, 2022
17.3
—
(1.2)
(0.2)
15.9
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 $97.6 million, $80.0 million and $78.2 million for
the years ended December 31, 2023, 2022 and 2021, respectively. For 2023, catastrophe losses included winter
storm, wind, hail, and tornado events.
The total amounts of reinsurance recoverable on unpaid insurance reserves classified as assets and included in
the amounts being reported as Reinsurance balances receivable in the Consolidated Balance Sheets were as
follows:
128 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 7 - Reinsurance and Catastrophes (continued)
($ in millions)
Reinsurance recoverables on reserves and unpaid claims
December 31,
2023
2022
Property & Casualty
Reinsurance companies
State insurance facilities
Group benefits
Life and health
Total
$
$
7.4 $
96.6
306.2
14.0
424.2 $
3.1
97.7
352.4
9.3
462.5
As of December 31, 2023, the Company had a reinsurance recoverable in the amount of $181.0 million from
National Guardian Life Insurance Company (NGL) that exceeded 10.0% of consolidated shareholders' equity as
of the reporting date. NGL currently has an assigned credit rating of A by A.M. Best.
The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in
proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and
claim settlement expenses, including estimated amounts for unsettled claims, IBNR claims and policy benefits,
are estimated in a manner consistent with the insurance liability associated with the policy. The effects of
reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits,
claims and settlement expenses were as follows (2022 recast for the adoption of LDTI):
($ in millions)
Year Ended December 31, 2023
Net premiums written and contract deposits(2)
Net premiums and contract charges earned
Benefits, claims and settlement expenses
Year Ended December 31, 2022
Net premiums written and contract deposits(2)
Net premiums and contract charges earned
Benefits, claims and settlement expenses
Year Ended December 31, 2021
Net premiums written and contract deposits(2)
Net premiums and contract charges earned
Benefits, claims and settlement expenses
Gross
Amount
Ceded to
Other
Companies(1)
Assumed
from Other
Companies
Net
Amount
$
1,583.6 $
1,097.7
803.6
67.9 $
76.3
45.7
36.9 $
35.7 $
11.2 $
1,552.6
1,057.1
769.1
1,499.0
1,046.7
772.5
1,373.6
912.4
592.3
62.9
72.0
43.5
23.1
33.3
7.8
53.0 $
53.0 $
18.0 $
1,489.1
1,027.7
747.0
9.4 $
9.7 $
6.2 $
1,359.9
888.8
590.7
(1) Excludes 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.
There were no losses from uncollectible reinsurance recoverables in the three years ended December 31, 2023.
Past due reinsurance recoverables as of December 31, 2023 were not material.
The Company maintains property and casualty catastrophe excess of loss reinsurance coverage. For 2023, 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 2023, the catastrophe excess of loss contract
consisted of three layers of which provided for one mandatory reinstatement. The coverage provided was 57%
for the layer of $20.0 million excess of $30.0 million, 92% coverage for the layer of $40.0 million excess of $50.0
million and 95% coverage for the layer of $85.0 million excess of $90.0 million. For 2024, our retention will
increase to $35.0 million and the catastrophe excess of loss reinsurance coverage will provide 89% coverage for
the layer of $25.0 million excess of $35.0 million, 90% coverage for the layer of $35.0 million excess of
$60.0 million, and 92% coverage for the layer of $90.0 million excess of $95.0 million.
For liability coverages, in 2023, 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
Horace Mann Educators Corporation
Annual Report on Form 10-K 129
NOTE 7 - Reinsurance and Catastrophes (continued)
two or more casualty coverages or policies issued by the Company to be involved in the same loss occurrence
for coverage to apply.
The maximum individual life insurance risk retained by the Company is $0.5 million on any individual life, while
either $0.1 million or $0.125 million is retained on each group life policy depending on the type of coverage.
Excess amounts are reinsured. The Company also maintains a life catastrophe reinsurance program. For 2023,
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 worksite direct 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 employer-sponsored products, the Company has retained approximately 72.4% of gross and
assumed group disability and specialty health benefits in 2023. 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 $2.4 billion of fixed annuity reserves are reinsured on a
coinsurance basis. The separate account assets and liabilities of approximately $0.7 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
$104.9 million and $103.5 million for the years ended December 31, 2023 and 2022, 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, 2023, the Company performed a qualitative goodwill impairment test. Based on the results of the
test, 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.
At October 1, 2022, the Company performed a quantitative goodwill impairment test. Based on the results of the
test, 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 with the exception of lower than anticipated BCG
revenues which triggered an impairment of the goodwill associated with the BCG reporting unit within the
Retirement operating segment. For the evaluation, the fair value of BCG was measured using a discounted cash
flow method. The carrying amount exceeded the fair value, resulting in a $2.0 million goodwill impairment
charge.
130 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 9 - Goodwill and Intangible Assets (continued)
At October 1, 2021, the Company performed a quantitative goodwill impairment test. Based on the results of the
test, there were no events or circumstances that led to a determination that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount.
Goodwill impairment charges are reported as Other expense - goodwill and intangible asset impairments in the
Consolidated Statements of Operations and Comprehensive Income (Loss).
The changes in the carrying amount of goodwill by reporting segment for the year ended December 31, 2023
were as follows:
($ in millions)
Property &
Casualty
Life &
Retirement
Supplemental
& Group
Benefits
Total
Balance as of January 1, 2021
Goodwill
Accumulated impairment losses
Total goodwill, net
$
Acquisitions
Impairments
Balance as of December 31, 2021
Goodwill
Accumulated impairment losses
Total goodwill, net
Acquisitions
Impairments
Balance as of December 31, 2022
Goodwill
Accumulated impairment losses
Total goodwill, net
Acquisitions
Impairments
Balance as of December 31, 2023
Goodwill
Accumulated impairment losses
Total goodwill, net
$
9.5 $
—
9.5
—
—
9.5
—
9.5
—
—
9.5
—
9.5
—
—
48.0 $
(33.6)
14.4
—
—
48.0
(33.6)
14.4
—
(2.0)
48.0
(35.6)
12.4
—
—
19.6 $
—
19.6
—
—
19.6
—
19.6
12.8
—
32.4
—
32.4
—
—
9.5
—
9.5 $
48.0
(35.6)
12.4 $
32.4
—
32.4 $
77.1
(33.6)
43.5
—
—
77.1
(33.6)
43.5
12.8
(2.0)
89.9
(35.6)
54.3
—
—
89.9
(35.6)
54.3
As of December 31, 2023, 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 Madison
National during 2022. The acquisitions of BCG, BCGS, NTA and Madison National 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 $56.5 million, respectively. As of December 31, 2023 the outstanding amounts of definite-lived
intangible assets subject to amortization were as follows:
Horace Mann Educators Corporation
Annual Report on Form 10-K 131
NOTE 9 - Goodwill and Intangible Assets (continued)
($ in millions)
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:
Weighted Average
Useful Life (in Years)
28
17
14
10
20
$
$
100.1
54.0
17.0
59.9
231.0
(35.3)
(17.5)
(9.8)
(11.5)
(74.1)
156.9
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
retained by NTA. The value of customer relationships intangible asset represents the present value of the
expected profits from existing BCG and Madison National 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,
2024
2025
2026
2027
2028
Thereafter
Total
$
$
14.5
14.3
14.2
14.1
14.1
85.7
156.9
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 was being amortized based on the
present value of future profits to be received but will be 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 Madison National.
132 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 9 - Goodwill and Intangible Assets (continued)
Indefinite-lived intangible assets (not subject to amortization) as of December 31, 2023 were as follows:
($ in millions)
Balance as of January 1, 2021
$
7.9 $
2.9 $
Trade Names
State Licenses
Total
Impairments
Acquisitions
Balance as of December 31, 2021
Impairments
Acquisitions
Balance as of December 31, 2022
Impairments
Acquisitions
—
—
7.9
(0.3)
—
7.6
—
—
—
—
2.9
—
2.9
5.8
—
—
Balance as of December 31, 2023
$
7.6 $
5.8 $
10.8
—
—
10.8
(0.3)
2.9
13.4
—
—
13.4
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 Madison
National 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, 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.
At October 1, 2022, 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 with the exception of lower than anticipated BCG revenues
which triggered a requirement to evaluate the intangible assets associated with BCG. For the evaluation, the fair
value of BCG's intangible assets were measured using discounted cash flow methods. The carrying amounts for
customer relationships and trade names exceeded their fair values resulting in a $2.5 million intangible asset
impairment charge for customer relationships and a $0.3 million intangible asset impairment charge for trade
names.
At October 1, 2021, the Company performed a qualitative assessment to determine whether it was necessary to
perform quantitative intangible asset impairment tests. Based on the assessment of qualitative factors, there
were no events or circumstances that led to a determination that it is more likely than not that the fair value of an
intangible asset is less than its carrying amount.
Intangible asset impairment charges are reported as Other expense - goodwill and intangible asset impairments
in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Horace Mann Educators Corporation
Annual Report on Form 10-K 133
NOTE 10 - Debt
Indebtedness and scheduled maturities consisted of the following:
($ in millions)
Short-term debt
Revolving Credit Facility
Long-term debt(1)
Interest
Rates
Final
Maturity
December 31,
2023
2022
Variable
2026
$
— $
249.0
7.25% 2023 Senior Notes, Aggregate principal amount
of $300.0 less unaccrued discount of $0.5 and $0.0
and unamortized debt issuance costs of $2.8 and $0.0
4.50% 2015 Senior Notes, Aggregate principal amount
of $250.0 less unaccrued discount of $0.2 and $0.2
and unamortized debt issuance costs of $0.5 and $0.8
Total
7.25%
2028
296.7
—
4.50%
2025
249.3
546.0 $
249.0
498.0
$
(1) The Company designates debt obligations as "long-term" based on maturity date at issuance.
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 net proceeds from the sale of the 2023 Senior Notes were used to fully repay the $249.0 million balance on
the Revolving Credit Facility with remaining net proceeds from the sale to be used for general corporate
purposes.
2015 Senior Notes
As of December 31, 2023, the Company had outstanding $250.0 million aggregate principal amount of 4.50%
Senior Notes (2015 Senior Notes), which will mature on December 1, 2025, issued at a discount resulting in an
effective yield of 4.53%. Interest on the 2015 Senior Notes is payable semi-annually at a rate of 4.50%. Detailed
information regarding the redemption terms of the 2015 Senior Notes is contained in the Part II - Item 8, Note 10
of the Consolidated Financial Statements in the Company's inter-document reference for the year ended
December 31, 2022. The 2015 Senior Notes are traded in the open market (HMN 4.50).
Credit Agreement with Financial Institutions (Revolving Credit Facility)
In 2021, the Company, as borrower, amended its Credit Agreement (Revolving Credit Facility). The amended
Revolving Credit Facility increased the amount available on the senior revolving credit facility from $225.0 million
to $325.0 million. 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 amended Revolving
Credit Facility expires on July 12, 2026.
The Company utilized $114.0 million of the Revolving Credit Facility to fund a portion of the acquisition of
Madison National Life Insurance Company, Inc. that occurred effective January, 1 2022. The unused portion of
the Revolving Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis as of
December 31, 2023. As noted above, the outstanding balance on the Revolving Credit Facility was fully paid off
on September 15, 2023 from the proceeds of the 2023 Senior Notes.
Federal Home Loan Bank Borrowings
As of December 31, 2023, the Company had no borrowing outstanding with FHLB. The Board has authorized a
maximum amount equal to 15% of net aggregate admitted assets less separate account assets of the insurance
subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing
capacity.
134 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 10 - Debt (continued)
Covenants
The Company is in compliance with all of the financial covenants contained in the 2015 Senior Notes indenture,
the 2023 Senior Notes indenture and the Revolving Credit Facility agreement, consisting primarily of
relationships of (1) debt to capital, (2) net worth, as defined in the financial covenants, (3) insurance subsidiaries'
risk-based capital and (4) securities subject to funding agreements and repurchase agreements.
NOTE 11 - Income Taxes
The income tax assets and liabilities included in Other assets and Other liabilities, respectively, in the
Consolidated Balance Sheets were as follows (2022 recast for the adoption of LDTI):
($ in millions)
Income tax (asset) liability
Current
Deferred
December 31,
2023
2022
$
(25.9) $
33.4
(18.8)
8.8
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 (2022 recast for the adoption of LDTI):
($ in millions)
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
Intangibles
Postretirement benefits other than pensions
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
Other comprehensive income - net reserve remeasurements
Other, net
Total gross deferred tax liabilities
Net deferred tax liability
December 31,
2023
2022
82.1 $
13.3
9.3
2.0
2.0
2.7
0.8
9.3
1.4
0.2
123.1
45.9
46.4
4.3
0.3
44.8
5.8
9.0
156.5
105.8
10.1
8.4
2.0
2.3
2.8
—
3.6
—
0.2
135.2
48.5
42.4
6.4
0.5
29.9
15.7
0.6
144.0
8.8
$
33.4 $
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, 2023 and 2022.
Horace Mann Educators Corporation
Annual Report on Form 10-K 135
NOTE 11 - Income Taxes (continued)
The components of the provision for income tax expense (benefit) were as follows (2022 and 2021 recast for the
adoption of LDTI):
($ in millions)
Current
Deferred
Total income tax expense (benefit)
Years Ended December 31,
2023
2022
2021
$
$
6.5 $
1.8
8.3 $
(0.7) $
(2.6)
(3.3) $
27.7
12.0
39.7
Income tax expense for the following periods differed from the expected tax computed by applying the federal
corporate tax rate of 21% for 2023, 2022 and 2021 to income before income taxes as follows (2022 and 2021
recast for the adoption of LDTI):
($ in millions)
Expected federal tax on income
Add (deduct) tax effects of:
Tax-exempt interest
Dividend received deduction
Employee share-based compensation
Contingent consideration
Compensation deduction limitation
Research and development reserve
Prior year adjustments
Other, net
Years Ended December 31,
2023
2022
2021
$
11.2 $
3.5 $
44.1
(2.7)
(1.3)
0.1
—
0.8
(0.2)
0.3
0.1
8.3 $
(3.3)
(3.2)
(0.5)
(0.3)
0.7
(0.4)
0.1
0.1
(3.3) $
(3.9)
(2.2)
(1.3)
—
1.5
(0.2)
0.1
1.6
39.7
Income tax expense (benefit) provided on income
$
The Company's federal income tax returns for years prior to 2020 are no longer subject to examination by the
Internal Revenue Service (IRS).
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.
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
are not included in HMEC's consolidated federal income tax return and will file separate federal income tax
returns until they are eligible to participate in HMEC's consolidated federal income tax return. This is expected to
occur in 2025.
Unrecognized tax benefits were immaterial in each of the years ended December 31, 2023, 2022 and 2021.
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, 2023, 2022 and 2021.
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 25, 2022, the Board of Directors authorized a share repurchase program allowing repurchases of up to
$50 million (i.e., the 2022 Program) to begin following the completion of the $50 million repurchase plan which
was authorized on September 30, 2015 (i.e., the 2015 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. The 2015 Program was completed in July 2022 and the Company began repurchasing shares
under the 2022 Program.
During 2023, the Company repurchased 196,934 shares of its common stock, or 0.5% of the shares outstanding
as of December 31, 2022, at an aggregate cost of $6.5 million, or an average price of $32.85 per share. During
2022, the Company repurchased 670,816 shares of its common stock, or 1.6% of the shares outstanding as of
December 31, 2021, at an aggregate cost of $24.0 million, or an average price of $35.82 per share. In total and
through December 31, 2023, 439,035 shares were repurchased under the Programs at an average price of
$34.49 per share. The repurchase of shares was funded through use of cash. As of December 31, 2023, $34.9
million remained authorized for future share repurchases under the 2022 Program.
As of December 31, 2023, the Company held 25,911,087 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, 2023 and 2022.
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 2021, the shareholders of HMEC approved an amendment and restatement of the
Comprehensive Plan which included an increase of 2,500,000 in the number of shares of common stock
reserved for issuance under the Comprehensive Plan. As of December 31, 2023, approximately 1,067,611
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:
CSUs related to deferred compensation for Directors
CSUs related to deferred compensation for employees
Stock options
RSUs related to incentive compensation
Total
December 31,
2023
14,458
12,972
1,402,514
925,230
2,355,174
2022
15,372
12,437
1,194,352
816,759
2,038,920
2021
26,313
16,571
1,032,128
834,981
1,909,993
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, 2023, 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:
December 31, 2022
Granted
Vested
Exercised
Forfeited
Expired
December 31, 2023
Weighted
Average
Option Price
per Share
$39.41
$35.62
$40.56
$28.88
$—
$—
$38.85
Range of
Option Prices
per Share
$28.88-$42.95
$32.13-$35.98
$38.99-$41.83
$28.88-$28.88
$—
$—
$28.88-$42.95
Options
Outstanding
Vested and
Exercisable
1,194,352
209,028
—
(866)
—
—
1,402,514
766,444
—
176,954
(866)
—
—
942,532
Option information segregated by ranges of exercise prices were as follows:
December 31, 2023
Total Outstanding Options
Vested and Exercisable Options
Range of
Option
Prices
per Share
28.88-32.35
35.98-38.99
40.10-42.95
Weighted
Average
Option Price
per Share
$30.94
$37.51
$41.62
$38.85
Options
213,890
388,544
800,080
1,402,514
Weighted
Average
Remaining
Term
2.31
7.10
5.91
5.69
Weighted
Average
Option Price
per Share
$30.82
$38.96
$41.87
$38.98
Weighted
Average
Remaining
Term
1.60
5.12
5.19
4.44
Options
194,326
199,080
549,126
942,532
Total
The weighted average exercise prices of vested and exercisable options as of December 31, 2022 and 2021
were $38.60 and $37.94, respectively.
As of December 31, 2023, based on a closing stock price of $32.70 per share, the aggregate intrinsic (in-the-
money) values of vested options and all options outstanding were $0.4 million and $0.4 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:
December 31, 2022
Granted(1)
Adjustment for performance
achievement
Vested
Forfeited
Distributed(2)
Total Outstanding Units
Vested Units
Units
816,759
Weighted Average
Grant Date Fair
Value per Unit
$36.58
Units
416,082
Weighted Average
Grant Date Fair
Value per Unit
$28.93
286,648
$35.78
—
—
6,174
—
(5,323)
(179,028)
$44.49
—
$42.25
$41.65
—
176,082
—
(179,028)
—
$41.93
—
$41.65
December 31, 2023
925,230
$35.43
413,136
$29.04
(1) Includes dividends reinvested into additional RSUs.
(2) Includes distributed units which were utilized to satisfy withholding taxes due on the distribution.
NOTE 13 - Statutory Information and Dividend Restrictions
The insurance departments of various states in which the insurance subsidiaries of HMEC are domiciled
recognize as net income and surplus those amounts determined in conformity with statutory accounting
principles prescribed or permitted by the insurance departments, which differ in certain respects from GAAP.
HMEC has principal insurance subsidiaries domiciled in Illinois, New York, Wisconsin and Texas. The statutory
financial statements of these subsidiaries are prepared in accordance with accounting principles prescribed or
permitted by the Illinois Department of Insurance, the New York Department of Financial Services, the Wisconsin
Office of the Commissioner of Insurance and the Texas Department of Insurance, as applicable. Prescribed
statutory accounting principles include a variety of publications of the NAIC, as well as state laws, regulations
and general administrative rules.
In converting from statutory to GAAP, typical adjustments include DAC, certain reinsurance transactions, the
inclusion of statutory non-admitted assets, the inclusion of net unrealized investment gains or losses in
shareholders' equity relating to fixed maturity securities and establishing life reserves using different actuarial
assumptions.
The following table includes selected information for HMEC's insurance subsidiaries:
($ in millions)
Consolidated net income, statutory basis
Consolidated capital and surplus, statutory basis(1)
(1) Subject to regulatory restrictions.
Year Ended December 31,
2023
2022
2021
$
$
24.7 $
1,043.6 $
77.0 $
1,024.5 $
114.8
955.1
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, 2023 and 2022, the minimum statutory-basis capital and surplus required to be maintained by
HMEC's insurance subsidiaries was $135.3 million and $123.3 million, respectively. As of December 31, 2023
and 2022, 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 were $29.2 million and $28.6 million as of
Horace Mann Educators Corporation
Annual Report on Form 10-K 139
NOTE 13 - Statutory Information and Dividend Restrictions (continued)
December 31, 2023 and 2022, 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, except as noted below, the Company does not have
pending litigation from which there is a reasonable possibility of material loss.
In 2023, the Horace Mann Insurance Company (HMIC) was named as a defendant in one lawsuit and received
various demands for reimbursement and notices of claims related to legacy, long-tail commercial lines claims,
including asbestos, environmental, and sexual molestation claims. It is alleged that HMIC reinsured certain
commercial lines policies as a member of various insurance pooling arrangements in the late 1960s and early
1970s. The related policies were written prior to the 1975 acquisition of Horace Mann by INA discussed in Part I
- Item 1 of this Annual Report on Form 10-K. HMEC’s available records indicate that on January 1, 1975, HMIC
entered a quota share retrocession treaty with INA. It is the Company’s understanding that claims arising under
these legacy policies were handled by various third parties pursuant to the terms of that treaty and its
subsequent amendments entered into on behalf of HMIC. Ultimately, after amendments to the treaty and various
corporate transactions involving the reinsurer, these obligations were assumed by companies that were affiliated
with R&Q Reinsurance Company (R&Q).
The matters noted above arose following the March 23, 2023, Order of Liquidation in Pennsylvania of R&Q.
HMIC is defending itself against the pending litigation and is in the process of investigating and evaluating the
other demands and claims notices under a complete reservation of rights. In addition, in order to preserve its
rights, HMIC submitted a proof of claim in the pending R&Q liquidation proceeding.
The amounts claimed against HMIC, if successful, could be material. However, based on the preliminary nature
of the matters, the information available to date and considering the legal and factual challenges to the litigation
and claims, it is not possible to provide a reasonable estimate of any resultant payment.
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such
unfunded commitments were $502.6 million and $704.2 million for the years ended December 31, 2023 and
2022, respectively.
140 Annual Report on Form 10-K
Horace Mann Educators Corporation
NOTE 15 - Comprehensive Income (Loss) and Accumulated Other
Comprehensive Income (Loss)
Comprehensive income (loss) represents the change in shareholders' equity during a reporting period from
transactions and other events and circumstances from non-shareholder sources. For the Company,
comprehensive income (loss) is equal to net income plus or minus the after tax change in net unrealized
investment gains (losses) on fixed maturity securities, the after tax change in net reserve remeasurements
attributable to discount rates, and the after tax change in net funded status of benefit plans for the periods as
shown in the Consolidated Statements of Changes in Shareholders' Equity. AOCI represents the accumulated
change in shareholders' equity from these transactions and other events and circumstances from non-
shareholder sources as shown in the Consolidated Balance Sheets.
In the Consolidated Balance Sheets, the Company recognizes the net funded status of benefit plans as a
component of AOCI, net of tax.
Comprehensive Income (Loss)
The components of comprehensive income (loss) were as follows (in millions, 2022 and 2021 recast for the
adoption of LDTI):
($ in millions)
Net income
Other comprehensive income (loss):
Effect of adopting ASU 2018-12
Year Ended December 31,
2023
2022
2021
$
45.0 $
19.8 $
170.4
—
—
(426.6)
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
133.9
(1,042.6)
(122.8)
(20.3)
154.2
32.9
121.3
(47.2)
(10.1)
(37.1)
1.5
0.3
1.2
(29.1)
(1,013.5)
(216.8)
(796.7)
567.6
121.7
445.9
1.8
0.4
1.4
(7.7)
(115.1)
(24.8)
(90.3)
141.0
30.2
110.8
1.2
0.2
1.0
Total comprehensive income (loss)
$
130.4 $
(329.6) $
(234.7)
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 (2022 and 2021 recast for the
adoption of LDTI)
($ 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, 2023
$
(449.6) $
59.0 $
(8.8) $
(399.4)
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from AOCI
Net current period other
comprehensive income (loss)
Ending balance, December 31, 2023
Beginning balance, January 1, 2022
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from AOCI
Net current period other
comprehensive income (loss)
Ending balance, December 31, 2022
Beginning balance, January 1, 2021
Effect of adopting ASU 2018-12
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from AOCI
Net current period other
comprehensive income (loss)
Ending balance, December 31, 2021
$
$
$
$
$
105.3
16.0
121.3
(328.3) $
(37.1)
—
(37.1)
21.9 $
1.2
—
1.2
(7.6) $
69.4
16.0
85.4
(314.0)
347.1 $
(386.9) $
(10.2) $
(50.0)
(819.7)
23.0
(796.7)
(449.6) $
366.3 $
71.1
(96.4)
6.1
(90.3)
347.1 $
445.9
—
445.9
59.0 $
— $
(497.7)
110.8
—
110.8
(386.9) $
1.4
—
1.4
(8.8) $
(11.2) $
—
1.0
—
1.0
(10.2) $
(372.4)
23.0
(349.4)
(399.4)
355.1
(426.6)
15.4
6.1
21.5
(50.0)
(1) All amounts are net of tax.
(2) The pretax amounts reclassified from AOCI, $(20.3) million, $(29.1) million and $(7.7) million, are included in net investment gains (losses) and the
related income tax expense (benefit), $(4.3) million, $(6.1) million and $(1.6) million, are included in income tax expense (benefit) in the
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021,
respectively.
Comparative information for elements that are not required to be reclassified in their entirety to net income in the
same reporting period is located in Note 3.
Note 16 - Supplemental Consolidated Cash and Cash Flow Information
($ in millions)
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
Years Ended December 31,
2023
2022
2021
29.0 $
42.2 $
0.7
0.6
133.0
0.7
29.7 $
42.8 $
133.7
30.1 $
18.2 $
14.0
8.6
13.5
23.7
$
$
$
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, 2023, 2022 and 2021,
respectively.
142 Annual Report on Form 10-K
Horace Mann Educators Corporation
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. In addition to ongoing transactions such as corporate debt
service, net investment gains (losses) and certain public company expenses, such items also have included
corporate debt retirement costs, when applicable.
The accounting policies of the reporting segments are the same as those described in Note 1. The Company
accounts for intersegment transactions, primarily the allocation of operating and agency costs from Corporate &
Other to Property & Casualty, Life & Retirement, and Supplemental & Group Benefits on a direct cost basis.
Summarized financial information for these segments is as follows (2022 and 2021 recast for the adoption of
LDTI):
($ in millions)
Net premiums and contract charges earned
Property & Casualty
Life & Retirement
Supplemental & Group Benefits(1)
Total
Net investment income
Property & Casualty
Life & Retirement
Supplemental & Group Benefits(1)
Corporate & Other
Intersegment eliminations
Total
Net income (loss)
Property & Casualty
Life & Retirement
Supplemental & Group Benefits(1)
Corporate & Other
Total
($ in millions)
Assets
Property & Casualty
Life & Retirement
Supplemental & Group Benefits(1)
Corporate & Other
Intersegment eliminations
Total
December 31,
2023
2022
2021
$
$
$
$
$
$
645.6 $
151.7
259.8
1,057.1 $
608.2 $
144.0
275.5
1,027.7 $
37.9 $
369.9
38.9
0.3
(2.2)
444.8 $
(35.5) $
71.5
54.9
(45.9)
45.0 $
31.4 $
338.3
33.3
—
(2.1)
400.9 $
(44.4) $
63.8
65.9
(65.5)
19.8 $
617.4
143.4
128.0
888.8
61.1
338.6
25.2
(0.1)
(2.3)
422.5
57.0
89.1
52.9
(28.6)
170.4
December 31,
2023
2022
2021
$
1,218.1 $
1,083.8 $
11,365.0
1,338.8
190.4
(62.4)
10,754.4
1,359.3
173.4
(64.8)
$
14,049.9 $
13,306.1 $
1,243.4
12,144.2
855.6
281.8
(64.8)
14,460.2
Horace Mann Educators Corporation
Annual Report on Form 10-K 143
NOTE 17 - Segment Information (continued)
Additional significant financial information for these segments is as follows (2022 and 2021 recast for the
adoption of LDTI):
($ in millions)
DAC amortization expense
Property & Casualty
Life & Retirement
Supplemental & Group Benefits(1)
Total
Income tax expense (benefit)
Property & Casualty
Life & Retirement
Supplemental & Group Benefits(1)
Corporate & Other
Total
Years Ended December 31,
2022
2021
2023
$
$
$
$
71.3 $
28.0
1.9
101.2 $
(9.8) $
15.1
14.8
(11.8)
8.3 $
64.3 $
23.0
0.9
88.2 $
(13.8) $
10.6
18.1
(18.2)
(3.3) $
67.7
22.0
0.9
90.6
13.2
19.3
14.5
(7.3)
39.7
(1) Group Benefits was acquired effective January 1, 2022 and thus, comparison to amounts for the year ended December 31, 2021 is not
meaningful.
Note 18 - Prior Period Consolidated Financial Statements
Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services – Insurance (Topic 944):
Targeted Improvements to the Accounting for Long-Duration Contracts (also known as LDTI). The Company
adopted LDTI using the modified retrospective approach where permitted with changes applied as of January 1,
2021. As a result of adoption, the Company’s prior period consolidated financial statements have been recast.
The following tables summarize the effects of adopting LDTI on our Consolidated Financial Statements.
144 Annual Report on Form 10-K
Horace Mann Educators Corporation
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEET
($ in millions, except share data)
December 31,
2022
As Reported
Effect of the
Adoption of
ASU
2018-12
December 31,
2022
Reclassifications(1)
As Adjusted
Assets
Total investments
Cash
Deferred policy acquisition costs
Reinsurance balances receivable
Deposit asset on reinsurance
Intangible assets
Goodwill
Other assets
Separate Account variable annuity assets
$
6,587.6 $
42.8
433.1
506.2
2,516.6
185.2
54.3
328.7
2,792.3
— $
—
(102.5)
(38.2)
—
—
—
—
—
— $
6,587.6
—
—
—
—
—
—
—
—
Total assets
$
13,446.8 $
(140.7) $
— $
Liabilities and Shareholders' Equity
Policy liabilities
Investment contract and policy reserves
$
6,968.0 $
(151.9) $
(6,816.1) $
Future policy benefit reserves
Policyholders' account balances
Unpaid claims and claim expenses
Unearned premiums
Total policy liabilities
Other policyholder funds
Other liabilities
Short-term debt
Long-term debt
Separate Account variable annuity liabilities
Total liabilities
Preferred stock
Common stock
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
Total shareholders’ equity
—
—
585.1
264.2
7,817.3
954.0
297.0
249.0
249.0
2,792.3
12,358.6
—
0.1
502.6
1,468.6
—
—
(2.9)
1.9
(152.9)
(0.4)
2.5
—
—
—
(150.8)
—
—
—
43.8
(356.9)
(92.7)
—
(8.8)
(517.4)
1,088.2
59.0
—
—
10.1
1,718.0
5,260.6
(18.2)
—
144.3
(144.3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total liabilities and shareholders’ equity
$
13,446.8 $
(140.7) $
— $
(1) The Company has reclassified the presentation of certain information to conform to the current year's presentation.
42.8
330.6
468.0
2,516.6
185.2
54.3
328.7
2,792.3
13,306.1
—
1,718.0
5,260.6
564.0
266.1
7,808.7
809.3
299.5
249.0
249.0
2,792.3
12,207.8
—
0.1
502.6
1,512.4
(449.6)
59.0
(8.8)
(517.4)
1,098.3
13,306.1
Horace Mann Educators Corporation
Annual Report on Form 10-K 145
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
($ in millions, except per share data)
Year Ended
December 31,
2022
As Reported
Effect of the
Adoption of ASU
2018-12
Year Ended
December 31,
2022
As Adjusted
Statement 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
Interest credited
Operating expenses
DAC amortization expense
Intangible asset amortization expense
Interest expense
Other expense - goodwill and intangible asset
impairment
Total benefits, losses and expenses
Income before income taxes
Income tax expense (benefit)
Net income
Net income per share
Basic
Diluted
Weighted average number of shares and equivalent
shares
Basic
Diluted
Statement of Comprehensive Income (Loss)
Net income
Other comprehensive income (loss), net of tax:
Change in net unrealized investment losses on fixed
maturity securities
Change in net reserve remeasurements attributable to
discount rates
Change in net funded status of benefit plans
Other comprehensive loss
Comprehensive income (loss)
$
$
1,029.0 $
400.9
(56.5)
9.5
1,382.9
761.6
177.6
315.9
98.7
16.8
19.4
4.8
1,394.8
(11.9)
(9.3)
(2.6)
(0.06)
(0.06)
41.6
41.8
(1.3) $
—
—
—
(1.3)
(14.6)
(4.2)
(0.4)
(10.5)
—
—
—
(29.7)
28.4
6.0
22.4
0.54
0.53
—
—
1,027.7
400.9
(56.5)
9.5
1,381.6
747.0
173.4
315.5
88.2
16.8
19.4
4.8
1,365.1
16.5
(3.3)
19.8
0.48
0.47
41.6
41.8
(2.6)
22.4
19.8
(647.6)
(149.1)
—
1.4
(646.2)
(648.8) $
445.9
—
296.8
319.2 $
(796.7)
445.9
1.4
(349.4)
(329.6)
146 Annual Report on Form 10-K
Horace Mann Educators Corporation
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
($ in millions, except per share data)
Year Ended
December 31,
2021
As Reported
Effect of the
Adoption of ASU
2018-12
Year Ended
December 31,
2021
As Adjusted
Statement 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
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 (benefit)
Net income
Net income per share
Basic
Diluted
Weighted average number of shares and equivalent
shares
Basic
Diluted
Statement of Comprehensive Income (Loss)
Net income
Other comprehensive income (loss), net of tax:
Effect of adopting ASU 2018-12
Change in net unrealized investment losses on fixed
maturity securities
Change in net reserve remeasurements attributable to
discount rates
Change in net funded status of benefit plans
Other comprehensive loss
Comprehensive income (loss)
$
$
889.6 $
422.5
(11.0)
29.0
1,330.1
617.7
164.4
251.5
94.7
13.0
13.9
1,155.2
174.9
32.1
142.8
3.40
3.39
42.0
42.2
(0.8) $
—
—
—
(0.8)
(27.0)
(4.4)
(0.5)
(4.1)
—
—
(36.0)
35.2
7.6
27.6
0.66
0.65
—
—
888.8
422.5
(11.0)
29.0
1,329.3
590.7
160.0
251.0
90.6
13.0
13.9
1,119.2
210.1
39.7
170.4
4.06
4.04
42.0
42.2
142.8
27.6
170.4
—
(426.6)
(426.6)
(75.6)
(14.7)
—
1.0
(74.6)
68.2 $
110.8
—
(330.5)
(302.9) $
(90.3)
110.8
1.0
(405.1)
(234.7)
Horace Mann Educators Corporation
Annual Report on Form 10-K 147
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
($ in millions)
Common stock, $0.001 par value
Ending balance
Additional paid-in capital
Ending balance
Retained earnings
Beginning balance
Net income
Effect of adopting ASU 2018-12(1)
Dividends per share; 2022, $1.28 per share
Ending balance
Accumulated other comprehensive income (loss), net of
tax:
Beginning balance
Change in net unrealized investment 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
Ending balance
Shareholders' equity at end of period
$
Year Ended
December 31,
2022
As Reported
Effect of the
Adoption of ASU
2018-12
Year Ended
December 31,
2022
As Adjusted
$
0.1 $
— $
0.1
502.6
—
502.6
1,524.9
(2.6)
—
(53.7)
1,468.6
22.1
22.4
(0.7)
—
43.8
280.5
(330.5)
(647.6)
(149.1)
—
1.4
(365.7)
445.9
—
(33.7)
1,547.0
19.8
(0.7)
(53.7)
1,512.4
(50.0)
(796.7)
445.9
1.4
(399.4)
(517.4)
1,088.2 $
—
10.1 $
(517.4)
1,098.3
(1) See Note 1 to the Consolidated Financial Statements for information regarding ASU 2018-12.
148 Annual Report on Form 10-K
Horace Mann Educators Corporation
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
($ in millions)
Common stock, $0.001 par value
Ending balance
Additional paid-in capital
Ending balance
Retained earnings
Beginning balance
Net income
Effect of adopting ASU 2018-12
Dividends per share; 2021, $1.24 per share
Ending balance
Accumulated other comprehensive income (loss), net of
tax:
Beginning balance
Effect of adopting ASU 2018-12
Change in net unrealized investment 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
Ending balance
Shareholders' equity at end of period
$
Year Ended
December 31,
2021
As Reported
Effect of the
Adoption of ASU
2018-12
Year Ended
December 31,
2021
As Adjusted
$
0.1 $
— $
0.1
495.3
—
495.3
1,434.6
142.8
—
(52.5)
1,524.9
—
27.6
(5.5)
—
22.1
355.1
—
—
(426.6)
(75.6)
(14.7)
—
1.0
280.5
110.8
—
(330.5)
1,434.6
170.4
(5.5)
(52.5)
1,547.0
355.1
(426.6)
(90.3)
110.8
1.0
(50.0)
(493.4)
1,807.4 $
—
(308.4) $
(493.4)
1,499.0
Horace Mann Educators Corporation
Annual Report on Form 10-K 149
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in millions)
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 from EMA investments, net of dividends or
distributions
Other expense - goodwill impairment
Changes in:
Insurance liabilities
Amounts due under reinsurance agreements
Income tax liabilities
Other operating assets and liabilities
Other, net
Net cash provided by operating activities
Cash flows - investing activities
Year Ended
December 31,
2022
As Reported
Effect of the
Adoption of ASU
2018-12
Year Ended
December 31,
2022
As Adjusted
$
(2.6) $
22.4 $
19.8
56.5
27.6
8.9
18.2
4.8
440.5
(348.2)
(17.1)
(28.1)
11.0
171.5
—
—
—
—
—
(106.3)
38.4
127.6
(81.3)
(0.8)
—
56.5
27.6
8.9
18.2
4.8
334.2
(309.8)
110.5
(109.4)
10.2
171.5
Net cash used in investing activities
(214.6)
—
(214.6)
Cash flows - financing activities
Net cash provided by financing activities
Net decrease in cash
Cash at beginning of period
Cash at end of period
(47.8)
(90.9)
133.7
42.8 $
$
—
—
—
— $
(47.8)
(90.9)
133.7
42.8
150 Annual Report on Form 10-K
Horace Mann Educators Corporation
Note 18 - Prior Period Consolidated Financial Statements (continued)
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in millions)
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 from EMA investments, net of dividends or
distributions
Other expense - goodwill impairment
Changes in:
Insurance liabilities
Amounts due under reinsurance agreements
Income tax liabilities
Other operating assets and liabilities
Other, net
Net cash provided by operating activities
Cash flows - investing activities
Net cash used in investing activities
Cash flows - financing activities
Net cash provided by financing activities
Net decrease in cash
Cash at beginning of period
Cash at end of period
Year Ended
December 31,
2021
As Reported
Effect of the
Adoption of ASU
2018-12
Year Ended
December 31,
2021
As Adjusted
$
142.8 $
27.6 $
170.4
11.0
18.4
8.4
(41.5)
—
46.9
(1.5)
8.5
8.9
3.0
204.9
302.0
208.5
111.4
22.3
$
133.7 $
—
—
—
—
—
67.6
8.9
(99.7)
(4.4)
—
—
11.0
18.4
8.4
(41.5)
—
114.5
7.4
(91.2)
4.5
3.0
204.9
—
302.0
—
—
—
— $
208.5
111.4
22.3
133.7
Horace Mann Educators Corporation
Annual Report on Form 10-K 151
Note 18 - Prior Period Consolidated Financial Statements (continued)
Selected unaudited quarterly financial data is presented below.
($ in millions, except per share data)
Three Months Ended
December 31, September 30,
June 30,
March 31,
2022
Insurance premiums and contract changes
earned
Insurance premiums written and contract
deposits
Total Revenues
Net income
Per share information
Basic
$
259.1 $
257.4 $
255.4 $
358.2
346.4
(16.7)
372.7
342.6
20.4
359.9
345.9
(4.2)
Net income
Shares of common stock - weighted
average
Diluted
Net income
$
$
(0.40) $
0.49 $
(0.10) $
41.4
41.4
41.8
(0.40) $
0.49 $
(0.10) $
Shares of common stock and
equivalent shares - weighted average
41.4
41.6
41.8
2021
Insurance premiums and contract changes
earned
Insurance premiums written and contract
deposits
Total Revenues
Net income
Per share information
Basic
$
210.6 $
225.2 $
225.6 $
314.0
331.2
46.9
346.2
329.4
20.2
334.2
346.9
54.2
Net income
Shares of common stock - weighted
average
Diluted
Net income
Shares of common stock and
equivalent shares - weighted average
$
$
1.12 $
0.48 $
1.29 $
42.0
42.0
42.0
1.11 $
0.48 $
1.29 $
42.2
42.2
42.2
255.8
346.2
346.7
20.3
0.48
41.9
0.48
42.1
227.4
304.4
321.7
49.1
1.17
41.9
1.16
42.1
152 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, 2023. 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, 2023, 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, 2023 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, 2023. 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 153
Based on our assessment, we concluded that our internal control over financial reporting was effective at
December 31, 2023, 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, 2023, 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, 2023, 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, 2023 and 2022,
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, 2023, and the related
notes and financial statement schedules I to IV (collectively, the consolidated financial statements), and our
report dated February 27, 2024 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.
154 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
Chicago, Illinois
February 27, 2024
Horace Mann Educators Corporation
Annual Report on Form 10-K 155
ITEM 9B. I Other Information
Not applicable.
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 12, 2024 in preparation for our 2024 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)
(b)
The following sections of our Proxy Statement for our 2024 Annual Meeting of Shareholders, are
incorporated herein by reference: "Board of Directors and Committees," "Executive Officers," and
"Corporate Governance".
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 2024 Annual Meeting of Shareholders, are incorporated
herein by reference: "Director Compensation" and "Compensation Discussion and Analysis" including "Pay
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)
(b)
The "Security Ownership of Certain Beneficial Owners and Management" section of our Proxy
Statement for our 2024 Annual Meeting of Shareholders, is incorporated herein by reference.
The "Equity Compensation Plan Information" section of our Proxy Statement for our 2024 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.
156 Annual Report on Form 10-K
Horace Mann Educators Corporation
ITEM 13. I Certain Relationships and Related Transactions and
Director Independence
The following sections of our Proxy Statement for our 2024 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 2024
Annual Meeting of Shareholders in the section "Proposal No. 4 - Ratification of Independent Registered Public
Accounting Firm".
PART IV
ITEM 15. I Exhibits and Financial Statement Schedules
(a)(1)
8 of this report, Page 72 to Page 152
(a)(1) The following consolidated financial statements of the Company are contained in Part II - Item
(a)(2)
Financial statement schedules
Schedule I - Summary of Investments - Other than Investments in Related Parties, Page 158
Schedule II - Condensed Financial Information of Registrant, Page 159
Schedule III - Supplementary Insurance Information, Page 163
Schedule IV - Reinsurance, Page 164
Horace Mann Educators Corporation
Annual Report on Form 10-K 157
HORACE MANN EDUCATORS CORPORATION
SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2023
($ in millions)
SCHEDULE I
Fixed maturity securities
Type of Investments
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
Cost or
amortized
cost, net
Fair
Value
Balance
Sheet
$
925.0 $
819.2 $
1,333.4
23.1
93.8
1,850.0
1,044.7
13.9
342.9
26.1
1,270.1
22.1
80.9
1,665.5
1,020.5
12.9
317.8
26.3
819.2
1,270.1
22.1
80.9
1,665.5
1,020.5
12.9
317.8
26.3
Total fixed maturity securities
5,652.9
5,235.3
5,235.3
Equity securities
Industrial, miscellaneous and all other
Banking & finance and insurance companies
Non-redeemable preferred stocks
Closed-end fund
Total equity securities
Limited partnership interests
Short-term investments
Policy loans
Derivatives
Mortgage loans
Other
0.3
1.1
68.3
16.5
86.2
1,138.8
132.9
141.4
12.5 $
43.2
33.7
XXX
XXX
XXX
XXX
XXX
0.3
1.1
68.3
16.5
86.2
19.0
0.3
1.1
68.3
16.5
86.2
1,138.8
132.9
141.4
19.0
43.2
33.7
Total investments
$
7,241.6
XXX
$
6,830.5
See accompanying Report of Independent Registered Public Accounting Firm.
158 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS
As of December 31, 2023 and 2022
($ in millions, except share data)
SCHEDULE II
December 31,
2023
2022
ASSETS
$
$
3.4 $
1,716.6
17.1
2.1
1,597.1
7.1
1,737.1 $
1,606.3
LIABILITIES AND SHAREHOLDERS' EQUITY
$
— $
Investments and cash
Investments in subsidiaries
Other assets
Total assets
Short-term debt
Long-term debt
Other liabilities
Total liabilities
546.0
15.8
561.8
—
0.1
510.9
1,502.2
(328.3)
21.9
(7.6)
(523.9)
249.0
249.0
10.0
508.0
—
0.1
502.6
1,512.4
(449.6)
59.0
(8.8)
(517.4)
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, 2023, 66,747,821; 2022, 66,618,465
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, 2023, 25,911,087 shares;
2022, 25,714,153 shares
Total shareholders' equity
1,175.3
1,098.3
Total liabilities and shareholders' equity
$
1,737.1 $
1,606.3
See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.
Horace Mann Educators Corporation
Annual Report on Form 10-K 159
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS
($ in millions)
SCHEDULE II (continued)
Revenues
Net investment income
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 (losses) of subsidiaries
Year Ended December 31,
2023
2022
2021
$
0.2 $
— $
(0.1)
0.2
—
(0.1)
29.7
5.1
34.8
(34.6)
(6.9)
(27.7)
72.7
19.4
8.4
27.8
(27.8)
(6.3)
(21.5)
41.3
13.8
11.2
25.0
(25.1)
(5.4)
(19.7)
190.1
Net income (loss)
$
45.0 $
19.8 $
170.4
See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.
160 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS
($ in millions)
SCHEDULE II (continued)
Cash flows from operating activities
Net income (loss)
Equity in net income of subsidiaries
Dividends received from subsidiaries
Changes in:
Income taxes
Operating assets and liabilities
Other
Year Ended December 31,
2023
2022
2021
$
45.0 $
(72.7)
132.1
19.8 $
(41.3)
184.3
170.4
(190.1)
66.0
(5.8)
6.0
1.2
3.9
0.8
(1.5)
1.8
8.4
(2.6)
Net cash provided by operating activities
105.8
166.0
53.9
Cash flows from investing activities
Purchase of equity securities
Net increase (decrease) in short-term investments
Capital contributions to subsidiaries
Acquisition of business, net of cash acquired
—
(1.3)
(98.0)
—
—
(0.7)
(35.0)
(172.3)
Net cash used in investing activities
(99.3)
(208.0)
Cash flows from financing activities
Dividends paid to shareholders
Proceeds from issuance 2023 Senior Note due 2028
Principal borrowings on Revolving Credit Facility
Principal repayment on senior revolving credit facility
Acquisition of treasury stock
Proceeds from exercise of stock options
Withholding tax payments on RSUs tendered
Proceeds for Share-based compensation
(53.9)
296.5
—
(249.0)
(6.5)
—
(1.8)
8.0
(52.6)
—
—
—
(24.0)
—
(2.4)
7.1
—
2.7
(5.0)
—
(2.3)
(51.4)
—
114.0
—
(5.3)
0.3
(2.0)
6.7
Net cash provided by (used in) financing activities
(6.7)
(71.9)
62.3
Net increase (decrease) in cash
Cash at beginning of period
(0.2)
0.3
(113.9)
114.2
113.9
0.3
Cash at end of period
$
0.1 $
0.3 $
114.2
See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.
Horace Mann Educators Corporation
Annual Report on Form 10-K 161
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE TO CONDENSED FINANCIAL STATEMENTS
SCHEDULE II (continued)
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.
162 Annual Report on Form 10-K
Horace Mann Educators Corporation
HORACE MANN EDUCATORS CORPORATION
SCHEDULE III: SUPPLEMENTARY INSURANCE INFORMATION
($ in millions)
SCHEDULE III
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, 2023
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Other, including consolidating
eliminations
$
29.3 $
416.9 $
297.9 $
— $
645.5 $
37.9 $
557.0 $
71.3 $
103.3 $
297.7
9.3
N/A
6,418.2
695.4
N/A
—
3.0
N/A
816.0
100.0
N/A
151.8
259.8
N/A
369.9
38.9
(1.9)
325.1
92.7
N/A
28.0
1.9
N/A
99.0
123.2
37.1
Total
$
336.3 $
7,530.5 $
300.9 $
916.0 $
1,057.1 $
444.8 $
974.8 $
101.2 $
362.6 $
Year Ended December 31, 2022 (recast)
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Other, including consolidating
eliminations
$
24.6 $
388.7 $
259.1 $
— $
608.2 $
31.4 $
534.3 $
64.3 $
102.6 $
299.5
6.5
N/A
6,413.7
740.2
N/A
4.0
3.0
N/A
719.8
89.5
N/A
144.0
275.5
N/A
338.3
33.3
(2.1)
293.6
92.5
N/A
23.0
0.9
N/A
108.2
118.1 $
27.6
Total
$
330.6 $
7,542.6 $
266.1 $
809.3 $
1,027.7 $
400.9 $
920.4 $
88.2 $
356.5 $
Year Ended December 31, 2021 (recast)
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
Other, including consolidating
eliminations
$
24.4 $
367.4 $
249.8 $
— $
617.4 $
61.1 $
447.9 $
67.7 $
97.2 $
607.8
295.1
4.9
N/A
6,714.6
395.4
N/A
2.8
3.1
N/A
873.4
72.5
N/A
143.4
128.0
N/A
338.6
25.2
(2.4)
269.7
33.1
N/A
22.1
0.8
N/A
102.0
54.3 $
24.4
Total
$
324.4 $
7,477.4 $
255.7 $
945.9 $
888.8 $
422.5 $
750.7 $
90.6 $
277.9 $
N/A - Not applicable.
684.4
29.2
195.7
N/A
909.3
617.5
29.5
213.2
N/A
860.2
30.6
93.3
N/A
731.7
See accompanying Report of Independent Registered Public Accounting Firm.
Horace Mann Educators Corporation
Annual Report on Form 10-K 163
HORACE MANN EDUCATORS CORPORATION
REINSURANCE
($ in millions)
SCHEDULE IV
Column A
Column B
Column C
Column D
Column E
Column F
Gross
Amount
Ceded to
Other
Companies
Assumed
from Other
Companies
Net
Amount
Percentage
of Amount
Assumed to
Net
Year Ended December 31, 2023
Life insurance in force
Premiums
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
$
$
40,422.9 $
9,597.7 $
— $
30,825.2
—
653.0 $
166.5
278.1
18.1 $
14.8
43.4
10.7 $
—
25.1
645.6
151.7
259.8
1.7 %
—
9.7 %
Total premiums
$
1,097.6 $
76.3 $
35.8 $
1,057.1
3.4 %
Year Ended December 31, 2022
Life insurance in force
Premiums
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
$
$
38,564.6 $
9,330.9 $
— $
29,233.7
—
614.7 $
158.9
273.1
15.0 $
14.9
42.1
8.5 $
—
44.5
608.2
144.0
275.5
1.4 %
—
16.2 %
Total premiums
$
1,046.7 $
72.0 $
53.0 $
1,027.7
5.2 %
Year Ended December 31, 2021
Life insurance in force
Premiums
Property & Casualty
Life & Retirement
Supplemental & Group Benefits
$
$
21,032.6 $
4,693.5 $
— $
16,339.1
—
623.0 $
159.5
129.9
15.3 $
16.1
1.9
9.7 $
—
—
617.4
143.4
128.0
1.6 %
—
—
Total premiums
$
912.4 $
33.3 $
9.7 $
888.8
1.1 %
Note: Premiums above include insurance premiums earned and contract charges earned.
See accompanying Report of Independent Registered Public Accounting Firm.
164 Annual Report on Form 10-K
Horace Mann Educators Corporation
(a)(3)
by an asterisk (*).
The following items are filed as Exhibits. Management contracts and compensatory plans are indicated
Exhibit
No.
Description
(3) Articles of incorporation and bylaws:
3.1
3.2
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.
2020 Amended and Restated Bylaws of HMEC, incorporated by reference to Exhibit 3.1 to
HMEC’s 8-K filing filed with the SEC on April 1, 2020.
(4) Instruments defining the rights of security holders, including indentures:
4.1
4.1(a)
4.1(b)
4.2
4.3
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 4.500% Senior Notes due 2025, incorporated by reference to Exhibit 4.2 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.
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:
10.1
10.1(a)
10.1(b)
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 165
10.2*
10.2(a)*
10.2(b)*
10.2(c)*
10.2(d)*
10.2(e)*
10.3*
10.3(a)*
10.3(b)*
10.3(c)*
10.3(d)*
10.3(e)*
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.
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.
166 Annual Report on Form 10-K
Horace Mann Educators Corporation
10.3(f)*
10.3(g)*
10.3(h)*
10.3(i)*
10.3(j)*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
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 Exhibit
10.7 to HMEC's Quarterly Report on Form 10-Q for the quarter ended June, 30, 2022, filed with
the SEC on August 8, 2022.
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, 2023,
filed with the SEC on May 10, 2023.
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.
10.10*
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 167
10.10(a)*
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, 2023, filed with the SEC on May 10, 2023.
10.11*
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.
10.11(a)*
10.11(b)*
10.12
10.13
10.14
10.15
(21)
(23)
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, 2023, filed
with the SEC on May 10, 2023.
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.
Subsidiaries of HMEC.
Consent of KPMG LLP.
(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:
31.1
31.2
Certification by Marita Zuraitis, Chief Executive Officer of HMEC.
Certification by Bret A. Conklin, Chief Financial Officer of HMEC.
(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
32.1
32.2
97.1
Certification by Marita Zuraitis, Chief Executive Officer of HMEC.
Certification by Bret A. Conklin, Chief Financial Officer of HMEC.
Horace Mann Educators Corporation Clawback Policy
168 Annual Report on Form 10-K
Horace Mann Educators Corporation
(99) Additional exhibits:
99.1
Glossary of Selected Terms.
(101) Interactive Data File:
101.1
The following information from Horace Mann Educators Corporation’s Annual Report on
Form 10-K for the year ended December 31, 2023 formatted in Inline XBRL: (i) Consolidated
Balance Sheets as of December 31, 2023 and 2022 (ii) Consolidated Statements of Operations
and Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021;
(iii) Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2023, 2022 and 2021; (iv) Consolidated Statements of Cash Flows for the years
ended December 31, 2023, 2022 and 2021; (v) Notes to Consolidated Financial Statements;
(vi) Financial Statement Schedules; and (vii) the cover page.
104.1
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.
Horace Mann Educators Corporation
Annual Report on Form 10-K 169
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
By:
/s/ Marita Zuraitis
Marita Zuraitis
President and Chief Executive Officer
February 27, 2024
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
By:
/s/ Marita Zuraitis
Marita Zuraitis
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 27, 2024
By:
/s/ Bret A. Conklin
Bret A. Conklin
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
February 27, 2024
By:
/s/ Kimberly A. Johnson
Kimberly A. Johnson
Senior Vice President and Controller
(Principal Accounting Officer)
February 27, 2024
By:
/s/ H. Wade Reece
H. Wade Reece
By:
/s/ Thomas A. Bradley
Thomas A. Bradley
By:
/s/ Victor P. Fetter
Victor P. Fetter
By:
/s/ Perry G. Hines
Perry G. Hines
By:
/s/ Mark E. Konen
Mark E. Konen
By:
/s/ Beverly J. McClure
Beverly J. McClure
By:
/s/ Aaliyah A. Samuel
Aaliyah A. Samuel
By:
/s/ Elaine A. Sarsynski
Elaine A. Sarsynski
Chairman of the Board of Directors
February 27, 2024
Director
February 27, 2024
Director
February 27, 2024
Director
February 27, 2024
Director
February 27, 2024
Director
February 27, 2024
Director
February 27, 2024
Director
February 27, 2024
170 Annual Report on Form 10-K
Horace Mann Educators Corporation
Directors
Officers
Marita Zuraitis
President & Chief Executive Officer
Bret A. Conklin
Executive Vice President & Chief
Financial Officer
Stephen J. McAnena
Executive Vice President & Chief
Operating Officer
Matthew P. Sharpe
Executive Vice President,
Supplemental & Group Benefits
and Corporate Strategy
Donald M. Carley
Executive Vice President, General
Counsel, Corporate Secretary and
Chief Compliance Officer
Stephanie A. Fulks
Senior Vice President & Chief
Information Officer
Kimberly A. Johnson
Senior Vice President & Controller
Jennifer E. Thayer
Senior Vice President & Chief
Human Resources Officer
H. Wade Reece, Chairman
Chairman of the Board & Chief
Executive Officer (retired)
BB&T Insurance Services, Inc.
and BB&T Insurance Holdings, Inc.
Marita Zuraitis
President & Chief Executive Officer
Horace Mann Educators Corporation
Thomas A. Bradley*
Executive Vice President and
CFO (retired)
Allied World Assurance
Company Holdings, AG
Victor P. Fetter*
Global Chief Information Officer
Fortive
Perry G. Hines
Senior Vice President, Chief Marketing
and Communications Officer (retired)
Irwin Mortgage Corporation
Mark E. Konen*
President, Insurance and Retirement
Solutions (retired)
Lincoln Financial Group
Beverley J. McClure
Senior Vice President, Enterprise
Operations (retired)
United Services Automobile
Association (USAA)
Dr. Aaliyah A. Samuel
President and Chief Executive Officer
CASEL
Elaine A. Sarsynski
Chairwoman, Chief Executive Officer
and President (retired)
Mass Mutual International
Corporate data
Corporate Office
1 Horace Mann Plaza
Springfield, IL 62715-0001
horacemann.com
Annual Meeting
May 22, 2024, 9 a.m.
Information on how to attend
the virtual Annual Meeting will be
included in the proxy materials. All
shareholders of record as of the
close of business on March 26, 2024
will be sent a formal notice of the
meeting and proxy materials.
Independent Registered Public
Accounting Firm
KPMG LLP
200 East Randolph Street
Chicago, IL 60601
Common Stock
HMN Stock is traded on the NYSE
Senior Notes
HMN senior notes are traded in the
open market (HMN 4.50 and HMN
7.25)
Transfer Agent
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
Additional Information
Additional financial data on HMN
and its subsidiaries is included in
Form 10-K filed with the Securities
and Exchange Commission.
Electronic copies of HMN’s SEC filings
are available on horacemann.com.
Printed copies of SEC filings are
available upon written request from:
Investor Relations
Horace Mann
1 Horace Mann Plaza
Springfield, IL 62715-0001
investorrelations@horacemann.com
* Member of the Audit Committee, each an
independent director
HA-C00397 (Feb. 2024)