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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, 2021
☐ 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 | 37-0911756
(State or other jurisdiction of incorporation or organization) | (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 | Trading Symbol(s) | Name of each exchange on which registered
Common Stock, par value $0.001 per share | HMN | 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 | ☑ |  | Accelerated filer | ☐
Non-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. ☑
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, 2021, was $1,511.2 million.
As of February 16, 2022, the registrant had 41,351,438 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 2022 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, 2021.

Auditor Name: KPMG LLP |  | Auditor Location: Chicago, Illinois |  | Auditor Firm ID: 185

HORACE MANN EDUCATORS CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 2021
INDEX

Part |  | Item |  |  |  | Page
I |  | 1. |  | Business |  | 1
|  |  |  | Introduction |  | 1
|  |  |  | Forward-looking Information |  | 1
|  |  |  | Overview, History and Available Information |  | 1
|  |  |  | Corporate Strategy |  | 3
|  |  |  | Human Capital Resources |  | 4
|  |  |  | Reporting Segments |  | 5
|  |  |  | 2021 Geographic Composition of Business |  | 13
|  |  |  | Competition |  | 14
|  |  |  | Investments |  | 14
|  |  |  | Cash Flow |  | 16
|  |  |  | Regulation |  | 17
|  |  |  | Changing Climate Conditions |  | 18
|  |  |  | Enterprise Risk Management |  | 19
|  | 1A. |  | Risk Factors |  | 20
|  | 1B. |  | Unresolved Staff Comments |  | 33
|  | 2. |  | Properties |  | 33
|  | 3. |  | Legal Proceedings |  | 33
|  | 4. |  | Mine Safety Disclosures |  | 34
II |  | 5. |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 34
|  | 6. |  | [Reserved] |  | 36
|  | 7. |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 37
|  |  |  | Forward-looking Information |  | 37
|  |  |  | Introduction |  | 38
|  |  |  | Consolidated Financial Highlights |  | 39
|  |  |  | Consolidated Results of Operations |  | 39
|  |  |  | Outlook for 2022 |  | 41
|  |  |  | Application of Critical Accounting Estimates |  | 43
|  |  |  | Results of Operations by Segment |  | 49
|  |  |  | Investment Results |  | 57
|  |  |  | Liquidity and Capital Resources |  | 60
|  |  |  | Future Adoption of New Accounting Standards |  | 64
|  |  |  | Effects of Inflation and Changes in Interest Rates |  | 64
|  | 7A. |  | Quantitative and Qualitative Disclosures about Market Risk |  | 65
|  | 8. |  | Financial Statements and Supplementary Data |  | 67
|  | 9. |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |  | 133
|  | 9A. |  | Controls and Procedures |  | 133
|  | 9B. |  | Other Information |  | 135
|  | 9C. |  | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |  | 135
III |  | 10. |  | Directors, Executive Officers and Corporate Governance |  | 136
|  | 11. |  | Executive Compensation |  | 136
|  | 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |  | 136
|  | 13. |  | Certain Relationships and Related Transactions and Director Independence |  | 136
|  | 14. |  | Principal Accountant Fees and Services |  | 136
IV |  | 15. |  | Exhibits and Financial Statement Schedules |  | 137
|  | 16. |  | Form 10-K Summary |  | 148
|  | Signatures |  | 149

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 report. 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 2021 Investor Supplement.
Forward-looking Information
Horace Mann Educators Corporation (referred to in this report as "we", "our", "us", the "Company", "Horace Mann" or "HMEC") is an insurance holding company. Our actual results could differ materially from those projected in forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained in Part I - Item 1A and in Part II - Item 7 of this report.
Overview, History and Available Information
We are an insurance holding company incorporated in Delaware. In 2021, through our subsidiaries, we marketed and underwrote:
•personal lines of property and casualty insurance, primarily auto and property coverages
•supplemental insurance products, including cancer, heart, hospital, supplemental disability and accident
•retirement products, primarily tax-qualified fixed and variable annuities
•life insurance, primarily traditional term and whole life insurance products
In 2021 and prior, we conducted and managed our business through five reporting segments. The four operating segments, representing the major lines of business, were: Property & Casualty, Supplemental, Retirement and Life.
Beginning in 2022, we will conduct business in three operating segments: (1) Property & Casualty, (2) Life & Retirement, and (3) Supplemental & Group Benefits. The Property & Casualty and Life & Retirement segments will be within the Individual Insurance & Financial Services Division. The Supplemental & Group Benefits segment will also function as a division, and will include the results of Madison National Life Insurance Company, Inc. (Madison National), which was acquired effective January 1, 2022.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 1

This change aligns with how we will make operating decisions and assess performance, maintaining discrete segment financial information to evaluate performance and allocate resources.
We do not allocate the impact of corporate-level transactions to the operating 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.
Founded by Educators for Educators®, our business began in Springfield, Illinois in 1945 when two school teachers started selling auto insurance to other teachers within Illinois. We expanded our business to other states and broadened our product line to include life insurance in 1949, 403(b) tax-qualified retirement annuities in 1961 and property insurance in 1965. In 2019, we added our Supplemental segment and increased our market share when we acquired all of the equity interests in NTA Life Enterprises, LLC (NTA). On January 1, 2022, we enhanced our value proposition for school districts by acquiring Madison National.
Madison National is a leading writer of employer-paid and sponsored benefits provided to educators by K-12 school districts. Founded in 1961 and headquartered in Madison, Wisconsin, it offers short- and long-term group disability, group term, and worksite solutions products, including accident, critical illness and fixed indemnity. Over half of Madison National’s premiums are from Midwestern districts, so there is opportunity for geographic expansion, leveraging Horace Mann’s national footprint.
Our common stock has traded on the New York Stock Exchange (NYSE) under the symbol HMN since our initial public offering in November 1991.
We provide protection and savings products that primarily benefit K-12 teachers, administrators and other employees of public schools and their families. Our more than 1 million households typically have moderate annual incomes. Their financial planning tends to focus on retirement, security, savings and primary insurance needs. We believe that we are the largest national multi-line insurance and financial services company focused on the nation's educators as its primary market.
Today, we market primarily through a dedicated sales force of full-time Exclusive Agents supported by our Customer Contact Center. These agents sell our products and limited third-party vendor products made available through the Horace Mann General Agency. Some of these agents are former educators or individuals with close ties to the educational community who utilize their contacts within, and knowledge of, the target market. Beginning in 2022, we will also work with benefit brokers and others to bring employer-paid and voluntary benefit solutions for educators directly to district decision makers. School districts, particularly large ones, often work with organizations with special expertise in benefits plan design to help develop plans that support employee recruitment and retention.
Our premiums and contract charges earned for the year ended December 31, 2021 were $889.6 million. Premiums written and contract deposits* for the year ended December 31, 2021 were $1.3 billion. Net income was $142.8 million. Our total assets were $14.4 billion at December 31, 2021. Total investments were $7.4 billion at December 31, 2021 and consisted primarily of investment grade fixed maturity securities.
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, and code of ethics, 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, 2021, 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, 2020, the CEO and Chief Financial Officer (CFO) certifications required under Section 302 of the Sarbanes-Oxley Act.

2 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Corporate Strategy
Our vision is to be the company of choice to provide financial solutions for educators and others who serve their communities. 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.
Education Market
With the addition of Madison National, we serve approximately 1 million households in the United States of America (U.S.). Horace Mann, Madison National and NTA have all served a customer base of about 80% educators. There is significant opportunity to grow in this niche market. The U.S. Department of Education estimates that there are approximately 7.5 million K-12 school teachers, administrators and support staff nationwide, and the number of needed educator positions continues to grow.
Because of the primary focus on this niche market, we have a largely homogeneous customer set with similar characteristics and preferred risk profiles. This allows for more precise underwriting processes and more targeted marketing operations, amplifying the benefit of successful approaches.
Growth Strategy
We established our solutions orientation for the education market through a focus on products, distribution and infrastructure (PDI):
•Products designed to meet educators’ needs and protect their unique risks;
•Knowledgeable, trusted distribution tailored to educator preferences; and
•Modern, scalable infrastructure that is easy to do business with.
Since July 2019, we completed several transactions to support our PDI strategy: acquiring NTA and Madison National, as well as reinsuring a $2.9 billion block of legacy annuity business. The annuity reinsurance transaction reduced interest rate risk while releasing capital that was redeployed into higher-margin products.
As a result, we have become a larger, more diverse company that expects to leverage our transformation to increase our share of the education market.
With the addition of Madison National's offerings, we can now offer a full suite of employer-paid and voluntary benefits to help school districts address educator recruitment and retention. Educators are generally paid less than private-sector jobs with similar educational requirements, and attrition has long been high compared to other professions. The COVID-19 pandemic continues to exacerbate school district administrators' staffing concerns. One avenue administrators pursue to address educator compensation is adding or improving employee benefit packages.
Relevant Products
At the core of our value proposition is the commitment to providing relevant products and solutions to address the issues that educators face at each stage of their career and life. Our protection products, including auto, property, life, disability and specialty health insurance, as well as our savings products, are tailored to meet the insurance and financial services needs of educators. Over the past few years, we have strengthened those offerings with the addition of employer-paid group products, as well as the introduction of our Retirement Advantage® open architecture platform for 403(b)(7) and other defined contribution plans. We modernized our traditional life insurance products, and made significant improvements in our auto and property offerings.
We offer complimentary solutions for educators as well. One example is Student Loan Solutions, relevant for many educators and particularly those new to the profession for whom student loan debt may preclude 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.
Trusted Distribution
We aim to provide solutions to educators however they get their protection and savings products, whether that is through an individual purchase or coverage is provided through their school district employer. The core

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 3

component of the individual educator strategy is our local agents, who support the educational community through both in-person and virtual activities, such as providing financial wellness workshops and hosting school events. Our trusted adviser model builds particularly strong brand loyalty and affinity.
To meet the preferences of customers who prefer "on demand" services, our direct sales team is available by phone or electronically to respond to questions or bind coverages. Customers can also secure auto, property and life quotes and coverage comparisons online. As customer needs become more complex, they frequently seek the help of a trusted advisor.
For our employer-paid worksite offerings, we will primarily work through established benefit brokers that assist in the design of employee benefits plans and offerings. In addition, we will continue to enhance our Section 125 Employer Services platform offering to expand the menu of benefits available to all school district employees, such as retirement savings and voluntary supplemental insurance products. Worksite distribution often includes the support of a benefit enrollment team.
To build brand awareness, engage with the educator community, and stay abreast of developments and challenges faced by educators, we partner with multiple national, state and local associations. Through strategic alliances with a diverse group of educator associations (e.g., the American Association of School Administrators, The School Superintendents Association and the Association of School Business Officials), we build relationships with administrators. Through partnerships with some state and local National Education Association (NEA) teacher associations, we have the opportunity to build our brand awareness and discuss issues and challenges faced by individual educators.
Modern Infrastructure
We are implementing a multi-year effort to upgrade our infrastructure and enhance our digital capabilities to ensure our operation runs efficiently and educators can connect with us in the manner they 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, annuity and supplemental products, which offers substantial benefits in terms of customer experience and operating efficiencies.
In 2017, we completed the first phase of a Guidewire implementation focused on the claims system that resulted in reduced cycle times and more insight into customer and loss trends. The second phase (which is focused on policy administration and billing) is currently underway. As of January 2022, the system was launched in seven states, representing close to 40% of total Property & Casualty premiums written. Similar to the claims system implementation, it offers substantial benefits in terms of data segmentation and analysis, digital capabilities and ease of use.
In 2022, we are implementing LifePro for new life insurance policies, leveraging the knowledge gained in our supplemental business, which has used LifePro for seven years. Over the next three years, we expect to implement additional life and retirement products.
During the pandemic, we accelerated planned technology solutions, including video meetings software, enhanced e-signature capabilities, and dynamic online appointment setting tools. These upgrades made it easier for both agents and customers to conduct business online, including annual policy reviews where our agents address any new or additional coverage needs. These upgrades will serve us well in the future, allowing us to easily pivot between in-person and virtual customer engagement, depending on individual situations.
Human Capital Resources
Horace Mann's mission of helping educators achieve lifelong financial success resonates strongly with our 1,450 employees. Almost 90% of employees and agents said serving educators is an important reason why they work at Horace Mann in a 2019 survey. In interactions with customers, each other and all stakeholders, we aim to reflect the core values at the heart of who we are: compassionate, trustworthy, straightforward, approachable, respectful and knowledgeable.
We believe that an engaged employee base is critical to deliver on our commitment to educators and achieve our business objectives. Our strategy to attract and retain talented employees is based on offering a competitive Total Rewards package, a flexible work environment and investing in employee professional development. In

4 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

addition to competitive base salaries, every Horace Mann employee is eligible for an annual bonus program based on company performance and annual merit increases based on individual performance.
We strive to have policies and practices in place to attract top talent, maintain high levels of employee engagement and increase retention, such as reviewing highly skilled and hard-to-fill positions to ensure market competitiveness and creating a robust “stay interview” process. In 2021, we introduced a hybrid workforce model, in which more than 70% of our employees have the ability to work remotely as part of their regular weekly schedule.
We have long strived to foster an inclusive culture in which individual differences are recognized, respected and appreciated. In 2021, we took several steps to deliberately advance our focus in this cultural initiative, including introducing company-wide learning opportunities hosted by our Diversity, Equity and Inclusion (DEI) Council, and designating Juneteenth as a company holiday beginning in 2022. For the fourth year in a row, Horace Mann was named to the Bloomberg Gender-Equality Index, which recognizes corporate commitment to transparency in gender reporting and advancing women’s equality.
We have no collective bargaining agreements with any employees.
Reporting Segments
In 2021, we conducted and managed our business through five reporting segments: Property & Casualty, Supplemental, Retirement, Life and Corporate & Other.
These segments are defined based on the way management organizes the segments 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 19 of the Consolidated Financial Statements in this report. 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 report.
Property & Casualty
Our primary property and casualty insurance products include private passenger auto insurance and residential home 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 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.
376,302 auto risks in force and
176,446 property risks in force at December 31, 2021.
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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 5

Catastrophe Losses (Pretax)(1)
The number of catastrophe events and the level of catastrophe losses can fluctuate significantly from year to year. Our catastrophe losses for the last five years are shown in the following table ($ in millions).

Year |  | Month |  | Event Description |  | States/Region |  | Total
2021 |  |  |  |  |  |  |  | $ | 78.2 |
|  | February |  | Winter Storm Viola |  | AR, IL, LA, MO, OK, TN, TX |  | 5.1 |
|  | August |  | Hurricane Ida |  | AL, AK, CT, DE, DC, FL, GA, KY, LA, MD, MA, MS, NJ, NY, NC, PA ,RI, TN, VI, WV |  | 24.0 |
|  | December |  | Wildfire Marshall |  | CO |  | 5.3 |
|  |  |  | Other single events less than $5.0 million |  |  |  | 43.8 |
2020 |  |  |  |  |  |  |  | $ | 84.4 |
|  | August |  | Derecho |  | IA, IL, IN, KS, MI, MN, MO, NE, OH, SD, WI |  | 6.5 |
|  | August |  | Hurricane Laura |  | AR, LA, MS, TN, TX |  | 9.5 |
|  | October |  | Hurricane Delta |  | AL, AR, GA, LA, MS, NC, SC, TX |  | 3.3 |
|  | October |  | Hurricane Zeta |  | AL, GA, LA, MS, NC, SC |  | 2.7 |
|  |  |  | Other single events less than $5.0 million |  |  |  | 62.4 |
2019 |  |  |  |  |  |  |  | $ | 52.0 |
|  | May |  | Wind and Hail |  | CO, IA, IL, IN, KS, MO, NE, OH, OK, PA, WY |  | 5.5 |
|  |  |  | Other single events less than $5.0 million |  |  |  | 46.5 |
2018 |  |  |  |  |  |  |  | $ | 114.1 |
|  | June |  | Wind and Hail |  | CO, UT |  | 8.2 |
|  | July |  | Carr Fire |  | CA |  | 5.9 |
|  | September |  | Hurricane Florence |  | Southeast and Mid-Atlantic |  | 11.4 |
|  | October |  | Hurricane Michael |  | Southeastern U.S. |  | 4.5 |
|  | November |  | Camp Fire(2) |  | CA |  | 31.2
|  |  |  | Other single events less than $5.0 million |  |  |  | 52.9 |
2017 |  |  |  |  |  |  |  | $ | 61.8 |
|  | May |  | Wind, Hail, Tornado |  | CO |  | 10.0 |
|  | June |  | Wind and Hail |  | MN (primarily) |  | 10.0 |
|  | August |  | Hurricane Harvey |  | Southeastern U.S. |  | 4.8 |
|  | August |  | Hurricane Irma |  | Eastern U.S. |  | 3.0 |
|  |  |  | Other single events less than $5.0 million |  |  |  | 34.0 |

(1) Net of reinsurance and before income tax benefits. Includes allocated loss adjustment expenses.
(2) As recognized in 2018 and excludes subrogation recoveries of $4.8 million pretax received in 2020.

6 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Fluctuations in catastrophe losses impact a property and casualty insurance company's claims and claim expenses incurred and paid.
Claims and Claim Expenses Incurred(1), 2019 - 2021 ($ 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 expenses (loss reserves) represent management's 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 generally accepted actuarial standards. We engage an independent property and casualty actuarial consulting firm to prepare an independent study of our Property & Casualty reserves at December 31 st 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, 2021, 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 8 of the Consolidated Financial Statements of this report.
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. Due to the nature of our personal lines business, we have no exposure to losses related to claims for toxic waste cleanup, other environmental remediation or asbestos-related illnesses other than claims under property insurance policies for environmental related items such as mold.
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, 2021 were not material.
We maintain catastrophe excess of loss reinsurance coverage. For 2021, 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. The catastrophe excess of loss reinsurance contract provided 95% coverage for catastrophe losses above a $25.0 million retention per occurrence up to $175.0 million per occurrence. This contract consisted of three layers, each of which provided for one mandatory reinstatement. The layers were $25.0 million excess of $25.0 million, $40.0 million excess of $50.0 million and $85.0 million excess of $90.0 million. Our 2022 catastrophe excess of loss reinsurance coverage is unchanged from 2021.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 7

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 2021, we reinsured each loss above a retention of $1.0 million up to $5.0 million per occurrence and $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. Our 2021 liability contract provides 85% coverage for losses of $1.0 million up to $5.0 million. For 2022, the reinsurance layer of $1.0 million up to $5.0 million occurrence has been eliminated. The 2022 clash event coverage is unchanged from 2021.
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. We reinsure 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. For business written in Massachusetts, the quota share portion is 75%.
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 2021, MCCA reimbursed PIP losses including allocated loss adjustment expenses in excess of $0.6 million.
For property coverages, in 2021, we reinsured each loss above a retention of $1.0 million up to $5.0 million per risk, including catastrophe losses. Also, we could submit to the reinsurers two per risk losses from the same occurrence for a total of $8.0 million of property recovery in any one event. Our 2021 property contract provides 85% coverage for losses of $1.0 million up to $5.0 million. This reinsurance layer has been eliminated for 2022.
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, 2022. No other single reinsurer's percentage participation in 2022 or 2021 exceeds 5%. We monitor reinsurers' financial strength by reviewing A.M. Best and S&P ratings.
Property Catastrophe First Event Excess of Loss Reinsurance Participants In Excess of 5%

A.M. Best Rating |  | S&P Rating |  | Reinsurer |  | Parent |  | 2022 |  | 2021
A |  | A+ |  | Lloyd's of London Syndicates |  |  |  | 14.2 | % |  | 19.4 | %
A+ |  | A+ |  | Everest Reinsurance Company |  | Everest Re Group, Ltd |  | 10.7 | % |  | 7.1 | %
A+ |  | AA- |  | Swiss Re Underwriters Agency, Inc. |  | Swiss Reinsurance Company, Zurich |  | 9.9 | % |  | 9.6 | %
NR |  | A+ |  | R+V Versicherung AG |  | DZ BANK AG |  | 8.9 | % |  | 8.7 | %
A+ |  | AA- |  | SCOR Global P&C SE |  | SCOR SE |  | 6.7 | % |  | 6.7 | %
A+ |  | A+ |  | Transatlantic Reinsurance Company |  | Alleghany Corporation |  | 5.3 | % |  | 4.9 | %

NR - Not rated.

8 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Supplemental
We entered the supplemental market in July 2019 when we acquired NTA. Our supplemental insurance products include cancer, heart, hospital, supplemental disability and accident. A typical supplemental policy offers "HIPAA Excepted" benefits with simplified issuance. Our supplemental products are limited benefit products that offer defined benefit amounts 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 with higher deductible health care plans and expanded voluntary offerings along with an increasing focus on health and wellness. Our supplemental products are well designed, offering indemnity benefits only rather than reimbursement of actual costs. The benefit risk is well controlled with no coverage for pre-existing conditions and specified benefit maximums per occurrence or time period. Diagnosis or treatment is required for benefit payment.
Our supplemental disability products have elimination and short-term benefit periods. Sound underwriting techniques and significant underwriting expertise help ensure loss experience is commensurate with pricing expectations.
277,896 total Supplemental policies in force at December 31, 2021.
Supplemental Reserves
Supplemental policy reserves represent our best estimate of the present value of future ultimate benefits, net of future premiums, to be provided for cancer, heart, hospital, supplemental disability and accident claims. Unpaid claims and claim expenses provide provisions for claims reported to us plus an estimated accrual for IBNR claims.
Supplemental 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 by our Supplemental segment is $100,000. The excess risk on the life insurance products issued by our Supplemental segment is ceded to and reinsured by a third party that is rated A (Excellent) by A.M. Best.
Retirement
Our Retirement segment primarily 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; and other retirement products to educators. 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).

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 9

We entered the educator retirement annuity market in 1961 and 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 2021, 47.7% of net annuity contract deposits* were for 403(b) tax-qualified annuities. At December 31, 2021, 62.3% of accumulated annuity value on deposit were 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.
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, 2021 was $5.3 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 Dow Jones Industrial Average (DJIA).
229,629 annuity contracts in force at December 31, 2021.
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, 2021, we had 121 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.
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 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, Horace Mann Stable Value Solution, as an option within a number of the 401(k) plans BCG administers. BCG had $1.6 billion of recordkeeping assets under administration as of December 31, 2021.
Annuity Reinsurance
Effective April 1, 2019, we reinsure a $3.2 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 $0.8 billion are reinsured on a modified coinsurance basis and thus, remain on our consolidated

10 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

financial statements, but the related results of operations are fully reinsured. The annuity reinsurance agreement does not expose the reinsurer (i.e., 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.
Retirement Assets Under Administration, 2019 - 2021 ($ in billions)
Life
We entered the individual life insurance business in 1949. We primarily offer traditional term and whole life insurance products as well as indexed universal life (IUL) products and, from time to time, revise products and product features or develop new products. Additionally, we offer educator rates for our customers.
During 2021, the average face amount of individual life insurance policies issued by us was approximately $191,000 and the average face amount of all life insurance policies in force at December 31, 2021 was approximately $102,000.
We offer a lineup of several 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 11

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 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.
Life Reinsurance
The maximum individual life insurance risk retained by our Life segment is $500,000 on any individual life, while either $100,000 or $125,000 is retained on each group life policy depending on the type of coverage. 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 2021, we reinsured 100% of the catastrophe risk in excess of $1.0 million up to $35.0 million per occurrence, with one reinstatement. For 2021, 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.
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 operating segments, consistent with the basis for management's evaluation of the results of those segments.

12 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

2021 Geographic Composition of Business
Our business is geographically diversified. For the year ended December 31, 2021, 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 were California, 10.2%; Texas, 7.5%; North Carolina, 7.0%; Minnesota, 5.4%; and Pennsylvania, 5.1%.
$622.1 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.
$625.1 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.
$125.6 million in direct premiums, defined as premiums earned before reinsurance as determined
under statutory accounting principles. Our principal supplemental insurance subsidiaries are
licensed to write business in all 50 states, the U.S. Virgin Islands and the District of Columbia.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 13

Competition
We have over 75 years of experience serving the education market and are uniquely positioned to tailor financial solutions for educators at each stage of their lives, empowering them to achieve lifelong financial success. We believe this helps us succeed in a highly competitive environment. The insurance industry consists of a large number of insurance 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. In our target market, we believe that our principal competitive advantages in the sale of property and casualty and supplemental insurance products are overall service, worksite sales and service, price, and name recognition. We believe that our principal competitive advantages in the sale of retirement products and life insurance are worksite sales and service, product features, perceived stability of the insurer, price, overall service and name recognition.
With our focus on the education market, we can benefit from a homogeneous customer set that permits more precise underwriting processes and more targeted marketing operations, amplifying the benefit of successful approaches. We seek to provide:
•Products designed to meet educators’ needs and protect their unique risks;
•Knowledgeable, trusted distribution tailored to educator preferences; and
•Modern, scalable infrastructure that is easy to do business with.
Competition in this market for personal protection products is from a number of national providers of personal auto, property, supplemental and life insurance including State Farm, Allstate, Farmers, Liberty Mutual, Aflac, Unum and Nationwide, 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.
National providers of annuities and other financial service platforms that serve the retirement needs of educators and others that serve the community, include The Variable Annuity Life Insurance Company, a subsidiary of American International Group; AXA, Voya Financial, Inc., Life Insurance Company of the Southwest, a subsidiary of National Life Insurance Company; Security Benefit, and Teachers Insurance and Annuity Association – College Retirement Equities Fund. Select mutual fund families and financial planners also compete in this marketplace.
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.
Investments
Our investment strategy is primarily focused on generating income to support product liabilities, and balances principal protection and risk. Our investment objectives are implemented through portfolios that primarily emphasize investment grade fixed maturity securities that are selected to match the anticipated duration of our liabilities. In addition to these securities, we also invest in limited partnership interests (which include commercial mortgage loan funds) and equity securities to help improve overall returns.
We have separate investment strategies and guidelines for our Property & Casualty, Supplemental, Retirement and Life 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 attempt to coordinate the duration of the assets with 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.
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

14 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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.
Investment Portfolio at December 31, 2021

($ in millions) |  | % of Total Carrying Value |  | Carrying Value |  |
|  |  | Total |  | Life and Retirement |  | Supplemental |  | Property & Casualty(7) |  | Amortized Cost, net(8)
Publicly Traded Fixed Maturity Securities, Equity Securities and Short-term Investments: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and agency obligations:(1) |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | 8.9 | % |  | $ | 662.5 |  |  | $ | 546.2 |  |  | $ | 104.4 |  |  | $ | 11.9 |  |  | $ | 612.1 |
Other, including U.S. Treasury securities |  | 4.9 |  |  | 365.9 |  |  | 340.5 |  |  | 13.8 |  |  | 11.6 |  |  | 342.5 |
Investment grade corporate and public utility bonds |  | 21.8 |  |  | 1,626.4 |  |  | 1,235.2 |  |  | 204.1 |  |  | 187.1 |  |  | 1,483.9 |
Non-investment grade corporate and public utility bonds(2) |  | 3.0 |  |  | 220.9 |  |  | 185.0 |  |  | 11.3 |  |  | 24.6 |  |  | 213.3 |
Investment grade municipal bonds |  | 21.6 |  |  | 1,607.4 |  |  | 1,114.7 |  |  | 113.2 |  |  | 379.5 |  |  | 1,429.4 |
Non-investment grade municipal bonds(2) |  | 0.8 |  |  | 57.3 |  |  | 31.4 |  |  | 6.7 |  |  | 19.2 |  |  | 54.0 |
Investment grade other asset-backed securities(3) |  | 13.6 |  |  | 1,017.6 |  |  | 819.3 |  |  | 108.5 |  |  | 89.8 |  |  | 1,011.7 |
Non-investment grade other asset-backed securities(2)(3) |  | 0.3 |  |  | 24.6 |  |  | 24.3 |  |  | 0.3 |  |  | — |  |  | 30.2 |
Foreign government bonds |  | 0.6 |  |  | 43.6 |  |  | 43.6 |  |  | — |  |  | — |  |  | 40.2 |
Redeemable preferred stock |  | 0.4 |  |  | 29.7 |  |  | 28.6 |  |  | 1.1 |  |  | — |  |  | 27.4 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Non-redeemable preferred stocks, investment grade |  | 1.3 |  |  | 99.8 |  |  | 92.5 |  |  | 7.3 |  |  | — |  |  | 99.8 |
Non-redeemable preferred stocks, non-investment grade |  | 0.3 |  |  | 19.7 |  |  | 17.2 |  |  | 1.5 |  |  | 1.0 |  |  | 19.7 |
Common stocks |  | 0.1 |  |  | 5.9 |  |  | 0.1 |  |  | — |  |  | 5.8 |  |  | 5.9 |
Closed-end fund |  | 0.3 |  |  | 21.5 |  |  | — |  |  | — |  |  | 21.5 |  |  | 21.5 |
Short-term investments(4) |  | 2.1 |  |  | 157.8 |  |  | 87.5 |  |  | 17.2 |  |  | 53.1 |  |  | 157.8 |
Total publicly traded securities |  | 80.0 |  |  | 5,960.6 |  |  | 4,566.1 |  |  | 589.4 |  |  | 805.1 |  |  | 5,549.4 |
Other Invested Assets: |  |  |  |  |  |  |  |  |  |  |  |
Investment grade private placements |  | 6.9 |  |  | 513.7 |  |  | 485.8 |  |  | 27.9 |  |  | — |  |  | 490.9 |
Non-investment grade private placements(2) |  | 0.9 |  |  | 70.0 |  |  | 61.1 |  |  | 8.9 |  |  | — |  |  | 70.1 |
Mortgage loans(5) |  | 0.1 |  |  | 6.7 |  |  | 6.7 |  |  | — |  |  | — |  |  | 6.7 |
Policy loans(5) |  | 1.9 |  |  | 142.1 |  |  | 141.3 |  |  | 0.8 |  |  | — |  |  | 142.1 |
Limited partnership interests |  | 9.6 |  |  | 712.8 |  |  | 492.9 |  |  | 48.1 |  |  | 171.8 |  |  | 712.8 |
Other |  | 0.6 |  |  | 43.6 |  |  | 39.1 |  |  | 3.5 |  |  | 1.0 |  |  | 43.6 |
Total other invested assets |  | 20.0 |  |  | 1,488.9 |  |  | 1,226.9 |  |  | 89.2 |  |  | 172.8 |  |  | 1,466.2 |
Total investments(6) |  | 100.0 | % |  | $ | 7,449.5 |  |  | $ | 5,793.0 |  |  | $ | 678.6 |  |  | $ | 977.9 |  |  | $ | 7,015.6 |

(1)All investment grade that includes $325.1 million fair value of investments guaranteed by the full faith and credit of the U.S. Government and $703.2 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 National Association of Insurance Commissioners' (NAIC) rating for such security. The rating agencies monitor securities and their issuers regularly, and make changes to the ratings as necessary. We incorporate rating changes on a monthly basis.
(3)Includes commercial mortgage-backed securities, asset-backed securities, other mortgage-backed securities and collateralized loan obligations.
(4)Short-term investments mature within one year of being acquired and are carried at cost, which approximates fair value. Short-term investments of $157.8 million are all money market funds and not rated.
(5)Mortgage loans are carried at amortized cost, net and policy loans are carried at unpaid principal balances.
(6)Approximately 7.4% of our investment portfolio, having a carrying value of $551.7 million as of December 31, 2021, consisted of securities with some form of credit support, such as insurance. Of the securities with credit support as of December 31, 2021, municipal bonds represented $386.3 million carrying value.
(7)Includes $1.0 million of equity securities and $1.0 million of short-term investments held in Corporate & Other.
(8)The values of limited partnership interests are carried using the equity method of accounting which approximates fair value.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 15

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. The 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 (AOCI) within shareholders' equity, net of applicable deferred taxes and the related impact from deferred policy acquisition costs (DAC) associated with annuity contracts and life insurance products with account values. 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 at December 31, 2021

|  | % of Fixed Maturity Securities Portfolio |  | % of Total Investment Portfolio
Investment grade |  | 85.5 | % |  | 71.6 | %
Non-investment grade |  | 14.5 | % |  | 12.1 | %
Average credit quality |  | A+ |  | A+
Average option-adjusted duration |  | 6.7 |  |  | 6.7 |
Percent maturing in next 5 years |  | 31.0 | % |  | 26.0 | %

Cash Flow
Information regarding our sources and uses of cash, including payment of principal and interest with respect to our indebtedness, and payment of dividends to our shareholders, is contained in Part II - Item 8, Note 14 of the Consolidated Financial Statements and in Part II - Item 7, Liquidity and Capital Resources — Cash Flow and — Capital Resources of this report.
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 st. 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 2022 from all of our insurance subsidiaries, including Madison National, without prior regulatory approval is approximately $134.8 million, excluding the impact and timing of prior year dividends, of which $57.0 million was paid during the year ended December 31, 2021.
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.

16 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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. 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 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. At December 31, 2021 and 2020, 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 consumer privacy, insurance availability, prices, allegations of unfair-discriminatory pricing, underwriting practices, or solvency concerns. 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, cybersecurity, 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.
Assessments Against Insurers and Mandatory Insurance Facilities
Under insurance insolvency or guaranty laws in most states in which we operate, insurers doing business therein can be assessed for policyholder losses related to insolvencies of other insurance companies, and many assessments paid by us pursuant to these laws may be used as credits for a portion of our premium taxes in certain states. Also, we are required to participate in various mandatory insurance facilities in proportion to the amount of our direct writings in the applicable state. For the three years ended December 31, 2021, the impacts of the above industry items were not material to our results of operations.
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 report. Other federal regulation 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., our broker-dealer and Registered Investment Adviser subsidiaries, are also regulated by the SEC, the Financial Industry Regulatory Authority, Inc., 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

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legislation to this effect has been proposed in the past, but has not been enacted. Although no such legislative proposals are known to exist at this time, such proposals may be made again in the future. Changes in other federal and state laws and regulations could also affect the relative tax and other advantages of our annuity and life products.
Financial Regulation Legislation
In addition, from time to time, the United States Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) created the Federal Insurance Office (FIO) within the U.S. Department of the Treasury. FIO studies the current insurance regulatory system and is charged with monitoring and providing specific reports on various aspects of the insurance industry, including the collection of information about the insurance industry and monitoring the industry for systemic risk. However, FIO does not have general supervisory or regulatory authority over the business of insurance.
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 as 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 coverage for $25 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 create 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. Our deep commitment to helping our customers was evident in our response to the 2018 Camp Fire in California and the subsequent launch of a pilot wildfire certification program.
As we look ahead, we believe climate change risks should be understood, modeled and better priced into our insurance products and services. There are also public policy implications, such as discouraging overbuilding in high-risk areas through flood insurance requirements and state regulatory approaches to insurance premium approvals; and modifying and enforcing building codes to better protect at-risk communities against the effects of natural catastrophes.
Similar to other insurers, we may be subject to increased losses from catastrophes and other weather-related events that are exacerbated by weather/climate variability.
As we discuss in Part I - Item 1A—Risk Factors—“Catastrophe events, as well as significant weather events not designated as catastrophes, can have a material adverse affect on our financial condition and results of operations” of this report, 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.

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•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 report. 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. See Part I - Item 1A—Risk Factors— “If our investment strategy is not successful, we could suffer unexpected losses” of this report.
•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. See Part I - Item 1— Business – Regulation of this report.
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.
We use property and casualty catastrophe models that are run by our reinsurance intermediary. Life and retirement asset cash flows are projected using third-party software for certain security types. We also utilize proprietary third-party computer modeling processes to evaluate capital adequacy. These analytical techniques are an integral component of our ERM process and further support our long-term financial strategies and objectives.
Within Horace Mann, ERM is an ongoing assessment process used to identify and manage or mitigate risk, which will continue to influence our strategy and direction. The ERM Committee objectives include the following:
•Apply appropriate consideration to risk in strategic and operational decision-making
•Define and communicate risk appetite and risk management policies
•Approve and oversee processes aimed at identifying, evaluating, and managing risk
•Monitor and discuss emerging risks and risk management capabilities
The ERM Committee is composed of senior executives from across Horace Mann and has ultimate oversight over the risk management process, with each leader having ownership and accountability over certain identified key risks. In 2020, a Chief Risk Officer (CRO) was appointed and, in conjunction with the ERM Committee, is responsible for working with the business leaders to ensure that they are actively monitoring and managing their

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key risks. The CRO is also responsible for developing 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 of the 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
The following are certain risk factors that could affect our business, financial position and results of operations. The risks that we have highlighted in the following section of this report are not the only ones that we face.
Our business involves various risks and uncertainties which are based on the lines of business we write as well as more global risks associated with the general business and insurance industry environments.
Further, to the effects of COVID-19 and resulting disruptions on our business and operations as discussed in Item 7 of this report and in the risk factors below, additional or unforeseen effects from COVID-19 and the global economic climate may give rise to or amplify many of the risk factors discussed below.
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.
Financial markets in the U.S. and elsewhere can experience extreme volatility and disruption for uncertain periods of time. During such times, stresses affecting the global banking system can lead to economic volatility, which can exert significant downward pressure on prices of equity securities and many other investment asset classes and result in severely constrained credit and capital markets, particularly for financial institutions, and an overall loss of investor confidence. Many states and local governments can also be impacted by adverse economic conditions, which could have an impact on both our niche market and our investment portfolio. Like other financial institutions that face significant financial market risk in their operations, we have been adversely affected by these conditions and could be adversely impacted by similar circumstances in the future. Our ability to access the capital markets to refinance outstanding indebtedness or raise capital could be impaired during significant financial market disruptions.
As discussed further in subsequent risk factors, in addition to the effects of financial markets volatility, a prolonged economic recession may have other adverse impacts on our financial condition and results of operations.
If our investment strategy is not successful, we could suffer unexpected losses.
The success of our investment strategy is crucial to the success of our business. Specifically, our fixed maturity securities portfolio is subject to a number of risks including:
•interest rate risk, which is the risk that interest rates will decline and funds reinvested will earn less than expected;
•market value risk, which is the risk that invested assets will decrease in value due to changes in yields realized on the assets and prevailing market yields for similar assets, an unfavorable change in the

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liquidity of the asset or an unfavorable change in the financial prospects or a downgrade in the credit rating of the issuer of the asset;
•credit risk, which is the risk that the value of certain investments become impaired due to deterioration in the financial condition of one or more issuers of those instruments or the deterioration in performance or credit quality of the underlying collateral of certain structured securities and, ultimately, the risk of permanent loss in the event of default by an issuer or underlying credit;
•market fundamentals risk, which is the risk that there are changes in the market that can have an unfavorable impact on securities valuation such as availability of credit in the capital markets, re-pricing of credit risk, reduced market liquidity due to broker-dealers' unwillingness to hold inventory, and increased market volatility;
•concentration risk, which is the risk that the portfolio may be too heavily concentrated in the securities of one or more issuers, sectors or industries, which could result in a significant decrease in the value of the portfolio in the event of deterioration in the financial condition of those issuers or the market value of their securities;
•liquidity risk, which is the risk that liabilities are surrendered or mature sooner than anticipated requiring the sale of assets at an undesirable time to provide for policyholder surrenders, withdrawals or claims; and,
•regulatory risk, which is the risk that regulatory bodies or governments, in the U.S. or in other countries, may make substantial investments or take significant ownership positions in, or ultimately nationalize, financial institutions or other issuers of securities held in our investment portfolio, which could adversely impact the seniority or contractual terms of the securities. Regulatory risk could also come from changes in tax laws or bankruptcy laws that could adversely impact the valuation and/or after tax yields of certain invested assets.
Although our defined benefit pension plan has been frozen since 2002, declining financial markets could also cause, and in the past have caused, the value of the investments in this plan to decrease, resulting in additional pension expense, a reduction in other comprehensive income and an increase in required contributions to this plan, which could have an adverse effect on our financial condition and results of operations.
The determination of fair value of our fixed maturity securities portfolio includes methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially affect our financial condition and results of operations.
The determination of fair value is made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts. During periods of market disruption, including periods of rapidly widening credit spreads or illiquidity, it may be difficult to value certain securities if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the financial environment. In such cases, fair value determination may require more subjectivity and management judgment and those fair values may differ materially from the value at which the investments could ultimately be sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities and the period-to-period changes in fair value could vary significantly. The difference between fair value and amortized cost, net of applicable deferred income taxes and the related impact on DAC associated with annuity contracts and life insurance products with account values is reflected as a component of AOCI within shareholders' equity. Decreases in the fair value of investments could have a material adverse effect on our financial condition and results of operations.
Equity method adjustments on certain investments in limited partnership interests as well as fair value accounting for equity securities and derivatives may reduce profitability and/or cause volatility in our results of operations.

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We invest in limited partnership interests, which are accounted for using the equity method of accounting. This means that our proportionate share of the changes in fair value of the underlying net asset values are reported in net investment income in the Consolidated Statements of Operations. As a result, the amount of net investment income recognized from these investments can vary substantially from period to period. Equity and credit market volatility may reduce net investment income from these types of investments and negatively impact the results of operations. Changes in fair value from applying fair value accounting to equity securities, which are reported in net investment gains (losses) in the Consolidated Statements of Operations, may cause volatility in our results of operations.
The application of fair value accounting for derivatives and embedded derivatives in FIA and IUL products may cause volatility in our results of operations.
Risks Related to Property & Casualty Segment
Catastrophe events, as well as significant weather events not designated as catastrophes, can have a material adverse affect on our financial condition and results of operations.
Underwriting results of property and casualty insurers are subject to weather and other conditions prevailing in an accident year. While one year may be relatively free of major weather or other disasters — not all of which are designated by the insurance industry as a catastrophe, another year may have numerous such events causing results for such a year to be materially worse than for previous years.
Our Property & Casualty insurance subsidiaries have experienced, and we anticipate that in the future they will continue to experience, catastrophe losses. A catastrophe event, a series of multiple catastrophe events or a series of non-catastrophe severe weather events could have a material adverse effect on the financial condition and results of operations of our insurance subsidiaries.
Various events can cause catastrophes, including hurricanes, windstorms, hail, severe winter weather, wildfires, earthquakes, explosions and terrorism. The frequency and severity of these catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposures in the area affected by the event and the severity of the event. Although catastrophes can cause losses in a variety of property and casualty lines, most of the catastrophe-related claims of our insurance subsidiaries are related to property coverages. Our ability to provide accurate estimates of ultimate catastrophe losses is based on several factors, including:
•the proximity of the catastrophe occurrence date to the date of our estimate;
•potential inflation of property repair costs in the affected area;
•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 2021 direct premiums earned, 57.8% 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, South Carolina, Louisiana and Colorado.
Our property and casualty loss reserves may not be adequate.
Our Property & Casualty insurance subsidiaries maintain loss reserves to provide for their estimated ultimate liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred as of the end of each reporting date. If these loss reserves prove inadequate, a loss is recognized and measured by the amount of the shortfall and, as a result, the financial condition and results of operations of the insurance subsidiaries may be adversely affected, potentially affecting their ability to distribute cash to us.
Reserves do not represent an exact calculation of liability. Reserves represent estimates, generally involving actuarial projections at a given time, of what the insurance subsidiaries expect the ultimate settlement and adjustment of claims will cost, net of salvage and subrogation. Estimates are based on assessments of known facts and circumstances, assumptions related to the ultimate cost to settle such claims, estimates of future

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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 actually reported. Our insurance subsidiaries adjust their reserve estimates regularly as experience develops and further claims are reported and settled.
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.
Risks Related to Supplemental Segment
Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition.
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. Reserves do not represent an exact calculation of future benefit liabilities but are instead actuarial and statistical-based estimates. Actual experience may differ from our reserve assumptions. There are no assurances that reserves will be sufficient to fund our future liabilities in all scenarios. Future loss development may require reserves to be increased, which could adversely affect earnings in current and future periods. Adjustments to reserve amounts may be required in the event of changes from the assumptions regarding future morbidity, mortality, persistency and interest rates used in calculating the reserve amounts, which could have a material adverse affect on our financial condition and results of operations.
Risks Related to Life & Retirement Segments
A sustained period of low interest rates or interest rate fluctuations could negatively affect net interest margin derived from the difference between interest earned on investments and interest paid under fixed annuity and life insurance products with account values.
Significant changes in interest rates expose us to the risk of not earning the appropriate level of income or experiencing losses based on the differences between the interest earned on investments and the credited interest paid on outstanding fixed annuity and life insurance products with account values. Significant changes in interest rates may affect:
•the ability to maintain appropriate interest rate spreads over the rates guaranteed in fixed annuity and life products with account values;
•the book yield of the investment portfolio; and
•the net unrealized investment gains (losses) in the portfolio and the related after tax effect on shareholders' equity and total capital.
Both rising and declining interest rates can negatively affect the income derived from interest rate spreads on annuity and life insurance products with account values. During periods of falling interest rates or a sustained period of low interest rates, investment earnings will be lower because new investments in fixed maturity securities likely will bear lower interest rates. We may not be able to fully offset the decline in investment earnings with lower crediting rates on fixed annuity products, particularly in a multi-year period of low interest rates. As of the time of issuance of this Annual Report on Form 10-K, yields on new investments remain at historically low levels. If interest rates do remain low over an extended period of time, it could pressure investment income by having to invest insurance cash flows and reinvest the cash flows from the investment portfolio in lower yielding securities.
During periods of rising interest rates, there may be competitive pressure to increase the crediting rates on fixed annuity products. We may not, however, immediately have the ability to acquire investments with interest rates

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sufficient to offset an increase in crediting rates under fixed annuity products. Therefore, changes in interest rates could affect interest rate spreads.
Changes in interest rates may also affect business in other ways. For example, a rapidly changing interest rate environment may result in less competitive crediting rates on certain fixed rate products which could make those products less attractive, leading to lower sales and/or increases in the level of life insurance and fixed annuity product surrenders and withdrawals. New business volume also could be negatively impacted by product or agent compensation changes which we might make to mitigate the income effect of spread compression. Interest rate fluctuations that impact future profits may also impact DAC amortization.
The Retirement business may be, and in the past has been, adversely affected by volatile or declining financial market conditions.
Conditions in the U.S. and international financial markets affect the sale and profitability of retirement products. In general, sales of fee-based products decrease when financial markets are declining or experiencing a higher than normal level of volatility over an extended period of time. Therefore, weak and/or volatile financial market performance may adversely affect sales of fee-based products to potential customers, may cause current customers to withdraw or reduce the amounts invested in fee-based products and may reduce the market value of existing customers' investments in fee-based products, in turn reducing the amount of fee-based product revenues generated. In addition, some variable annuity products offer guaranteed minimum death benefit features, which provide for a benefit if the contractholder dies and the contract value is less than a specified amount. A decline in the financial markets could cause the contract value to fall below this specified amount, increasing exposure to losses from variable annuity products featuring guaranteed minimum death benefits. Declining or volatile financial markets that impact future profits may also impact DAC amortization.
Deviations from assumptions regarding future market appreciation, interest spreads, business persistency, mortality and morbidity used in calculating life and annuity reserves and DAC amortization could have a material adverse effect on our financial condition and results of operations.
The processes of calculating reserves and DAC amortization for the life and annuity businesses involve the use of a number of assumptions, including those related to market appreciation (the rate of growth in market value of the underlying variable annuity sub-accounts due to price appreciation), interest spreads (the interest rates expected to be received on investments less the rate of interest credited to contractholders), business persistency (how long a contract stays with us), mortality (the relative incidence of death over a given period of time) and morbidity (the relative incidence of disability resulting from disease or physical impairment). We periodically review the adequacy of these reserves and DAC recoverability on an aggregate basis and, if future experience is estimated to differ significantly from previous assumptions, adjustments to reserves and DAC amortization may be required that could have a material adverse effect on our financial condition and results of operations.
A reduction or elimination of the tax advantages of retirement and life products and/or a change in the tax benefits of various government-authorized retirement programs, such as 403(b) products and individual retirement accounts (IRAs), could make our products less attractive to clients and adversely affect our results of operations.
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 life and 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. Also, see Part I - Item 1, Regulation of this report.
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

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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.
Strategic Risks
The integration of Madison National may not be as successful as anticipated.
The Madison National acquisition involves numerous operational, strategic, financial, accounting, legal, tax and other risks. Difficulties in executing the acquisition strategy may cause our financial results to differ from our expectations or the expectations of the investor community. Potential difficulties that may be encountered in the integration process include, among other factors:
•the inability to successfully integrate the businesses and distribution force of Madison National in a manner that permits us to achieve the full revenue and cost savings desired from the acquisition;
•complexities associated with managing the larger, more complex, business;
•loss of key employees;
•disruption of, or loss of momentum in, each company's ongoing business; and,
•Madison National's distribution risk inherent in its in force block, which is highly concentrated with one distribution partner.
Lack of successful execution on acquisition integration strategies could result in impairment of goodwill and intangible assets that could adversely affect our results of operations.
We accounted for the NTA and BCG 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, 2021, the Company's Consolidated Balance Sheet reflected goodwill of $24.1 million and intangible assets of $145.4 million recognized in connection with the NTA and BCG acquisitions (see Part II - Item 8, Note 7 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.
The personal lines insurance and retirement 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 and life insurance and retirement products.
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 and life insurance products 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

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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. During the current cycle, and potentially beyond, competition from direct writers and large, mass market carriers has been particularly aggressive, evidenced in part by their significant national advertising expenditures. In addition, advancements in vehicle technology and safety features, such as accident prevention technologies or the development of autonomous or partially autonomous vehicles — once widely available and utilized, as well as expanded availability of usage-based insurance, could materially alter the way that auto insurance is marketed, priced and underwritten. The 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, that 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.
If we are not able to effectively develop and expand our marketing operations, including agents and other points of distribution, our financial condition and results of operations could be adversely affected.
Our agencies are owned primarily by non-employee, independent contractor Exclusive Distributors with most agencies operating in outside offices with licensed producers. The economic viability of each agency is directly dependent on the productivity of the agency and the success at penetrating, serving and cross-selling our educator market.
Our success in marketing and selling our products is largely dependent upon the efforts of our agent sales force and the success of their agency operations. As we expand our business, we may need to expand the number of agencies marketing our products. If we are unable to appoint additional agents, fail to 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.
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, any significant decrease in access, either through fewer payroll slots, increased security measures, impacts of state or federal level pension reform initiatives, requirements of national and state Do Not Call registries, 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

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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.
Operational Risks
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.
Further, the global pandemic caused by COVID-19 that was initially reported in December 2019 has developed into a worldwide crisis over subsequent months and is causing significant human suffering as well as widespread economic damage. The effects of the outbreak 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 COVID-19 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:
•employees contracting COVID-19;
•reductions in our operating effectiveness as our employees work from home;
•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;
•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 COVID-19 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 and severity of weather-related catastrophes and other losses is 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

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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 flooding, 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 addition, global climate change could have an impact on our fixed maturity security and limited partnership portfolios, resulting in realized and unrealized losses in future periods that could have a material adverse effect on our financial position, results of operations and cash flows. It is not possible to foresee which, if any, assets, industries or markets may be materially and adversely affected, nor is it possible to foresee the magnitude of such effect. 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.
Data security breaches or denial of service on our websites could have an adverse effect on our business and reputation.
Unauthorized access to and unintentional dissemination of our confidential, highly-sensitive customer, employee or company data or other breaches of data security in our facilities, networks or databases, or those of our agents or third-party vendors - including information technology and software vendors, could result in loss or theft of assets or sensitive information, data corruption or operational disruption that may expose us to liability and/or regulatory action and may have an adverse impact on our customers, employees, investors, reputation and business. In addition, any compromise of the security of company data or prolonged denial of service on our websites could harm our business and reputation. Additionally, we recognize the increased external threats of data breaches in the marketplace resulting in non-public data of customers becoming increasingly available in the public domain.
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. While we have effectively upgraded our infrastructure technologies with improvements in our data center, a new communications platform and enhancements to our disaster recovery capabilities, our ability to replace or supplement dated, monolithic legacy business systems — such as our Life, Retirement and Property & Casualty policy administrative systems — 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, information technology services — such as those associated with the Life, Retirement and Property & Casualty 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.

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Factors that affect our ability to attract and retain such employees include:
•Competitive total rewards; including compensation and benefits
•Robust training and development programs
•Reputation as a successful business with a culture of fair hiring, and of training and promoting qualified employees
•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.
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.

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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. 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 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 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 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 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.
An inability to access Federal Home Loan Bank (FHLB) funding could adversely affect our results of operations.
Any changes in requirements to retain membership in the FHLB, or changes in regulation, could impact our eligibility for continued FHLB membership or our FHLB funding capacity. Any event that adversely affects amounts received from FHLB could have an adverse effect on our results of operations. See Part II - Item 7, Financing Activities of this report for more information about FHLB activities.
Regulatory and Legal Risks
The results of the recent U.S. Presidential and Congressional elections may create significant changes in tax rates, laws or regulations which could adversely impact our financial results.
With the change in administration, there are initiatives at the federal level to reverse the corporate tax cuts in the favorable Tax Cuts and Jobs Act of 2017 (TCJA), 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. For example, any proposals to make changes related to

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U.S. tax law, such as those involving a reduction or elimination of the tax advantages of retirement and life products as noted in Part I - Item 1A – Risk Factors, Risks Related to Life & Retirement Segments of this report, may have a material adverse effect on our future business, financial condition, results of operations, and growth prospects.
The insurance industry is highly regulated.
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. Certain 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. In addition, consumer privacy requirements may increase our cost of processing business. Our ability to comply with laws and regulations, at a reasonable cost, and to obtain necessary regulatory action in a timely manner, is and will continue to be critical to our success.
The NAIC has adopted a system of assessing minimum capital adequacy that is applicable to our insurance subsidiaries. This system, known as risk-based capital, 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 risk-based capital requirements. Insurance companies write business based, in part, upon guidelines including capital ratios considered by the NAIC and various rating agencies. Some of these ratios include risk-based capital ratios for property and casualty insurance companies, supplemental insurance companies and life insurance companies, as well as a ratio of premiums to surplus for property and casualty insurance companies. Risk-based capital ratios measure an insurer's capital adequacy and consider various risks such as underwriting, investment, credit, asset concentration and interest rate. If our insurance subsidiaries cannot maintain profitability in the future or if significant investment valuation losses are incurred, they may be required to draw on their surplus, thereby reducing capital adequacy, in order to pay dividends to us to enable us to meet our financial obligations. As their surplus is reduced by the payment of dividends, continuing losses or both, our insurance subsidiaries' ability to write business and maintain acceptable financial strength ratings could also be reduced. 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.
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 efforts by those legislatures to expand regulations to address these concerns. Resulting new legislation could adversely affect the financial condition and results of operations of our insurance subsidiaries.
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.
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.
Dodd-Frank created 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 regulations could adversely

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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.
Regulatory initiatives, including the enactment of Dodd-Frank, could adversely affect liquidity and volatility of financial markets in which we participate.
In response to the credit and financial crisis, U.S. and overseas governmental and regulatory authorities are considering or implementing enhanced or new regulatory requirements intended to prevent future crises or stabilize the institutions under their supervision. Such measures are leading to stricter regulation of financial institutions. Changes from Dodd-Frank and other U.S. and overseas governmental initiatives have created uncertainty and could continue to adversely impact liquidity and increase volatility of the financial markets in which we participate and, in turn, negatively affect our financial condition or results of operations.
Statutory and regulatory developments could adversely impact our business by increasing costs or making our business less profitable.
The costs of running our business and its profitability could be adversely impacted by laws, rules and regulations that affect the business and financial communities, including changes to the interpretation or enforcement of laws governing standards of care applicable to broker-dealers and investment advisors. New laws, rules and regulations, or changes to the interpretation or enforcement of existing laws, rules or regulations, could also result in limitations on the products and services we offer or plan to offer to clients, modifications to our current or future business practices, compressed margins, increased capital requirements, and additional costs. For example, in June 2019, the SEC adopted new Regulation Best Interest, which imposes an overarching standard of conduct that requires broker-dealers and their associated persons to act in the best interest of their retail customers when making securities recommendations and imposes a number of new compliance and disclosure obligations on broker-dealers. Other state legislatures (including Nevada, New Jersey and Massachusetts) have or are considering, statutes that impose fiduciary standards and other obligations on broker-dealers and investment advisers operating in their states. The DOL also recently adopted its final rule regarding ERISA fiduciary investment advice, which focuses on, among other things, the fiduciary status of rollover recommendations made by financial professionals to retirement investors. We expect that 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 ability to recruit and retain key personnel.
It is also unclear how and whether other regulators, such as other state securities and insurance regulators may respond to, or enforce elements of, these new laws and regulations, or develop their own similar laws and regulations. The impacts, degree and timing of the effect of these laws and regulations on our business cannot now be anticipated or planned for, and may have further adverse impacts on our products and services, and the results of our operations.
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 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.
Our business costs and profitability may be adversely impacted by current and future rule making and enforcement activity by the various federal, state and other regulatory organizations to which we are subject.
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

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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.
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.
Individual states may impose additional cybersecurity regulations, increasing the complexity of compliance.
Our businesses must comply with regulations to control the privacy of customer, employee and third party data. State and federal regulations regarding data privacy, including the California Consumer Privacy Act, are becoming increasingly more onerous. A misuse or mishandling of confidential or proprietary information could result in legal liability, regulatory action and reputational harm. Third parties, including third party administrators and cloud-based systems, are also subject to cyber-breaches of confidential information, along with the other risks outlined above, any one of which may result in us incurring substantial remediation costs and other negative consequences, including a material adverse effect on our business, reputation, financial condition, results of operations and liquidity.
ITEM 1B. I Unresolved Staff Comments
None.
ITEM 2. I Properties
As of December 31, 2021, we owned two buildings located in Springfield, Illinois comprised of our headquarters of approximately 225,000 square feet and another building of approximately 12,000 square feet. In addition, we lease office space in suburban Dallas, Texas (approximately 114,000 of rentable square feet), suburban Raleigh, North Carolina, and Cherry Hill, New Jersey which are utilized by one or more of all five reporting segments, depending on the location. For more information on reporting segments, see Part I - Item 1, Reporting Segments of this report. We believe our properties and facilities are suitable and adequate for current operations.
ITEM 3. I Legal Proceedings
At the time of issuance of this Annual Report on Form 10-K, we do not have pending litigation from which there is a reasonable possibility of material loss.

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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 closing prices of our common stock on the NYSE Composite Tape and the cash dividends paid per share of common stock during the periods indicated.

|  | Market Price |  | Dividend Paid
Fiscal Period |  | High |  | Low |
2021: |  |  |  |  |  |
Fourth Quarter |  | $ | 41.10 |  |  | $ | 36.70 |  |  | $ | 0.31 |
Third Quarter |  | 41.81 |  |  | 37.00 |  |  | 0.31 |
Second Quarter |  | 43.71 |  |  | 37.16 |  |  | 0.31 |
First Quarter |  | 43.98 |  |  | 38.04 |  |  | 0.31 |
2020: |  |  |  |  |  |
Fourth Quarter |  | $ | 43.63 |  |  | $ | 33.46 |  |  | $ | 0.30 |
Third Quarter |  | 40.99 |  |  | 32.76 |  |  | 0.30 |
Second Quarter |  | 40.46 |  |  | 31.30 |  |  | 0.30 |
First Quarter |  | 45.66 |  |  | 31.40 |  |  | 0.30 |

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 14 of the Consolidated Financial Statements in this report.

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Shareholder Return Performance Graph
The graph below sets forth the total five-year shareholder return on our common stock. The graph assumes a $100 investment at December 31, 2016. 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. 2016 |  | Dec. 2017 |  | Dec. 2018 |  | Dec. 2019 |  | Dec. 2020 |  | Dec. 2021
HMEC |  | $ | 100 |  |  | $ | 106 |  |  | $ | 92 |  |  | $ | 111 |  |  | $ | 110 |  |  | $ | 105 |
S&P 500 Insurance Index |  | 100 |  |  | 116 |  |  | 103 |  |  | 133 |  |  | 133 |  |  | 174 |
S&P 500 Index |  | 100 |  |  | 122 |  |  | 116 |  |  | 153 |  |  | 181 |  |  | 233 |

Holders and Shares Issued
As of February 16, 2022, the number of holders of our common stock was approximately 40,000.
During 2021, stock options were exercised for the issuance of 8,015 shares or 0.02% of our common stock issued and outstanding at December 31, 2020. We received $0.3 million in proceeds from the exercise of stock options, which was used for general corporate purposes.
For information required by Item 201(d) of Regulation S-K regarding the equity compensation plan, see Part III - Item 12, of this report.

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Issuer Purchases of Equity Securities
On September 30, 2015, the Board authorized a share repurchase program allowing repurchases of up to $50.0 million of our common stock, par value $0.001 (Program). The Program authorizes the repurchase of common stock in open market or privately negotiated transactions, from time to time, depending on market conditions. The Program does not have an expiration date and may be limited or terminated at any time without notice.
For the quarterly periods ended 2021 and 2020, we repurchased shares of our common stock under the Program as follows:

Period |  | Total Number of Shares Purchased |  | Average Price Paid per Share |  | Total Number of Shares Purchased under the Program |  | Approximate Dollar Value of Shares that may yet be Purchased under the Program
2021: |  |  |  |  |  |  |  |
Fourth Quarter |  | 96,073 |  |  | $ | 37.14 |  |  | 96,073 |  |  | $15.3 million
Third Quarter |  | 5,000 |  |  | $ | 36.88 |  |  | 5,000 |  |  | $18.9 million
Second Quarter |  | 200 |  |  | $ | 37.01 |  |  | 200 |  |  | $19.1 million
First Quarter |  | 39,485 |  |  | $ | 38.44 |  |  | 39,485 |  |  | $19.1 million
2020: |  |  |  |  |  |  |  |
Fourth Quarter |  | — |  |  | — |  |  | — |  |  | $20.6 million
Third Quarter |  | — |  |  | — |  |  | — |  |  | $20.6 million
Second Quarter |  | — |  |  | — |  |  | — |  |  | $20.6 million
First Quarter |  | 52,095 |  |  | $ | 41.17 |  |  | 52,095 |  |  | $20.6 million

ITEM 6. I [Reserved]

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ITEM 7. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
($ in millions, except per share data)
Measures within this MD&A that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within this Part II - Item 7. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Annual Report on Form 10-K and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Fourth Quarter 2021 Investor Supplement.
Increases or decreases in our MD&A that are not meaningful are marked "N.M.".
Forward-looking Information
Statements made in the following discussion 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 report 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.
This MD&A covers the following:

|  | Page
Introduction |  | 38
Consolidated Financial Highlights |  | 39
Consolidated Results of Operations |  | 39
Outlook for 2022 |  | 41
Application of Critical Accounting Estimates |  | 43
Results of Operations by Segment |  | 49
Property & Casualty |  | 49
Supplemental |  | 52
Retirement |  | 53
Life |  | 56
Corporate & Other |  | 57
Investment Results |  | 57
Liquidity and Capital Resources |  | 60
Future Adoption of New Accounting Standards |  | 64
Effects of Inflation and Changes in Interest Rates |  | 64

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 37

Introduction
The purpose of our MD&A is to provide an understanding of our consolidated results of operations and financial condition and should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part II - Item 8 of this report. Our MD&A generally discusses the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020. For a discussion of the results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, 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, 2020, which was filed with the Securities and Exchange Commission (SEC) on February 26, 2021.
HMEC is an insurance holding company and through its subsidiaries, we market and underwrite personal lines of property and casualty insurance products, supplemental insurance products, retirement products and life insurance products in the United States of America (U.S.). We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families.
On July 14, 2021, we announced that we entered into a Stock Purchase Agreement (Agreement), by and among us and Independence Capital Corp. and Independence Holding Company (Seller) to acquire 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). The Agreement provided, among other things, that, upon the terms and subject to the conditions set forth in the Agreement, we would acquire all the equity interests in Madison National (Acquisition) for $172.5 million. The Seller will have a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023.
Effective January 1, 2022, we acquired Madison National. As a result of the acquisition, Madison National became a wholly owned subsidiary of HMEC.
COVID-19 Considerations
Beginning in March 2020, the global pandemic associated with the novel coronavirus COVID-19 and related economic conditions introduced unprecedented challenges for our country. Those challenges are ongoing. We relied on our previously developed Corporate Pandemic Plan to address preparation, prevention and response measures specific to COVID-19 while allowing flexibility to quickly react to evolving circumstances and implement varying actions accordingly.
As discussed in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, we continue to successfully meet the challenges of the pandemic environment and are now operating in a hybrid model. Our return to office plans are being guided by data from the Centers for Disease Control and Prevention.
In the hybrid working environment, we continue to monitor cybersecurity including increasing security and network monitoring to proactively identify and prevent potential security threats and vulnerabilities. We also are identifying and assessing critical third-party vendors and ensuring their ability to continue to perform as anticipated.
Although educators have largely remained employed through the pandemic, the impact of the pandemic resulted in slower growth in new sales, particularly sales generated from in-person events at schools. We continue to work with our network of exclusive agents to make sure they are using virtual and other tools so they can reach current and potential educator customers regardless of the level of access they have to a specific school.
For further discussion regarding the current period and potential future impacts of COVID-19 and related economic conditions on HMEC, see Outlook for 2022 and other content within this MD&A as well as Part I - Item 1A in this Annual Report on Form 10-K for the year ended December 31, 2021.

38 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Consolidated Financial Highlights

($ in millions) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change %
Total revenues |  | $ | 1,330.1 |  |  | $ | 1,310.4 |  |  | 1.5 | %
Net income |  | 142.8 |  |  | 133.3 |  |  | 7.1 | %
Per diluted share: |  |  |  |  |  |
Net income |  | 3.39 |  |  | 3.17 |  |  | 6.9 | %
Net investment losses, after tax |  | (0.20) |  |  | (0.04) |  |  | N.M.
Book value per share |  | 43.66 |  |  | 43.22 |  |  | 1.0 | %
Net income return on equity - last twelve months |  | 8.0 | % |  | 8.1 | % |  | -0.1 | pts

For 2021, our net income increased $9.5 million compared to 2020 due to higher net investment income partially offset by higher net investment losses (due primarily to net credit loss impairments) and higher auto loss costs that returned to pre-pandemic levels.
See Results of Operations by Segment for further details.
Consolidated Results of Operations

($ in millions) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change %
Premiums and contract charges earned |  | $ | 889.6 |  |  | $ | 930.7 |  |  | -4.4 | %
Net investment income |  | 422.5 |  |  | 357.6 |  |  | 18.1 | %
Net investment losses |  | (11.0) |  |  | (2.3) |  |  | N.M.
Other income |  | 29.0 |  |  | 24.4 |  |  | 18.9 | %
Total revenues |  | 1,330.1 |  |  | 1,310.4 |  |  | 1.5 | %
Benefits, claims and settlement expenses |  | 617.7 |  |  | 568.9 |  |  | 8.6 | %
Interest credited |  | 164.4 |  |  | 204.6 |  |  | -19.6 | %
Operating expenses |  | 251.5 |  |  | 237.8 |  |  | 5.8 | %
DAC unlocking and amortization expense |  | 94.7 |  |  | 99.9 |  |  | -5.2 | %
Intangible asset amortization expense |  | 13.0 |  |  | 14.4 |  |  | -9.7 | %
Interest expense |  | 13.9 |  |  | 15.2 |  |  | -8.6 | %
Other expense - goodwill and intangible asset impairments |  | — |  |  | 10.0 |  |  | N.M.
Total benefits, losses and expenses |  | 1,155.2 |  |  | 1,150.8 |  |  | 0.4 | %
Income before income taxes |  | 174.9 |  |  | 159.6 |  |  | 9.6 | %
Income tax expense |  | 32.1 |  |  | 26.3 |  |  | 22.1 | %
Net income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | 7.1 | %

Premiums and Contract Charges Earned
For 2021, insurance premiums and contract charges earned decreased $41.1 million compared to 2020, primarily due to a reduction in Property & Casualty risks in force.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 39

Net Investment Income
Excluding accreted investment income on the deposit asset on reinsurance, 2021 net investment income increased $61.1 million compared to 2020, primarily due to exceptional returns on limited partnership interests. Current year private equity and venture capital returns have been strong, reflecting the strength of the equity markets and the favorable environment for initial public offerings. Investment yields continue to be impacted by the low interest rate environment of recent years. The annualized investment yield on the fixed income portfolio* was as follows:

|  | Year Ended December 31,
|  | 2021 |  | 2020
Investment yield on fixed income portfolio, pretax - annualized* |  | 4.3% |  | 4.2%

During 2021, 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 intent to increase our allocation to this portion of our portfolio to increase yields while balancing protection and risk.
Net Investment Losses
For 2021, net investment losses increased $8.7 million, primarily due to recognition of $7.7 million of net credit loss impairments. The break down of net investment gains (losses) by transaction type is shown in the following table:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020
Impairments on investments recognized in net income |  | $ | (10.4) |  |  | $ | (5.3) |
Sales and other, net |  | 4.3 |  |  | 15.0 |
Change in fair value - equity securities |  | (2.3) |  |  | (0.2) |
Change in fair value and losses realized on settlements - derivatives |  | (2.6) |  |  | (11.8) |
Net investment losses |  | $ | (11.0) |  |  | $ | (2.3) |

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at the reporting date. Such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in our intent to hold a fixed maturity security.
Other Income
For 2021, other income increased $4.6 million, primarily due to the impact of the strong financial markets on asset-based fees.
Benefits, Claims and Settlement Expenses
For 2021, benefits, claims and settlement expenses were higher primarily due to an offsetting change in interest credited of $25.3 million, the remaining difference primarily attributable to an increase in underlying auto loss experience.
Interest Credited
For 2021, interest credited decreased $40.2 million compared to 2020, driven primarily by an offsetting change in benefits, claims and settlement expenses of $25.3 million. Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be reported. The average deferred annuity credited rate, excluding the reinsured block was 2.4% for 2021 and 2020.
Operating Expenses
For 2021, operating expenses increased $13.7 million compared to 2020. Targeted spend on product, distribution and infrastructure has increased, including legal and due diligence costs incurred while the acquisition of Madison National was being finalized. Increased operating expenses also reflect a lower level of expenses realized in 2020 due to the pandemic.

40 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

DAC Unlocking and Amortization Expense
For 2021, DAC unlocking and amortization expense decreased $5.2 million compared to 2020, as revenue growth has slowed in the Property & Casualty segment.
Intangible Asset Amortization Expense
For 2021, intangible asset amortization expense decreased $1.4 million compared to 2020.
Interest Expense
For 2021, interest expense decreased $1.3 million compared to 2020, due to lower interest rates on our senior revolving credit facility.
Other Expense - Goodwill and Intangible Asset Impairments
For 2020, other expense represents goodwill and intangible asset impairment charges with regards to Benefit Consultants Group, Inc. (BCG). See Part II - Item 8, Note 7 of the Consolidated Financial Statements in this report for further information.
Income Tax Expense
The effective income tax rate on our pretax income, including net investment gains (losses) was 18.4% and 16.5% for the years ended December 31, 2021 and 2020, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 3.5 and 3.6 percentage points for 2021 and 2020, respectively. The goodwill and intangible asset impairment charges in the Retirement segment decreased the effective income tax rate by 0.1 percentage points at December 31, 2020.
The tax effects of legislation enacted in 2020 due to the Coronavirus pandemic were reflected in our income tax expense calculations as of December 31, 2020. Total income tax expense for the year ended December 31, 2020, included a benefit of $2.8 million (that reduced the effective income tax rate by 1.7 percentage points) to reflect a net operating loss carryback to taxable years for which the corporate rate was 35% as compared to the current corporate rate of 21%.
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.
At December 31, 2021, our federal income tax returns for years prior to 2014 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 report for further information.
Outlook for 2022
The following discussion provides outlook information for our results of operations and capital position.
The impacts of the COVID-19 pandemic and related economic conditions on the Company's results continue to be highly uncertain and outside the Company's control. The scope, duration and magnitude of the direct and indirect effects of the pandemic continue to evolve in ways that are difficult or impossible to anticipate. For additional information on the risks posed by the pandemic, see “A large-scale pandemic, the occurrence of terrorism or military actions may have an adverse effect on our business” included in Part I - Item 1A—Risk Factors in this Annual Report on Form 10-K.
At the time of issuance of this Annual Report on Form 10-K, we estimate that 2022 full year net income will be within a range of $3.45 to $3.65 per diluted share, generating a core return on equity* of near 10%. The outlook assumes a federal statutory corporate tax rate of 21%. In 2022, we will report results in three new operating segments, as discussed in more detail below, and our outlook is based on that expectation.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 41

Property & Casualty Segment
In 2022, net income for Property & Casualty is anticipated to be in the range of $44 million to $48 million. The primary factors in our outlook include:
•Underlying auto loss ratio slightly higher than the 2021 level as auto frequency remains near pre-pandemic levels, with inflation driving higher severity in both auto and property lines.
•Catastrophe loss assumption of approximately 9.5 points on the combined ratio, in line with the 10-year average.
•Net investment income lower in this segment than in 2021, as it benefited from outsized limited partnership returns last year.
Our longer-term Property & Casualty combined ratio target remains 95-96%.
Supplemental & Group Benefits Segment
This segment will include our current Supplemental business, as well as Madison National and a small group life block from our legacy Life segment. In 2022, net income for Supplemental & Group Benefits is anticipated to be in the range of $47 million to $50 million.
Our guidance anticipates claims utilization for supplemental and disability products to return to near pre-pandemic levels, leading to a benefit ratio of approximately 35% for voluntary products and approximately 50% for employer-paid products. As a result of the Madison National transaction, 2022 total amortization of intangible assets is expected to increase by 8 to 12 cents per share over 2021.
Life & Retirement Segment
This segment will combine our current Retirement segment and our current Life segment less a small group life block that will move to the Supplemental & Group Benefits segment. In 2022, net income for Life & Retirement is anticipated in the range of $74 million to $77 million.
In this segment, we anticipate net investment income will be up slightly, maintaining the net interest spread near the 2021 level. Our guidance reflects mortality returning to actuarial expectations.
Investments
For 2022, we expect total net investment income of between $410 million and $420 million, including approximately $100 million of accreted investment income on the deposit asset on reinsurance in the Retirement segment. Our guidance anticipates limited partnership portfolio returns modeled closer to historical averages and net investment income slightly below 2021.
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. We believe that a projection of net income is not appropriate on a forward-looking basis because it is not possible to provide a valid forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.

42 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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 as listed in Part II - Item 8 of this report.
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
•Evaluation of goodwill and intangible assets for impairment
•Valuation of annuity and life deferred policy acquisition costs
•Valuation of liabilities for property and casualty unpaid claims and claim expenses
•Valuation of certain investment contracts and policy 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 estimated amount at which the security could be exchanged in an orderly transaction between knowledgeable, unrelated and willing parties. We utilize ICE Pricing Data, our investment managers and custodian bank to obtain fair value prices from independent third-party valuation service providers, broker quotes, model prices and matrix pricing. Each month, we obtain fair value prices from our investment managers and custodian bank, each of which use a variety of independent, nationally recognized pricing sources to determine market valuations for fixed maturity securities. Differences in prices between the sources that we consider significant are researched and we utilize the price that we consider most representative of an exit price. Typical inputs used by these pricing sources include, but are not limited to, reported trades, bids, offers, benchmark yield curves, benchmarking of like securities, rating designations, sector groupings, issuer spreads and/or estimated cash flows, prepayment and default speeds, among others. Our fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the portfolio to be priced through pricing services. Approximately 90.2% of the portfolio, based on fair value, was priced through pricing services or index priced using observable inputs as of December 31, 2021.
The valuation of hard-to-value fixed maturity securities (generally 150 - 200 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 anticipated 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 and default speeds, 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

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 43

priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.
We gain assurance that our portfolio of fixed maturity securities including hard-to-value fixed maturity securities is appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. Our processes and controls are designed to ensure (1) the valuation methodologies are appropriate and consistently applied, (2) the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and (3) the fair values are accurately recorded. For example, on a continuing basis, we assess the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers. We perform procedures to understand and assess the methodologies, processes and controls of valuation service providers. In addition, we may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities.
At December 31, 2021, Level 3 invested assets comprised 5.6% 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 that are supported by little or no market activity 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 (as disclosed in Part II - Item 8, Note 3 of the Consolidated Financial Statements in this report) is reported as a component of accumulated other comprehensive income (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 is recorded. We have a comprehensive portfolio monitoring process to evaluate fixed maturity securities (at the cusip/issuer level) on a quarterly basis that may require a credit loss allowance. 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 in an unrealized loss position, 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 would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with the incremental 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 value 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 current effective rate and are compared to the amortized cost basis of the security. The determination of cash flow estimates 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. That information 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, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, sector credit ratings, financial

44 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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. The estimated fair value of collateral will be used to estimate the anticipated recovery value if we determine that the security is dependent on the liquidation of collateral for ultimate settlement.
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 recorded as a net investment loss.
When a security is sold or otherwise disposed or the security is deemed uncollectible and written off, we remove amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received.
For additional detail on credit loss impairments, see Part II - Item 8, Note 3 of the Consolidated Financial Statements in this report.
Evaluation of Goodwill and Intangible Assets for Impairment
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. 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. A goodwill impairment charge could have a material adverse effect on our results of operations. Our reporting units, for which goodwill has been allocated, are equivalent to our operating segments. As of December 31, 2021, our allocation of goodwill by reporting unit was as follows: $9.5 million, Property & Casualty; $19.6 million, Supplemental; $4.5 million, Retirement; and $9.9 million, Life. Also see Part II - Item 8, Notes 1 and 7 of the Consolidated Financial Statements in this report.
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.
The process of evaluating goodwill for impairment requires management to make multiple judgments and assumptions to determine the fair value of each reporting unit, including discounted cash flow calculations, the level of our own share price and assumptions that market participants would make in valuing each reporting unit. Fair value estimates are based primarily on an in-depth analysis of historical experience, projected future cash flows and relevant discount rates, which consider market participant inputs and the relative risk associated with the projected cash flows. Other assumptions include levels of economic capital, future business growth, earnings projections and assets under management for each reporting unit. Estimates of fair value are subject to assumptions that are sensitive to change and represent our reasonable expectation regarding future developments. We also consider other valuation techniques such as peer company price-to-earnings and price-to-book multiples.
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 be below its carrying amount. Subsequent goodwill assessments could result in impairment, particularly for each reporting unit with at-risk goodwill, due to the impact of volatile financial markets on earnings, discount rate assumptions, liquidity and market capitalization. For 2021, there were no events or material changes in circumstances that indicated that an adverse material change in the fair value of our reporting units occurred. For 2020, lower than anticipated BCG wealth management sales outside of the education markets triggered a requirement to evaluate the goodwill associated with the BCG business of the Retirement reporting unit resulting in a write-down of a certain amount of goodwill in 2020. For 2019, the annuity reinsurance transaction triggered

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 45

an assessment resulting in a write-down of a certain amount of goodwill for impairment in 2019 (see Part II - Item 8, Note 7 of the Consolidated Financial Statements in this report for more information).
The value of business acquired (VOBA) represents the difference between the fair value of insurance contracts and insurance policy reserves measured in accordance with our 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 was $76.9 million as of December 31, 2021 and is being amortized by product based on the present value of future premiums to be received. We estimate that we will recognize VOBA amortization of $6.2 million in 2022, $5.8 million in 2023, $5.4 million in 2024, $5.1 million in 2025 and $4.7 million in 2026.
We account for the value of distribution acquired associated with the acquisition of NTA (NTA VODA) based on an actuarial estimate of the present value of future business to be written by the existing distribution channel. VODA was $41.8 million as of December 31, 2021 and is being amortized on a straight-line basis. We estimate that we will recognize VODA amortization of $2.9 million in each of the years 2022 through 2026, respectively.
VOBA is reviewed for recoverability from future income, including net investment income, and costs which are deemed unrecoverable are expensed in the period in which the determination is made. No such costs were deemed unrecoverable during the year ended December 31, 2021.
NTA VODA is 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. The test results from our annual impairment assessment for NTA VODA at October 1, 2021 indicated there was no impairment. See Part II - Item 8, Note 7 of the Consolidated Financial Statements in this report for more information.
Valuation of Annuity and Life Deferred Policy Acquisition Costs
DAC, consisting of commissions, policy issuance and other costs which are incremental and directly related to the successful acquisition of new or renewal business, are deferred and amortized on a basis consistent with the type of insurance coverage. For all annuity contracts, DAC is amortized over 20 years in proportion to estimated gross profits. DAC is amortized in proportion to estimated gross profits over 20 years for certain life insurance products with account values and over 30 years for IUL. For further information, see Part II - Item 8, Note 1 of the Consolidated Financial Statements in this report.
The most significant assumptions that are involved in the estimation of annuity gross profits include interest rate spreads, future financial market performance, business surrender/lapse rates, expenses and the impact of net investment gains (losses). For the variable deposit portion of Retirement, we amortize DAC utilizing a future financial market performance assumption of an 8.0% reversion to the mean approach with a 200 basis point corridor around the mean during the reversion period, representing a cap and a floor on our long-term assumption. Our practice with regard to future financial market performance assumes that long-term appreciation in the financial markets is not changed by short-term market fluctuations, but is only changed when sustained annual deviations are experienced. We monitor these fluctuations and only change the assumption when the long-term expectation changes. The potential effect of an increase by 100 basis points in the assumed future rate of return is reasonably likely to result in an estimated decrease in DAC amortization expense of approximately $2.0 million. The potential effect of a decrease by 100 basis points in the assumed future rate of return is reasonably likely to result in an estimated increase in DAC amortization expense of approximately $1.5 million. Although this evaluation reflects likely outcomes, it is possible an actual outcome may fall below or above these estimates. At December 31, 2021, the ratio of DAC to the total annuity accumulated cash value was 1.8%.
In the event actual experience differs significantly from assumptions or assumptions are significantly revised, we may be required to record a material charge or credit to current period amortization expense for the period in which the adjustment is made. As noted above, there are key assumptions involved in the evaluation of DAC. In terms of the sensitivity of this amortization to three of the more significant assumptions, based on DAC as of December 31, 2021 and assuming all other assumptions are met, (1) a 10 basis point deviation in the annual targeted interest rate spread assumption would impact amortization between $0.3 million and $0.4 million, (2) a 1.0% deviation from the targeted financial market performance for the underlying mutual funds of our variable annuities would impact amortization between $0.3 million and $0.4 million and (3) a $1.0 million net investment

46 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

gain (loss) would impact amortization between $0.1 million and $0.2 million. These results may change depending on the magnitude and direction of any actual deviations but represent a range of reasonably likely experience for the noted assumptions. Detailed discussion of the impact of adjustments to DAC amortization expense is included in Results of Operations by Segment.
The most significant assumptions that are involved in the estimation of life insurance gross profits include interest rates expected to be received on investments, business persistency and mortality. Conversions from term to permanent insurance cause an immediate write down of the associated DAC. The impact on amortization due to assumption changes has an immaterial impact on the results of operations.
Annually, we perform a gross premium valuation on life insurance policies 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 DAC asset, in aggregate for the life insurance block, a loss would be recognized by first writing off the DAC and then increasing the liability.
Valuation of Liabilities for Property & Casualty Unpaid Claims and Claim Expenses
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 (which is equal to the actuarial point estimate) 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 8 of the Consolidated Financial Statements in this report. Due to the nature of our personal lines business, we have no exposure to losses related to claims for toxic waste cleanup, other environmental remediation or asbestos-related illnesses other than claims under property insurance policies for environmentally related items such as mold.
Based on our products and coverages, historical experience, and modeling of various actuarial methodologies used to develop reserve estimates, we estimate that the potential variability of the Property & Casualty loss reserves within a reasonable probability of other possible outcomes may be approximately plus or minus 6.0%, which equates to plus or minus approximately $12.0 million of net income based on net reserves as of December 31, 2021. Although this evaluation reflects the most likely outcomes, it is possible the final outcome may fall below or above these estimates.
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 the most recent 36 month period is a reasonably likely scenario based on recent experience and would result in a change in the estimated net reserves of between $5.0 million and $9.0 million for long-tail liability related exposures (auto liability coverages) and between $1.0 million and $3.0 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

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 47

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 expenses for Property & Casualty were as follows:

($ in millions) |  | December 31, 2021 |  | December 31, 2020
|  | Case Reserves |  | IBNR Reserves |  | Total(1) |  | Case Reserves |  | IBNR Reserves |  | Total(1)
Auto liability |  | $ | 99.7 |  |  | $ | 183.2 |  |  | $ | 282.9 |  |  | $ | 100.2 |  |  | $ | 190.5 |  |  | $ | 290.7 |
Auto other |  | 14.4 |  |  | (6.1) |  |  | 8.3 |  |  | 8.5 |  |  | (3.9) |  |  | 4.6 |
Property |  | 16.6 |  |  | 42.4 |  |  | 59.0 |  |  | 20.8 |  |  | 45.7 |  |  | 66.5 |
All other |  | 1.6 |  |  | 10.6 |  |  | 12.2 |  |  | 0.5 |  |  | 9.9 |  |  | 10.4 |
Total |  | $ | 132.3 |  |  | $ | 230.1 |  |  | $ | 362.4 |  |  | $ | 130.0 |  |  | $ | 242.2 |  |  | $ | 372.2 |

(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. At December 31, 2021, the impact of a reserve re-estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.0 million in net income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by approximately $2.0 million.
Favorable prior years' reserve re-estimates increased net income in 2021 by approximately $7.2 million pretax, primarily the result of favorable loss trends in auto and property for accident years 2020 and prior. The lower than expected claims emergence and resultant lower expected loss ratios caused us to lower our reserve estimate at December 31, 2021.
Valuation of Certain Investment Contracts and Policy Reserves
Liabilities for future benefits on annuity and life policies are established in amounts adequate to meet the estimated future obligations on policies in force.
Liabilities for future benefits on deferred annuity contracts, excluding fixed indexed annuity (FIA) products, are carried at accumulated policyholder values without reduction for potential surrender or withdrawal charges. Liabilities for FIA products are bifurcated into an embedded derivative and a host contract. The embedded derivative is recognized at fair value and is reported in Other policyholder funds on the Consolidated Balance Sheets, and is determined using the option budget method. The host contract is accounted for as a debt instrument with the initial amount determined as the consideration amount less the initial embedded derivative, as described above. Any discount to the minimum account value is accreted over the life of the products using the effective yield method. Key assumptions used in the estimation of the liabilities for FIA products include the risk free interest rate, the value of options currently in force, the future expected option budget based on product pricing targets, mortality and lapses.
Liabilities for future benefits on payout annuity contracts are determined as the present value of expected future benefit payments. Key assumptions used in the calculation include the future investment yield and mortality, for those contracts with life contingencies.
Liabilities for future policy benefits on supplemental insurance policies are computed using the net level premium method and are based on assumptions as to future investment yields, morbidity, mortality, persistency, expenses and other assumptions based on our experience, including provisions for adverse deviation. Mortality, morbidity and lapse assumptions for all policies have been based on standard actuarial tables which are modified as appropriate to reflect our own experience. In the event actual experience is worse than the assumptions, additional reserves may be required. This would result in recognition of a loss in the period for which the increase in reserves occurred.
Liabilities for future policy benefits on life insurance policies, excluding indexed universal life (IUL) products, are computed using the net level premium method and are based on assumptions as to future investment yield, mortality and lapses. Mortality and lapse assumptions for all policies have been based on actuarial tables which

48 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

are consistent with our own experience. In the event actual experience is worse than the assumptions, additional reserves may be required. This would result in recognition of a loss in the period for which the increase in reserves occurred. Also, see Part II - Item 8, Note 1 of the Consolidated Financial Statements in this report. Liabilities for IUL products are bifurcated into an embedded derivative and a host contract. The embedded derivative is recognized at fair value and is set equal to the fair value of the current call options purchased to hedge the liability. The host contract is measured using the retrospective deposit method which is equal to the account balance.
Results of Operations by Segment
Consolidated financial results primarily reflect the results of four operating segments as well as the corporate and other line. These segments are defined based on financial information management uses to evaluate performance and to determine the allocation of resources.
•Property & Casualty
•Supplemental
•Retirement
•Life
•Corporate & Other
The determination of segment data is described in more detail in Part II - Item 8, Note 19 of the Consolidated Financial Statements in this report. The following sections provide analysis and discussion of results of operations for each of the reporting segments as well as investment results.
Property & Casualty
2021 net income reflected the following factors:
•A 43% increase in net investment income due to exceptional returns on limited partnership interests
•Auto loss costs reflected loss frequency near pre-pandemic levels as well as elevated severity that added 8.5 points to the underlying combined ratio
•Premiums written* and premiums earned reduced by lower new business volume due to the continuing impact of the pandemic on sales
•Lower levels of favorable prior years' reserve development (PYD) recognized in 2021 ($5.2 million of favorable PYD recognized in 2020 due to subrogation received largely related to the 2018 Camp Fire in California)

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 49

The following table provides certain financial information for Property & Casualty for the periods indicated.

($ in millions, unless otherwise indicated) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change
Financial Data: |  |  |  |  |  |
Premiums written*: |  |  |  |  |  |
Auto |  | $ | 394.5 |  |  | $ | 416.8 |  |  | -5.4 | %
Property and other |  | 213.3 |  |  | 218.7 |  |  | -2.5 | %
Total premiums written |  | 607.8 |  |  | 635.5 |  |  | -4.4 | %
Change in unearned premiums |  | (9.6) |  |  | (14.6) |  |  | 34.2 | %
Total premiums earned |  | 617.4 |  |  | 650.1 |  |  | -5.0 | %
Incurred claims and claims expenses: |  |  |  |  |  |
Claims occurring in the current year |  | 455.1 |  |  | 441.2 |  |  | 3.2 | %
Prior years' reserve development(1) |  | (7.2) |  |  | (10.2) |  |  | -29.4 | %
Total claims and claim expenses incurred |  | 447.9 |  |  | 431.0 |  |  | 3.9 | %
Operating expenses, including DAC amortization |  | 164.8 |  |  | 171.7 |  |  | -4.0 | %
Underwriting gain |  | 4.7 |  |  | 47.4 |  |  | -90.1 | %
Net investment income |  | 61.1 |  |  | 42.6 |  |  | 43.4 | %
Income before income taxes |  | 70.2 |  |  | 91.9 |  |  | -23.6 | %
Net income / Core earnings* |  | 57.0 |  |  | 76.5 |  |  | -25.5 | %
Operating Statistics: |  |  |  |  |  |
Total Property & Casualty |  |  |  |  |  |
Loss and loss adjustment expense ratio |  | 72.5 | % |  | 66.3 | % |  | 6.2 | pts
Expense ratio |  | 26.7 | % |  | 26.4 | % |  | 0.3 | pts
Combined ratio: |  | 99.2 | % |  | 92.7 | % |  | 6.5 | pts
Prior years' reserve development(1) |  | -1.2 | % |  | -1.6 | % |  | 0.4 | pts
Catastrophes |  | 12.7 | % |  | 13.0 | % |  | -0.3 | pts
Underlying combined ratio* |  | 87.7 | % |  | 81.3 | % |  | 6.4 | pts
Auto |  |  |  |  |  |
Loss and loss adjustment expense ratio |  | 69.4 | % |  | 61.2 | % |  | 8.2 | pts
Expense ratio |  | 26.7 | % |  | 26.8 | % |  | -0.1 | pts
Combined ratio: |  | 96.1 | % |  | 88.0 | % |  | 8.1 | pts
Prior years' reserve development(1) |  | -1.2 | % |  | -0.5 | % |  | -0.7 | pts
Catastrophes |  | 1.6 | % |  | 1.3 | % |  | 0.3 | pts
Underlying combined ratio* |  | 95.7 | % |  | 87.2 | % |  | 8.5 | pts
Property |  |  |  |  |  |
Loss and loss adjustment expense ratio |  | 78.5 | % |  | 76.1 | % |  | 2.4 | pts
Expense ratio |  | 26.9 | % |  | 25.9 | % |  | 1.0 | pts
Combined ratio: |  | 105.4 | % |  | 102.0 | % |  | 3.4 | pts
Prior years' reserve development(1) |  | -1.0 | % |  | -3.7 | % |  | 2.7 | pts
Catastrophes |  | 33.6 | % |  | 35.5 | % |  | -1.9 | pts
Underlying combined ratio* |  | 72.8 | % |  | 70.2 | % |  | 2.6 | pts
Risks in force (in thousands) |  |  |  |  |  |
Auto(2) |  | 376 |  |  | 399 |  |  | -5.8 | %
Property |  | 177 |  |  | 184 |  |  | -3.8 | %
Total |  | 553 |  |  | 583 |  |  | -5.1 | %

(1) (Favorable) unfavorable.
(2) Includes assumed risks in force of 4.

50 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Catastrophe losses incurred were as follows:(1)

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020
Three months ended |  |  |  |
March 31 |  | $ | 11.0 |  |  | $ | 8.8 |
June 30 |  | 17.5 |  |  | 34.7 |
September 30 |  | 38.6 |  |  | 34.8 |
December 31 |  | 11.1 |  |  | 6.1 |
Total full year |  | $ | 78.2 |  |  | $ | 84.4 |

(1) See Part I - Item 1 - Reporting Segments - Property & Casualty for further details regarding catastrophe losses for the last five years.
The 8.1 point of increase in the auto combined ratio in 2021 was mainly attributable to an 8.6 point increase in the auto underlying loss ratio*. The increase in the auto underlying loss ratio reflected a return to near pre-pandemic loss frequency levels as well as an increase in severity trends. Auto loss costs were unusually low in 2020, reflecting the impact of temporary changes in policyholder driving patterns due to the pandemic. The reported property combined ratio increased 3.4 points and the property underlying loss ratio* increased 1.6 points reflecting higher non-catastrophe fire losses and non-weather water losses as well as overall inflation due to the cost of labor and materials.
In 2021, total premiums written* decreased $27.7 million compared to 2020, primarily due to a reduction in auto premiums written*. In 2021, average approved rate changes were insignificant. The continuing impact of the pandemic affected sales* in 2021.
Auto premiums written* decreased $22.3 million compared to 2020, as the number of auto risks in force has declined. Average premium written and average premium earned increased slightly. The number of educator risks has been over 80% relative to overall auto risks in force over the past two years.
Property and other premiums written* decreased $5.4 million compared to 2020, as the number of property risks in force has declined. In addition, the subrogation recovery for the 2018 California Camp Fire Event provided for the return of $3.7 million of reinsurance reinstatement premium in 2020. Average premium written per risk and average premium earned per risk increased 3.5% and 2.9%, respectively, compared to 2020, but with inflationary pressure continuing, adjustments to coverage values and rates are expected to play a greater role in the coming quarters. The number of educator risks has been over 80% relative to overall property 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 51

Supplemental
2021 net income reflected the following factors:
•Net investment income up 39% over 2020 driven by favorable returns on limited partnership interests
•Favorable business trends reflected in the benefits ratio, including some continued benefit from changes in policyholder behavior due to the pandemic
The following table provides certain information for Supplemental for the periods indicated.

($ in millions, unless otherwise indicated) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change
Financial Data: |  |  |  |  |  |
Premiums written and contract deposits* |  | $ | 125.3 |  |  | $ | 130.3 |  |  | -3.8 | %
Premiums and contract charges earned |  | 125.3 |  |  | 130.7 |  |  | -4.1 | %
Net investment income |  | 24.8 |  |  | 17.8 |  |  | 39.3 | %
Benefits and settlement expenses |  | 37.2 |  |  | 38.2 |  |  | -2.6 | %
Operating expenses (includes DAC unlocking and amortization expense) |  | 41.9 |  |  | 40.4 |  |  | 3.7 | %
Intangible asset amortization expense |  | 11.7 |  |  | 12.6 |  |  | -7.1 | %
Income before income taxes |  | 59.0 |  |  | 55.1 |  |  | 7.1 | %
Net income / Core earnings* |  | 46.3 |  |  | 43.1 |  |  | 7.4 | %
Operating Statistics: |  |  |  |  |  |
Supplemental insurance in force (thousands) |  | 278 |  |  | 287 |  |  | -3.1 | %
Benefits ratio(1) |  | 31.9 | % |  | 33.0 | % |  | -1.1 | pts
Operating expense ratio(2) |  | 27.5 | % |  | 26.7 | % |  | 0.8 | pts
Pretax profit margin(2) |  | 38.7 | % |  | 36.4 | % |  | 2.3 | pts
Persistency |  | 92.5 | % |  | 90.5 | % |  | 2.0 | pts

(1) Benefits ratio measured to earned premium.
(2) Operating expense ratio and pretax profit margin measured to total revenues.
While Supplemental sales* increased sequentially each quarter during 2021, they continued to be impacted by limited school access from the pandemic. 2020 Supplemental sales overall were higher as they contained one quarter of pre-pandemic sales. Persistency was strong, reflecting a 2.0 point increase to 92.5%.
In 2021, Supplemental contributed $46.3 million to net income, reflecting strong net investment income and some short-term benefit from changes in policyholder behavior due to the pandemic. The non-cash impact from amortization of intangible assets recognized in connection with the purchase accounting of NTA reduced pretax net income by $11.7 million and $12.6 million in 2021 and 2020, respectively. The pretax profit margin remained above our longer-term expectations because of pandemic-related changes in policyholder behavior.

52 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Retirement
2021 net income reflected the following factors:
•Strong annualized net interest spread on fixed annuities of 290 bps
•10% growth in assets under management
•Continued growth in net annuity contract deposits* that increased $19.7 million or approximately 5% over prior year deposits

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 53

The following table provides certain information for Retirement for the periods indicated.

($ in millions, unless otherwise indicated) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change
Financial Data: |  |  |  |  |  |
Contract charges earned |  | $ | 38.5 |  |  | $ | 29.7 |  |  | 29.6 | %
Net investment income |  | 154.8 |  |  | 132.5 |  |  | 16.8 | %
Interest credited |  | 56.2 |  |  | 58.6 |  |  | -4.1 | %
Net interest margin without net investment gains (losses) |  | 98.6 |  |  | 73.9 |  |  | 33.4 | %
Net interest margin - Reinsured block |  | (3.5) |  |  | (3.6) |  |  | 2.8 | %
Mortality loss and other reserve charges |  | (5.5) |  |  | (5.3) |  |  | -3.8 | %
Operating expenses |  | 66.2 |  |  | 60.3 |  |  | 9.8 | %
DAC and intangible asset amortization expense, excluding DAC unlocking |  | 21.1 |  |  | 20.3 |  |  | 3.9 | %
DAC unlocking |  | (1.3) |  |  | (1.8) |  |  | 27.8 | %
Other expenses - goodwill and intangible asset impairments |  | — |  |  | 10.0 |  |  | N.M.
Income before income taxes |  | 61.9 |  |  | 22.2 |  |  | 178.8 | %
Net income |  | 52.0 |  |  | 20.1 |  |  | 158.7 | %
Core earnings* |  | 52.0 |  |  | 28.2 |  |  | 84.4 | %
Operating Statistics: |  |  |  |  |  |
Net annuity contract deposits* |  |  |  |  |  |
Variable |  | $ | 266.5 |  |  | $ | 226.2 |  |  | 17.8 | %
Fixed |  | 182.3 |  |  | 202.9 |  |  | -10.2 | %
Total |  | 448.8 |  |  | 429.1 |  |  | 4.6 | %
Single |  | 243.4 |  |  | 218.7 |  |  | 11.3 | %
Recurring |  | 205.4 |  |  | 210.4 |  |  | -2.4 | %
Total |  | 448.8 |  |  | 429.1 |  |  | 4.6 | %
Assets under administration (AUA) |  |  |  |  |  |
Annuity assets under management(1) |  | $ | 5,339.8 |  |  | $ | 4,841.8 |  |  | 10.3 | %
Broker and advisory assets under administration |  | 2,597.9 |  |  | 2,324.1 |  |  | 11.8 | %
Recordkeeping assets under administration |  | 1,572.0 |  |  | 1,518.1 |  |  | 3.6 | %
Total |  | 9,509.7 |  |  | 8,684.0 |  |  | 9.5 | %
Persistency |  |  |  |  |  |
Variable annuities |  | 94.4 | % |  | 95.0 | % |  | -0.6 | pts
Fixed annuities |  | 94.3 | % |  | 94.7 | % |  | -0.4 | pts
Total |  | 94.4 | % |  | 94.8 | % |  | -0.4 | pts
Annuity contracts in force (thousands) |  | 230 |  |  | 230 |  |  | — | %
Retirement Advantage® contracts in force (thousands) |  | 15 |  |  | 13 |  |  | 15.4 | %
Net interest spread on fixed annuities - YTD annualized (basis points) |  | 290 |  |  | 212 |  |  | 78 | bps

(1) Amount reported as of December 31, 2021 excludes $834.6 million of assets under management held under modified coinsurance reinsurance.
For 2021, net annuity contract deposits* increased $19.7 million compared to 2020. Variable annuity deposits increased $40.3 million and fixed annuity deposits decreased $20.6 million, as educators continue to find value in our retirement savings products, including our competitively priced annuity products.
For 2020, Retirement segment net income reflected an after-tax impairment charge of $8.1 million for goodwill and intangible assets associated with BCG due to lower than anticipated BCG wealth management sales outside of the education markets. Operational benefits from the BCG acquisition remain on track.

54 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

At December 31, 2021, annuity assets under management were up $498.0 million, or 10.3%, compared to a year ago primarily due to market appreciation. Assets under administration, which includes Retirement Advantage® and other advisory and recordkeeping assets, were up $825.7 million, or 9.5%, from a year ago. The full-year 2021 annualized net interest spread on fixed annuities, excluding reinsurance, increased 78 basis points, primarily reflecting higher net investment income due to returns on limited partnership interests.
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 $792.8 million of the combined Retirement and Life investment portfolio and related investable cash flows will be reinvested at current market rates. As interest rates remain at low levels, borrowers may prepay or redeem the securities with greater frequency in order to borrow at lower market rates, which could increase investable cash flows and exacerbate the reinvestment risk.
As a general guideline, for a 100 basis point decline in the average reinvestment rate and based on our existing policies and investment portfolio, the impact from investing in that lower interest rate environment could further reduce Retirement net investment income by approximately $3.0 million in year one and $9.1 million in year two, further reducing the annualized net interest spread by approximately 10 basis points and 30 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.
The expectation for future annualized net interest spreads is also an important component in the amortization of DAC. In terms of the sensitivity of this amortization to the annualized net interest spread, based on DAC as of December 31, 2021 and assuming all other assumptions are met, a 10 basis point deviation in the current year targeted annualized net interest rate spread assumption would impact amortization between $0.3 million and $0.4 million. This result may change depending on the magnitude and direction of any actual deviations but represents a range of reasonably likely experience for the noted assumption.
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 minimum guaranteed rate for deferred annuity account values excluding the reinsured block is shown below.

($ in millions) |  | December 31, 2021
|  | Total Deferred Annuities |  | Deferred Annuities at Minimum Guaranteed Rate
|  | Percent of Total |  | Accumulated Value (AV) |  | Percent of Total Deferred Annuities AV |  | Percent of Total |  | Accumulated Value
Minimum guaranteed interest rates: |  |  |  |  |  |  |  |  |  |
Less than 2% |  | 55.5 | % |  | $ | 1,404.8 |  |  | 73.7 | % |  | 49.0 | % |  | $ | 1,035.7 |
Equal to 2% but less than 3% |  | 11.3 |  |  | 284.6 |  |  | 83.6 |  |  | 11.3 |  |  | 238.0 |
Equal to 3% but less than 4% |  | 24.7 |  |  | 624.9 |  |  | 99.9 |  |  | 29.5 |  |  | 624.5 |
Equal to 4% but less than 5% |  | 6.6 |  |  | 167.0 |  |  | 100.0 |  |  | 7.9 |  |  | 167.0 |
5% or higher |  | 1.9 |  |  | 48.7 |  |  | 100.0 |  |  | 2.3 |  |  | 48.7 |
Total |  | 100.0 | % |  | $ | 2,530.0 |  |  | 83.6 | % |  | 100.0 | % |  | $ | 2,113.9 |

We will continue to be disciplined in executing strategies to mitigate the negative impact on profitability of a sustained low interest rate environment. However, the success of these strategies may be affected by the factors discussed in Part I - Item 1A and other factors of this report.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 55

Life
2021 net income reflected the following factors:
•Higher net investment income driven by favorable returns on limited partnership interests
•Higher mortality costs
The ordinary life insurance in force lapse ratio was 3.5% and 4.2% for 2021 and 2020, respectively.
The following table provides certain information for Life for the periods indicated.

($ in millions, unless otherwise indicated) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change
Financial Data: |  |  |  |  |  |
Premiums written and contract deposits* |  | $ | 116.9 |  |  | $ | 110.1 |  |  | 6.2 | %
Premiums and contract charges earned |  | 108.4 |  |  | 120.2 |  |  | -9.8 | %
Net investment income |  | 83.1 |  |  | 69.8 |  |  | 19.1 | %
Benefits and settlement expenses |  | 127.9 |  |  | 134.6 |  |  | -5.0 | %
Operating expenses |  | 36.8 |  |  | 35.3 |  |  | 4.2 | %
DAC amortization expense, excluding unlocking |  | 7.6 |  |  | 7.7 |  |  | -1.3 | %
DAC unlocking |  | (0.2) |  |  | (0.3) |  |  | 33.3 | %
Income before income taxes |  | 19.7 |  |  | 12.9 |  |  | 52.7 | %
Net income / core earnings* |  | 16.1 |  |  | 10.4 |  |  | 54.8 | %
Operating Statistics: |  |  |  |  |  |
Life insurance in force |  | $ | 20,440 |  |  | $ | 19,821 |  |  | 3.1 | %
Number of policies in force* (in thousands) |  | 200 |  |  | 202 |  |  | -1.0 | %
Average face amount in force (in dollars) |  | $ | 102,026 |  |  | $ | 98,434 |  |  | 3.6 | %
Lapse ratio (ordinary life insurance in force) |  | 3.5 | % |  | 4.2 | % |  | -0.7 | pts
Mortality costs |  | $ | 43.5 |  |  | $ | 38.8 |  |  | 12.1 | %

56 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Corporate & Other
The following table provides certain financial information for Corporate & Other for the periods indicated.

($ in millions) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change %
Interest expense |  | $ | 13.8 |  |  | $ | 14.8 |  |  | -6.8 | %
Net investment losses pretax |  | (11.0) |  |  | (2.3) |  |  | N.M.
Tax benefit on net investment losses |  | (2.4) |  |  | (0.6) |  |  | N.M.
Net investment losses after tax benefit |  | (8.6) |  |  | (1.7) |  |  | N.M.
Net loss |  | (28.6) |  |  | (16.8) |  |  | -70.2 | %
Core earnings (loss)* |  | (20.0) |  |  | (15.1) |  |  | -32.5 | %

Corporate expenses increased primarily due to transaction costs to acquire Madison National. The net loss in 2021 increased due to recognition of $7.7 million of net credit loss impairments.
Investment Results
Our investment strategy is primarily focused on generating income to support product liabilities, and balances principal protection and risk. 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, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change %
Net investment income - investment portfolio |  | $ | 321.4 |  |  | $ | 260.3 |  |  | 23.5 | %
Investment income - deposit asset on reinsurance |  | 101.1 |  |  | 97.3 |  |  | 3.9 | %
Total net investment income |  | 422.5 |  |  | 357.6 |  |  | 18.1 | %
Pretax net investment losses |  | (11.0) |  |  | (2.3) |  |  | N.M.
Pretax net unrealized investment gains on fixed maturity securities |  | 441.6 |  |  | 556.7 |  |  | -20.7 | %

For 2021, net investment income from our investment portfolio increased $61.1 million compared to 2020, primarily due to exceptional returns on limited partnership interests.
For 2021, pretax net investment losses increased $8.7 million. The increase in net investment losses in 2021 is primarily attributable to recognition of $7.7 million of net credit loss impairments. For 2021, pretax net unrealized investment gains on fixed maturity securities were down $115.1 million compared to 2020, reflecting U.S. Treasury rates that increased 60 basis points that more than offset tighter credit spreads across most asset classes.

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, 2021
|  | Number of Issuers |  | Fair Value |  | Amortized Cost, net |  | Pretax Net Unrealized Gain (Loss)
Fixed maturity securities |  |  |  |  |  |  |  |
Corporate bonds |  |  |  |  |  |  |  |
Banking & Finance |  | 158 |  | $ | 515.0 |  |  | $ | 479.6 |  |  | $ | 35.4 |
Insurance |  | 53 |  | 191.8 |  |  | 168.0 |  |  | 23.8 |
Energy(1) |  | 93 |  | 189.7 |  |  | 174.4 |  |  | 15.3 |
Healthcare, Pharmacy |  | 89 |  | 164.5 |  |  | 151.7 |  |  | 12.8 |
Miscellaneous |  | 38 |  | 139.3 |  |  | 138.2 |  |  | 1.1 |
Real Estate |  | 47 |  | 137.4 |  |  | 131.3 |  |  | 6.1 |
Utilities |  | 69 |  | 131.9 |  |  | 122.2 |  |  | 9.7 |
Transportation |  | 50 |  | 125.3 |  |  | 117.6 |  |  | 7.7 |
Food and Beverage |  | 36 |  | 101.4 |  |  | 89.5 |  |  | 11.9 |
Technology |  | 42 |  | 90.1 |  |  | 85.7 |  |  | 4.4 |
All other corporates(2) |  | 367 |  | 602.2 |  |  | 559.6 |  |  | 42.6 |
Total corporate bonds |  | 1,042 |  | 2,388.6 |  |  | 2,217.8 |  |  | 170.8 |
Mortgage-backed securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agencies |  | 258 |  | 462.6 |  |  | 433.9 |  |  | 28.7 |
Commercial(3) |  | 134 |  | 310.3 |  |  | 286.6 |  |  | 23.7 |
Other |  | 31 |  | 21.7 |  |  | 21.6 |  |  | 0.1 |
Municipal bonds(4) |  | 595 |  | 1,703.4 |  |  | 1,519.7 |  |  | 183.7 |
Government bonds |  |  |  |  |  |  |  |
U.S. |  | 40 |  | 365.9 |  |  | 342.6 |  |  | 23.3 |
Foreign |  | 7 |  | 43.6 |  |  | 40.1 |  |  | 3.5 |
Collateralized loan obligations(5) |  | 201 |  | 669.1 |  |  | 665.7 |  |  | 3.4 |
Asset-backed securities |  | 96 |  | 274.1 |  |  | 269.7 |  |  | 4.4 |
Total fixed maturity securities |  | 2,404 |  |  | $ | 6,239.3 |  |  | $ | 5,797.7 |  |  | $ | 441.6 |
Equity securities |  |  |  |  |  |  |  |
Non-redeemable preferred stocks |  | 28 |  | $ | 119.4 |  |  |  |  |
Common stocks |  | 93 |  | 6.3 |  |  |  |  |
Closed-end fund |  | 1 |  | 21.5 |  |  |  |  |
Total equity securities |  | 122 |  | $ | 147.2 |  |  |  |  |
Total |  | 2,526 |  |  | $ | 6,386.5 |  |  |  |  |

(1)At December 31, 2021, the fair value amount included $382.7 million which were non-investment grade.
(2)The All Other Corporates category contains 18 additional industry classifications. Broadcasting and media, telecommunications, consumer products, leisure entertainment, and industry manufacturing represented $312.6 million of fair value at December 31, 2021, with the remaining 13 classifications each representing less than $289.6 million.
(3)At December 31, 2021, 100% were investment grade, with an overall credit rating of AA+, and the positions were well diversified by property type, geography and sponsor.
(4)Holdings are geographically diversified, 48.9% are tax-exempt and 76.3% 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- at December 31, 2021.
(5)Based on fair value, 93.6% of the collateralized loan obligation securities were rated investment grade by Standard & Poor's Global Inc. (S&P), Moody's Investors Service, Inc. (Moody's) and/or Fitch Ratings, Inc. (Fitch) at December 31, 2021.

58 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

At December 31, 2021, our diversified fixed maturity securities portfolio consisted of 3,712 investment positions, issued by 2,404 entities, and totaled approximately $6.2 billion in fair value. This portfolio was 85.5% 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 AAA or AA 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. At December 31, 2021, 85.1% 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, 2021
|  | Percent of Total Fair Value |  | Fair Value |  | Amortized Cost, net
Fixed maturity securities |  |  |  |  |  |
AAA |  | 10.1 | % |  | $ | 627.4 |  |  | $ | 606.4 |
AA(2) |  | 36.7 |  |  | 2,292.8 |  |  | 2,105.8 |
A |  | 17.4 |  |  | 1,089.1 |  |  | 993.1 |
BBB |  | 21.3 |  |  | 1,326.8 |  |  | 1,222.2 |
BB |  | 3.1 |  |  | 191.7 |  |  | 183.2 |
B |  | 1.3 |  |  | 82.8 |  |  | 82.1 |
CCC or lower |  | — |  |  | 1.0 |  |  | 1.0 |
Not rated(3) |  | 10.1 |  |  | 627.7 |  |  | 603.9 |
Total fixed maturity securities |  | 100.0 | % |  | $ | 6,239.3 |  |  | $ | 5,797.7 |
Equity securities |  |  |  |  |  |
AAA |  | — |  |  | — |  |  |
AA |  | — |  |  | — |  |  |
A |  | 0.5 | % |  | $ | 0.8 |  |  |
BBB |  | 67.3 |  |  | 99.0 |  |  |
BB |  | 12.7 |  |  | 18.7 |  |  |
B |  | — |  |  | — |  |  |
CCC or lower |  | — |  |  | — |  |  |
Not rated |  | 19.5 |  |  | 28.7 |  |  |
Total equity securities |  | 100.0 | % |  | $ | 147.2 |  |  |
Total |  |  |  | $ | 6,386.5 |  |  |

(1)Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody's or Fitch. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.
(2)At December 31, 2021, the AA rated fair value amount included $359.1 million of U.S. Government and federally sponsored agency securities and $653.1 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 either S&P, Moody's or Fitch.
At December 31, 2021, the fixed maturity securities portfolio had $18.6 million of pretax gross unrealized investment losses on $995.3 million of fair value related to 638 positions. Of the investment positions with gross unrealized losses, there were 16 trading below 80.0% of the carrying value at December 31, 2021.
We view the pretax gross unrealized investment losses of all our fixed maturity securities at December 31, 2021 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of impairment.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 59

Liquidity and Capital Resources
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 3 of the Consolidated Financial Statements in this report.
Cash Flow
Our short-term liquidity requirements, within a 12 month operating cycle, are for the timely payment of claims and benefits to policyholders, operating expenses, interest payments and federal income taxes. Cash flow generated from operations has been, and is expected to be, adequate to meet our operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth and acquisitions, pay dividends to shareholders and repurchase shares of our common stock. Long-term liquidity requirements, beyond one year, are principally for the payment of future insurance and annuity policy claims and benefits, as well as retirement of debt. The following table summarizes our consolidated cash flows activity for the periods indicated.

($ in millions) |  | Year Ended December 31, |  | 2021-2020
|  | 2021 |  | 2020 |  | Change %
Net cash provided by operating activities |  | $ | 204.9 |  |  | $ | 259.8 |  |  | -21.1 | %
Net cash used in investing activities |  | (302.0) |  |  | (406.8) |  |  | 25.8 | %
Net cash provided by financing activities |  | 208.5 |  |  | 143.8 |  |  | 45.0 | %
Net increase (decrease) in cash |  | 111.4 |  |  | (3.2) |  |  | N.M.
Cash at beginning of year |  | 22.3 |  |  | 25.5 |  |  | -12.5 | %
Cash at end of year |  | $ | 133.7 |  |  | $ | 22.3 |  |  | N.M.

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 2021, net cash provided by operating activities decreased $54.9 million compared to 2020, primarily due to higher claims paid on insurance policies in the current year partially offset by higher investment income collected in the current year.
Investing Activities
Our insurance subsidiaries maintain significant investments in fixed maturity securities to meet future contractual obligations to policyholders. In conjunction with our management of liquidity and other asset/liability management objectives, we, from time to time, will sell fixed maturity securities prior to maturity, and reinvest the proceeds into other investments with different interest rates, maturities or credit characteristics. Accordingly, we have classified the entire fixed maturity securities portfolio as available for sale.
Financing Activities
Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, issuances and repurchases of our common stock, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
For 2021, net cash provided by financing activities increased $64.7 million compared to 2020, primarily due to an increase net cash inflows of $96.5 million from advances received under Federal Home Loan Bank of Chicago (FHLB) funding agreements and $114.0 million of principal borrowings on Bank Credit Facility in 2021, partially offset by principal repayment on FHLB borrowings of $54.0 million in 2021 and an increase in benefits, withdrawals and net transfers to Separate Account (variable annuity) assets of $84.1 million.
The following table shows activity from FHLB funding agreements for the periods indicated.

60 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

($ in millions) |  | Year Ended December 31, | 2021-2020 |  | 2021-2020
|  | 2021 |  | 2020 |  | Change $ |  | Change %
Balance at beginning of the year |  | $ | 590.5 |  |  | $ | 495.0 |  |  | $ | 95.5 |  |  | 19.3 | %
Advances received from FHLB funding agreements |  | 554.0 |  |  | 95.5 |  |  | 458.5 |  |  | N.M.
Principal repayment on FHLB funding agreements |  | (362.0) |  |  | — |  |  | (362.0) |  |  | N.M.
Balance at end of the year |  | $ | 782.5 |  |  | $ | 590.5 |  |  | $ | 192.0 |  |  | 32.5 | %

Liquidity Sources and Uses
Our potential sources and uses of funds principally include the following activities:

|  | Property & Casualty |  | Supplemental |  | Retirement |  | Life |  | 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 |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Sales of investments |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Funds from FHLB and line of credit agreements |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Intercompany loans |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Capital contributions from parent |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  |
Dividends or return of capital from subsidiaries |  |  |  |  |  |  |  |  |  | ☑
Tax refunds/settlements |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Funds from periodic issuance of additional securities |  |  |  |  |  |  |  |  |  | ☑
Proceeds from debt issuances |  |  |  |  |  |  |  |  |  | ☑
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 |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  |
Operating costs and expenses |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Purchase of investments |  | ☑ |  | ☑ |  | ☑ |  | ☑ |  | ☑
Repayment of FHLB and line of credit 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 repayment |  |  |  |  |  |  |  |  |  | ☑
Payments related to employee benefit plans |  |  |  |  |  |  |  |  |  | ☑
Payments for acquisitions |  |  |  |  |  |  |  |  |  | ☑

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,

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 61

we have existing intercompany agreements in place that facilitate liquidity management across HMEC to enhance flexibility.
As of December 31, 2021, 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 a revolving line of credit, 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 2022 from all of our insurance subsidiaries, including Madison National, without prior regulatory approval is approximately $134.8 million, excluding the impact and timing of prior year dividends, of which $57.0 million was paid during the year ended December 31, 2021. 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 14 of the Consolidated Financial Statements in this report.
Total capital was $2,310.0 million at December 31, 2021, including $502.6 million of short-term and long-term debt. Total debt represented 21.8% of total capital including net unrealized investment gains on fixed maturity securities (24.9% of total capital excluding net unrealized investment gains on fixed maturity securities*) at December 31, 2021, which was below our long-term target of 25.0%.
Shareholders' equity was $1,807.4 million at December 31, 2021, including net unrealized investment gains on fixed maturity securities of $290.7 million after taxes and the related impact of DAC associated with annuity contracts and life insurance products with account values. The market value of our common stock and the market value per share were $1,601.9 million and $38.70, respectively, at December 31, 2021. Book value per share was $43.66 at December 31, 2021 ($36.64 excluding net unrealized investment gains on fixed maturity securities*).
Additional information regarding net unrealized investment gains on fixed maturity securities at December 31, 2021 is included in Part II - Item 7, Results of Operations by Segment and Part II - Item 8, Note 3 of the Consolidated Financial Statements in this report.
Total shareholder dividends paid were $51.4 million for the year ended December 31, 2021. In March, May, September and December 2021, the Board declared regular quarterly dividends of $0.31 per share. Compared to the full year per share dividends paid in 2020 of $1.20, the total 2021 dividends paid per share of $1.24 represented an increase of 3.3%.
On September 30, 2015, the Board authorized a share repurchase program allowing repurchases of up to $50.0 million of HMEC's common stock, par value $0.001 (Program). The Program authorizes the repurchase of common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The Program does not have an expiration date and may be limited or terminated at any time without notice. During 2021, we repurchased 140,758 shares of our common stock at an average price of $37.49 per share under the Program. In total and through December 31, 2021, 1,040,226 shares have been repurchased under the Program at an average price of $33.33 per share. The repurchase of shares was funded through use of

62 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

cash. As of December 31, 2021, $15.3 million remained authorized for future share repurchases under the Program.
The following table summarizes our debt obligations.

($ in millions) |  | Interest Rates |  | Final Maturity |  | December 31,
|  |  |  | 2021 |  | 2020
Short-term debt |  |  |  |  |  |  |  |
Bank Credit Facility |  | Variable |  | 2026 |  | $ | 249.0 |  |  | $ | 135.0 |
Long-term debt(1) |  |  |  |  |  |  |  |
4.50% Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.3 and $0.4 and unamortized debt issuance costs of $1.1 and $1.3 |  | 4.50% |  | 2025 |  | 248.6 |  |  | 248.3 |
FHLB borrowing |  | 0.00% |  | 2022 |  | 5.0 |  |  | 54.0 |
Total |  |  |  |  |  | $ | 502.6 |  |  | $ | 437.3 |

(1) We designate our debt obligations as "long-term" based on maturity date at issuance.
As of December 31, 2021, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (Senior Notes), which mature on December 1, 2025, issued at a discount resulting in an effective yield of 4.53%. Interest on the Senior Notes is payable semi-annually at a rate of 4.50%. Detailed information regarding the redemption terms of the Senior Notes is contained in Part II - Item 8, Note 10 of the Consolidated Financial Statements in this report. The Senior Notes are traded in the open market (HMN 4.50).
As of December 31, 2021, we had $5.0 million of 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. The total $5.0 million received matures on May 16, 2022 and is reported as Long-term debt in the Consolidated Balance Sheets.
Effective July 12, 2021, we, as borrower, amended our Credit Agreement (Bank Credit Facility). The amended Bank Credit Facility increased the amount available on the senior revolving credit facility from $225.0 million to $325.0 million. PNC Bank, National Association and JPMorgan Chase Bank, N.A. serve as joint lead arrangers under the amended Bank Credit Facility, with The Northern Trust Company, KeyBank National Association, U.S. Bank National Association, Illinois National Bank, and Comerica Bank as lenders participating in the syndicate. Terms and conditions of the amended Bank Credit Facility are substantially consistent with the prior agreement, with an interest rate based on LIBOR plus 115 basis points.
On December 31, 2021, we utilized $114.0 million of the senior revolving credit facility to fund a portion of the acquisition of Madison National that occurred effective January 1, 2022, resulting in an amount outstanding of $249.0 million. We expect that the unused portion of the senior revolving credit facility will be available for ongoing working capital, capital expenditures and general corporate expenditures. The unused portion of the Bank Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis at December 31, 2021.
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. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K.
On March 13, 2018, we filed a "shelf" registration statement on Form S-4 with the SEC which became effective on May 2, 2018. Under this registration statement, we may from time to time offer and issue up to 5,000,000 shares of our common stock in connection with future acquisitions of other businesses, assets or securities. Unless withdrawn by us, this registration statement remains effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 63

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. A.M. Best currently rates our NTA Life subsidiary at the same level as our Property & Casualty and Life & Retirement subsidiaries. On February 9, 2022, A.M. Best removed from under review with developing implications and affirmed Madison National’s Financial Strength Rating of A- (Excellent) following its acquisition by Horace Mann. Assigned ratings and respective affirmation/review dates as of February 18, 2022 were as follows:

|  | Insurance Financial Strength Ratings (Outlook) |  | Debt Ratings (Outlook) |  | Affirmed/Reviewed
A.M. Best |  |  |  |  |  |  |  |  |  |
HMEC (parent company) |  | N.A. |  |  |  | bbb |  | (stable) |  | 7/14/2021
HMEC's Life & Retirement subsidiaries |  | A |  | (stable) |  | N.A. |  |  |  | 7/14/2021
HMEC's Property & Casualty subsidiaries |  | A |  | (stable) |  | N.A. |  |  |  | 7/14/2021
HMEC's Supplemental & Group Benefits subsidiaries |  |  |  |  |  |  |  |  |  |
Madison National Life Insurance Company |  | A- |  | (stable) |  | N.A. |  |  |  | 2/09/2022
National Teachers Associates Life Insurance Company |  | A |  | (stable) |  | N.A. |  |  |  | 7/14/2021
Fitch |  | A |  | (stable) |  | BBB |  | (stable) |  | 9/14/2021
Moody's |  | A2 |  | (stable) |  | Baa2 |  | (stable) |  | 10/28/2021
S&P |  | A |  | (stable) |  | BBB |  | (stable) |  | 2/14/2022

Reinsurance Programs
Information regarding the reinsurance programs for our Property & Casualty, Supplemental, Retirement and Life segments are located in Part I - Item 1, Reporting Segments of this report.
Future Adoption of New Accounting Standards
There is one new accounting standard that we have not adopted because the adoption date has not yet occurred. For a discussion of this new standard, see Part II - Item 8, Note 1 of the Consolidated Financial Statements in this report. The effect of implementing certain accounting standards on our financial results and financial condition is often based in part on market conditions at the time of implementation of the standard and other factors that we are unable to determine prior to implementation. For this reason, we are sometimes unable to estimate the effect of certain pending accounting standards until the relevant authoritative body finalizes these standards or until we implement them.
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 interest rate fluctuation is managed through asset/liability management techniques, including cash flow analysis. In addition, an annuity reinsurance agreement entered into in the second quarter of 2019, which reinsured a $2.2 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.

64 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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 report 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 report 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. At December 31, 2021, approximately 11.6% of the fixed maturity securities portfolio supported Property & Casualty, 9.6% supported Supplemental, and 78.8% supported Retirement and Life. For 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 report.
Our Retirement and Life 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 report 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, at December 31, 2021, the duration of the fixed maturity securities portfolio was estimated to be approximately 6.7 years and the duration of our insurance liabilities and debt was estimated to be approximately 6.5 years.
Retirement and Life 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 65

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 decrease in shareholders' equity of approximately $108.0 million after tax, or 10.0%. 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 $34.0 million after tax, or 3.0%. 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 continue to be at historically low levels. If interest rates remain low over an extended period of time, we recognize it could pressure investment income by having to invest insurance cash flows and reinvest the cash flows from the investment portfolio in lower yielding securities. Moreover, issuers of securities in our investment portfolio may prepay or redeem fixed maturity securities, as well as asset-backed and commercial and mortgage-backed securities, with greater frequency to borrow at lower market rates. As a general guideline, we estimate that pretax net income in 2022 and 2023 would decrease by approximately $8.5 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 amortization of DAC, as well as the recoverability of goodwill and certain intangible assets, due to the impacts on the estimated fair value of our operating segments.
We have been and continue to be proactive in our investment strategies, product designs and crediting rate strategies to mitigate the risk of unfavorable consequences in this type of interest rate environment without venturing into asset classes or individual securities that would be inconsistent with our investment guidelines. Lowering interest crediting rates on annuity contracts and cap and participation rates on fixed indexed annuity contracts can help offset decreases in investment margins on some products. Our ability to lower interest crediting rates could be limited by competition, regulatory approval or contractual guarantees of minimum rates and may not match the timing or magnitude of changes in investment yields.
Based on our overall exposure to interest rate risk, we believe that these changes in interest rates would not materially affect our consolidated near-term financial position, results of operations or cash flows.

66 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

ITEM 8. I Financial Statements and Supplementary Data
HORACE MANN EDUCATORS CORPORATION
INDEX TO FINANCIAL INFORMATION

|  | Page
Report of Independent Registered Public Accounting Firm |  | 68
Consolidated Balance Sheets |  | 71
Consolidated Statements of Operations and Comprehensive Income (Loss) |  | 72
Consolidated Statements of Changes in Shareholders' Equity |  | 73
Consolidated Statements of Cash Flows |  | 74
Notes to Consolidated Financial Statements |  | 75
Note 1 - Basis of Presentation and Significant Accounting Policies |  | 75
Note 2 - Subsequent Events |  | 87
Note 3 - Investments |  | 87
Note 4 - Fair Value of Financial Instruments |  | 93
Note 5 - Derivatives |  | 100
Note 6 - Deposit Asset on Reinsurance |  | 102
Note 7 - Goodwill and Intangible Assets |  | 103
Note 8 - Unpaid Claims and Claim Expenses |  | 105
Note 9 - Reinsurance and Catastrophes |  | 112
Note 10 - Debt |  | 114
Note 11 - Income Taxes |  | 115
Note 12 - Operating Leases |  | 118
Note 13 - Shareholders' Equity and Share-Based Compensation |  | 119
Note 14 - Statutory Information and Dividend Restrictions |  | 122
Note 15 - Retirement Plans and Other Postretirement Benefits |  | 122
Note 16 - Contingencies and Commitments |  | 127
Note 17 - Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) |  | 128
Note 18 - Supplemental Consolidated Cash and Cash Flow Information |  | 130
Note 19 - Segment Information |  | 130

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 67

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, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedules I to IV and VI (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, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, 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, 2021, 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 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

68 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

Fair value for hard-to-value fixed maturity securities
As discussed in Note 4 to the consolidated financial statements, as of December 31, 2021, 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, 2021, the estimated fair value of fixed maturity securities was $6,239.3 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, for 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 expenses
As discussed in Notes 1 and 8 of the consolidated financial statements, the Company employs actuarial techniques to estimate the liability for property and casualty unpaid claims and claims expenses (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 $252.1 million for property and casualty unpaid claims and claim expenses as of December 31, 2021.
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, 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 69

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 judgements by comparing to generally accepted actuarial standards
•developing an independent estimate for certain lines of business based on actuarial methodologies and assumptions in order to evaluate the Company’s recorded reserves
•examining the methods and certain assumptions used in and results of the Company’s internal actuarial analyses for certain remaining lines of business
•developing a range of reserves based on actuarial methodologies and assumptions in order to evaluate the Company’s consolidated reserves
•assessing movement of the Company’s consolidated reserves within the range of reserves
/s/ KPMG LLP
KPMG LLP
We have served as the Company’s auditor since 1989.
Chicago, Illinois
February 25, 2022

70 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in millions, except share data)

|  | December 31,
|  | 2021 |  | 2020
Assets |  |  |  |
Investments |  |  |  |
Fixed maturity securities, available for sale, at fair value (amortized cost, net 2021, $5,797.7; 2020, $5,788.6) |  | $ | 6,239.3 |  |  | $ | 6,345.3 |
Equity securities at fair value |  | 147.2 |  |  | 121.6 |
Limited partnership interests |  | 712.8 |  |  | 449.0 |
Short-term and other investments |  | 350.2 |  |  | 346.3 |
Total investments |  | 7,449.5 |  |  | 7,262.2 |
Cash |  | 133.7 |  |  | 22.3 |
Deferred policy acquisition costs |  | 248.0 |  |  | 229.8 |
Deposit asset on reinsurance |  | 2,481.5 |  |  | 2,420.9 |
Intangible assets |  | 145.4 |  |  | 158.5 |
Goodwill |  | 43.5 |  |  | 43.5 |
Other assets |  | 441.3 |  |  | 443.2 |
Separate Account (variable annuity) assets |  | 3,441.0 |  |  | 2,891.4 |
Total assets |  | $ | 14,383.9 |  |  | $ | 13,471.8 |
Liabilities and Shareholders' Equity |  |  |  |
Policy liabilities |  |  |  |
Investment contract and policy reserves |  | $ | 6,577.8 |  |  | $ | 6,445.3 |
Unpaid claims and claim expenses |  | 425.9 |  |  | 438.8 |
Unearned premiums |  | 255.1 |  |  | 264.5 |
Total policy liabilities |  | 7,258.8 |  |  | 7,148.6 |
Other policyholder funds |  | 945.9 |  |  | 751.3 |
Other liabilities |  | 428.2 |  |  | 453.1 |
Short-term debt |  | 249.0 |  |  | 135.0 |
Long-term debt |  | 253.6 |  |  | 302.3 |
Separate Account (variable annuity) liabilities |  | 3,441.0 |  |  | 2,891.4 |
Total liabilities |  | 12,576.5 |  |  | 11,681.7 |
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, 2021, 66,436,821; 2020, 66,316,797 |  | 0.1 |  |  | 0.1 |
Additional paid-in capital |  | 495.3 |  |  | 488.4 |
Retained earnings |  | 1,524.9 |  |  | 1,434.6 |
Accumulated other comprehensive income (loss), net of tax: |  |  |  |
Net unrealized investment gains on fixed maturity securities |  | 290.7 |  |  | 366.3 |
Net funded status of benefit plans |  | (10.2) |  |  | (11.2) |
Treasury stock, at cost, 2021, 25,043,337 shares; 2020, 24,902,579 shares |  | (493.4) |  |  | (488.1) |
Total shareholders' equity |  | 1,807.4 |  |  | 1,790.1 |
Total liabilities and shareholders' equity |  | $ | 14,383.9 |  |  | $ | 13,471.8 |

See accompanying Notes to Consolidated Financial Statements.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 71

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
($ in millions, except per share data)

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Statements of Operations |  |  |  |  |  |
Revenues |  |  |  |  |  |
Premiums and contract charges earned |  | $ | 889.6 |  |  | $ | 930.7 |  |  | $ | 898.0 |
Net investment income |  | 422.5 |  |  | 357.6 |  |  | 365.1 |
Net investment (losses) gains |  | (11.0) |  |  | (2.3) |  |  | 153.3 |
Other income |  | 29.0 |  |  | 24.4 |  |  | 14.1 |
Total revenues |  | 1,330.1 |  |  | 1,310.4 |  |  | 1,430.5 |
Benefits, losses and expenses |  |  |  |  |  |
Benefits, claims and settlement expenses |  | 617.7 |  |  | 568.9 |  |  | 585.1 |
Interest credited |  | 164.4 |  |  | 204.6 |  |  | 212.8 |
Operating expenses |  | 251.5 |  |  | 237.8 |  |  | 234.6 |
DAC unlocking and amortization expense |  | 94.7 |  |  | 99.9 |  |  | 109.2 |
Intangible asset amortization expense |  | 13.0 |  |  | 14.4 |  |  | 8.8 |
Interest expense |  | 13.9 |  |  | 15.2 |  |  | 15.6 |
Other expense - goodwill and intangible asset impairments |  | — |  |  | 10.0 |  |  | 28.0 |
Total benefits, losses and expenses |  | 1,155.2 |  |  | 1,150.8 |  |  | 1,194.1 |
Income before income taxes |  | 174.9 |  |  | 159.6 |  |  | 236.4 |
Income tax expense |  | 32.1 |  |  | 26.3 |  |  | 52.0 |
Net income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Net income per share |  |  |  |  |  |
Basic |  | $ | 3.40 |  |  | $ | 3.18 |  |  | $ | 4.42 |
Diluted |  | $ | 3.39 |  |  | $ | 3.17 |  |  | $ | 4.40 |
Weighted average number of shares and equivalent shares |  |  |  |  |  |
Basic |  | 42.0 |  |  | 41.9 |  |  | 41.7 |
Diluted |  | 42.2 |  |  | 42.0 |  |  | 41.9 |
Statements of Comprehensive Income (Loss) |  |  |  |  |  |
Net income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |
Change in net unrealized investment gains (losses) on fixed maturity securities |  | (75.6) |  |  | 135.9 |  |  | 133.5 |
Change in net funded status of benefit plans |  | 1.0 |  |  | (0.4) |  |  | 1.4 |
Other comprehensive income (loss) |  | (74.6) |  |  | 135.5 |  |  | 134.9 |
Comprehensive income |  | $ | 68.2 |  |  | $ | 268.8 |  |  | $ | 319.3 |

See accompanying Notes to Consolidated Financial Statements.

72 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($ in millions, except per share data)

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Common stock, $0.001 par value |  |  |  |  |  |
Beginning balance |  | $ | 0.1 |  |  | $ | 0.1 |  |  | $ | 0.1 |
Options exercised |  | — |  |  | — |  |  | — |
Conversion of common stock units |  | — |  |  | — |  |  | — |
Conversion of restricted common stock units |  | — |  |  | — |  |  | — |
Ending balance |  | 0.1 |  |  | 0.1 |  |  | 0.1 |
Additional paid-in capital |  |  |  |  |  |
Beginning balance |  | 488.4 |  |  | 481.0 |  |  | 475.1 |
Options exercised and conversion of common stock units and restricted stock units |  | (0.8) |  |  | 1.5 |  |  | (0.5) |
Share-based compensation expense |  | 7.7 |  |  | 5.9 |  |  | 6.4 |
Ending balance |  | 495.3 |  |  | 488.4 |  |  | 481.0 |
Retained earnings |  |  |  |  |  |
Beginning balance |  | 1,434.6 |  |  | 1,352.5 |  |  | 1,216.6 |
Net income |  | 142.8 |  |  | 133.3 |  |  | 184.4 |
Dividends, 2021, $1.24 per share; 2020, $1.20 per share; 2019, $1.15 per share |  | (52.5) |  |  | (50.7) |  |  | (48.5) |
Cumulative effect of change in accounting principle |  | — |  |  | (0.5) |  |  | — |
Ending balance |  | 1,524.9 |  |  | 1,434.6 |  |  | 1,352.5 |
Accumulated other comprehensive income (loss), net of tax: |  |  |  |  |  |
Beginning balance |  | 355.1 |  |  | 219.6 |  |  | 84.7 |
Change in net unrealized investment gains (losses) on fixed maturity securities |  | (75.6) |  |  | 135.9 |  |  | 133.5 |
Change in net funded status of benefit plans |  | 1.0 |  |  | (0.4) |  |  | 1.4 |
Ending balance |  | 280.5 |  |  | 355.1 |  |  | 219.6 |
Treasury stock, at cost |  |  |  |  |  |
Beginning balance |  | (488.1) |  |  | (485.9) |  |  | (485.9) |
Acquisition of shares |  | (5.3) |  |  | (2.2) |  |  | — |
Ending balance |  | (493.4) |  |  | (488.1) |  |  | (485.9) |
Shareholders' equity at end of year |  | $ | 1,807.4 |  |  | $ | 1,790.1 |  |  | $ | 1,567.3 |

See accompanying Notes to Consolidated Financial Statements.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 73

HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Cash flows - operating activities |  |  |  |  |  |
Net income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Net investment (gains) losses |  | 11.0 |  |  | 2.3 |  |  | (153.3) |
Depreciation and intangible asset amortization |  | 18.4 |  |  | 23.4 |  |  | 15.6 |
Share-based compensation expense |  | 8.4 |  |  | 6.7 |  |  | 7.3 |
Other expense - goodwill and intangible asset impairments |  | — |  |  | 10.0 |  |  | 28.0 |
Income from equity method investments, net of dividends or distributions |  | (41.5) |  |  | (2.7) |  |  | (9.1) |
Changes in: |  |  |  |  |  |
Accrued investment income |  | 0.8 |  |  | (1.6) |  |  | 46.9 |
Insurance liabilities |  | 46.9 |  |  | 69.9 |  |  | (96.8) |
Reinsurance recoverables |  | (1.5) |  |  | 1.6 |  |  | 22.0 |
Income tax liabilities |  | 8.5 |  |  | 8.3 |  |  | 28.8 |
Other operating assets and liabilities |  | 8.1 |  |  | 0.6 |  |  | 47.4 |
Other |  | 3.0 |  |  | 8.0 |  |  | 6.4 |
Net cash provided by operating activities |  | 204.9 |  |  | 259.8 |  |  | 127.6 |
Cash flows - investing activities |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |
Purchases |  | (1,459.0) |  |  | (1,439.7) |  |  | (1,058.7) |
Sales |  | 578.2 |  |  | 472.9 |  |  | 805.9 |
Maturities, paydowns, calls and redemptions |  | 873.3 |  |  | 640.3 |  |  | 799.5 |
Equity securities |  |  |  |  |  |
Purchases |  | (46.1) |  |  | (37.4) |  |  | (15.6) |
Sales and repayments |  | 4.7 |  |  | 12.7 |  |  | 33.5 |
Limited partnership interests |  |  |  |  |  |
Purchases |  | (320.6) |  |  | (98.6) |  |  | (129.4) |
Sales |  | 86.5 |  |  | 30.9 |  |  | 91.5 |
Change in short-term and other investments, net |  | (19.0) |  |  | 12.1 |  |  | (49.3) |
Acquisition of businesses, net of cash acquired |  | — |  |  | — |  |  | (421.5) |
Net cash (used in) provided by investing activities |  | (302.0) |  |  | (406.8) |  |  | 55.9 |
Cash flows - financing activities |  |  |  |  |  |
Dividends paid to shareholders |  | (51.4) |  |  | (49.6) |  |  | (47.3) |
Principal borrowings on Bank Credit Facility |  | 114.0 |  |  | — |  |  | 135.0 |
FHLB borrowings |  | 5.0 |  |  | 4.0 |  |  | — |
Principal repayment on FHLB borrowings |  | (54.0) |  |  | — |  |  | — |
Acquisition of treasury stock |  | (5.3) |  |  | (2.2) |  |  | — |
Proceeds from exercise of stock options |  | 0.3 |  |  | 2.4 |  |  | 1.7 |
Withholding tax payments on RSUs tendered |  | (2.0) |  |  | (2.3) |  |  | (3.7) |
Annuity contracts: variable, fixed and FHLB funding agreements |  |  |  |  |  |
Deposits |  | 1,060.4 |  |  | 578.9 |  |  | 637.5 |
Benefits, withdrawals and net transfers to Separate Account (variable annuity) assets |  | (462.7) |  |  | (378.6) |  |  | (419.0) |
Principal repayment on FHLB funding agreements |  | (362.0) |  |  | — |  |  | (305.0) |
Life policy accounts |  |  |  |  |  |
Deposits |  | 8.9 |  |  | 9.0 |  |  | 9.4 |
Withdrawals and surrenders |  | (3.8) |  |  | (3.9) |  |  | (3.5) |
Change in deposit asset on reinsurance |  | (39.2) |  |  | (21.2) |  |  | (150.4) |
Change in book overdrafts |  | 0.3 |  |  | 7.3 |  |  | (24.6) |
Net cash provided by (used in) financing activities |  | 208.5 |  |  | 143.8 |  |  | (169.9) |
Net increase (decrease) in cash |  | 111.4 |  |  | (3.2) |  |  | 13.6 |
Cash at beginning of year |  | 22.3 |  |  | 25.5 |  |  | 11.9 |
Cash at end of year |  | $ | 133.7 |  |  | $ | 22.3 |  |  | $ | 25.5 |

See accompanying Notes to Consolidated Financial Statements.

74 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020 and 2019
($ 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 auto and property insurance), supplemental insurance products (primarily cancer, heart, hospital, supplemental disability and accident coverages), retirement products (primarily tax-qualified fixed and variable annuities) and life insurance products, primarily to K-12 teachers, administrators and other employees of public schools and their families (collectively, HMEC, the Company or Horace Mann).
Basis of Presentation
The accompanying audited consolidated financial statements have been prepared in accordance 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 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, disclosure of contingent assets and liabilities at the 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, evaluation of goodwill and intangible assets for impairment, valuation of annuity and life deferred policy acquisition costs, valuation of liabilities for property and casualty unpaid claims and claim expenses and valuation of certain investment contracts and policy 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 4 – Fair Value of Financial Instruments – Investments for a detailed description of how the Company estimates fair value for its fixed maturity securities portfolio including hard-to-value securities. An adjustment for net unrealized investment gains (losses) on all fixed maturity securities available for sale and carried at fair value, is recognized as a separate component of accumulated other comprehensive income (AOCI) within shareholders’ equity, net of applicable deferred taxes and the related impact on deferred policy acquisition costs (DAC) associated with annuity contracts and life insurance products with account values that would have occurred if the securities had been sold at their aggregate fair value and the proceeds reinvested at current yields. The Company excludes accrued interest receivable from the amortized cost basis of its AFS fixed maturity securities.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 75

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 funds, private equity funds, infrastructure debt funds, infrastructure equity funds and other funds.
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 fair value. Other investments primarily consist of policy loans, Federal Home Loan Bank of Chicago (FHLB) common stock, mortgage loans and derivatives. Policy loans are carried at unpaid principal balances. 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, including corporate securities, mortgage-backed securities and asset-backed securities. 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 receivable is monitored for recoverability and when not expected to be collected is 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 from investees.
The Company reports accrued investment income separately from AFS fixed maturity securities and has elected not to measure an allowance for credit losses for accrued investment income. Accrued investment income is written-off and recognized as a net investment loss at the time the issuer of the security defaults or is expected to default on payments.
Net Investment Gains (Losses)
Net investment gains (losses) include gains and losses on investment sales, changes in the credit loss allowances related to fixed maturity securities and mortgage loans, impairments, valuation changes of equity securities and periodic changes in fair value and settlements of derivatives. Net investment gains (losses) on investment sales are determined on a specific identification basis and are net of credit losses already recognized through an allowance.

76 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Credit Loss Impairments for Fixed Maturity Securities
For AFS fixed maturity securities, 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 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 is recorded. The Company has a comprehensive portfolio monitoring process to evaluate fixed maturity securities (at the cusip/issuer level) on a quarterly basis that may require a credit loss allowance. These reviews, in conjunction with our investment managers’ monthly credit reports and relevant factors such as (1) the financial condition and near-term prospects of the issuer; (2) the Company’s intent to sell a security or whether it is more likely than not that the Company will be required to sell a security before the anticipated recovery in value; (3) the market leadership of the issuer; (4) the debt ratings of the issuer; and (5) the cash flows and liquidity of the issuer or the underlying cash flows for asset-backed securities , are all considered in the impairment assessment.
For each fixed maturity security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not that the Company 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 would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with the incremental losses recorded as a net investment loss.
If the Company has not made the decision to sell the fixed maturity security and it is not more likely than not that the Company will be required to sell the fixed maturity security before the anticipated recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company estimates the anticipated recovery value 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 current effective rate and are compared to the amortized cost basis of the security. The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant to the collectability of the security are considered when developing the estimate of cash flows expected to be collected. That information 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, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. 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. The estimated fair value of collateral will be used to estimate the anticipated recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement.
If the Company does 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 the Company determines that the fixed maturity security does not have sufficient cash flows or other information to estimate a recovery value for the security, the Company may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded as a net investment loss.
When a security is sold or otherwise disposed or the security is deemed uncollectible and written off, the Company removes amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received.
Prior to the adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments on January 1, 2020, when other-than-temporary impairment was deemed to have occurred, the investment in the fixed maturity security would be written-down to fair value which became the new cost basis for the security.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 77

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Deferred Policy Acquisition Costs
The Company's deferred policy acquisition costs (DAC) by reporting segment were as follows:

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Property & Casualty |  | $ | 24.4 |  |  | $ | 26.1 |
Supplemental |  | 4.2 |  |  | 4.3 |
Retirement |  | 153.8 |  |  | 137.7 |
Life |  | 65.6 |  |  | 61.7 |
Total |  | $ | 248.0 |  |  | $ | 229.8 |

DAC consists of commissions, policy issuance and other costs which are incremental and directly related to the successful acquisition of new or renewal business, which are deferred and amortized on a basis consistent with the type of insurance coverage. For property and casualty risks, DAC is amortized over the terms of the insurance policies (6 or 12 months). For supplemental policies, DAC is amortized in proportion to anticipated premiums over the terms of the insurance policies (approximately 7 years, based on an estimated average duration across all supplemental products). For all annuity contracts, DAC is amortized over 20 years in proportion to estimated gross profits. DAC is amortized in proportion to estimated gross profits over 20 years for certain life insurance products with account values and over 30 years for indexed universal life (IUL) products. For other individual life contracts, DAC is amortized in proportion to anticipated premiums over the terms of the insurance policies (10, 15, 20, 30 years).
The Company periodically reviews the assumptions and estimates used in DAC and also periodically reviews its estimations of gross profits, a process sometimes referred to as "unlocking". The most significant assumptions that are involved in the estimation of annuity gross profits include interest rate spreads, future financial market performance, business surrender/lapse rates, expenses and the impact of net investment gains (losses) on fixed maturity and equity securities. For the variable deposit portion of Retirement, the Company amortizes DAC utilizing a future financial market performance assumption of an 8% reversion to the mean approach with a 200 basis point corridor around the mean during the reversion period, representing a cap and a floor on the Company's long-term assumption. The Company's practice with regard to future financial market performance assumes that long-term appreciation in the financial markets is not changed by short-term market fluctuations, but is only changed when sustained deviations are experienced. The Company monitors these fluctuations and only changes the assumption when long-term expectations change.
The most significant assumptions that are involved in the estimation of life insurance gross profits include interest rates expected to be received on investments, business persistency, and mortality. Conversions from term to permanent insurance cause an immediate write down of the associated DAC.
The most significant assumptions that are involved in the estimation of supplemental gross profits include morbidity, persistency, expenses and interest rates expected to be received on investments. When a supplemental policy lapses, there is an immediate write down of the associated DAC.
Annually, the Company performs a gross premium valuation (GPV) on life insurance policies 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 DAC asset, in aggregate for the life insurance block, a loss would be recognized by first writing off the DAC asset and then increasing the liability.
In the event actual experience differs significantly from assumptions or assumptions are significantly revised, the Company may be required to recognize a material charge or credit to current period DAC amortization expense for the period in which the adjustment is made. The Company recognized the following adjustments to DAC amortization expense as a result of evaluating actual experience and prospective assumptions (i.e., the impact of unlocking):

78 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
(Decrease) increase to DAC amortization expense: |  |  |  |  |  |
Retirement |  | $ | (1.3) |  |  | $ | (1.8) |  |  | $ | 3.5 |
Life |  | (0.2) |  |  | (0.3) |  |  | (0.3) |
Total |  | $ | (1.5) |  |  | $ | (2.1) |  |  | $ | 3.2 |

DAC for annuity contracts and life insurance products with account values are adjusted for the impact on estimated future gross profits as if net unrealized investment gains (losses) on fixed maturity securities had been realized at the reporting date. This adjustment reduced DAC by $71.9 million, $90.5 million and $41.2 million at December 31, 2021, 2020 and 2019, respectively. The after tax impact of this adjustment is included in AOCI (along with net unrealized investment gains (losses) on fixed maturity securities) within shareholders' equity.
DAC is reviewed for recoverability from future income, including net investment income, and costs that are deemed unrecoverable are expensed in the period in which the determination is made. No such costs were deemed unrecoverable during the years ended December 31, 2021, 2020 and 2019.
Intangible Assets
The value of business acquired (VOBA) 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 was $76.9 million as of December 31, 2021 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 $6.2 million in 2022, $5.8 million in 2023, $5.4 million in 2024, $5.1 million in 2025 and $4.7 million in 2026.
The Company accounts for the value of distribution acquired (VODA) associated with the acquisition of NTA Life Enterprises, LLC (NTA) based on an actuarial estimate of the present value of future business to be written by the existing distribution channel. VODA was $41.8 million as of December 31, 2021 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 2022 through 2026, respectively.
The Company accounts for VODA associated with the acquisition of Benefit Consultants Group, Inc. (BCG) based on management's estimate of the present value of future business to be written by the existing distribution channel. VODA was $0.6 million as of December 31, 2021 and is being amortized based on the present value of future profits to be received. The Company estimates that it will recognize cumulative VODA amortization of $0.3 million for the years 2022 through 2026.
The Company accounts for the value of agency relationships based on the present value of commission overrides retained by NTA. Agency relationships was $10.7 million as of December 31, 2021 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 $1.9 million in 2022, $1.6 million in 2023, $1.4 million in 2024, $1.2 million in 2025 and $1.0 million in 2026.
The Company accounts for the value of customer relationships based on the present value of expected profits from existing BCG customers in force at the date of acquisition. Customer relationships was $4.6 million as of December 31, 2021 and is being amortized based on the present value of future profits to be received. The Company estimates that it will recognize customer relationships amortization of $1.1 million in 2022, $0.9 million in 2023, $0.7 million in 2024, $0.6 million in 2025 and $0.5 million in 2026.
Trade names represents the present value of future savings accruing to NTA and BCG by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. State licenses represents the regulatory licenses held by NTA that were valued using the cost approach. Both 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

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 79

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 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, 2021.
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. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of an intangible asset that is not subject to amortization exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.
At October 1, 2021, the Company performed both qualitative assessments and quantitative impairment tests for intangible assets and concluded that no impairments were warranted.
At October 1, 2020, the Company performed qualitative assessments to determine whether it was necessary to perform quantitative intangible asset impairment tests. Based on the assessments 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 was less than its carrying amount with exception to VODA and trade names intangible assets assigned to BCG, for which quantitative intangible asset impairment tests were performed that resulted in intangible asset impairment charges of $4.4 million in aggregate.
Goodwill
When the Company was acquired from CIGNA Corporation by HME Holdings, Inc. in 1989, intangible assets were recognized as goodwill in the application of purchase accounting. In addition, goodwill was recognized in 1994 related to the acquisition of Horace Mann Property & Casualty Insurance Company and in 2019 related to the acquisitions of BCG and NTA.
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 equivalent to the Company's operating segments. Refer to Note 7 for the allocation of goodwill by reporting unit as of December 31, 2021.
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. In 2019, the Company adopted guidance to eliminate Step 2 of the goodwill impairment test. Goodwill impairment is now 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.

80 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 1 - Basis of Presentation and Significant Accounting Policies (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.
At October 1, 2020, 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 exception to lower than anticipated BCG wealth management sales outside of the education markets which triggered an impairment of the goodwill associated with the BCG business of the Retirement reporting unit. 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 $5.6 million goodwill impairment charge.
During each year from 2019 through 2021, the Company completed the required annual goodwill impairment testing. With exception to the goodwill impairment charges described in Note 7, 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 range from 20 to 45 years. The estimated useful lives of leasehold improvements and other property and equipment, including capitalized software, generally range from 3 to 10 years. The following amounts are included in Other assets in the Consolidated Balance Sheets:

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Property and equipment |  | $ | 136.4 |  |  | $ | 131.3 |
Less: accumulated depreciation |  | 70.4 |  |  | 66.6 |
Total |  | $ | 66.0 |  |  | $ | 64.7 |

Separate Account (Variable Annuity) Assets and Liabilities
Separate Account assets represent variable annuity contractholder funds invested in various mutual funds. The Separate Account 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 assets are invested are obtained daily from the fund managers. Separate Account liabilities are equal to the estimated fair value of Separate Account 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 except for (1) contract charges earned, (2) the activity related to contract guarantees, which are benefits on existing variable annuity contracts, and (3) the impact of financial market performance on the amortization of DAC. 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.
Investment Contract and Policy Reserves
This table summarizes the Company's investment contract and policy reserves.

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Investment contract reserves |  | $ | 4,941.3 |  |  | $ | 4,847.6 |
Policy reserves |  | 1,636.5 |  |  | 1,597.7 |
Total |  | $ | 6,577.8 |  |  | $ | 6,445.3 |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 81

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Liabilities for future benefits on supplemental, life and annuity policies are established in amounts adequate to meet the estimated future obligations on policies in force.
Liabilities for future policy benefits on certain supplemental and life insurance policies are computed using the net level premium method including assumptions as to investment yields, mortality, morbidity, persistency, expenses and other assumptions based on the Company's experience, including a provision for adverse deviation. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. If experience is less favorable than the assumptions, additional liabilities may be established, resulting in recognition of a loss for that period.
Liabilities for future benefits on annuity contracts and certain long-duration life insurance contracts are carried at accumulated policyholder values without reduction for potential surrender or withdrawal charges. The liability also includes provisions for the unearned portion of certain policy charges.
A guaranteed minimum death benefit (GMDB) generally provides an additional benefit if the contractholder dies and the variable annuity contract value is less than a contractually defined amount. The Company has estimated and recorded a GMDB reserve on variable annuity contracts in accordance with GAAP. Contractually defined amounts vary from contract to contract based on the date the contract was entered into as well as the GMDB feature elected by the contractholder. The Company regularly monitors the GMDB reserve considering fluctuations in financial markets. The Company has relatively low exposure to GMDB risk as shown below.

($ in millions) |  | December 31,
|  | 2021 |  | 2020
GMDB reserve |  | $ | 0.1 |  |  | $ | 0.1 |
Aggregate in-the-money death benefits under the GMDB provision |  | 22.3 |  |  | 26.7 |
Variable annuity contract value distribution based on GMDB feature: |  |  |  |
No guarantee |  | 24 | % |  | 26 | %
Return of premium guarantee |  | 71 | % |  | 69 | %
Guarantee of premium roll-up at an annual rate of 3% or 5% |  | 5 | % |  | 5 | %
Total |  | 100 | % |  | 100 | %

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 related to FIA products. 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. The embedded derivative is bifurcated from the host contract and included in Other policyholder funds 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, 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. The Company elected to not use hedge accounting for derivative transactions related to the IUL products. 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. IUL policies with a balance in one or more indexed accounts are considered to have an

82 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 Investment contract and life policy reserves in the Consolidated Balance Sheets.
See Note 4 for more information regarding the determination of fair value for derivatives embedded in FIA and IUL and purchased call options.
Unpaid Claims and Claim Expenses
Liabilities for Property & Casualty unpaid claims and claim expenses 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. Due to the nature of the Company's personal lines business, the Company has no exposure to losses related to claims for toxic waste cleanup, other environmental remediation or asbestos-related illnesses other than claims under property insurance policies for environmentally related items such as mold.
Other Policyholder Funds
Other policyholder funds includes payout annuity contracts without life contingencies and dividend accumulations, as well as balances outstanding under funding agreements with the Federal Home Loan Bank of Chicago (FHLB) and embedded derivatives related to FIA products. Except for embedded derivatives, each of these components is carried at cost. Embedded derivatives are carried at fair value. 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
In 2013, Horace Mann Life Insurance Company (HMLIC), and in 2019, NTA became members of FHLB, which provides both 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 15% of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB advances and funding agreements combined. In 2021, HMLIC and NTA collectively received advances of $554.0 million from FHLB under funding agreements and repaid $362.0 million on FHLB funding agreements. Outstanding advances under FHLB funding agreements are reported as Other policyholder funds in the Consolidated Balance Sheets and totaled $782.5 million as of December 31, 2021. Interest on the funding agreements accrues at their effective interest rates.
As of December 31, 2021, scheduled maturity dates for outstanding FHLB funding agreements were as follows:

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 83

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)

($ in millions) |  |  |  |  |  |
|  | Amount |  | Interest Rate |  | Maturity Date
|  | $10.0 |  | 0.000% |  | May 16, 2022
|  | 60.0 |  | 0.489% |  | January 13, 2023
|  | 25.0 |  | 0.427% |  | February 10, 2023
|  | 20.0 |  | 0.446% |  | November 15, 2023
|  | 100.0 |  | 0.249% |  | December 15, 2023
|  | 50.0 |  | 0.449% |  | January 12, 2024
|  | 25.0 |  | 0.374% |  | April 3, 2024
|  | 10.0 |  | 0.393% |  | May 22, 2024
|  | 50.0 |  | 0.393% |  | May 22, 2024
|  | 10.0 |  | 0.530% |  | February 14, 2025
|  | 10.0 |  | 0.448% |  | February 28, 2025
|  | 50.0 |  | 0.448% |  | February 28, 2025
|  | 12.5 |  | 0.670% |  | June 26, 2025
|  | 125.0 |  | 0.570% |  | September 11, 2025
|  | 200.0 |  | 0.225% |  | January 16, 2026
|  | 25.0 |  | 0.298% |  | September 9, 2026
Total |  | $782.5 |  |  |  |

Reinsurance
The Company enters into reinsurance arrangements pursuant to which it cedes certain insurance risks to unaffiliated reinsurers. Cessions under reinsurance agreements do not discharge the Company's obligations as the primary insurer. The accounting for reinsurance arrangements depends on whether the arrangement provides indemnification against loss or liability relating to insurance risk in accordance with GAAP.
If the Company determines that a reinsurance agreement exposes the reinsurer to a reasonable possibility of a significant loss from insurance risk, the ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of its legal liability to its policyholders. See Note 9 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 6 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 long-term traditional life and supplemental 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.

84 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
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 13.
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, 2021, 2020 and 2019, the Company recognized $1.2 million, $1.1 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, 2021, 2020 and 2019, the Company recognized $6.6 million, $4.8 million and $5.2 million, respectively, of RSU expense as a result of the performance and/or vesting of RSUs during the respective periods.
In 2021, 2020 and 2019, the Company granted stock options as quantified in the table below, which also provides the weighted average grant date fair value for stock options granted in each year. The fair value of stock options granted was estimated on the respective dates of grant using the Black-Scholes option pricing model with the weighted average assumptions shown in the following table.

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Number of stock options granted |  | 183,272 |  |  | 234,248 |  |  | 282,040 |
Weighted average grant date fair value of stock options granted |  | $ | 7.73 |  |  | $ | 6.02 |  |  | $ | 6.26 |
Weighted average assumptions: |  |  |  |  |  |
Risk-free interest rate |  | 0.8 | % |  | 0.8 | % |  | 2.5 | %
Expected dividend yield |  | 3.0 | % |  | 2.7 | % |  | 2.9 | %
Expected life, in years |  | 5.1 |  | 5.1 |  | 5.0
Expected volatility (based on historical volatility) |  | 30.1 | % |  | 22.8 | % |  | 21.9 | %

The weighted average fair value of nonvested stock options outstanding on December 31, 2021 was $6.80. Total unrecognized compensation expense relating to the nonvested stock options outstanding as of December 31, 2021 was approximately $2.0 million. This amount will be recognized as expense over the remainder of the vesting period, which is scheduled to be 2022 through 2025. 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, 2021 was approximately $6.6 million. This amount will be recognized as expense over the remainder of the performance and/or vesting period, which is scheduled to be 2022 through 2024. 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.
Income Taxes
The Company uses the asset and liability method for calculating deferred federal income taxes. Income tax provisions are generally based on income reported for financial statement purposes. The provisions for federal income taxes for the years ended December 31, 2021, 2020 and 2019 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 85

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 13.
The computations of net income per share on both basic and diluted bases, including reconciliations of the numerators and denominators, were as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Basic: |  |  |  |  |  |
Net income for the period |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Weighted average number of common shares during the period (in millions) |  | 42.0 |  |  | 41.9 |  |  | 41.7 |
Net income per share - basic |  | $ | 3.40 |  |  | $ | 3.18 |  |  | $ | 4.42 |
Diluted: |  |  |  |  |  |
Net income for the period |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Weighted average number of common shares during the period (in millions) |  | 42.0 |  |  | 41.9 |  |  | 41.7 |
Weighted average number of common equivalent shares to reflect the dilutive effect of common stock equivalent securities (in millions): |  |  |  |  |  |
Stock options |  | — |  |  | — |  |  | 0.1 |
CSUs related to deferred compensation for employees |  | — |  |  | — |  |  | — |
RSUs related to incentive compensation |  | 0.2 |  |  | 0.1 |  |  | 0.1 |
Total common and common equivalent shares adjusted to calculate diluted earnings per share (in millions) |  | 42.2 |  |  | 42.0 |  |  | 41.9 |
Net income per share - diluted |  | $ | 3.39 |  |  | $ | 3.17 |  |  | $ | 4.40 |

Options to purchase 734,018 shares of common stock at $38.05 to $42.95 per share were granted in 2017, 2018, 2019, 2020 and 2021 but were not included in the computation of 2021 diluted earnings per share because of their anti-dilutive effect. These options, which expire in 2027, 2028, 2029, 2030 and 2031, were still outstanding at December 31, 2021.
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 18 for further information.
Future Adoption of New Accounting Standards
Accounting for Long-Duration Insurance Contracts
In August 2018, the FASB issued accounting and disclosure guidance that contains targeted improvements to the accounting for long-duration insurance contracts. Under the new guidance, the cash flow assumptions used to measure the liability for future policy benefits for traditional insurance contracts will be required to be updated at least annually with changes recognized as a benefit expense (i.e., assumptions will no longer be locked-in). Insurance entities will be required to use a standard discount rate to measure the liabilities that will be equivalent to the yield from a high-quality bond. The new guidance also changes the amortization of DAC to be on a constant-level basis over the expected term of the related contracts with no interest accruing on the DAC balance. The new guidance also introduces a new category of contract features associated with deposit type contracts referred to as market risk benefits (MRBs). Contract features meeting the definition of a MRB will be measured at fair value. New disclosures will be required for long-duration insurance contracts in order to provide better transparency into the exposure of insurance entities and the drivers of their results. For public business entities, the guidance is effective for annual reporting periods beginning after December 15, 2022, including

86 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
interim periods within those years. With regards to the liability for future policy benefits and DAC, the guidance applies to contracts in force as of the beginning of the earliest period presented and may be applied retrospectively. With regards to MRBs, the guidance is to be applied retrospectively at the beginning of the earliest period presented. Early adoption is permitted. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company.
NOTE 2 - Subsequent Events
On July 14, 2021, the Company announced that it entered into a Stock Purchase Agreement (Agreement), by and among the Company and Independence Capital Corp. and Independence Holding Company (Seller) to acquire 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). Founded in 1961 and headquartered in Madison, Wisconsin, Madison National offers short- and long-term group disability, group term, and worksite solutions products, including accident, critical illness and fixed indemnity. The Agreement provided, among other things, that, upon the terms and subject to the conditions set forth in the Agreement, the Company would acquire all the equity interests in Madison National for $172.5 million. The Seller will have a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023 and as such, the final purchase price is subject to adjustment.
Effective January 1, 2022, the Company completed its acquisition of Madison National. As a result of the acquisition, Madison National became a wholly owned subsidiary of the Company.
NOTE 3 - Investments
The components of net investment income for the following periods were as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Fixed maturity securities |  | $ | 235.6 |  |  | $ | 232.9 |  |  | $ | 283.2 |
Equity securities |  | 5.3 |  |  | 4.7 |  |  | 4.9 |
Limited partnership interests |  | 79.0 |  |  | 20.9 |  |  | 25.7 |
Short-term and other investments |  | 11.6 |  |  | 11.4 |  |  | (10.1) |
Investment expenses |  | (10.1) |  |  | (9.6) |  |  | (9.4) |
Net investment income - investment portfolio |  | 321.4 |  |  | 260.3 |  |  | 294.3 |
Investment income - deposit asset on reinsurance |  | 101.1 |  |  | 97.3 |  |  | 70.8 |
Total net investment income |  | $ | 422.5 |  |  | $ | 357.6 |  |  | $ | 365.1 |

Net Investment Gains (Losses)
Net investment gains (losses) for the following periods were as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Fixed maturity securities(1) |  | $ | (7.7) |  |  | $ | 9.4 |  |  | $ | 141.4 |
Equity securities |  | (0.8) |  |  | 1.8 |  |  | 16.0 |
Short-term investments and other |  | (2.5) |  |  | (13.5) |  |  | (4.1) |
Net investment gains (losses) |  | $ | (11.0) |  |  | $ | (2.3) |  |  | $ | 153.3 |

(1) Net investment gains on fixed maturity securities include a $135.3 million realized investment gain associated with a transfer of investments to a reinsurer as consideration paid in connection with a reinsurance transaction of a $2.9 billion block of in force fixed and variable annuity business in 2019. See Notes 6 and 18 for further information.
The Company, from time to time, sells fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in the Company's intent or ability to hold 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 87

NOTE 3 - Investments (continued)
Net Investment Gains (Losses) by Transaction Type
The following table reconciles net investment gains (losses) pretax by transaction type:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Credit loss impairments(1) |  | $ | (8.1) |  |  | $ | — |  |  | $ | (1.1) |
Intent-to-sell impairments |  | (2.3) |  |  | (5.3) |  |  | (0.3) |
Total impairments on investments recognized in net income |  | (10.4) |  |  | (5.3) |  |  | (1.4) |
Sales and other, net |  | 4.3 |  |  | 15.0 |  |  | 151.5 |
Change in fair value - equity securities |  | (2.3) |  |  | (0.2) |  |  | 7.3 |
Change in fair value and losses realized on settlements - derivatives |  | (2.6) |  |  | (11.8) |  |  | (4.1) |
Net investment (losses) gains |  | $ | (11.0) |  |  | $ | (2.3) |  |  | $ | 153.3 |

(1) Due to the adoption of the measurement of credit losses on financial instruments accounting standard in 2020, other-than-temporary write-downs reported in 2019 are now presented as credit losses,
Allowance for Credit Loss Impairments on Fixed Maturity Securities
The following table presents changes in the allowance for credit loss impairments on fixed maturity securities classified as available for sale for the category of other asset-backed securities (no other categories of fixed maturity securities have an allowance for credit loss impairments):

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020
Beginning balance |  | $ | — |  |  | $ | — |
Credit losses on fixed maturity securities for which credit losses were not previously reported(1) |  | 8.1 |  |  | — |
Net (increases) decreases related to credit losses previously reported |  | — |  |  | — |
Reduction of credit allowances related to sales |  | — |  |  | — |
Write-offs |  | (0.4) |  |  | — |
Ending balance |  | $ | 7.7 |  |  | $ | — |

(1) Because the standard for the measurement of credit losses on financial instruments became effective January 1, 2020, there are no allowances for credit loss impairments to report for the year ended December 31, 2019.

88 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 3 - Investments (continued)
Fixed Maturity Securities
The Company's investment portfolio is comprised primarily of fixed maturity securities. Amortized cost, net, unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:

($ in millions) |  | Amortized Cost, net |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
December 31, 2021 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 612.1 |  |  | $ | 51.9 |  |  | $ | 1.5 |  |  | $ | 662.5 |
Other, including U.S. Treasury securities |  | 342.5 |  |  | 27.7 |  |  | 4.3 |  |  | 365.9 |
Municipal bonds |  | 1,519.7 |  |  | 184.4 |  |  | 0.7 |  |  | 1,703.4 |
Foreign government bonds |  | 40.2 |  |  | 3.4 |  |  | — |  |  | 43.6 |
Corporate bonds |  | 2,217.7 |  |  | 176.2 |  |  | 5.2 |  |  | 2,388.7 |
Other asset-backed securities |  | 1,065.5 |  |  | 16.6 |  |  | 6.9 |  |  | 1,075.2 |
Totals |  | $ | 5,797.7 |  |  | $ | 460.2 |  |  | $ | 18.6 |  |  | $ | 6,239.3 |
December 31, 2020 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 605.5 |  |  | $ | 79.6 |  |  | $ | 0.3 |  |  | $ | 684.8 |
Other, including U.S. Treasury securities |  | 395.0 |  |  | 39.2 |  |  | 1.0 |  |  | 433.2 |
Municipal bonds |  | 1,612.3 |  |  | 215.7 |  |  | 0.5 |  |  | 1,827.5 |
Foreign government bonds |  | 40.2 |  |  | 4.9 |  |  | — |  |  | 45.1 |
Corporate bonds |  | 1,905.2 |  |  | 221.6 |  |  | 3.9 |  |  | 2,122.9 |
Other asset-backed securities |  | 1,230.4 |  |  | 24.1 |  |  | 22.7 |  |  | 1,231.8 |
Totals |  | $ | 5,788.6 |  |  | $ | 585.1 |  |  | $ | 28.4 |  |  | $ | 6,345.3 |

(1) Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $376.7 million and $387.1 million; Federal Home Loan Mortgage Corporation (FHLMC) of $326.5 million and $344.3 million; and Government National Mortgage Association (GNMA) of $112.1 million and $132.3 million as of December 31, 2021 and 2020, respectively.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 89

NOTE 3 - Investments (continued)
The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position at December 31, 2021 and 2020, respectively. The Company views the decrease in fair value of all fixed maturity securities with unrealized losses at December 31, 2021 — which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition — as temporary. As of December 31, 2021, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before anticipated recovery in value. Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any impairments as of December 31, 2021.

($ 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, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 67.4 |  |  | $ | 1.3 |  |  | $ | 3.9 |  |  | $ | 0.2 |  |  | $ | 71.3 |  |  | $ | 1.5 |
Other |  | 59.5 |  |  | 1.7 |  |  | 35.1 |  |  | 2.6 |  |  | 94.6 |  |  | 4.3 |
Municipal bonds |  | 56.8 |  |  | 0.7 |  |  | 0.6 |  |  | — |  |  | 57.4 |  |  | 0.7 |
Foreign government bonds |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate bonds |  | 220.7 |  |  | 3.8 |  |  | 44.1 |  |  | 1.4 |  |  | 264.8 |  |  | 5.2 |
Other asset-backed securities |  | 379.0 |  |  | 3.8 |  |  | 128.2 |  |  | 3.1 |  |  | 507.2 |  |  | 6.9 |
Total |  | $ | 783.4 |  |  | $ | 11.3 |  |  | $ | 211.9 |  |  | $ | 7.3 |  |  | $ | 995.3 |  |  | $ | 18.6 |
Number of positions with a gross unrealized loss |  | 516 |  |  |  |  | 122 |  |  |  |  | 638 |  |  |
Fair value as a percentage of total fixed maturities securities fair value |  | 12.6 | % |  |  |  | 3.4 | % |  |  |  | 16.0 | % |  |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 4.9 |  |  | $ | 0.1 |  |  | $ | 2.6 |  |  | $ | 0.2 |  |  | $ | 7.5 |  |  | $ | 0.3 |
Other |  | 95.9 |  |  | 1.0 |  |  | — |  |  | — |  |  | 95.9 |  |  | 1.0 |
Municipal bonds |  | 18.1 |  |  | 0.5 |  |  | — |  |  | — |  |  | 18.1 |  |  | 0.5 |
Foreign government bonds |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate bonds |  | 126.6 |  |  | 3.7 |  |  | 10.9 |  |  | 0.2 |  |  | 137.5 |  |  | 3.9 |
Other asset-backed securities |  | 316.9 |  |  | 17.2 |  |  | 409.3 |  |  | 5.5 |  |  | 726.2 |  |  | 22.7 |
Total |  | $ | 562.4 |  |  | $ | 22.5 |  |  | $ | 422.8 |  |  | $ | 5.9 |  |  | $ | 985.2 |  |  | $ | 28.4 |
Number of positions with a gross unrealized loss |  | 308 |  |  |  |  | 123 |  |  |  |  | 431 |  |  |
Fair value as a percentage of total fixed maturities securities fair value |  | 8.9 | % |  |  |  | 6.7 | % |  |  |  | 15.6 | % |  |

Fixed maturity securities with an investment grade rating represented 69.8% of the gross unrealized losses as of December 31, 2021. With respect to fixed maturity securities involving securitized financial assets, the underlying collateral cash flows were stress tested to determine there was no adverse change in the present value of cash flows below the amortized cost basis.

90 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 3 - Investments (continued)
Maturities of Fixed Maturity Securities
The following table presents the distribution of the Company's fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.

($ in millions) |  | December 31, 2021
|  | Amortized Cost, net |  | Fair Value |  | Percent of Total Fair Value
Estimated expected maturity: |  |  |  |  |  |
Due in 1 year or less |  | $ | 245.4 |  |  | $ | 250.8 |  |  | 4.0 | %
Due after 1 year through 5 years |  | 1,613.8 |  |  | 1,686.2 |  |  | 27.0 | %
Due after 5 years through 10 years |  | 1,600.5 |  |  | 1,729.5 |  |  | 27.7 | %
Due after 10 years through 20 years |  | 1,339.9 |  |  | 1,488.2 |  |  | 23.9 | %
Due after 20 years |  | 998.1 |  |  | 1,084.6 |  |  | 17.4 | %
Total |  | $ | 5,797.7 |  |  | $ | 6,239.3 |  |  | 100.0 | %
Average option-adjusted duration, in years |  | 6.7 |  |  |  |

Sales of Fixed Maturity and Equity Securities
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each year were as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019(1)
Fixed maturity securities |  |  |  |  |  |
Proceeds received |  | $ | 578.2 |  |  | $ | 472.9 |  |  | $ | 805.9 |
Gross gains realized |  | 10.5 |  |  | 20.5 |  |  | 150.9 |
Gross losses realized |  | (7.7) |  |  | (6.1) |  |  | (7.8) |
Equity securities |  |  |  |  |  |
Proceeds received |  | $ | 4.7 |  |  | $ | 12.7 |  |  | $ | 29.9 |
Gross gains realized |  | 1.5 |  |  | 2.2 |  |  | 9.2 |
Gross losses realized |  | (0.1) |  |  | (1.9) |  |  | (0.8) |

(1) Gross gains realized presented above include a $135.3 million realized investment gain associated with a transfer of investments to a reinsurer as consideration paid during the second quarter of 2019 in connection with the reinsurance of a $2.9 billion block of in force fixed and variable annuity business. See Notes 6 and 18 for further information.
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, before the impact on DAC:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Net unrealized investment gains (losses) on fixed maturity securities, net of tax |  |  |  |  |  |
Beginning of period |  | $ | 439.8 |  |  | $ | 264.4 |  |  | $ | 111.7 |
Change in net unrealized investment (losses) gains on fixed maturity securities |  | (97.6) |  |  | 184.2 |  |  | 277.1 |
Reclassification of net investment losses (gains) on fixed maturity securities to net income |  | 6.7 |  |  | (8.8) |  |  | (124.4) |
End of period |  | $ | 348.9 |  |  | $ | 439.8 |  |  | $ | 264.4 |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 91

NOTE 3 - Investments (continued)
Limited Partnership Interests
All investments in limited partnership interests are accounted for using EMA and include interests in commercial mortgage loan funds, private equity funds, infrastructure debt funds, infrastructure equity funds and other funds. Principal factors influencing carrying amount appreciation or decline include operating performance, comparable public company earnings multiples, capitalization rates and the economic environment. The Company recognizes an impairment loss for equity method limited partnership interests when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. The carrying amounts of equity method limited partnership interests were as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020
Commercial mortgage loan funds |  | $ | 346.8 |  |  | $ | 149.6 |
Private equity funds |  | 74.0 |  |  | 39.6 |
Infrastructure debt funds |  | 62.4 |  |  | 58.3 |
Infrastructure equity funds |  | 58.3 |  |  | 52.1 |
Other funds(1) |  | 171.3 |  |  | 149.4 |
Total |  | $ | 712.8 |  |  | $ | 449.0 |

(1)Other funds consist primarily of limited partnership interests in hedge funds, real estate equity and corporate mezzanine funds.
Investment in Entities Exceeding 10% of Shareholders' Equity
At December 31, 2021 and 2020, there were no investments which exceeded 10% of total shareholders' equity in entities other than obligations of the U.S. Government and federally sponsored government agencies and authorities.
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 provide that the Company will receive or pledge financial collateral in the event minimum thresholds have been reached.
The following table presents the instruments that were subject to a master netting arrangement for the Company.

($ in millions) |  |  |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |
|  | Gross Amounts |  |  |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 10.7 |  |  | $ | — |  |  | $ | 10.7 |  |  | $ | 4.5 |  |  | $ | 6.4 |  |  | $ | (0.2) |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 16.8 |  |  | $ | — |  |  | $ | 16.8 |  |  | $ | 13.7 |  |  | $ | 2.6 |  |  | $ | 0.5 |

Deposits
At December 31, 2021 and 2020, fixed maturity securities with a fair value of $26.2 million and $26.9 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, at December 31, 2021 and 2020, fixed maturity securities with a fair value of $870.1 million and $707.3 million, respectively, were on deposit with FHLB as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $787.5 million and $644.5 million at the respective dates. The deposited securities are reported as Fixed maturity securities on the Company's Consolidated Balance Sheets.

92 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 4 - Fair Value of Financial Instruments
The Company is required to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values of 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. However, 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 its financial and nonfinancial assets and liabilities into a three-level hierarchy based on the priority of the inputs to the valuation technique. The three levels of inputs that may be used to measure fair value are:

Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include fixed maturity and equity securities (both common stock and preferred stock) that are traded in an active exchange market, as well as U.S. Treasury securities.
Level 2 | Unadjusted observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for the assets or liabilities. Level 2 assets and liabilities include fixed maturity securities (1) with quoted prices that are traded less frequently than exchange-traded instruments or (2) values based on discounted cash flows with observable inputs. This category generally includes certain U.S. Government and agency mortgage-backed securities, non-agency structured securities, corporate fixed maturity securities, preferred stocks, derivatives and embedded derivatives.
Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, certain discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation and for which the significant inputs are unobservable. This category generally includes certain private debt and equity investments, 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 the fair values 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 investment holdings. Care 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 instruments. This condition could cause an 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 amounts disclosed.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 93

NOTE 4 - Fair Value of Financial Instruments (continued)
Investments
The fair value of a fixed maturity security is the estimated amount at which the security could be exchanged in an orderly transaction between knowledgeable, unrelated and willing parties. The Company utilizes ICE Data Pricing, its investment managers and custodian bank to obtain fair value prices from independent third-party valuation service providers, broker quotes, model prices and matrix pricing. Each month, the Company obtains fair value prices from its investment managers and custodian bank, each of which use a variety of independent, nationally recognized pricing sources to determine market valuations for fixed maturity securities. Differences in prices between the sources that the Company considers significant are researched and the Company utilizes the price that it considers most representative of an exit price. Typical inputs used by these pricing sources include, but are not limited to, reported trades, bids, offers, benchmark yield curves, benchmarking of like securities, rating designations, sector groupings, issuer spreads and/or estimated cash flows, prepayment and default speeds, among others. The Company's fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the portfolio to be priced through pricing services. Approximately 90.2% and 91.9% of the portfolio, based on fair value, was priced through pricing services or index priced as of December 31, 2021 and 2020, respectively. The remainder of the portfolio was priced by broker quotes, model prices or matrix pricing. When non-binding broker quotes can be corroborated by comparison to other vendor quotes, pricing models or analyses, the securities are generally classified as Level 2, otherwise they are classified as Level 3. There were no significant changes to the valuation process during 2021.
The valuation of hard-to-value fixed maturity securities (generally 150 -200 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 anticipated 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 and default speeds, 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.
The Company gains assurance that its portfolio of fixed maturity securities including hard-to-value fixed maturity securities is appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. The Company’s processes and controls are designed to ensure (1) the valuation methodologies are appropriate and consistently applied, (2) the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and (3) the fair values are accurately recorded. For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers. The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers. In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities.
To determine the fair value of equity securities, the Company utilizes its investment managers and its custodian bank to obtain fair value prices from independent third-party valuation service providers. Each month, the Company obtains fair value prices from its investment managers and custodian bank, each of which use a variety of independent, nationally recognized pricing sources to determine market valuations for equity securities.
Policy loans and mortgage loans as well as investments in limited partnership interests which are accounted for using EMA are excluded from the fair value hierarchy.

94 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 4 - Fair Value of Financial Instruments (continued)
In summary, the following financial assets and financial liabilities are carried at fair value:
Financial assets
•Fixed maturity securities including hard-to-value fixed maturity securities, as described above.
•Equity securities, as described above.
•Short-term fixed maturity securities — Because of the nature of these assets, carrying amounts generally approximate fair values.
•Derivatives — Fair values 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.
•FHLB membership and activity stocks — Fair value is based on redemption value, which is equal to par value.
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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 95

NOTE 4 - 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. At December 31, 2021, Level 3 investments comprised approximately 5.6% of the Company's total investment portfolio at fair value.

($ in millions) |  | Carrying Amount |  | Fair Value |  | Fair Value Measurements at Reporting Date Using
|  |  |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2021 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 662.5 |  |  | $ | 662.5 |  |  | $ | — |  |  | $ | 662.5 |  |  | $ | — |
Other, including U.S. Treasury securities |  | 365.9 |  |  | 365.9 |  |  | 17.7 |  |  | 348.2 |  |  | — |
Municipal bonds |  | 1,703.4 |  |  | 1,703.4 |  |  | — |  |  | 1,642.6 |  |  | 60.8 |
Foreign government bonds |  | 43.6 |  |  | 43.6 |  |  | — |  |  | 43.6 |  |  | — |
Corporate bonds |  | 2,388.7 |  |  | 2,388.7 |  |  | 14.9 |  |  | 2,163.5 |  |  | 210.3 |
Other asset-backed securities |  | 1,075.2 |  |  | 1,075.2 |  |  | — |  |  | 976.3 |  |  | 98.9 |
Total fixed maturity securities |  | 6,239.3 |  |  | 6,239.3 |  |  | 32.6 |  |  | 5,836.7 |  |  | 370.0 |
Equity securities |  | 147.2 |  |  | 147.2 |  |  | 35.2 |  |  | 110.6 |  |  | 1.4 |
Short-term investments |  | 157.8 |  |  | 157.8 |  |  | 157.8 |  |  | — |  |  | — |
Other investments |  | 43.6 |  |  | 43.6 |  |  | — |  |  | 43.6 |  |  | — |
Totals |  | $ | 6,587.9 |  |  | $ | 6,587.9 |  |  | $ | 225.6 |  |  | $ | 5,990.9 |  |  | $ | 371.4 |
Separate Account (variable annuity) assets(1) |  | $ | 3,441.0 |  |  | $ | 3,441.0 |  |  | $ | 3,441.0 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and life policy reserves, embedded derivatives |  | $ | 2.1 |  |  | $ | 2.1 |  |  | $ | — |  |  | $ | 2.1 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 106.6 |  |  | $ | 106.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 106.6 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 684.8 |  |  | $ | 684.8 |  |  | $ | — |  |  | $ | 673.7 |  |  | $ | 11.1 |
Other, including U.S. Treasury securities |  | 433.2 |  |  | 433.2 |  |  | 18.4 |  |  | 414.8 |  |  | — |
Municipal bonds |  | 1,827.5 |  |  | 1,827.5 |  |  | — |  |  | 1,767.9 |  |  | 59.6 |
Foreign government bonds |  | 45.1 |  |  | 45.1 |  |  | — |  |  | 45.1 |  |  | — |
Corporate bonds |  | 2,122.9 |  |  | 2,122.9 |  |  | 14.9 |  |  | 1,952.2 |  |  | 155.8 |
Other asset-backed securities |  | 1,231.8 |  |  | 1,231.8 |  |  | — |  |  | 1,103.5 |  |  | 128.3 |
Total fixed maturity securities |  | 6,345.3 |  |  | 6,345.3 |  |  | 33.3 |  |  | 5,957.2 |  |  | 354.8 |
Equity securities |  | 121.6 |  |  | 121.6 |  |  | 39.2 |  |  | 82.1 |  |  | 0.3 |
Short-term investments |  | 141.8 |  |  | 141.8 |  |  | 137.7 |  |  | 4.1 |  |  | — |
Other investments |  | 36.3 |  |  | 36.3 |  |  | — |  |  | 36.3 |  |  | — |
Totals |  | $ | 6,645.0 |  |  | $ | 6,645.0 |  |  | $ | 210.2 |  |  | $ | 6,079.7 |  |  | $ | 355.1 |
Separate Account (variable annuity) assets(1) |  | $ | 2,891.4 |  |  | $ | 2,891.4 |  |  | $ | 2,891.4 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and life policy reserves, embedded derivatives |  | $ | 2.5 |  |  | $ | 2.5 |  |  | $ | — |  |  | $ | 2.5 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 104.5 |  |  | $ | 104.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 104.5 |

(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.

96 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 4 - 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 2021 and 2020. The following tables present reconciliations for the periods indicated for all Level 3 financial assets and financial liabilities measured at fair value on a recurring basis.

($ in millions) |  | Financial Assets |  | Financial Liabilities(1)
|  | Municipal Bonds |  | Corporate Bonds |  | Mortgage-Backed and Other Asset- Backed Securities(2) |  | Total Fixed Maturity Securities |  | Equity Securities |  | Total |  |
Beginning balance, January 1, 2021 |  | $ | 59.6 |  |  | $ | 155.8 |  |  | $ | 139.4 |  |  | $ | 354.8 |  |  | $ | 0.3 |  |  | $ | 355.1 |  |  | $ | 104.5 |
Transfers into Level 3(3) |  | 18.6 |  |  | 131.7 |  |  | 21.3 |  |  | 171.6 |  |  | 1.0 |  |  | 172.6 |  |  | — |
Transfers out of Level 3(3) |  | — |  |  | (64.4) |  |  | (19.2) |  |  | (83.6) |  |  | — |  |  | (83.6) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | (8.2) |  |  | (8.2) |  |  | 0.1 |  |  | (8.1) |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10.0 |
Net unrealized investment gains (losses) included in OCI |  | (2.5) |  |  | — |  |  | 8.8 |  |  | 6.3 |  |  | — |  |  | 6.3 |  |  | — |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4.9 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (14.9) |  |  | (12.8) |  |  | (43.2) |  |  | (70.9) |  |  | — |  |  | (70.9) |  |  | (12.8) |
Ending balance, December 31, 2021 |  | $ | 60.8 |  |  | $ | 210.3 |  |  | $ | 98.9 |  |  | $ | 370.0 |  |  | $ | 1.4 |  |  | $ | 371.4 |  |  | $ | 106.6 |
Beginning balance, January 1, 2020 |  | $ | 44.3 |  |  | $ | 104.0 |  |  | $ | 146.8 |  |  | $ | 295.1 |  |  | $ | 0.1 |  |  | $ | 295.2 |  |  | $ | 93.7 |
Transfers into Level 3(3) |  | 80.7 |  |  | 83.6 |  |  | 104.3 |  |  | 268.6 |  |  | 0.2 |  |  | 268.8 |  |  | — |
Transfers out of Level 3(3) |  | (69.1) |  |  | (36.6) |  |  | (84.6) |  |  | (190.3) |  |  | — |  |  | (190.3) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | (0.3) |  |  | (0.3) |  |  | — |  |  | (0.3) |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11.5 |
Net unrealized investment gains (losses) included in OCI |  | 4.3 |  |  | 1.4 |  |  | (10.5) |  |  | (4.8) |  |  | — |  |  | (4.8) |  |  | — |
Purchases |  | — |  |  | 6.9 |  |  | 1.9 |  |  | 8.8 |  |  | — |  |  | 8.8 |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8.4 |
Sales |  | — |  |  | — |  |  | 1.2 |  |  | 1.2 |  |  | — |  |  | 1.2 |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.6) |  |  | (3.5) |  |  | (19.4) |  |  | (23.5) |  |  | — |  |  | (23.5) |  |  | (9.1) |
Ending balance, December 31, 2020 |  | $ | 59.6 |  |  | $ | 155.8 |  |  | $ | 139.4 |  |  | $ | 354.8 |  |  | $ | 0.3 |  |  | $ | 355.1 |  |  | $ | 104.5 |

(1) Represents embedded derivatives, all related to the Company's FIA products, reported in Other policyholder funds 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, 2021 and 2020 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.
At December 31, 2021, the Company had $8.1 million of net investment losses on Level 3 financial assets that were included in net income and were primarily attributable to credit loss impairments. At December 31, 2020 the Company had $0.3 million of net investment losses on Level 3 financial assets that were included in net income. For the years ended December 31, 2021 and 2020, net investment losses of $10.0 million and $11.5 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 97

NOTE 4 - Fair Value of Financial Instruments (continued)
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized within Level 3.

($ in millions)
Financial Assets |  | Fair Value at December 31, 2021 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Municipal bonds |  | $ | 60.8 |  |  | discounted cash flow |  | I spread(2) |  | 374 - 425 bps
Corporate bonds |  | 210.3 |  |  | discounted cash flow |  | N spread(3) |  | 211 - 531 bps
|  |  |  | discounted cash flow |  | I spread(2) |  | 333 - 365 bps
|  |  |  | discounted cash flow |  | T spread(4) |  | 130 - 540 bps
|  |  |  | discounted cash flow |  | yield |  | 3.4% - 8.8%
|  |  |  | discounted cash flow |  | discount rate |  | 11.3% - 12.0%
|  |  |  | market comparable |  | option adjusted spread |  | 12.5%
Other asset-backed securities |  | 98.9 |  |  | vendor price |  | haircut |  | 3.0% - 5.0%
|  |  |  | discounted cash flow |  | discount margin |  | 14.6%
|  |  |  | discounted cash flow |  | discount rate |  | 8.5% - 20.0%
|  |  |  | discounted cash flow |  | median comparable yield |  | 7.3% - 16.1%
|  |  |  | market comparable |  | median price |  | $54.79 - $97.95
|  |  |  | discounted cash flow |  | N spread(3) |  | 341 bps
|  |  |  | discounted cash flow |  | T spread(4) |  | 196 bps
Equity securities |  | 1.4 |  |  | Black-Scholes |  | volatility |  | low 29.0% - high 34.0%
|  |  |  | discounted cash flow |  | variable |  | $100.00 - $121.95

($ in millions)
Financial Liabilities |  | Fair Value at December 31, 2021 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Derivatives embedded in fixed indexed annuity products |  | $ | 106.6 |  |  | discounted cash flow |  | lapse rate |  | 5.3%
|  |  |  |  |  | mortality multiplier(5) |  | 66.8%
|  |  |  |  |  | option budget |  | 0.9% - 2.5%
|  |  |  |  |  | non-performance adjustment(6) |  | 5.0%

(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
(2) "I spread" is the interpolated weighted average life point on the "on the run" (OTR) point of the curve.
(3) "N spread" is the interpolated weighted average life point on the swap curve.
(4) "T spread" is a specific point on the OTR curve.
(5) Mortality multiplier is applied to the Annuity 2000 table.
(6) 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 control processes as previously described in this Note. Generally, valuation techniques for fixed maturity securities include spread pricing, matrix pricing and discounted cash flow methodologies; include inputs such as quoted prices for identical or similar securities that are less liquid; and are based on lower levels of trading activity than securities classified as Level 2. The valuation techniques and significant unobservable inputs used in the fair value measurement for equity securities classified as Level 3 use similar valuation techniques and significant unobservable inputs as those used for fixed maturity securities.

98 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 4 - Fair Value of Financial Instruments (continued)
The sensitivity of the estimated fair values to changes in the significant unobservable inputs for fixed maturity and equity securities included in Level 3 include: benchmark yield, liquidity premium, estimated cash flows, prepayment and default speeds, spreads, weighted average life, and credit rating. Significant spread widening in isolation will adversely impact the overall valuation, while significant tightening will lead to substantial valuation increases. Significant increases (decreases) in illiquidity premiums in isolation will result in substantially lower (higher) valuations. Significant increases (decreases) in expected default rates in isolation will result in substantially lower (higher) valuations.
Financial Instruments Not Carried at Fair Value
The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. The following table presents the carrying amount, fair value and fair value hierarchy of these financial assets and financial liabilities.

($ in millions) |  | Carrying Amount |  | Fair Value |  | Fair Value Measurements at Reporting Date Using
|  |  |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2021 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 148.8 |  |  | $ | 152.4 |  |  | $ | — |  |  | $ | — |  |  | $ | 152.4 |
Deposit asset on reinsurance |  | 2,481.5 |  |  | 2,935.1 |  |  | — |  |  | — |  |  | 2,935.1 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, fixed annuity contracts |  | 4,941.3 |  |  | 5,004.9 |  |  | — |  |  | — |  |  | 5,004.9 |
Investment contract and life policy reserves, account values on life contracts |  | 105.4 |  |  | 115.4 |  |  | — |  |  | — |  |  | 115.4 |
Other policyholder funds |  | 839.3 |  |  | 839.3 |  |  | — |  |  | 782.8 |  |  | 56.5 |
Short-term debt |  | 249.0 |  |  | 249.0 |  |  | — |  |  | — |  |  | 249.0 |
Long-term debt |  | 253.6 |  |  | 277.4 |  |  | — |  |  | 277.4 |  |  | — |
December 31, 2020 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 168.3 |  |  | $ | 172.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 172.1 |
Deposit asset on reinsurance |  | 2,420.9 |  |  | 3,030.6 |  |  | — |  |  | — |  |  | 3,030.6 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, fixed annuity contracts |  | 4,847.6 |  |  | 4,963.3 |  |  | — |  |  | — |  |  | 4,963.3 |
Investment contract and life policy reserves, account values on life contracts |  | 98.7 |  |  | 108.4 |  |  | — |  |  | — |  |  | 108.4 |
Other policyholder funds |  | 646.8 |  |  | 646.8 |  |  | — |  |  | 590.7 |  |  | 56.1 |
Short-term debt |  | 135.0 |  |  | 135.0 |  |  | — |  |  | — |  |  | 135.0 |
Long-term debt |  | 302.3 |  |  | 331.1 |  |  | — |  |  | 331.1 |  |  | — |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 99

NOTE 4 - Fair Value of Financial Instruments (continued)
Other Investments
Other investments includes policy loans and mortgage loans. 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 future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and similar remaining maturities.
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.
Investment Contract and Policy Reserves
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.
Also, included in investment contract and policy reserves are embedded derivatives related to the Company's IUL products which are carried at fair value. See Note 5 for further information.
Other Policyholder Funds
Other policyholder funds are liabilities related to supplementary contracts without life contingencies and dividend accumulations, as well as balances outstanding under funding agreements with the FHLB and embedded derivatives related to the FIA products. Except for embedded derivatives, each of these components is 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.
The fair value of the embedded derivatives related to FIA products is estimated at each reporting date by (1) projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and (2) discounting the excess of the projected contract value amounts at the applicable risk free interest rates adjusted for the Company's nonperformance risk related to those liabilities. The projections of policy contract values are based on the Company's best estimate assumptions for future contract growth and decrements. The assumptions for future contract growth include the expected index credits which are derived from the fair values of the underlying call options purchased to fund such index credits and the expected costs of annual call options that will be purchased in the future to fund index credits beyond the next contract anniversary. Projections of minimum guaranteed contract values include the same best estimate assumptions for contract decrements used to project policy contract values.
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.
NOTE 5 - Derivatives
The Company offers FIA products, which are deferred fixed annuities that guarantee the return of principal to the contractholder and credit interest based on a percentage of the gain in a specified market index. The Company also offers IUL products which credit 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 call options are carried at fair value with changes in fair value included in Net investment gains (losses), a component of revenues, in the Consolidated Statements of Operations.

100 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 5 - Derivatives (continued)
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. The fair values of derivatives, including derivatives embedded in FIA and IUL contracts, are presented in the Consolidated Balance Sheets as follows:

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Assets |  |  |  |
Derivatives, reported in Short-term and other investments |  | $ | 10.7 |  |  | $ | 16.8 |
Liabilities |  |  |  |
FIA - embedded derivatives, reported in Other policyholder funds |  | 106.6 |  |  | 104.5 |
IUL - embedded derivatives, reported in Investment contract and policy reserves |  | 2.1 |  |  | 2.5 |

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 options valued in 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 were as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Change in fair value of derivatives:(1) |  |  |  |  |  |
Revenues |  |  |  |  |  |
Net investment gains (losses) |  | $ | 8.7 |  |  | $ | 0.2 |  |  | $ | 9.5 |
Change in fair value of embedded derivatives: |  |  |  |  |  |
Revenues |  |  |  |  |  |
Net investment gains (losses) |  | (11.3) |  |  | (12.1) |  |  | (13.6) |

(1) Includes gains or 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 101

NOTE 5 - 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 cash 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, 2021 |  | December 31, 2020
|  | Credit Rating |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Counterparty |  | S&P |  | Moody's |  |  |  |
Bank of America, N.A. |  | A+ |  | Aa2 |  | $ | 193.0 |  |  | $ | 6.3 |  |  | $ | 205.2 |  |  | $ | 14.0 |
Barclays Bank PLC |  | A |  | A1 |  | 98.7 |  |  | 4.1 |  |  | 81.9 |  |  | 2.8 |
Citigroup Inc. |  | BBB+ |  | A3 |  | — |  |  | — |  |  | — |  |  | — |
Credit Suisse International |  | A+ |  | A1 |  | 14.0 |  |  | 0.3 |  |  | — |  |  | — |
Societe Generale |  | A |  | A1 |  | — |  |  | — |  |  | — |  |  | — |
Total |  |  |  |  |  | $ | 305.7 |  |  | $ | 10.7 |  |  | $ | 287.1 |  |  | $ | 16.8 |

As of December 31, 2021 and 2020, the Company held $10.9 million and $16.3 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 6 - Deposit Asset on Reinsurance
The Company reinsures a $3.2 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 $0.8 billion are reinsured on a modified coinsurance basis and thus, remain on the Company's consolidated financial statements, but the related results of operations are fully reinsured.
The annuity reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk. Therefore, the Company recognizes the annuity reinsurance agreement using the deposit method of accounting. The assets transferred to the reinsurer as consideration paid is reported as a Deposit asset on reinsurance on the Company's Consolidated Balance Sheets. As amounts are received or paid, consistent with the underlying reinsured contracts, the Deposit asset on reinsurance is adjusted. The Deposit asset on reinsurance is accreted to the estimated ultimate cash flows using the interest method and the adjustment is reported as Net investment income. Interest accreted on the Deposit asset on reinsurance was $101.1 million and $97.3 million for the years ended December 31, 2021 and 2020, respectively.

102 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 7 - 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, 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.
At October 1, 2020, 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 exception to lower than anticipated BCG wealth management sales outside of the education markets which triggered an impairment of the goodwill associated with the BCG business of the Retirement reporting unit. 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 $5.6 million goodwill impairment charge.
In 2019, an annuity reinsurance transaction as described in Note 6 triggered a requirement to evaluate the goodwill associated with the annuity business of the Retirement reporting unit. For the evaluation, the fair value of the Retirement reporting unit was measured using a discounted cash flow method. The carrying amount exceeded the fair value, resulting in a $28.0 million goodwill impairment charge.
Goodwill impairment charges are reported as Other expense - goodwill and intangible asset impairments in the Consolidated Statements of Operations.
The changes in the carrying amount of goodwill by reportable segment for the year ended December 31, 2021 were as follows:

($ in millions) |  | December 31, 2020 |  | Impairments |  | Acquisitions |  | December 31, 2021
Property & Casualty |  | $ | 9.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 9.5 |
Supplemental |  | 19.6 |  |  | — |  |  | — |  |  | 19.6 |
Retirement |  | 4.5 |  |  | — |  |  | — |  |  | 4.5 |
Life |  | 9.9 |  |  | — |  |  | — |  |  | 9.9 |
Total |  | $ | 43.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 43.5 |

As of December 31, 2021, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of BCG and NTA during 2019. The acquisition of BCG resulted in initial recognition of definite-lived intangible assets subject to amortization in the amount of $14.1 million and the acquisition of NTA resulted in initial recognition of definite-lived intangible assets subject to amortization in the amount of $160.4 million. As of December 31, 2021 the outstanding amounts of definite-lived intangible assets subject to amortization were as follows:

($ in millions) |  | Weighted Average Useful Life (in Years) |  |
At inception: |  |  |  |
Value of business acquired |  | 30 |  | $ | 94.4 |
Value of distribution acquired |  | 17 |  | 54.0 |
Value of agency relationships |  | 14 |  | 17.0 |
Value of customer relationships |  | 10 |  | 9.1 |
Total |  | 23 |  | 174.5 |
Accumulated amortization and impairments: |  |  |  |
Value of business acquired |  |  |  | (17.6) |
Value of distribution acquired |  |  |  | (11.6) |
Value of agency relationships |  |  |  | (6.3) |
Value of customer relationships |  |  |  | (4.4) |
Total |  |  |  | (39.9) |
Net intangible assets subject to amortization: |  |  |  | $ | 134.6 |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 103

NOTE 7 - Goodwill and Intangible Assets (continued)
In regard to the definite-lived intangible assets in the table above, the VOBA intangible asset represents the difference between the fair value of insurance contracts and insurance policy reserves measured in accordance with the Company's accounting policies for insurance contracts acquired. VOBA was based on an actuarial estimate of the present value of future distributable earnings for insurance in force as of the acquisition date. The VODA intangible asset represents the present value of future business to be written by the existing distribution channel. 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 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, |  |
2022 |  | $ | 12.1 |
2023 |  | 11.2 |
2024 |  | 10.5 |
2025 |  | 9.8 |
2026 |  | 9.2 |
Thereafter |  | 81.8 |
Total |  | $ | 134.6 |

The VOBA intangible asset is being amortized by product based on the present value of future premiums to be received. The VODA intangible asset in respect to the acquisition of NTA is being amortized on a straight-line basis. The VODA intangible asset in respect to the acquisition of BCG is being amortized based on the present value of future profits to be received. 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 asset is being amortized based on the present value of future profits to be received.
Indefinite-lived intangible assets (not subject to amortization) as of December 31, 2021 were as follows:

($ in millions) |  | December 31, 2020 |  | Impairments |  | Acquisitions |  | December 31, 2021
Trade names |  | $ | 7.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 7.9 |
State licenses |  | 2.9 |  |  | — |  |  | — |  |  | 2.9 |
Total |  | $ | 10.8 |  |  | $ | — |  |  | $ | — |  |  | $ | 10.8 |

The trade names intangible asset represents the present value of future savings accruing NTA and BCG 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 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, 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.
At October 1, 2020, 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 exception to lower than anticipated BCG wealth management sales outside of the education markets 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 VODA and trade names exceeded the fair values

104 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 7 - Goodwill and Intangible Assets (continued)
resulting in a $3.6 million intangible asset impairment charge for VODA and a $0.8 million intangible asset impairment charge for trade names.
Intangible asset impairment charges are reported as Other expense - goodwill and intangible asset impairments in the Consolidated Statements of Operations.
NOTE 8 - Unpaid Claims and Claim Expenses
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. The end of the year gross reserve (before reinsurance) balances and the reinsurance recoverable balances are reflected on a gross basis in the Consolidated Balance Sheets.

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Property & Casualty segment |  |  |  |  |  |
Gross reserves, beginning of year(1) |  | $ | 372.2 |  |  | $ | 387.0 |  |  | $ | 367.2 |
Less: reinsurance recoverables |  | 112.9 |  |  | 120.5 |  |  | 89.7 |
Net reserves, beginning of year(2) |  | 259.3 |  |  | 266.5 |  |  | 277.5 |
Incurred claims and claim expenses: |  |  |  |  |  |
Claims occurring in the current year |  | 455.1 |  |  | 441.2 |  |  | 483.1 |
Decrease in estimated reserves for claims occurring in prior years(3) |  | (7.2) |  |  | (10.2) |  |  | (7.5) |
Total claims and claim expenses incurred(4) |  | 447.9 |  |  | 431.0 |  |  | 475.6 |
Claims and claim expense payments for claims occurring during: |  |  |  |  |  |
Current year |  | 307.1 |  |  | 291.4 |  |  | 329.5 |
Prior years |  | 148.0 |  |  | 146.8 |  |  | 157.1 |
Total claims and claim expense payments |  | 455.1 |  |  | 438.2 |  |  | 486.6 |
Net reserves, end of year(2) |  | 252.1 |  |  | 259.3 |  |  | 266.5 |
Plus: reinsurance recoverables |  | 110.3 |  |  | 112.9 |  |  | 120.5 |
Gross reserves, end of year(1) |  | $ | 362.4 |  |  | $ | 372.2 |  |  | $ | 387.0 |

(1) Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Supplemental, Retirement and Life of $63.5 million, $66.6 million and $55.9 million as of December 31, 2021, 2020 and 2019, respectively, in addition to Property & Casualty reserves.
(2) Reserves are net of anticipated reinsurance recoverables.
(3) Shows the amounts by which the Company 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 2021, 2020 and 2019.
(4) Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for Supplemental, Retirement and Life of $169.8 million, $137.9 million, and $109.5 million for the years ended December 31, 2021, 2020 and 2019, respectively, in addition to Property & Casualty amounts.
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 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 (which is equal to the actuarial point estimate) 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

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 105

NOTE 8 - Unpaid Claims and Claim Expenses (continued)
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 74.0% as of December 31, 2021) 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.
An accident year refers to classifying claims based on the year in which the claims occurred. For estimating short-tail coverage reserves (e.g., homeowners and auto physical damage), which comprise approximately 26.0% of the Company's total loss reserves as of December 31, 2021, the primary actuarial technique utilized is the development of paid loss dollars due to the relatively quick claim settlement period. As it relates to estimating long-tail coverage reserves (primarily related to auto liability), which comprise approximately 74.0% of the Company's total loss reserves as of December 31, 2021, the primary actuarial technique utilized is the development of reported loss dollars due to the relatively long claim settlement period.
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

106 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 8 - Unpaid Claims and Claim Expenses (continued)
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 8 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 99.0% of the Company's incurred losses for 2021.
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.
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 approximately plus or minus 6.0% of reserves, which equates to plus or minus approximately $12.0 million of net income as of December 31, 2021. Although this evaluation reflects the most likely outcomes, it is possible the final outcome may fall below or above these estimates.
Net favorable development of total reserves for Property & Casualty claims occurring in prior years was $7.2 million in 2021, $10.2 million in 2020 and $7.5 million in 2019. In 2021, the favorable development was the result of favorable loss trends in auto and homeowners loss emergence for accident years 2020 and prior. In 2020, the favorable development was predominantly the result of favorable loss trends in property for accident years 2019 and prior including the recognition of $4.8 million of subrogation received on the 2018 Camp Fire event. In 2019, the favorable development was predominantly the result of favorable loss trends in auto for accident years 2018 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 at December 31 st of each year. The result of the independent actuarial study at December 31, 2021 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 the 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 107

NOTE 8 - Unpaid Claims and Claim Expenses (continued)
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 |  | 1 |  | 2 |  | 3 |  | 4 |  | 5 |  | 6 |  | 7 |  | 8 |  | 9 |  | 10
Homeowners |  | 79.6 | % |  | 17.1 | % |  | 2.0 | % |  | 0.6 | % |  | 0.5 | % |  | 0.2 | % |  | — |  |  | — |  |  | — |  |  | — |
Auto liability |  | 40.0 | % |  | 34.2 | % |  | 14.1 | % |  | 6.5 | % |  | 3.3 | % |  | 1.3 | % |  | 0.5 | % |  | 0.1 | % |  | — |  |  | — |
Auto physical damage |  | 95.6 | % |  | 4.7 | % |  | (0.3) | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |

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, 2012 to 2020 is presented as unaudited supplementary information.

108 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 8 - Unpaid Claims and Claim Expenses (continued)

($ in millions)
Homeowners |  |
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance |  |  |  |
Years Ended December 31, |  | As of December 31, 2021
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total of Incurred- But-Not-Reported Liabilities Plus Expected Development on Reported Claims |  | Cumulative Number of Reported Claims
Accident |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  |  |  |
Year |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  |
2012 |  | $ | 108.8 |  |  | $ | 109.2 |  |  | $ | 109.4 |  |  | $ | 106.5 |  |  | $ | 106.3 |  |  | $ | 106.3 |  |  | $ | 106.0 |  |  | $ | 106.0 |  |  | $ | 106.0 |  |  | $ | 106.0 |  |  | $ | — |  |  | 21.6 |
2013 |  |  |  | 105.6 |  |  | 107.5 |  |  | 104.0 |  |  | 102.4 |  |  | 102.3 |  |  | 101.8 |  |  | 101.7 |  |  | 101.7 |  |  | 101.7 |  |  | — |  |  | 19.2 |
2014 |  |  |  |  |  | 111.6 |  |  | 113.5 |  |  | 109.1 |  |  | 106.8 |  |  | 106.6 |  |  | 106.6 |  |  | 106.4 |  |  | 106.4 |  |  | — |  |  | 20.1 |
2015 |  |  |  |  |  |  |  | 111.7 |  |  | 115.1 |  |  | 114.4 |  |  | 114.1 |  |  | 115.1 |  |  | 114.9 |  |  | 114.9 |  |  | — |  |  | 18.7 |
2016 |  |  |  |  |  |  |  |  |  | 115.9 |  |  | 118.6 |  |  | 117.0 |  |  | 117.9 |  |  | 117.9 |  |  | 117.9 |  |  | — |  |  | 19.9 |
2017 |  |  |  |  |  |  |  |  |  |  |  | 126.3 |  |  | 129.8 |  |  | 132.7 |  |  | 130.7 |  |  | 130.8 |  |  | 0.3 |  |  | 19.9 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | 166.8 |  |  | 157.4 |  |  | 158.9 |  |  | 158.1 |  |  | 0.4 |  |  | 21.1 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 130.4 |  |  | 129.9 |  |  | 132.1 |  |  | 2.5 |  |  | 17.5 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 155.7 |  |  | 151.9 |  |  | 11.1 |  |  | 19.6 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 150.2 |  |  | 22.6 |  |  | 15.5 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  | $ | 1,270.0 |  |  |  |  |
($ 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 |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  |  |  |
2012 |  | $ | 84.3 |  |  | $ | 101.6 |  |  | $ | 104.2 |  |  | $ | 105.2 |  |  | $ | 105.6 |  |  | $ | 105.9 |  |  | $ | 106.0 |  |  | $ | 106.0 |  |  | $ | 106.0 |  |  | $ | 106.0 |  |  |  |  |
2013 |  |  |  | 76.9 |  |  | 96.6 |  |  | 99.4 |  |  | 101.0 |  |  | 101.5 |  |  | 101.7 |  |  | 101.7 |  |  | 101.7 |  |  | 101.7 |  |  |  |  |
2014 |  |  |  |  |  | 83.3 |  |  | 103.0 |  |  | 105.7 |  |  | 106.1 |  |  | 106.3 |  |  | 106.4 |  |  | 106.4 |  |  | 106.4 |  |  |  |  |
2015 |  |  |  |  |  |  |  | 90.7 |  |  | 109.3 |  |  | 111.9 |  |  | 113.3 |  |  | 114.6 |  |  | 114.9 |  |  | 114.7 |  |  |  |  |
2016 |  |  |  |  |  |  |  |  |  | 95.8 |  |  | 113.2 |  |  | 115.1 |  |  | 117.5 |  |  | 117.7 |  |  | 117.8 |  |  |  |  |
2017 |  |  |  |  |  |  |  |  |  |  |  | 106.8 |  |  | 128.5 |  |  | 129.8 |  |  | 130.0 |  |  | 130.5 |  |  |  |  |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | 130.5 |  |  | 152.4 |  |  | 157.0 |  |  | 157.4 |  |  |  |  |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 103.8 |  |  | 126.2 |  |  | 129.1 |  |  |  |  |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 106.8 |  |  | 138.7 |  |  |  |  |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 114.9 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  | 1,217.2 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Outstanding prior to 2012 |  | — |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Prior years paid |  | — |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities for claims and claim adjustment expenses, net of reinsurance |  | $ | 52.8 |  |  |  |  |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 109

NOTE 8 - Unpaid Claims and Claim Expenses (continued)

($ in millions)
Auto Liability |  |
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance |  |
Years Ended December 31, |  | As of December 31, 2021
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total of Incurred- But-Not-Reported Liabilities Plus Expected Development on Reported Claims |  | Cumulative Number of Reported Claims
Accident |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  |  |  |
Year |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  |
2012 |  | $ | 156.4 |  |  | $ | 153.8 |  |  | $ | 150.3 |  |  | $ | 149.3 |  |  | $ | 147.6 |  |  | $ | 145.8 |  |  | $ | 145.6 |  |  | $ | 145.5 |  |  | $ | 145.9 |  |  | $ | 145.8 |  |  | $ | — |  |  | 18.6 |
2013 |  |  |  | 153.9 |  |  | 152.9 |  |  | 150.7 |  |  | 150.7 |  |  | 148.1 |  |  | 148.0 |  |  | 148.1 |  |  | 148.3 |  |  | 147.7 |  |  | — |  |  | 19.4 |
2014 |  |  |  |  |  | 155.1 |  |  | 157.2 |  |  | 158.5 |  |  | 159.9 |  |  | 159.8 |  |  | 159.4 |  |  | 159.3 |  |  | 159.4 |  |  | 0.2 |  |  | 20.3 |
2015 |  |  |  |  |  |  |  | 165.5 |  |  | 172.6 |  |  | 177.0 |  |  | 178.3 |  |  | 178.7 |  |  | 179.2 |  |  | 178.9 |  |  | 0.4 |  |  | 20.8 |
2016 |  |  |  |  |  |  |  |  |  | 180.4 |  |  | 184.4 |  |  | 184.6 |  |  | 186.6 |  |  | 188.1 |  |  | 189.2 |  |  | 0.5 |  |  | 21.3 |
2017 |  |  |  |  |  |  |  |  |  |  |  | 188.0 |  |  | 188.8 |  |  | 188.6 |  |  | 189.1 |  |  | 191.7 |  |  | 1.9 |  |  | 20.1 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | 200.3 |  |  | 195.3 |  |  | 192.9 |  |  | 189.8 |  |  | 3.8 |  |  | 19.5 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 181.1 |  |  | 180.1 |  |  | 176.7 |  |  | 8.9 |  |  | 18.9 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 137.0 |  |  | 134.9 |  |  | 20.1 |  |  | 13.1 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 142.2 |  |  | 55.3 |  |  | 12.8 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  | $ | 1,656.3 |  |  |  |  |
($ in millions) |  |  |  |
Auto 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 |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  |  |  |
2012 |  | $ | 61.3 |  |  | $ | 109.6 |  |  | $ | 127.2 |  |  | $ | 138.6 |  |  | $ | 142.9 |  |  | $ | 144.6 |  |  | $ | 145.1 |  |  | $ | 145.2 |  |  | $ | 145.3 |  |  | $ | 145.3 |  |  |  |  |
2013 |  |  |  | 62.2 |  |  | 108.9 |  |  | 131.2 |  |  | 140.0 |  |  | 145.3 |  |  | 146.8 |  |  | 147.4 |  |  | 147.4 |  |  | 147.5 |  |  |  |  |
2014 |  |  |  |  |  | 61.3 |  |  | 117.5 |  |  | 139.5 |  |  | 149.1 |  |  | 155.8 |  |  | 157.6 |  |  | 158.6 |  |  | 158.8 |  |  |  |  |
2015 |  |  |  |  |  |  |  | 70.8 |  |  | 134.5 |  |  | 158.0 |  |  | 170.1 |  |  | 174.5 |  |  | 176.7 |  |  | 177.7 |  |  |  |  |
2016 |  |  |  |  |  |  |  |  |  | 73.1 |  |  | 140.9 |  |  | 166.8 |  |  | 177.8 |  |  | 184.5 |  |  | 188.1 |  |  |  |  |
2017 |  |  |  |  |  |  |  |  |  |  |  | 70.7 |  |  | 139.5 |  |  | 166.6 |  |  | 179.8 |  |  | 185.8 |  |  |  |  |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | 77.5 |  |  | 141.5 |  |  | 168.6 |  |  | 180.7 |  |  |  |  |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 69.7 |  |  | 129.1 |  |  | 155.5 |  |  |  |  |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 51.5 |  |  | 94.0 |  |  |  |  |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 52.9 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  | 1,486.3 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Outstanding prior to 2012 |  | 1.5 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Prior years paid |  | — |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities for claims and claim adjustment expenses, net of reinsurance |  | $ | 171.5 |  |  |  |  |

110 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 8 - Unpaid Claims and Claim Expenses (continued)

($ in millions)
Auto Physical Damage |  |
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance |  |
Years Ended December 31, |  | As of December 31, 2021
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total of Incurred- But-Not-Reported Liabilities Plus Expected Development on Reported Claims |  | Cumulative Number of Reported Claims
Accident |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  |  |  |
Year |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  |
2012 |  | $ | 83.8 |  |  | $ | 82.3 |  |  | $ | 83.4 |  |  | $ | 83.4 |  |  | $ | 83.4 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | — |  |  | 78.2 |
2013 |  |  |  | 91.4 |  |  | 88.9 |  |  | 88.7 |  |  | 88.6 |  |  | 88.5 |  |  | 88.5 |  |  | 88.5 |  |  | 88.5 |  |  | 88.4 |  |  | — |  |  | 80.9 |
2014 |  |  |  |  |  | 95.6 |  |  | 95.6 |  |  | 95.4 |  |  | 95.2 |  |  | 95.2 |  |  | 95.2 |  |  | 95.2 |  |  | 95.2 |  |  | — |  |  | 87.9 |
2015 |  |  |  |  |  |  |  | 99.3 |  |  | 98.0 |  |  | 97.6 |  |  | 97.5 |  |  | 97.6 |  |  | 97.6 |  |  | 97.6 |  |  | — |  |  | 87.5 |
2016 |  |  |  |  |  |  |  |  |  | 112.4 |  |  | 109.5 |  |  | 109.3 |  |  | 109.6 |  |  | 109.6 |  |  | 109.5 |  |  | — |  |  | 93.2 |
2017 |  |  |  |  |  |  |  |  |  |  |  | 115.5 |  |  | 111.8 |  |  | 110.5 |  |  | 110.6 |  |  | 110.5 |  |  | — |  |  | 91.3 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | 109.0 |  |  | 108.9 |  |  | 108.3 |  |  | 108.3 |  |  | — |  |  | 94.5 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 111.6 |  |  | 110.5 |  |  | 110.0 |  |  | (0.2) |  |  | 92.2 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 87.0 |  |  | 86.9 |  |  | (0.8) |  |  | 68.8 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 105.0 |  |  | (6.7) |  |  | 69.7 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  | $ | 994.7 |  |  |  |  |
($ in millions) |  |  |  |
Auto Physical Damage |  |  |  |
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance |  |  |  |
Years Ended December 31, |  |  |  |
Accident |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  | Unaudited |  |  |  |  |  |
Year |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  |  |  |
2012 |  | $ | 80.5 |  |  | $ | 83.4 |  |  | $ | 83.4 |  |  | $ | 83.4 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | 83.3 |  |  |  |  |
2013 |  |  |  | 85.1 |  |  | 88.7 |  |  | 88.6 |  |  | 88.5 |  |  | 88.5 |  |  | 88.5 |  |  | 88.5 |  |  | 88.4 |  |  | 88.4 |  |  |  |  |
2014 |  |  |  |  |  | 88.9 |  |  | 95.4 |  |  | 95.3 |  |  | 95.3 |  |  | 95.3 |  |  | 95.2 |  |  | 95.2 |  |  | 95.2 |  |  |  |  |
2015 |  |  |  |  |  |  |  | 92.1 |  |  | 97.9 |  |  | 97.7 |  |  | 97.6 |  |  | 97.6 |  |  | 97.6 |  |  | 97.6 |  |  |  |  |
2016 |  |  |  |  |  |  |  |  |  | 106.5 |  |  | 109.7 |  |  | 109.5 |  |  | 109.6 |  |  | 109.6 |  |  | 109.6 |  |  |  |  |
2017 |  |  |  |  |  |  |  |  |  |  |  | 105.2 |  |  | 110.8 |  |  | 110.7 |  |  | 110.6 |  |  | 110.6 |  |  |  |  |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | 103.6 |  |  | 109.1 |  |  | 108.3 |  |  | 108.3 |  |  |  |  |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 106.2 |  |  | 110.7 |  |  | 110.1 |  |  |  |  |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 84.1 |  |  | 87.6 |  |  |  |  |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 97.3 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  | 988.0 |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Outstanding prior to 2012 |  | — |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Prior years paid |  | — |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities for claims and claim adjustment expenses, net of reinsurance |  | $ | 6.7 |  |  |  |  |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 111

NOTE 8 - Unpaid Claims and Claim Expenses (continued)
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the Consolidated Balance Sheet is as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021
Property & Casualty segment |  |
Net reserves |  |
Homeowners |  | $ | 52.8 |
Auto liability |  | 171.5 |
Auto physical damage |  | 6.7 |
Other short duration lines |  | 2.8 |
Total net reserves for unpaid claims and claim adjustment expense, net of reinsurance |  | 233.8 |
Reinsurance recoverable on unpaid claims |  |
Homeowners |  | 1.4 |
Auto liability |  | 99.9 |
Other short duration lines |  | 9.0 |
Total reinsurance recoverable on unpaid claims |  | 110.3 |
Insurance lines other than short duration(1) |  | 63.5 |
Unallocated claims adjustment expenses |  | 18.3 |
Total other than short duration and unallocated claims adjustment expenses |  | 81.8 |
Gross reserves, end of year(1) |  | $ | 425.9 |

(1) This line includes Supplemental, Retirement and Life reserves included in the Consolidated Balance Sheet.
NOTE 9 - 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 of approximately $78.2 million, $84.4 million and $52.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. For 2021, catastrophe losses were impacted by winter storm events, wind/hail/tornado events, as well as wildfires, tropical storms and hurricanes.

112 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 9 - Reinsurance and Catastrophes (continued)
The total amounts of reinsurance recoverable on unpaid insurance reserves classified as assets and reported in Other assets in the Consolidated Balance Sheets were as follows:

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Reinsurance recoverables on reserves and unpaid claims |  |  |  |
Property & Casualty |  |  |  |
Reinsurance companies |  | $ | 10.4 |  |  | $ | 13.2 |
State insurance facilities |  | 99.9 |  |  | 99.7 |
Life and health |  | 9.3 |  |  | 9.6 |
Total |  | $ | 119.6 |  |  | $ | 122.5 |

The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, IBNR claims and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:

($ in millions) |  | Gross Amount |  | Ceded to Other Companies(1) |  | Assumed from Other Companies |  | Net Amount
Year Ended December 31, 2021 |  |  |  |  |  |  |  |
Premiums written and contract deposits(2) |  | $ | 1,370.1 |  |  | $ | 23.1 |  |  | $ | 9.4 |  |  | $ | 1,356.4 |
Premiums and contract charges earned |  | 913.2 |  |  | 33.3 |  |  | 9.7 |  |  | 889.6 |
Benefits, claims and settlement expenses |  | 619.3 |  |  | 7.8 |  |  | 6.2 |  |  | 617.7 |
Year Ended December 31, 2020 |  |  |  |  |  |  |  |
Premiums written and contract deposits(2) |  | 1,369.9 |  |  | 20.4 |  |  | 9.8 |  |  | 1,359.3 |
Premiums and contract charges earned |  | 949.6 |  |  | 28.8 |  |  | 9.9 |  |  | 930.7 |
Benefits, claims and settlement expenses |  | 475.7 |  |  | (86.2) |  |  | 7.0 |  |  | 568.9 |
Year Ended December 31, 2019 |  |  |  |  |  |  |  |
Premiums written and contract deposits(2) |  | 1,337.8 |  |  | 23.9 |  |  | 10.6 |  |  | 1,324.5 |
Premiums and contract charges earned |  | 917.6 |  |  | 30.4 |  |  | 10.8 |  |  | 898.0 |
Benefits, claims and settlement expenses |  | 633.9 |  |  | 56.3 |  |  | 7.5 |  |  | 585.1 |

(1) Excludes the annuity reinsurance agreement accounted for using the deposit method that is discussed in Note 6.
(2) This measure is not based on accounting principles generally accepted in the U.S. (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, 2021. Past due reinsurance recoverables as of December 31, 2021 were not material.
The Company maintains catastrophe excess of loss reinsurance coverage. For 2021, 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). The catastrophe excess of loss contract provided 95% coverage for catastrophe losses above a retention of $25.0 million per occurrence up to $170.0 million per occurrence. This contract consisted of three layers, each of which provided for one mandatory reinstatement. The layers were $25.0 million excess of $25.0 million, $40.0 million excess of $50.0 million and $85.0 million excess of $90.0 million.
For liability coverages, in 2021, the Company reinsured each loss above a retention of $1.0 million with coverage up to $5.0 million on a per occurrence basis and $20.0 million in a clash event. A clash cover is a reinsurance casualty excess contract requiring two or more casualty coverages or policies issued by the Company to be involved in the same loss occurrence for coverage to apply. For property coverages, in 2021, the Company reinsured each loss above a retention of $1.0 million up to $5.0 million on a per risk basis, including catastrophe

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 113

NOTE 9 - Reinsurance and Catastrophes (continued)
losses. Also, the Company could submit to the reinsurers two per risk losses from the same occurrence for a total of $8.0 million of property recovery in any one event.
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 2021, 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.
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%.
NOTE 10 - Debt
Indebtedness and scheduled maturities consisted of the following:

($ in millions) |  | Interest Rates |  | Final Maturity |  | December 31,
|  |  |  | 2021 |  | 2020
Short-term debt |  |  |  |  |  |  |  |
Bank Credit Facility |  | Variable |  | 2026 |  | $ | 249.0 |  |  | $ | 135.0 |
Long-term debt(1) |  |  |  |  |  |  |  |
4.50% Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.3 and $0.4 and unamortized debt issuance costs of $1.1 and $1.3 |  | 4.50% |  | 2025 |  | 248.6 |  |  | 248.3 |
Federal Home Loan Bank borrowing |  | 0.00% |  | 2022 |  | 5.0 |  |  | 54.0 |
Total |  |  |  |  |  | $ | 502.6 |  |  | $ | 437.3 |

(1) The Company designates debt obligations as "long-term" based on maturity date at issuance.
Credit Agreement with Financial Institutions (Bank Credit Facility)
Effective July 12, 2021, the Company, as borrower, amended its Credit Agreement (Bank Credit Facility). The amended Bank Credit Facility increased the amount available on the senior revolving credit facility from $225.0 million to $325.0 million. PNC Bank, National Association and JPMorgan Chase Bank, N.A. serve as joint lead arrangers under the amended Bank Credit Facility, with The Northern Trust Company, KeyBank National Association, U.S. Bank National Association, Illinois National Bank and Comerica Bank as lenders participating in the syndicate. Terms and conditions of the Bank Credit Facility are substantially consistent with the prior agreement, with an interest rate based on LIBOR plus 115 basis points.
As of December 31, 2021, the amount outstanding on the senior revolving credit facility was $249.0 million. The $76.0 million unused portion of the Bank Credit Facility is available for use and subject to a variable commitment fee, which was 0.15% on an annual basis at December 31, 2021.
On December 31, 2021, the Company utilized $114.0 million of the senior revolving credit facility to fund a portion of the acquisition of Madison National that occurred effective January 1, 2022, and the Company expects that the unused portion of the senior revolving credit facility will be available for ongoing working capital, capital expenditures and general corporate expenditures.
Senior Notes
As of December 31, 2021, the Company had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (Senior Notes), which will mature on December 1, 2025, issued at a discount of 0.265% resulting in an effective yield of 4.53%. Interest on the Senior Notes is payable semi-annually at a rate of 4.50%. The 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 35 basis points, plus, in either of the above cases, accrued interest to the date of redemption.

114 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 10 - Debt (continued)
Federal Home Loan Bank Borrowings
In 2017, Horace Mann Insurance Company (HMIC) became a member of the FHLB, which provides HMIC with access to collateralized borrowings and other FHLB products. As membership requires the ownership of membership stock, in June 2017, HMIC purchased common stock to meet the membership requirement. Any borrowing from the 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 the fourth quarter of 2017, HMIC purchased common stock to meet the activity-based requirement. In 2021, the Board authorized a maximum amount equal to 15% of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB borrowings. As of December 31, 2021, the Company had $5.0 million of borrowings outstanding with FHLB that mature on May 16, 2022. There is no interest on this borrowing. HMIC's FHLB borrowings of $5.0 million are included in Long-term debt in the Consolidated Balance Sheets.
Covenants
The Company is in compliance with all of the financial covenants contained in the Senior Notes indenture and the Bank 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:

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Income tax (asset) liability |  |  |  |
Current |  | $ | (9.5) |  |  | $ | (12.6) |
Deferred |  | 190.5 |  |  | 206.7 |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 115

NOTE 11 - Income Taxes (continued)
Deferred tax assets and liabilities are recognized for all future tax consequences attributable to "temporary differences" between the financial statement carrying value of existing assets and liabilities and their respective tax bases. There are no deferred tax liabilities that have not been recognized. The "temporary differences" that gave rise to the deferred tax balances were as follows:

($ in millions) |  | December 31,
|  | 2021 |  | 2020
Deferred tax assets |  |  |  |
Unearned premium reserve reduction |  | $ | 11.7 |  |  | $ | 11.5 |
Compensation accruals |  | 9.6 |  |  | 9.5 |
Impaired securities |  | 2.3 |  |  | 2.1 |
Other comprehensive income - net funded status of benefit plans |  | 2.7 |  |  | 3.0 |
Discounting of unpaid claims and claim expense tax reserves |  | 2.5 |  |  | 2.5 |
Intangibles |  | 0.1 |  |  | — |
Postretirement benefits other than pensions |  | 0.3 |  |  | 0.3 |
Total gross deferred tax assets |  | 29.2 |  |  | 28.9 |
Deferred tax liabilities |  |  |  |
Other comprehensive income - net unrealized gains on securities |  | 101.1 |  |  | 124.7 |
Deferred policy acquisition costs |  | 37.3 |  |  | 36.3 |
Life insurance future policy benefit reserve |  | 30.7 |  |  | 26.7 |
Life insurance future policy benefit reserve (transitional rule) |  | 8.5 |  |  | 10.7 |
Discounting of unpaid claims and claim expense tax reserves (transitional rule) |  | 0.6 |  |  | 0.8 |
Investment related adjustments |  | 37.3 |  |  | 34.2 |
Intangibles |  | — |  |  | 0.2 |
Other, net |  | 4.2 |  |  | 2.0 |
Total gross deferred tax liabilities |  | 219.7 |  |  | 235.6 |
Net deferred tax liability |  | $ | 190.5 |  |  | $ | 206.7 |

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, 2021 and 2020.
The components of the provision for income tax expense were as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Current |  | $ | 27.7 |  |  | $ | 16.9 |  |  | $ | 31.5 |
Deferred |  | 4.4 |  |  | 9.4 |  |  | 20.5 |
Total income tax expense |  | $ | 32.1 |  |  | $ | 26.3 |  |  | $ | 52.0 |

116 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 11 - Income Taxes (continued)
Income tax expense for the following periods differed from the expected tax computed by applying the federal corporate tax rate of 21% for 2021, 2020 and 2019 to income before income taxes as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Expected federal tax on income |  | $ | 36.7 |  |  | $ | 33.5 |  |  | $ | 49.6 |
Add (deduct) tax effects of: |  |  |  |  |  |
Tax-exempt interest |  | (3.9) |  |  | (4.2) |  |  | (4.2) |
Dividend received deduction |  | (2.2) |  |  | (1.5) |  |  | (1.4) |
Goodwill impairment |  | — |  |  | 0.2 |  |  | 5.9 |
CARES Act net operating loss carryback |  | — |  |  | (2.8) |  |  | — |
Employee share-based compensation |  | (1.3) |  |  | (0.5) |  |  | 0.3 |
Compensation deduction limitation |  | 1.5 |  |  | 0.7 |  |  | 0.7 |
Prior year adjustments |  | 0.1 |  |  | (0.2) |  |  | (0.7) |
Other, net |  | 1.2 |  |  | 1.1 |  |  | 1.8 |
Income tax expense provided on income |  | $ | 32.1 |  |  | $ | 26.3 |  |  | $ | 52.0 |

The Company's federal income tax returns for years prior to 2014 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 117

NOTE 11 - Income Taxes (continued)
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Balance as of the beginning of the year |  | $ | 2.3 |  |  | $ | 2.0 |  |  | $ | 1.8 |
Increases related to prior year tax positions |  | — |  |  | 0.2 |  |  | 0.1 |
Decreases related to prior year tax positions |  | (0.1) |  |  | — |  |  | — |
Increases related to current year tax positions |  | — |  |  | 0.1 |  |  | 0.1 |
Settlements |  | — |  |  | — |  |  | — |
Lapse of statute |  | (0.5) |  |  | — |  |  | — |
Balance as of the end of the year |  | $ | 1.7 |  |  | $ | 2.3 |  |  | $ | 2.0 |

The Company's effective tax rate would be affected to the extent there were unrecognized tax benefits that could be recognized. There are no positions for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly change within the next 12 months.
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, 2021, 2020 and 2019.
NOTE 12 - Operating Leases
The Company has various operating lease agreements, primarily for real estate offices. Such leases have remaining lease terms of 1 year to 4 years, some of which may include options to extend certain leases for up to an additional 25 years.
The components of lease expense were as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020
Operating lease cost |  | $ | 4.3 |  |  | $ | 4.5 |
Short-term lease cost |  | 0.1 |  |  | 0.1 |
Total lease cost |  | $ | 4.4 |  |  | $ | 4.6 |

Supplemental cash flow information related to operating leases was as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020
Cash paid for amounts included in the measurement of lease liabilities |  | $ | 4.3 |  |  | $ | 4.5 |

Supplemental balance sheet information related to operating leases were as follows:

($ in millions, except lease terms and discount rates) |  | December 31,
|  | 2021 |  | 2020
Assets: |  |  |  |
Right of use assets, included in Other assets |  | $ | 9.0 |  |  | $ | 12.6 |
Liabilities: |  |  |  |
Operating lease liabilities, included in Other liabilities |  | $ | 10.0 |  |  | $ | 13.6 |
Weighted average remaining lease term |  | 3.07 |  | 3.63
Weighted average discount rate |  | 3.67 | % |  | 3.75 | %

118 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 12 - Operating Leases (continued)
Future minimum lease payments under non-cancellable operating leases as of December 31, 2021 are as follows:

($ in millions) |  |
Year Ending December 31, |  |
2022 |  | $ | 4.2 |
2023 |  | 3.5 |
2024 |  | 2.0 |
2025 |  | 0.8 |
2026 |  | — |
Thereafter |  | — |
Total future minimum lease payments |  | 10.5 |
Less imputed interest |  | (0.5) |
Total |  | $ | 10.0 |

NOTE 13 - Shareholders' Equity and Share-Based Compensation
Share Repurchase Program and Treasury Shares
On September 30, 2015, the Board authorized a share repurchase program allowing repurchases of up to $50.0 million of HMEC's common stock, par value $0.001 (Program). The Program authorizes the repurchase of common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The Program does not have an expiration date and may be limited or terminated at any time without notice.
During 2021, the Company repurchased 140,758 shares of its common stock, or 0.3% of the shares outstanding as of December 31, 2020, at an aggregate cost of $5.3 million, or an average price of $37.49 per share. During 2020, the Company repurchased 52,095 shares of its common stock, or 0.1% of the shares outstanding as of December 31, 2019, at an aggregate cost of $2.2 million, or an average price of $41.17 per share. During 2019, the Company did not repurchase any shares of its common stock. In total and through December 31, 2021, 1,040,226 shares were repurchased under the Program at an average price of $33.33 per share. The repurchase of shares was funded through use of cash. As of December 31, 2021, $15.3 million remained authorized for future share repurchases under the Program.
At December 31, 2021, the Company held 25,043,337 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 at December 31, 2021 and 2020.
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, 2021, approximately 2,688,416

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 119

NOTE 13 - Shareholders' Equity and Share-Based Compensation (continued)
shares were available for grant under the Comprehensive Plan. Shares of common stock issued under the Comprehensive Plan may be either authorized and unissued shares of HMEC or shares that have been reacquired by HMEC; however, new shares have been issued historically.
As further described in the paragraphs below, CSUs, stock options and RSUs under the Comprehensive Plan were as follows:

|  | December 31,
|  | 2021 |  | 2020 |  | 2019
CSUs related to deferred compensation for Directors |  | 26,313 |  |  | 23,609 |  |  | 28,526 |
CSUs related to deferred compensation for employees |  | 16,571 |  |  | 20,467 |  |  | 25,194 |
Stock options |  | 1,032,128 |  |  | 916,287 |  |  | 908,557 |
RSUs related to incentive compensation |  | 834,981 |  |  | 823,393 |  |  | 889,438 |
Total |  | 1,909,993 |  |  | 1,783,756 |  |  | 1,851,715 |

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, 2021, 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 7 to 10 years from the date of grant. The exercise price of the option is equal to the market price of HMEC's common stock on the date of grant resulting in a grant date intrinsic value of $0.
Changes in outstanding options were as follows:

|  | Weighted Average Option Price per Share |  | Range of Option Prices per Share |  | Options
|  |  |  | Outstanding |  | Vested and Exercisable
December 31, 2020 |  | $38.99 |  | $28.88-$42.95 |  | 916,287 |  |  | 437,197 |
Granted |  | $40.10 |  | $40.10-$40.10 |  | 183,272 |  |  | — |
Vested |  | $41.27 |  | $28.88-$42.95 |  | — |  |  | 163,519 |
Exercised |  | $31.35 |  | $31.01-$32.35 |  | (8,015) |  |  | (8,015) |
Forfeited |  | $41.39 |  | $41.10-$42.73 |  | (49,411) |  |  | — |
Expired |  | $42.23 |  | $41.83-$42.73 |  | (10,005) |  |  | — |
December 31, 2021 |  | $39.10 |  | $28.88-$42.95 |  | 1,032,128 |  |  | 592,701 |

120 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 13 - Shareholders' Equity and Share-Based Compensation (continued)
Option information segregated by ranges of exercise prices were as follows:

|  | December 31, 2021
|  |  |  | Total Outstanding Options |  | Vested and Exercisable Options
|  | Range of Option Prices per Share |  | Options |  | Weighted Average Option Price per Share |  | Weighted Average Remaining Term |  | Options |  | Weighted Average Option Price per Share |  | Weighted Average Remaining Term
|  | $28.88-$33.41 |  | 195,192 |  |  | $30.81 |  | 3.59 |  | 195,192 |  |  | $30.81 |  | 3.59
|  | $36.04-$41.95 |  | 687,556 |  |  | $40.61 |  | 7.52 |  | 285,474 |  |  | $40.84 |  | 6.35
|  | $42.73-$42.73 |  | 149,380 |  |  | $42.95 |  | 6.18 |  | 112,035 |  |  | $42.95 |  | 6.18
Total |  |  |  | 1,032,128 |  |  | $39.10 |  | 6.58 |  | 592,701 |  |  | $37.94 |  | 5.41

The weighted average exercise prices of vested and exercisable options as of December 31, 2020 and 2019 were $36.59 and $34.81, respectively.
As of December 31, 2021, based on a closing stock price of $38.70 per share, the aggregate intrinsic (in-the-money) values of vested options and all options outstanding were $1.5 million and $1.5 million, respectively.
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 4 years from the date of grant. The outstanding units accrue dividends at the same rate as dividends paid to HMEC's shareholders. These dividends are reinvested into additional RSUs.
Changes in outstanding RSUs were as follows:

|  | Total Outstanding Units |  | Vested Units
|  | Units |  | Weighted Average Grant Date Fair Value per Unit |  | Units |  | Weighted Average Grant Date Fair Value per Unit
December 31, 2020 |  | 823,393 |  |  | $33.88 |  | 484,984 |  |  | $27.48
Granted(1) |  | 205,474 |  |  | $41.29 |  | — |  |  | —
Adjustment for performance achievement |  | 14,272 |  |  | $45.01 |  | — |  |  | —
Vested |  | — |  |  | — |  | 145,319 |  |  | $42.15
Forfeited |  | (47,214) |  |  | $43.08 |  | — |  |  | —
Distributed(2) |  | (160,944) |  |  | $38.43 |  | (160,944) |  |  | —
December 31, 2021 |  | 834,981 |  |  | $34.50 |  | 469,359 |  |  | $28.27

(1) Includes dividends reinvested into additional RSUs.
(2) Includes distributed units which were utilized to satisfy withholding taxes due on the distribution.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 121

NOTE 14 - 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 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 Insurance and the Texas Department of Insurance, as applicable. Prescribed statutory accounting principles include a variety of publications of the National Association of Insurance Commissioners (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 and the inclusion of net unrealized investment gains or losses in shareholders' equity relating to fixed maturity securities.
The following table includes selected information for HMEC's insurance subsidiaries:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Consolidated net income, statutory basis |  | $ | 117.2 |  |  | $ | 141.9 |  |  | $ | 62.3 |
Consolidated capital and surplus, statutory basis(1) |  | $ | 1,017.4 |  |  | $ | 937.3 |  |  | $ | 868.8 |

(1) Subject to regulatory restrictions.
The NAIC has risk-based capital guidelines to evaluate the adequacy of statutory capital and surplus in relation to risks assumed in investments, reserving policies, and volume and types of insurance business written. At December 31, 2021 and 2020, the minimum statutory-basis capital and surplus required to be maintained by HMEC's insurance subsidiaries was $123.0 million and $113.2 million, respectively. At December 31, 2021 and 2020, 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 $26.2 million and $26.9 million as of December 31, 2021 and 2020, 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 15 - Retirement Plans and Other Postretirement Benefits
The Company sponsors two qualified and three non-qualified retirement plans. Substantially all employees participate in the 401(k) 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. Certain employees participate in a non-qualified defined contribution plan.

122 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 15 - Retirement Plans and Other Postretirement Benefits (continued)
Qualified Plans
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 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.
For the two qualified plans, all assets are held in their respective plan trusts.
Non-qualified Plans
The non-qualified plans were established for specific employees whose otherwise eligible earnings exceeded the statutory limits under the qualified plans. Benefit accruals under the non-qualified supplemental defined benefit plans were frozen in 2002 and all participants are currently in payment status. 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.
Total Expense and Contribution Plans' Information
Total expense recognized for the non-qualified defined contribution, 401(k), defined benefit and supplemental retirement plans was $9.2 million, $10.0 million and $9.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Contributions to employees' accounts under the 401(k) plan and the non-qualified defined contribution plan, as well as total assets of the plans, were as follows:

($ in millions) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
401(k) plan |  |  |  |  |  |
Contributions to employees' accounts |  | $ | 8.2 |  |  | $ | 8.2 |  |  | $ | 8.2 |
Total assets at the end of the year |  | 246.9 |  |  | 228.4 |  |  | 206.2 |
Non-qualified defined contribution plan |  |  |  |  |  |
Contributions to employees' accounts |  | 0.1 |  |  | 0.1 |  |  | 0.1 |
Total assets at the end of the year |  | — |  |  | — |  |  | — |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 123

NOTE 15 - Retirement Plans and Other Postretirement Benefits (continued)
Defined Benefit Plan and Supplemental Retirement Plans
The following tables summarize the funded status of the defined benefit and supplemental retirement pension plans as of December 31, 2021, 2020 and 2019 (the measurement dates) and identify (1) the assumptions used to determine the projected benefit obligation and (2) the components of net pension cost for the defined benefit plan and supplemental retirement plans for the following periods:

($ in millions) |  | Defined Benefit Plan |  | Supplemental Defined Benefit Plans
|  | December 31, |  | December 31,
|  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Change in benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation at beginning of year |  | $ | 24.3 |  |  | $ | 24.8 |  |  | $ | 25.1 |  |  | $ | 15.7 |  |  | $ | 15.2 |  |  | $ | 15.4 |
Service cost |  | 0.6 |  |  | 0.7 |  |  | 0.7 |  |  | — |  |  | — |  |  | — |
Interest cost |  | 0.5 |  |  | 0.7 |  |  | 1.0 |  |  | 0.3 |  |  | 0.5 |  |  | 0.6 |
Actuarial loss (gain) |  | (0.6) |  |  | 1.0 |  |  | — |  |  | (0.2) |  |  | 1.3 |  |  | 0.5 |
Benefits paid |  | (2.6) |  |  | (1.5) |  |  | (2.0) |  |  | (1.3) |  |  | (1.3) |  |  | (1.3) |
Settlements |  | — |  |  | (1.4) |  |  | — |  |  | — |  |  | — |  |  | — |
Projected benefit obligation at end of year |  | $ | 22.2 |  |  | $ | 24.3 |  |  | $ | 24.8 |  |  | $ | 14.5 |  |  | $ | 15.7 |  |  | $ | 15.2 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 22.0 |  |  | $ | 23.2 |  |  | $ | 22.1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Actual return on plan assets |  | 1.0 |  |  | 2.3 |  |  | 3.5 |  |  | — |  |  | — |  |  | — |
Employer contributions |  | — |  |  | — |  |  | — |  |  | 1.3 |  |  | 1.3 |  |  | 1.3 |
Benefits paid |  | (2.6) |  |  | (1.5) |  |  | (2.0) |  |  | (1.3) |  |  | (1.3) |  |  | (1.3) |
Expenses paid |  | (0.6) |  |  | (0.6) |  |  | (0.4) |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | (1.4) |  |  | — |  |  | — |  |  | — |  |  | — |
Fair value of plan assets at end of year |  | $ | 19.8 |  |  | $ | 22.0 |  |  | $ | 23.2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Funded status |  | $ | (2.4) |  |  | $ | (2.3) |  |  | $ | (1.6) |  |  | $ | (14.5) |  |  | $ | (15.7) |  |  | $ | (15.2) |
Prepaid (accrued) benefit expense |  | $ | 4.9 |  |  | $ | 5.5 |  |  | $ | 6.7 |  |  | $ | 8.7 |  |  | $ | (9.3) |  |  | $ | (9.9) |
Total amount recognized in Consolidated Balance Sheets, all in Other liabilities |  | $ | (2.4) |  |  | $ | (2.3) |  |  | $ | (1.7) |  |  | $ | (14.5) |  |  | $ | (15.7) |  |  | $ | (15.2) |
Amounts recognized in accumulated other comprehensive income (loss) (AOCI): |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Net actuarial loss |  | (7.3) |  |  | (7.8) |  |  | (8.3) |  |  | (6.5) |  |  | (6.4) |  |  | (5.3) |
Total amount recognized in AOCI |  | $ | (7.3) |  |  | $ | (7.8) |  |  | $ | (8.3) |  |  | $ | (6.5) |  |  | $ | (6.4) |  |  | $ | (5.3) |
Information for pension plans with an accumulated benefit obligation greater than plan assets: |  |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation |  | $ | 22.2 |  |  | $ | 24.3 |  |  | $ | 24.8 |  |  | $ | 14.5 |  |  | $ | 15.7 |  |  | $ | 15.2 |
Accumulated benefit obligation |  | 22.2 |  |  | 24.3 |  |  | 24.8 |  |  | 14.5 |  |  | 15.7 |  |  | 15.2 |
Fair value of plan assets |  | 19.8 |  |  | 22.0 |  |  | 23.2 |  |  | — |  |  | — |  |  | — |

124 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 15 - Retirement Plans and Other Postretirement Benefits (continued)
The change in the Company's AOCI for the defined benefit plans for the year ended December 31, 2021 was primarily attributable to an increase in the discount rate and better than expected asset returns partially offset by updates to mortality assumptions, updated census dates and an updated mortality projection scale. The change in the Company's AOCI for the defined benefit plans for the year ended December 31, 2020 was primarily attributable to better than expected asset returns, updates to mortality assumptions and updated census dates partially offset by a decrease in the discount rate and an updated mortality projection scale. The change in the Company's AOCI for the defined benefit plans for the year ended December 31, 2019 was primarily attributable to better than expected asset returns, updates to mortality assumptions and updated census dates offset by a decrease in the discount rate.

($ in millions) |  | Defined Benefit Plan |  | Supplemental Defined Benefit Plans
|  | Year Ended December 31, |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Components of net periodic pension (income) expense: |  |  |  |  |  |  |  |  |  |  |  |
Service cost: |  |  |  |  |  |  |  |  |  |  |  |
Benefit accrual |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other expenses |  | 0.6 |  |  | 0.7 |  |  | 0.7 |  |  | — |  |  | — |  |  | — |
Interest cost |  | 0.5 |  |  | 0.7 |  |  | 1.0 |  |  | 0.3 |  |  | 0.5 |  |  | 0.6 |
Expected return on plan assets |  | (0.9) |  |  | (1.0) |  |  | (1.3) |  |  | — |  |  | — |  |  | — |
Settlement loss |  | — |  |  | 0.5 |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Actuarial loss |  | 0.4 |  |  | 0.3 |  |  | 0.3 |  |  | 0.4 |  |  | 0.3 |  |  | 0.3 |
Net periodic pension expense |  | $ | 0.6 |  |  | $ | 1.2 |  |  | $ | 0.7 |  |  | $ | 0.7 |  |  | $ | 0.8 |  |  | $ | 0.9 |
Changes in plan assets and benefit obligations included in other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Net actuarial loss (gain) |  | (0.2) |  |  | 0.3 |  |  | (1.8) |  |  | (0.2) |  |  | 1.3 |  |  | 0.5 |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Actuarial loss |  | (0.4) |  |  | (0.8) |  |  | (0.3) |  |  | (0.4) |  |  | (0.3) |  |  | (0.2) |
Total recognized in other comprehensive income (loss) |  | $ | (0.6) |  |  | $ | (0.5) |  |  | $ | (2.1) |  |  | $ | (0.6) |  |  | $ | 1.0 |  |  | $ | 0.3 |
Weighted average assumptions used to determine expense: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 2.08 | % |  | 3.10 | % |  | 4.20 | % |  | 2.08 | % |  | 3.10 | % |  | 4.20 | %
Expected return on plan assets |  | 4.74 | % |  | 4.80 | % |  | 5.75 | % |  | * |  | * |  | *
Annual rate of salary increase |  | * |  | * |  | * |  | * |  | * |  | *
Weighted average assumptions used to determine benefit obligations as of December 31: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 2.57 | % |  | 2.08 | % |  | 3.10 | % |  | 2.57 | % |  | 2.08 | % |  | 3.10 | %
Expected return on plan assets |  | 4.74 | % |  | 4.80 | % |  | 5.75 | % |  | * |  | * |  | *
Annual rate of salary increase |  | * |  | * |  | * |  | * |  | * |  | *

* Not applicable.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 125

NOTE 15 - Retirement Plans and Other Postretirement Benefits (continued)
The discount rates at December 31, 2021 were based on the average yield for long-term, high-grade securities available during the benefit payout period. To set its discount rate, the Company looks to leading indicators, including the Mercer Above Mean Yield Curve.
The assumption for the long-term rate of return on plan assets was determined by considering actual investment experience during the lifetime of the plan, balanced with reasonable expectations of future growth considering the various classes of assets and percentage allocation for each asset class.
The Company has an investment policy for the defined benefit pension plan that aligns the assets within the plan's trust to an approximate allocation of 35% equity and 65% fixed income funds. Management believes this allocation will produce the targeted long-term rate of return on assets necessary for payment of future benefit obligations, while providing adequate liquidity for payments to current beneficiaries. Assets are reviewed against the defined benefit pension plan's investment policy and the trustee has been directed to adjust invested assets at least quarterly to maintain the target allocation percentages.
Fair values of the equity security funds and fixed income funds have been determined from public quotations. The following table presents the fair value hierarchy for the Company's defined benefit pension plan assets, excluding cash held.

($ in millions) |  |  |  | Fair Value Measurements at Reporting Date Using
|  | Total |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2021 |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |
Equity security funds(1) |  |  |  |  |  |  |  |
United States |  | $ | 3.8 |  |  | $ | — |  |  | $ | 3.8 |  |  | $ | — |
International |  | 3.3 |  |  | — |  |  | 3.3 |  |  | — |
Fixed income funds |  | 12.4 |  |  | — |  |  | 12.4 |  |  | — |
Short-term investment funds |  | 0.3 |  |  | 0.3 |  |  | — |  |  | — |
Total |  | $ | 19.8 |  |  | $ | 0.3 |  |  | $ | 19.5 |  |  | $ | — |
December 31, 2020 |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |
Equity security funds(1) |  |  |  |  |  |  |  |
United States |  | $ | 4.4 |  |  | $ | — |  |  | $ | 4.3 |  |  | $ | — |
International |  | 4.3 |  |  | — |  |  | 4.3 |  |  | — |
Fixed income funds |  | 13.1 |  |  | — |  |  | 13.1 |  |  | — |
Short-term investments funds |  | 0.2 |  |  | 0.2 |  |  | — |  |  | — |
Total |  | $ | 22.0 |  |  | $ | 0.2 |  |  | $ | 21.7 |  |  | $ | — |

(1) None of the trust fund assets for the defined benefit pension plan have been invested in shares of HMEC's common stock.
There were no Level 3 assets held during the years ended December 31, 2021 and 2020.
In 2022, the Company expects amortization of net losses of $0.3 million and $0.4 million for the defined benefit plan and the supplemental retirement plans, respectively, and expects no amortization of prior service cost for the supplemental retirement plans to be included in net periodic pension expense.
Postretirement Benefits Other than Pensions
As of December 31, 2006, upon discontinuation of retiree medical benefits, Health Reimbursement Accounts (HRAs) were established for eligible participants and totaled $7.3 million. As of December 31, 2021, the balance of the previously established HRAs was $1.2 million. Funding of HRAs was $0.0 million, $0.1 million and $0.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

126 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 15 - Retirement Plans and Other Postretirement Benefits (continued)
2022 Contributions
In 2022, there is no minimum funding requirement for the Company's defined benefit plan. The following table discloses that minimum funding requirement and the expected full year contributions for the Company's plans.

($ in millions) |  | Defined Benefit Pension Plans
|  | Defined Benefit Plan |  | Supplemental Defined Benefit Plans
Minimum funding requirement for 2021 |  | $ | — |  |  | $ | — |
Expected contributions (approximations) for the year ended December 31, 2022 at the time of issuance of this Form 10-K(1) |  | $ | — |  |  | $ | 1.3 |

(1) HMEC's Annual Report on Form 10-K for the year ended December 31, 2021.
Estimated Future Benefit Payments
The Company's defined benefit plan may be subject to settlement accounting. Assumptions for both the number of individuals retiring in a calendar year and their elections regarding lump sum distributions are significant factors impacting the payout patterns for each of the plans below. Therefore, actual results could vary from the estimates shown. Estimated future benefit payments as of December 31, 2021 were as follows:

($ in millions) |  | 2022 |  | 2023 |  | 2024 |  | 2025 |  | 2026 |  | 2027-2031
Pension plans |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit plan |  | $ | 2.3 |  |  | $ | 2.1 |  |  | $ | 2.1 |  |  | $ | 2.0 |  |  | $ | 1.8 |  |  | $ | 6.8 |
Supplemental retirement plans |  | 1.3 |  |  | 1.3 |  |  | 1.2 |  |  | 1.2 |  |  | 1.2 |  |  | 5.1 |

NOTE 16 - Contingencies and Commitments
Lawsuits and Legal Proceedings
Companies in the insurance industry have been subject to substantial litigation resulting from claims, disputes and other matters. For instance, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies.
At the time of issuance of this Annual Report on Form 10-K, the Company does not have pending litigation from which there is a reasonable possibility of material loss.
Assessments for Insolvencies of Unaffiliated Insurance Companies
The Company is contingently liable for possible assessments under regulatory requirements pertaining to potential insolvencies of unaffiliated insurance companies. Liabilities, which are established based upon regulatory guidance, have generally been insignificant.
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $858.1 million and $571.9 million for the years ended December 31, 2021 and 2020, respectively.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 127

NOTE 17 - 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 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) |  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Net income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Other comprehensive income (loss): |  |  |  |  |  |
Change in net unrealized investment gains (losses) on fixed maturity securities: |  |  |  |  |  |
Net unrealized investment gains (losses) on securities arising during the period |  | (104.9) |  |  | 184.0 |  |  | 327.3 |
Less: reclassification adjustment for net investment gains (losses) included in income before income tax |  | (8.5) |  |  | 11.2 |  |  | 157.4 |
Total, before tax |  | (96.4) |  |  | 172.8 |  |  | 169.9 |
Income tax expense (benefit) |  | (20.8) |  |  | 36.9 |  |  | 36.4 |
Total, net of tax |  | (75.6) |  |  | 135.9 |  |  | 133.5 |
Change in net funded status of benefit plans: |  |  |  |  |  |
Before tax |  | 1.2 |  |  | (0.5) |  |  | 1.8 |
Income tax expense (benefit) |  | 0.2 |  |  | (0.1) |  |  | 0.4 |
Total, net of tax |  | 1.0 |  |  | (0.4) |  |  | 1.4 |
Total comprehensive income |  | $ | 68.2 |  |  | $ | 268.8 |  |  | $ | 319.3 |

128 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 17 - Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) (continued)
Accumulated Other Comprehensive Income (Loss)
The following table reconciles the components of AOCI for the periods indicated.

($ in millions) |  | Net Unrealized Investment Gains (Losses) on Securities(1)(2) |  | Net Funded Status of Benefit Plans(1) |  | Total(1)
Beginning balance, January 1, 2021 |  | $ | 366.3 |  |  | $ | (11.2) |  |  | $ | 355.1 |
Other comprehensive income (loss) before reclassifications |  | (82.3) |  |  | 1.0 |  |  | (81.3) |
Amounts reclassified from AOCI |  | 6.7 |  |  | — |  |  | 6.7 |
Net current period other comprehensive income (loss) |  | (75.6) |  |  | 1.0 |  |  | (74.6) |
Ending balance, December 31, 2021 |  | $ | 290.7 |  |  | $ | (10.2) |  |  | $ | 280.5 |
Beginning balance, January 1, 2020 |  | $ | 230.4 |  |  | $ | (10.8) |  |  | $ | 219.6 |
Other comprehensive income (loss) before reclassifications |  | 144.7 |  |  | (0.4) |  |  | 144.3 |
Amounts reclassified from AOCI |  | (8.8) |  |  | — |  |  | (8.8) |
Net current period other comprehensive income (loss) |  | 135.9 |  |  | (0.4) |  |  | 135.5 |
Ending balance, December 31, 2020 |  | $ | 366.3 |  |  | $ | (11.2) |  |  | $ | 355.1 |
Beginning balance, January 1, 2019 |  | $ | 96.9 |  |  | $ | (12.2) |  |  | $ | 84.7 |
Other comprehensive income (loss) before reclassifications |  | 257.9 |  |  | 1.4 |  |  | 259.3 |
Amounts reclassified from AOCI |  | (124.4) |  |  | — |  |  | (124.4) |
Net current period other comprehensive income (loss) |  | 133.5 |  |  | 1.4 |  |  | 134.9 |
Ending balance, December 31, 2019 |  | $ | 230.4 |  |  | $ | (10.8) |  |  | $ | 219.6 |

(1) All amounts are net of tax.
(2) The pretax amounts reclassified from AOCI, $(8.5) million, $11.2 million and $157.4 million, are included in net investment gains (losses) and the related tax expenses, $(1.8) million, $2.4 million and $33.0 million, are included in income tax expense in the Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 129

NOTE 18 - Supplemental Consolidated Cash and Cash Flow Information

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Cash |  | $ | 133.0 |  |  | $ | 21.8 |  |  | $ | 25.2 |
Restricted cash |  | 0.7 |  |  | 0.5 |  |  | 0.3 |
Total cash and restricted cash shown in the Consolidated Statements of Cash Flows |  | $ | 133.7 |  |  | $ | 22.3 |  |  | $ | 25.5 |
Cash paid during the year for: |  |  |  |  |  |
Interest |  | $ | 13.5 |  |  | $ | 15.5 |  |  | $ | 14.1 |
Income taxes |  | 23.7 |  |  | 17.3 |  |  | 22.9 |

Non-cash investing activities include $2.1 billion of investments transferred to a reinsurer as consideration paid in connection with a reinsurance transaction of a $2.9 billion block of in force fixed and variable annuity business in 2019. See Note 6 for further information.
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, 2021, 2020 and 2019, respectively.
NOTE 19 - Segment Information
The Company conducts and manages its business through five reporting segments. The four operating segments, representing the major lines of business, are: Property & Casualty (primarily personal lines of auto and property insurance products), Supplemental (primarily cancer, heart, hospital, supplemental disability and accident coverages), Retirement (primarily tax-qualified fixed and variable annuities) and Life (life insurance). The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management's evaluation of the results of those segments, but classifies those items in the fifth 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 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, Supplemental, Retirement and Life, on a direct cost basis.

130 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

NOTE 19 - Segment Information (continued)
Summarized financial information for these segments is as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Premiums and contract charges earned |  |  |  |  |  |
Property & Casualty |  | $ | 617.4 |  |  | $ | 650.1 |  |  | $ | 683.5 |
Supplemental(1) |  | 125.3 |  |  | 130.7 |  |  | 65.8 |
Retirement |  | 38.5 |  |  | 29.7 |  |  | 29.1 |
Life |  | 108.4 |  |  | 120.2 |  |  | 119.6 |
Total |  | $ | 889.6 |  |  | $ | 930.7 |  |  | $ | 898.0 |
Net investment income |  |  |  |  |  |
Property & Casualty |  | $ | 61.1 |  |  | $ | 42.6 |  |  | $ | 41.7 |
Supplemental(1) |  | 24.8 |  |  | 17.8 |  |  | 7.5 |
Retirement |  | 255.9 |  |  | 229.8 |  |  | 245.5 |
Life |  | 83.1 |  |  | 69.8 |  |  | 72.0 |
Corporate & Other |  | (0.1) |  |  | (0.2) |  |  | (0.1) |
Intersegment eliminations |  | (2.3) |  |  | (2.2) |  |  | (1.5) |
Total |  | $ | 422.5 |  |  | $ | 357.6 |  |  | $ | 365.1 |
Net income (loss) |  |  |  |  |  |
Property & Casualty |  | $ | 57.0 |  |  | $ | 76.5 |  |  | $ | 54.3 |
Supplemental(1) |  | 46.3 |  |  | 43.1 |  |  | 18.0 |
Retirement |  | 52.0 |  |  | 20.1 |  |  | (4.8) |
Life |  | 16.1 |  |  | 10.4 |  |  | 17.6 |
Corporate & Other |  | (28.6) |  |  | (16.8) |  |  | 99.3 |
Total |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |

($ in millions) |  | December 31,
|  | 2021 |  | 2020 |  | 2019
Assets |  |  |  |  |  |
Property & Casualty |  | $ | 1,243.4 |  |  | $ | 1,324.9 |  |  | $ | 1,327.1 |
Supplemental |  | 854.9 |  |  | 811.5 |  |  | 747.6 |
Retirement |  | 9,939.1 |  |  | 9,198.7 |  |  | 8,330.1 |
Life |  | 2,129.5 |  |  | 2,044.5 |  |  | 1,965.0 |
Corporate & Other |  | 281.8 |  |  | 182.3 |  |  | 173.0 |
Intersegment eliminations |  | (64.8) |  |  | (90.1) |  |  | (64.1) |
Total |  | $ | 14,383.9 |  |  | $ | 13,471.8 |  |  | $ | 12,478.7 |

(1) Acquired on July 1, 2019. The twelve month comparison is not meaningful.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 131

NOTE 19 - Segment Information (continued)
Additional significant financial information for these segments is as follows:

($ in millions) |  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
DAC amortization expense |  |  |  |  |  |
Property & Casualty |  | $ | 67.7 |  |  | $ | 74.4 |  |  | $ | 79.5 |
Supplemental(1) |  | 1.2 |  |  | 1.3 |  |  | 0.4 |
Retirement |  | 18.5 |  |  | 16.7 |  |  | 21.5 |
Life |  | 7.3 |  |  | 7.5 |  |  | 7.8 |
Total |  | $ | 94.7 |  |  | $ | 99.9 |  |  | $ | 109.2 |
Income tax expense (benefit) |  |  |  |  |  |
Property & Casualty |  | $ | 13.2 |  |  | $ | 15.4 |  |  | $ | 14.0 |
Supplemental(1) |  | 12.7 |  |  | 12.0 |  |  | 5.1 |
Retirement |  | 9.9 |  |  | 2.1 |  |  | 33.8 |
Life |  | 3.6 |  |  | 2.4 |  |  | 4.9 |
Corporate & Other |  | (7.3) |  |  | (5.6) |  |  | (5.8) |
Total |  | $ | 32.1 |  |  | $ | 26.3 |  |  | $ | 52.0 |

(1) Acquired on July 1, 2019. The twelve month comparison is not meaningful.

132 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, 2021. 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, 2021, 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 that occurred during the quarter ended December 31, 2021 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, 2021. 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.
Consistent with guidance issued by the Securities and Exchange Commission that an assessment of a recently acquired business may be omitted from management's report on internal control over financial reporting in the

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 133

year of acquisition, management excluded an assessment of the effectiveness of our internal control over financial reporting for one year after the acquisition related to NTA for the time period of July 1, 2019 through June 30, 2020. For the six month period ended June 30, 2020, NTA represented $75.2 million of consolidated revenues which are included in our consolidated financial statements for the year ended December 31, 2020.
Based on our assessment, we concluded that our internal control over financial reporting was effective at December 31, 2021, 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 Annual Report on Form 10-K, 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, 2021, 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, 2021, 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, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedules I to IV and VI (collectively, the consolidated financial statements), and our report dated February 25, 2022 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

134 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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.
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
KPMG LLP
Chicago, Illinois
February 25, 2022
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 30, 2022 in preparation for our 2022 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 135

ITEM 10. I Directors, Executive Officers and Corporate Governance
(a) The following sections of our Proxy Statement for our 2022 Annual Meeting of Shareholders, are incorporated herein by reference: "Board of Directors and Committees", "Executive Officers", "Delinquent Section 16(a) Reports", and "Corporate Governance".
(b) We have adopted a code of ethics 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 ethics for our Board members as it applies to each Board member's business conduct on behalf of us. The code of ethics is posted on our website, www.horacemann.com, under Investors — Governance — Governance Documents. In addition, amendments to the code of ethics requiring disclosure under applicable SEC rules will be posted on our website set forth 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 "Proposal No. 2 - Advisory Resolution to Approve Named Executive Officers' Compensation" section of our Proxy Statement for our 2022 Annual Meeting of Shareholders, is incorporated herein by reference. It includes "Compensation Discussion and Analysis", and "Compensation Committee Report".
ITEM 12. I Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
(a) The "Security Ownership of Certain Beneficial Owners and Management" section of our Proxy Statement for our 2022 Annual Meeting of Shareholders, is incorporated herein by reference.
(b) The "Equity Compensation Plan Information" section of our Proxy Statement for our 2022 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 13 of the Consolidated Financial Statements.
ITEM 13. I Certain Relationships and Related Transactions and Director Independence
The following sections of our Proxy Statement for our 2022 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 2022 Annual Meeting of Shareholders in the section "Proposal No. 3 - Ratification of Independent Registered Public Accounting Firm".

136 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

PART IV
ITEM 15. I Exhibits and Financial Statement Schedules

(a)(1) The following consolidated financial statements of the Company are contained in Part II - Item 8 of this report, Page 71 to Page 132
(a)(2) Financial statement schedules
Schedule I - Summary of Investments - Other than Investments in Related Parties, Page 138
Schedule II - Condensed Financial Information of Registrant, Page 139
Schedules III and VI Combined - Supplementary Insurance Information and Supplemental Information Concerning Property & Casualty Insurance Operations, Page 143
Schedule IV - Reinsurance, Page 144

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 137

SCHEDULE I
HORACE MANN EDUCATORS CORPORATION
SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2021
($ in millions)

Type of Investments |  | Cost (1) |  | Fair Value |  | Amount Shown in Balance Sheet
Fixed maturity securities |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations |  | $ | 776.4 |  |  | $ | 828.4 |  |  | $ | 828.4 |
States, municipalities and political subdivisions |  | 1,519.7 |  |  | 1,703.4 |  |  | 1,703.4 |
Foreign government bonds |  | 40.2 |  |  | 43.6 |  |  | 43.6 |
Public utilities |  | 91.8 |  |  | 100.4 |  |  | 100.4 |
All other corporate bonds |  | 2,091.6 |  |  | 2,251.0 |  |  | 2,251.0 |
Asset-backed securities |  | 935.4 |  |  | 943.2 |  |  | 943.2 |
Residential mortgage-backed securities (non-agency) |  | 21.5 |  |  | 21.6 |  |  | 21.6 |
Commercial mortgage-backed securities |  | 286.7 |  |  | 310.3 |  |  | 310.3 |
Redeemable preferred stocks |  | 34.4 |  |  | 37.4 |  |  | 37.4 |
Total fixed maturity securities |  | 5,797.7 |  |  | 6,239.3 |  |  | 6,239.3 |
Equity securities |  |  |  |  |  |
Industrial, miscellaneous and all other |  | 4.7 |  |  | 4.7 |  |  | 4.7 |
Banking & finance and insurance companies |  | 1.4 |  |  | 1.4 |  |  | 1.4 |
Public utilities |  | 0.2 |  |  | 0.2 |  |  | 0.2 |
Non-redeemable preferred stocks |  | 119.4 |  |  | 119.4 |  |  | 119.4 |
Closed-end fund |  | 21.5 |  |  | 21.5 |  |  | 21.5 |
Total equity securities |  | 147.2 |  |  | 147.2 |  |  | 147.2 |
Limited partnership interests |  | 712.8 |  |  | XXX |  | 712.8 |
Short-term investments |  | 157.8 |  |  | XXX |  | 157.8 |
Policy loans |  | 142.1 |  |  | XXX |  | 142.1 |
Derivatives |  | 7.8 |  |  | $ | 10.7 |  |  | 10.7 |
Mortgage loans |  | 6.7 |  |  | XXX |  | 6.7 |
Other |  | 32.9 |  |  | XXX |  | 32.9 |
Total investments |  | $ | 7,005.0 |  |  | XXX |  | $ | 7,449.5 |

(1) Bonds at original cost reduced by repayments and adjusted for amortization of premiums or accretion of discounts and impairment in value of specifically identified investments.
See accompanying Report of Independent Registered Public Accounting Firm.

138 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

SCHEDULE II
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS
As of December 31, 2021 and 2020
($ in millions, except share data)

|  | December 31,
|  | 2021 |  | 2020
ASSETS
Investments and cash |  | $ | 115.3 |  |  | $ | 4.1 |
Investments in subsidiaries |  | 2,191.3 |  |  | 2,121.0 |
Other assets |  | 11.3 |  |  | 58.9 |
Total assets |  | $ | 2,317.9 |  |  | $ | 2,184.0 |
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt |  | $ | 249.0 |  |  | $ | 135.0 |
Long-term debt |  | 248.6 |  |  | 248.3 |
Other liabilities |  | 12.9 |  |  | 10.6 |
Total liabilities |  | 510.5 |  |  | 393.9 |
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued |  | — |  |  | — |
Common stock, $1,000 par value, authorized 75,000,000 shares; issued, 2021, 66,436,821; 2020, 66,316,797 |  | 0.1 |  |  | 0.1 |
Additional paid-in capital |  | 495.3 |  |  | 488.4 |
Retained earnings |  | 1,524.9 |  |  | 1,434.6 |
Accumulated other comprehensive income (loss), net of taxes: |  |  |  |
Net unrealized investment gains on fixed maturity securities |  | 290.7 |  |  | 366.3 |
Net funded status of benefit plans |  | (10.2) |  |  | (11.2) |
Treasury stock, at cost, 2021, 25,043,337 shares; 2020, 24,902,579 shares |  | (493.4) |  |  | (488.1) |
Total shareholders' equity |  | 1,807.4 |  |  | 1,790.1 |
Total liabilities and shareholders' equity |  | $ | 2,317.9 |  |  | $ | 2,184.0 |

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 139

SCHEDULE II (continued)
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS
($ in millions)

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Revenues |  |  |  |  |  |
Net investment income |  | $ | (0.1) |  |  | $ | (0.2) |  |  | $ | (0.1) |
Net investment gains |  | — |  |  | — |  |  | — |
Total revenues |  | (0.1) |  |  | (0.2) |  |  | (0.1) |
Expenses |  |  |  |  |  |
Interest expense |  | 13.8 |  |  | 14.8 |  |  | 14.3 |
Other |  | 11.2 |  |  | 5.7 |  |  | 12.6 |
Total expenses |  | 25.0 |  |  | 20.5 |  |  | 26.9 |
Loss before income tax benefit and equity in net earnings of subsidiaries |  | (25.1) |  |  | (20.7) |  |  | (27.0) |
Income tax benefit |  | (5.4) |  |  | (5.3) |  |  | (6.0) |
Loss before equity in net earnings of subsidiaries |  | (19.7) |  |  | (15.4) |  |  | (21.0) |
Equity in net earnings of subsidiaries |  | 162.5 |  |  | 148.7 |  |  | 205.4 |
Net income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |

See accompanying Note to Condensed Financial Statements.
See accompanying Report of Independent Registered Public Accounting Firm.

140 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

SCHEDULE II (continued)
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS
($ in millions)

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Cash flows from operating activities |  |  |  |  |  |
Net Income |  | $ | 142.8 |  |  | $ | 133.3 |  |  | $ | 184.4 |
Equity in net income of subsidiaries |  | (162.5) |  |  | (148.7) |  |  | (205.4) |
Dividends received from subsidiaries |  | 66.0 |  |  | 167.0 |  |  | 363.2 |
Changes in: |  |  |  |  |  |
Income taxes |  | 1.8 |  |  | 2.0 |  |  | 3.4 |
Operating assets and liabilities |  | 8.4 |  |  | (5.9) |  |  | 8.3 |
Other |  | 4.1 |  |  | 1.7 |  |  | 0.7 |
Net cash provided by operating activities |  | 60.6 |  |  | 149.4 |  |  | 354.6 |
Cash flows from investing activities |  |  |  |  |  |
Purchase of equity securities |  | — |  |  | 1.0 |  |  | — |
Net increase (decrease) in short-term investments |  | 2.7 |  |  | (1.5) |  |  | 3.3 |
Capital contributions to subsidiaries |  | (5.0) |  |  | (97.0) |  |  | — |
Acquisition of businesses |  | — |  |  | — |  |  | (444.1) |
Net cash provided by (used in) investing activities |  | (2.3) |  |  | (97.5) |  |  | (440.8) |
Cash flows from financing activities |  |  |  |  |  |
Dividends paid to shareholders |  | (51.4) |  |  | (49.6) |  |  | (47.3) |
Principal borrowings on senior revolving credit facility |  | 114.0 |  |  | — |  |  | 135.0 |
Acquisition of treasury stock |  | (5.3) |  |  | (2.2) |  |  | — |
Proceeds from exercise of stock options |  | 0.3 |  |  | 2.4 |  |  | 1.7 |
Withholding tax payments on RSUs tendered |  | (2.0) |  |  | (2.3) |  |  | (3.7) |
Net cash (used in) provided by financing activities |  | 55.6 |  |  | (51.7) |  |  | 85.7 |
Net increase (decrease) in cash |  | 113.9 |  |  | 0.2 |  |  | (0.5) |
Cash at beginning of period |  | 0.3 |  |  | 0.1 |  |  | 0.6 |
Cash at end of period |  | $ | 114.2 |  |  | $ | 0.3 |  |  | $ | 0.1 |

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 141

SCHEDULE II (continued)
HORACE MANN EDUCATORS CORPORATION
(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE TO CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto.

142 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

SCHEDULE III & VI (COMBINED)
HORACE MANN EDUCATORS CORPORATION
SCHEDULE III: SUPPLEMENTARY INSURANCE INFORMATION
SCHEDULE VI: SUPPLEMENTAL INFORMATION CONCERNING PROPERTY & CASUALTY INSURANCE OPERATIONS
($ in millions)

Column identification for |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Schedule III: A |  | B |  | C |  |  |  | D |  | E |  | F |  | G |  | H |  |  |  | I |  | J |  |  |  | K
Schedule VI: A |  | B |  | C |  | D |  | E |  |  |  | F |  | G |  |  |  | H |  | I |  |  |  | J |  | K
|  | Deferred policy acquisition costs |  | Future policy benefits, claims and claim expenses |  | Discount, if any, deducted in previous column |  | Unearned premiums |  | Other policy claims and benefits payable |  | Premium revenue/ premium earned |  | Net investment income |  | Benefits, claims and settlement expenses |  | Claims and claim adjustment expenses incurred related to |  | Amortization of deferred policy acquisition costs |  | Other operating expenses |  | Paid claims and claim adjustment expenses |  | Premiums written
Segment |  |  |  |  |  |  |  |  |  | Current year |  | Prior years |  |  |  |
Year Ended December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Property & Casualty |  | $ | 24.4 |  |  | $ | 362.4 |  |  | $ | — |  |  | $ | 249.8 |  |  | $ | — |  |  | $ | 617.4 |  |  | $ | 61.1 |  |  | $ | 447.9 |  |  | $ | 455.1 |  |  | $ | (7.2) |  |  | $ | 67.7 |  |  | $ | 97.2 |  |  | $ | 455.1 |  |  | $ | 607.8 |
Supplemental |  | 4.2 |  |  | 393.9 |  |  | xxx |  | 3.1 |  |  | 72.5 |  |  | 125.3 |  |  | 24.8 |  |  | 40.0 |  |  | xxx |  | xxx |  | 1.1 |  |  | 52.5 |  |  | xxx |  | xxx
Retirement |  | 153.8 |  |  | 4,967.7 |  |  | xxx |  | 0.7 |  |  | 869.8 |  |  | 38.5 |  |  | 255.9 |  |  | 166.3 |  |  | xxx |  | xxx |  | 18.5 |  |  | 67.5 |  |  | xxx |  | xxx
Life |  | 65.6 |  |  | 1,279.7 |  |  | xxx |  | 1.5 |  |  | 3.6 |  |  | 108.4 |  |  | 83.1 |  |  | 127.9 |  |  | xxx |  | xxx |  | 7.4 |  |  | 36.8 |  |  | xxx |  | xxx
Other, including consolidating eliminations |  | N/A |  | N/A |  | xxx |  | N/A |  | N/A |  | N/A |  | (2.4) |  |  | N/A |  | xxx |  | xxx |  | N/A |  | 24.4 |  |  | xxx |  | xxx
Total |  | $ | 248.0 |  |  | $ | 7,003.7 |  |  | xxx |  | $ | 255.1 |  |  | $ | 945.9 |  |  | $ | 889.6 |  |  | $ | 422.5 |  |  | $ | 782.1 |  |  | xxx |  | xxx |  | $ | 94.7 |  |  | $ | 278.4 |  |  | xxx |  | xxx
Year Ended December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Property & Casualty |  | $ | 26.1 |  |  | $ | 372.1 |  |  | $ | — |  |  | $ | 259.4 |  |  | $ | — |  |  | $ | 650.1 |  |  | $ | 42.6 |  |  | $ | 431.0 |  |  | $ | 441.2 |  |  | $ | (10.2) |  |  | $ | 74.4 |  |  | $ | 97.7 |  |  | $ | 438.2 |  |  | $ | 635.5 |
Supplemental |  | 4.3 |  |  | 392.4 |  |  | xxx |  | 3.1 |  |  | 41.5 |  |  | 130.7 |  |  | 17.8 |  |  | 43.1 |  |  | xxx |  | xxx |  | 1.3 |  |  | 51.7 |  |  | xxx |  | xxx
Retirement |  | 137.7 |  |  | 4,874.2 |  |  | xxx |  | 0.7 |  |  | 706.3 |  |  | 29.7 |  |  | 229.8 |  |  | 164.8 |  |  | xxx |  | xxx |  | 16.8 |  |  | 72.0 |  |  | xxx |  | xxx
Life |  | 61.7 |  |  | 1,245.4 |  |  | xxx |  | 1.3 |  |  | 3.5 |  |  | 120.2 |  |  | 69.8 |  |  | 134.6 |  |  | xxx |  | xxx |  | 7.4 |  |  | 35.3 |  |  | xxx |  | xxx
Other, including consolidating eliminations |  | N/A |  | N/A |  | xxx |  | N/A |  | N/A |  | N/A |  | (2.4) |  |  | N/A |  | xxx |  | xxx |  | N/A |  | 20.7 |  |  | xxx |  | xxx
Total |  | $ | 229.8 |  |  | $ | 6,884.1 |  |  | xxx |  | $ | 264.5 |  |  | $ | 751.3 |  |  | $ | 930.7 |  |  | $ | 357.6 |  |  | $ | 773.5 |  |  | xxx |  | xxx |  | $ | 99.9 |  |  | $ | 277.4 |  |  | xxx |  | xxx
Year Ended December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Property & Casualty |  | $ | 28.6 |  |  | $ | 387.0 |  |  | $ | — |  |  | $ | 274.0 |  |  | $ | — |  |  | $ | 683.5 |  |  | $ | 41.7 |  |  | $ | 475.6 |  |  | $ | 483.1 |  |  | $ | (7.5) |  |  | $ | 79.4 |  |  | $ | 105.5 |  |  | $ | 486.6 |  |  | $ | 683.1 |
Supplemental |  | 2.0 |  |  | 390.3 |  |  | xxx |  | 3.2 |  |  | — |  |  | 65.8 |  |  | 7.5 |  |  | 24.7 |  |  | xxx |  | xxx |  | 0.5 |  |  | 26.5 |  |  | xxx |  | xxx
Retirement |  | 185.3 |  |  | 4,698.4 |  |  | xxx |  | 0.8 |  |  | 643.8 |  |  | 29.1 |  |  | 245.5 |  |  | 173.1 |  |  | xxx |  | xxx |  | 21.5 |  |  | 90.7 |  |  | xxx |  | xxx
Life |  | 60.8 |  |  | 1,201.6 |  |  | xxx |  | 1.2 |  |  | 3.5 |  |  | 119.6 |  |  | 72.0 |  |  | 124.5 |  |  | xxx |  | xxx |  | 7.8 |  |  | 37.9 |  |  | xxx |  | xxx
Other, including consolidating eliminations |  | N/A |  | N/A |  | xxx |  | N/A |  | N/A |  | N/A |  | (1.6) |  |  | N/A |  | xxx |  | xxx |  | N/A |  | 26.4 |  |  | xxx |  | xxx
Total |  | $ | 276.7 |  |  | $ | 6,677.3 |  |  | xxx |  | $ | 279.2 |  |  | $ | 647.3 |  |  | $ | 898.0 |  |  | $ | 365.1 |  |  | $ | 797.9 |  |  | xxx |  | xxx |  | $ | 109.2 |  |  | $ | 287.0 |  |  | xxx |  | xxx

N/A - Not applicable.
See accompanying Report of Independent Registered Public Accounting Firm.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 143

SCHEDULE IV
HORACE MANN EDUCATORS CORPORATION
REINSURANCE
($ in millions)

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, 2021 |  |  |  |  |  |  |  |  |  |
Life insurance in force |  | $ | 20,440.3 |  |  | $ | 4,533.6 |  |  | $ | — |  |  | $ | 15,906.7 |  |  | — |
Premiums |  |  |  |  |  |  |  |  |  |
Property & Casualty |  | $ | 623.0 |  |  | $ | 15.3 |  |  | $ | 9.7 |  |  | $ | 617.4 |  |  | 1.6 | %
Supplemental |  | 125.6 |  |  | 0.3 |  |  | — |  |  | 125.3 |  |  | — |
Retirement |  | 48.7 |  |  | 10.2 |  |  | — |  |  | 38.5 |  |  | — |
Life |  | 115.9 |  |  | 7.5 |  |  | — |  |  | 108.4 |  |  | — |
Total premiums |  | $ | 913.2 |  |  | $ | 33.3 |  |  | $ | 9.7 |  |  | $ | 889.6 |  |  | 1.1 | %
Year Ended December 31, 2020 |  |  |  |  |  |  |  |  |  |
Life insurance in force |  | $ | 19,821.2 |  |  | $ | 4,619.1 |  |  | $ | — |  |  | $ | 15,202.1 |  |  | — |
Premiums |  |  |  |  |  |  |  |  |  |
Property & Casualty |  | $ | 652.9 |  |  | $ | 12.7 |  |  | $ | 9.9 |  |  | $ | 650.1 |  |  | 1.5 | %
Supplemental |  | 130.9 |  |  | 0.2 |  |  | — |  |  | 130.7 |  |  | — |
Retirement |  | 38.0 |  |  | 8.3 |  |  | — |  |  | 29.7 |  |  | — |
Life |  | 127.7 |  |  | 7.5 |  |  | — |  |  | 120.2 |  |  | — |
Total premiums |  | $ | 949.5 |  |  | $ | 28.7 |  |  | $ | 9.9 |  |  | $ | 930.7 |  |  | 1.1 | %
Year Ended December 31, 2019 |  |  |  |  |  |  |  |  |  |
Life insurance in force |  | $ | 19,179.8 |  |  | $ | 4,813.2 |  |  | $ | — |  |  | $ | 14,366.6 |  |  | — |
Premiums |  |  |  |  |  |  |  |  |  |
Property & Casualty |  | $ | 689.2 |  |  | $ | 16.5 |  |  | $ | 10.8 |  |  | $ | 683.5 |  |  | 1.6 | %
Supplemental |  | 65.9 |  |  | 0.1 |  |  | — |  |  | 65.8 |  |  | — |
Retirement |  | 35.6 |  |  | 6.5 |  |  | — |  |  | 29.1 |  |  | — |
Life |  | 126.9 |  |  | 7.3 |  |  | — |  |  | 119.6 |  |  | — |
Total premiums |  | $ | 917.6 |  |  | $ | 30.4 |  |  | $ | 10.8 |  |  | $ | 898.0 |  |  | 1.2 | %

Note: Premiums above include insurance premiums earned and contract charges earned.
See accompanying Report of Independent Registered Public Accounting Firm.

144 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

(a)(3) The following items are filed as Exhibits. Management contracts and compensatory plans are indicated by an asterisk (*).

Exhibit |  |
No. |  | Description
(3) Articles of incorporation and bylaws:
3.1 |  | 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.
3.2 |  | Bylaws of HMEC, incorporated by reference to Exhibit 3.2 to HMEC's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the SEC on August 14, 2003.
(4) Instruments defining the rights of security holders, including indentures:
4.1 |  | 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.
4.1(a) |  | 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.
4.2 |  | 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.
4.3 |  | 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 |  | 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.
10.1(a) |  | 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.
10.1(b) |  | 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.
10.2* |  | 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.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 145

10.2(a)* |  | 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.
10.2(b)* |  | 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.
10.2(c)* |  | 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.
10.2(d)* |  | 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.
10.2(e)* |  | 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.
10.3* |  | First Amendment to the HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective as of May 20, 2015), incorporated by reference to Exhibit 10.3 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
10.3(a)* |  | 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.
10.3(b)* |  | HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Non-Section 16) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
10.3(c)* |  | 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.
10.3(d)* |  | 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, 2017, filed with the SEC on May 9, 2017.
10.3(e)* |  | 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.

146 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

10.3(f)* |  | 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.
10.3(g)* |  | Specimen Non-employee Director Restricted Stock Units Award 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.
10.4* |  | 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.
10.5* |  | 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.
10.6* |  | 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.
10.7* |  | 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, 2021, filed with the SEC on August 6, 2021.
10.8* |  | 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, 2021, filed with the SEC on May 7, 2021.
10.9* |  | 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.
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, 2021, filed with the SEC on May 7, 2021.
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)* |  | 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.
10.11(b)* |  | 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, 2021, filed with the SEC on May 7, 2021.

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 147

10.12 |  | 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.
10.13 |  | 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.
10.14 |  | 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.
(11) |  | Statement regarding computation of per share earnings.
(21) |  | Subsidiaries of HMEC.
(23) |  | Consent of KPMG LLP.
(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:
31.1 |  | Certification by Marita Zuraitis, Chief Executive Officer of HMEC.
31.2 |  | 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 |  | Certification by Marita Zuraitis, Chief Executive Officer of HMEC.
32.2 |  | Certification by Bret A. Conklin, Chief Financial Officer of HMEC.
(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, 2021 formatted in Inline XBRL: (i) Consolidated Balance Sheets at December 31, 2021 and 2020 (ii) Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019; (iv) Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2021, 2020 and 2019; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019; (vi) Notes to Consolidated Financial Statements; (vii) Financial Statement Schedules; and (viii) 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.

148 Annual Report on Form 10-K |  | Horace Mann Educators Corporation

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 report to be signed on its behalf by the undersigned, thereunto duly authorized.

HORACE MANN EDUCATORS CORPORATION |  |
By: |  | /s/ Marita Zuraitis |  | President and Chief Executive Officer |  | February 25, 2022
|  | Marita Zuraitis |  |  |  |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report 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 |  | President, Chief Executive Officer and Director |  | February 25, 2022
|  | Marita Zuraitis |  | (Principal Executive Officer) |  |
By: |  | /s/ Bret A. Conklin |  | Executive Vice President and Chief Financial Officer |  | February 25, 2022
|  | Bret A. Conklin |  | (Principal Financial Officer) |  |
By: |  | /s/ Kimberly A. Johnson |  | Senior Vice President and Controller |  | February 25, 2022
|  | Kimberly A. Johnson |  | (Principal Accounting Officer) |  |
By: |  | /s/ H. Wade Reece |  | Chairman of the Board of Directors |  | February 25, 2022
|  | H. Wade Reece |  |  |  |
By: |  | /s/ Thomas A. Bradley |  | Director |  | February 25, 2022
|  | Thomas A. Bradley |  |  |  |
By: |  | /s/ Mark S. Casady |  | Director |  | February 25, 2022
|  | Mark S. Casady |  |  |  |
By: |  | /s/ Daniel A. Domenech |  | Director |  | February 25, 2022
|  | Daniel A. Domenech |  |  |  |
By: |  | /s/ Perry G. Hines |  | Director |  | February 25, 2022
|  | Perry G. Hines |  |  |  |
By: |  | /s/ Mark E. Konen |  | Director |  | February 25, 2022
|  | Mark E. Konen |  |  |  |
By: |  | /s/ Beverly J. McClure |  | Director |  | February 25, 2022
|  | Beverley J. McClure |  |  |  |
By: |  | /s/ Elaine A. Sarsynski |  | Director |  | February 25, 2022
|  | Elaine A. Sarsynski |  |  |  |
By: |  | /s/ Robert Stricker |  | Director |  | February 25, 2022
|  | Robert Stricker |  |  |  |

Horace Mann Educators Corporation |  | Annual Report on Form 10-K 149