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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-10890
HORACE MANN EDUCATORS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware | 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, $0.001 par value |  | HMN |  | New York Stock Exchange

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes ☐ No ☑
As of April 30, 2022, the registrant had 41,431,097 common shares, $0.001 par value, outstanding.

HORACE MANN EDUCATORS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION | Page
Item 1. | Consolidated Financial Statements |
| Report of Independent Registered Public Accounting Firm | 1
| Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December, 31 2021 | 2
| Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (Unaudited) | 3
| Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited) | 4
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited) | 5
| Notes to Consolidated Financial Statements (Unaudited) |
| Note 1 - Basis of Presentation and Significant Accounting Policies | 6
| Note 2 - Acquisitions | 7
| Note 3 - Investments | 8
| Note 4 - Fair Value of Financial Instruments | 14
| Note 5 - Goodwill and Intangible Assets | 19
| Note 6 - Unpaid Claims and Claim Expenses | 21
| Note 7 - Reinsurance | 22
| Note 8 - Commitments | 22
| Note 9 - Segment Information | 23
| Note 10 - Accumulated Other Comprehensive Income (Loss) | 24
| Note 11 - Supplemental Consolidated Cash and Cash Flow Information | 24
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 46
Item 4. | Controls and Procedures | 47
PART II - OTHER INFORMATION |
Item 1A. | Risk Factors | 48
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 48
Item 5. | Other Information | 48
Item 6. | Exhibits | 48
SIGNATURES | 53

PART I: FINANCIAL INFORMATION
ITEM 1. I Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Horace Mann Educators Corporation:
Results of Review of Interim Financial Information
We have reviewed the consolidated balance sheets of Horace Mann Educators Corporation and subsidiaries (the Company) as of March 31, 2022, the related consolidated statements of operations, comprehensive loss and changes in shareholders' equity for the three-month periods ended March 31, 2022 and 2021, and cash flows for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously 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 the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. 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 reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP
KPMG LLP
Chicago, Illinois |
May 9, 2022 |

Horace Mann Educators Corporation | 1 | Quarterly Report on Form 10-Q

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

|  | March 31, 2022 |  | December 31, 2021
|  | (Unaudited) |  |
Assets |  |  |  |
Investments |  |  |  |
Fixed maturity securities, available for sale, at fair value (amortized cost, net 2022, $5,970.7; 2021, $5,797.7) |  | $ | 5,987.4 |  |  | $ | 6,239.3 |
Equity securities at fair value |  | 126.8 |  |  | 147.2 |
Limited partnership interests |  | 801.9 |  |  | 712.8 |
Short-term and other investments |  | 337.0 |  |  | 350.2 |
Total investments |  | 7,253.1 |  |  | 7,449.5 |
Cash |  | 49.1 |  |  | 133.7 |
Deferred policy acquisition costs |  | 323.5 |  |  | 248.0 |
Reinsurance balances receivable |  | 510.9 |  |  | 153.2 |
Deposit asset on reinsurance |  | 2,491.8 |  |  | 2,481.5 |
Intangible assets |  | 200.6 |  |  | 145.4 |
Goodwill |  | 56.3 |  |  | 43.5 |
Other assets |  | 320.2 |  |  | 288.1 |
Separate Account (variable annuity) assets |  | 3,221.9 |  |  | 3,441.0 |
Total assets |  | $ | 14,427.4 |  |  | $ | 14,383.9 |
Liabilities and Shareholders' Equity |  |  |  |
Policy liabilities |  |  |  |
Investment contract and policy reserves |  | $ | 7,020.2 |  |  | $ | 6,577.8 |
Unpaid claims and claim expenses |  | 475.7 |  |  | 425.9 |
Unearned premiums |  | 244.4 |  |  | 255.1 |
Total policy liabilities |  | 7,740.3 |  |  | 7,258.8 |
Other policyholder funds |  | 1,009.8 |  |  | 945.9 |
Other liabilities |  | 415.9 |  |  | 428.2 |
Short-term debt |  | 249.0 |  |  | 249.0 |
Long-term debt |  | 253.7 |  |  | 253.6 |
Separate Account (variable annuity) liabilities |  | 3,221.9 |  |  | 3,441.0 |
Total liabilities |  | 12,890.6 |  |  | 12,576.5 |
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, 2022, 66,484,165; 2021, 66,436,821 |  | 0.1 |  |  | 0.1 |
Additional paid-in capital |  | 496.6 |  |  | 495.3 |
Retained earnings |  | 1,525.9 |  |  | 1,524.9 |
Accumulated other comprehensive income (loss), net of tax: |  |  |  |
Net unrealized investment gains on fixed maturity securities |  | 20.0 |  |  | 290.7 |
Net funded status of benefit plans |  | (10.2) |  |  | (10.2) |
Treasury stock, at cost, 2022, 25,103,083 shares; 2021, 25,043,337 shares |  | (495.6) |  |  | (493.4) |
Total shareholders’ equity |  | 1,536.8 |  |  | 1,807.4 |
Total liabilities and shareholders’ equity |  | $ | 14,427.4 |  |  | $ | 14,383.9 |

See Notes to Consolidated Financial Statements.

Horace Mann Educators Corporation | 2 | Quarterly Report on Form 10-Q

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

|  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Statements of Operations |  |  |  |  |  |  |  |
Revenues |  |  |  |  |  |  |  |
Net premiums and contract charges earned |  |  |  |  |  | $ | 255.9 |  |  | $ | 227.6 |
Net investment income |  |  |  |  |  | 97.9 |  |  | 95.5 |
Net investment losses |  |  |  |  |  | (15.5) |  |  | (9.0) |
Other income |  |  |  |  |  | 8.5 |  |  | 7.9 |
Total revenues |  |  |  |  |  | 346.8 |  |  | 322.0 |
Benefits, losses and expenses |  |  |  |  |  |  |  |
Benefits, claims and settlement expenses |  |  |  |  |  | 177.0 |  |  | 134.3 |
Interest credited |  |  |  |  |  | 40.8 |  |  | 50.6 |
Operating expenses |  |  |  |  |  | 76.8 |  |  | 58.0 |
DAC unlocking and amortization expense |  |  |  |  |  | 26.4 |  |  | 24.1 |
Intangible asset amortization expense |  |  |  |  |  | 4.2 |  |  | 3.3 |
Interest expense |  |  |  |  |  | 3.9 |  |  | 3.5 |
Total benefits, losses and expenses |  |  |  |  |  | 329.1 |  |  | 273.8 |
Income before income taxes |  |  |  |  |  | 17.7 |  |  | 48.2 |
Income tax expense |  |  |  |  |  | 3.2 |  |  | 8.9 |
Net income |  |  |  |  |  | $ | 14.5 |  |  | $ | 39.3 |
Net income per share |  |  |  |  |  |  |  |
Basic |  |  |  |  |  | $ | 0.35 |  |  | $ | 0.94 |
Diluted |  |  |  |  |  | $ | 0.35 |  |  | $ | 0.93 |
Weighted average number of shares and equivalent shares |  |  |  |  |  |  |  |
Basic |  |  |  |  |  | 41.9 |  |  | 41.9 |
Diluted |  |  |  |  |  | 42.1 |  |  | 42.1 |
Statements of Comprehensive Loss |  |  |  |  |  |  |  |
Net income |  |  |  |  |  | $ | 14.5 |  |  | $ | 39.3 |
Other comprehensive loss, net of tax: |  |  |  |  |  |  |  |
Change in net unrealized investment gains (losses) on fixed maturity securities |  |  |  |  |  | (270.7) |  |  | (122.7) |
Change in net funded status of benefit plans |  |  |  |  |  | — |  |  | — |
Other comprehensive loss |  |  |  |  |  | (270.7) |  |  | (122.7) |
Comprehensive loss |  |  |  |  |  | $ | (256.2) |  |  | $ | (83.4) |

See Notes to Consolidated Financial Statements.

Horace Mann Educators Corporation | 3 | Quarterly Report on Form 10-Q

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

|  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Common stock, $0.001 par value |  |  |  |  |  |  |  |
Beginning balance |  |  |  |  |  | $ | 0.1 |  |  | $ | 0.1 |
Options exercised |  |  |  |  |  | — |  |  | — |
Conversion of common stock units |  |  |  |  |  | — |  |  | — |
Conversion of restricted stock units |  |  |  |  |  | — |  |  | — |
Ending balance |  |  |  |  |  | 0.1 |  |  | 0.1 |
Additional paid-in capital |  |  |  |  |  |  |  |
Beginning balance |  |  |  |  |  | 495.3 |  |  | 488.4 |
Options exercised and conversion of common stock units and restricted stock units |  |  |  |  |  | (0.6) |  |  | (1.2) |
Share-based compensation expense |  |  |  |  |  | 1.9 |  |  | 2.0 |
Ending balance |  |  |  |  |  | 496.6 |  |  | 489.2 |
Retained earnings |  |  |  |  |  |  |  |
Beginning balance |  |  |  |  |  | 1,524.9 |  |  | 1,434.6 |
Net income |  |  |  |  |  | 14.5 |  |  | 39.3 |
Dividends, 2022, $0.32 per share; 2021, $0.31 per share |  |  |  |  |  | (13.5) |  |  | (13.1) |
Ending balance |  |  |  |  |  | 1,525.9 |  |  | 1,460.8 |
Accumulated other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |
Beginning balance |  |  |  |  |  | 280.5 |  |  | 355.1 |
Change in net unrealized investment gains (losses) on fixed maturity securities |  |  |  |  |  | (270.7) |  |  | (122.7) |
Change in net funded status of benefit plans |  |  |  |  |  | — |  |  | — |
Ending balance |  |  |  |  |  | 9.8 |  |  | 232.4 |
Treasury stock, at cost |  |  |  |  |  |  |  |
Beginning balance |  |  |  |  |  | (493.4) |  |  | (488.1) |
Acquisition of shares |  |  |  |  |  | (2.2) |  |  | (1.5) |
Ending balance |  |  |  |  |  | (495.6) |  |  | (489.6) |
Shareholders' equity at end of period |  |  |  |  |  | $ | 1,536.8 |  |  | $ | 1,692.9 |

See Notes to Consolidated Financial Statements.

Horace Mann Educators Corporation | 4 | Quarterly Report on Form 10-Q

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

|  | Three Months Ended March 31,
|  | 2022 |  | 2021
Cash flows - operating activities |  |  |  |
Net income |  | $ | 14.5 |  |  | $ | 39.3 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
Net investment losses |  | 15.5 |  |  | 9.0 |
Depreciation and intangible asset amortization |  | 3.8 |  |  | 5.5 |
Share-based compensation expense |  | 2.1 |  |  | 2.2 |
Income from equity method investments, net of dividends or distributions |  | 1.6 |  |  | (6.8) |
Changes in: |  |  |  |
Accrued investment income |  | (4.5) |  |  | (5.0) |
Insurance liabilities |  | 450.5 |  |  | 80.8 |
Amounts due under reinsurance agreements |  | (357.7) |  |  | (4.0) |
Income tax liabilities |  | 3.4 |  |  | 8.9 |
Other operating assets and liabilities |  | (31.0) |  |  | 9.0 |
Other |  | (2.5) |  |  | 3.1 |
Net cash provided by operating activities |  | 95.7 |  |  | 142.0 |
Cash flows - investing activities |  |  |  |
Fixed maturity securities |  |  |  |
Purchases |  | (397.4) |  |  | (478.4) |
Sales |  | 168.3 |  |  | 95.5 |
Maturities, paydowns, calls and redemptions |  | 234.4 |  |  | 176.3 |
Equity securities |  |  |  |
Purchases |  | (1.1) |  |  | (28.4) |
Sales and repayments |  | 6.8 |  |  | 0.4 |
Limited partnership interests |  |  |  |
Purchases |  | (111.0) |  |  | (58.6) |
Sales |  | 20.5 |  |  | 13.7 |
Change in short-term and other investments, net |  | 26.2 |  |  | 40.0 |
Acquisition of business, net of cash acquired |  | (164.4) |  |  | — |
Net cash used in investing activities |  | (217.7) |  |  | (239.5) |
Cash flows - financing activities |  |  |  |
Dividends paid to shareholders |  | (13.2) |  |  | (12.9) |
Acquisition of treasury stock |  | (2.2) |  |  | (1.5) |
Proceeds from exercise of stock options |  | — |  |  | 0.3 |
Withholding tax payments on RSUs tendered |  | (0.9) |  |  | (1.7) |
Annuity contracts: variable, fixed and FHLB funding agreements: |  |  |  |
Deposits |  | 182.8 |  |  | 235.8 |
Benefits, withdrawals and net transfers to Separate Account (variable annuity) assets |  | (117.9) |  |  | (101.1) |
Life policy accounts: |  |  |  |
Deposits |  | 2.2 |  |  | 2.2 |
Withdrawals and surrenders |  | (0.8) |  |  | (1.1) |
Change in deposit asset on reinsurance |  | (14.2) |  |  | (2.8) |
Change in book overdrafts |  | 1.6 |  |  | (2.6) |
Net cash provided by financing activities |  | 37.4 |  |  | 114.6 |
Net (decrease) increase in cash |  | (84.6) |  |  | 17.1 |
Cash at beginning of period |  | 133.7 |  |  | 22.3 |
Cash at end of period |  | $ | 49.1 |  |  | $ | 39.4 |

See Notes to Consolidated Financial Statements.

Horace Mann Educators Corporation | 5 | Quarterly Report on Form 10-Q

HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - Basis of Presentation and Significant Accounting Policies
Business
Horace Mann Educators Corporation is a holding company for insurance subsidiaries that market and underwrite personal lines of property and casualty insurance products (primarily personal lines of auto and property insurance), life insurance products, retirement products (primarily tax-qualified fixed and variable annuities), voluntary supplemental insurance products (primarily cancer, heart, hospital, supplemental disability and accident coverages), and employer-sponsored group benefit products (primarily short-term and long-term group disability, and group term life coverages), primarily to K-12 teachers, administrators and other employees of public schools and their families (collectively, HMEC, the Company or Horace Mann).
As described more fully in Note 2, the Company acquired Madison National Life Insurance Company, Inc. (Madison National) effective January 1, 2022. In conjunction with the acquisition, management changed how it manages and conducts business resulting in three operating segments: (1) Property & Casualty, (2) Life & Retirement, and (3) Supplemental & Group Benefits (which includes the results of Madison National).
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in conformity with GAAP, but are not required for interim reporting purposes, have been omitted. These Consolidated Financial Statements and Notes thereto should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Part II - Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.
The accompanying Consolidated Financial Statements and Notes thereto are unaudited. These financial statements reflect all adjustments (generally consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Part II - Item 8, Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
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 reporting date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The most significant critical accounting estimates include valuation of hard-to-value fixed maturity securities, evaluation of credit loss impairments for fixed maturity securities, 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 and valuation of assets acquired and liabilities assumed under purchase accounting and purchase price allocation.

Horace Mann Educators Corporation | 6 | Quarterly Report on Form 10-Q

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Future Adoption of New Accounting Standards
Accounting for Long-Duration Insurance Contracts
In August 2018, the FASB issued targeted improvements to the accounting and disclosure guidance 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 deferred policy acquisition costs (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 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 currently evaluating the impact this guidance will have on the results of operations and financial position of the Company.
NOTE 2 - Acquisitions
Effective January 1, 2022, the Company acquired all the equity interests in Madison National pursuant to a Stock Purchase Agreement (Agreement) dated as of July 14, 2021. The adjusted purchase price of the transaction was $172.3 million. The seller of Madison National has a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. The adjusted purchase price is subject to finalization within 165 days of the acquisition date pursuant to the terms of the Agreement. As a result of the acquisition, Madison National became a wholly owned subsidiary of the Company. Madison National is a leading writer of employer-sponsored benefits provided to educators by K-12 school districts. Founded in 1961 and headquartered in Madison, Wisconsin, Madison National offers short- term and long-term group disability, group term life, and worksite solutions products, including accident and critical illness.
Madison National's results are being reported in the operating segment titled "Supplemental & Group Benefits". The amount of revenues and pretax loss for Madison National since the date of acquisition included in the Company's Consolidated Statement of Operations for the three months ended March 31, 2022 are $40.0 million and $(0.7) million (inclusive of the $1.2 million non-cash impact from amortization of intangible assets under purchase accounting), respectively.
The Company has not yet completed the process of estimating the fair value of Madison National assets acquired and liabilities assumed, including, but not limited to, intangible assets, policy reserves and certain tax-related balances. Accordingly, the Company’s preliminary estimates and the allocation of the adjusted purchase price to the assets acquired and liabilities assumed are subject to change as the Company completes the process. In accordance with Accounting Standards Codification (ASC) 805, Business Combinations, changes if any, to the preliminary estimates and allocation of the adjusted purchase price will be reported in the Company’s financial statements as an adjustment to the opening balance sheet. Based on the Company’s preliminary allocation of the adjusted purchase price, the fair values of the assets acquired and liabilities assumed were as follows:

Horace Mann Educators Corporation | 7 | Quarterly Report on Form 10-Q

NOTE 2 - Acquisitions (continued)

($ in millions) |  |
Assets: |  |
Investments |  | $ | 90.4 |
Cash and short-term investments |  | 123.4 |
Reinsurance recoverable |  | 356.0 |
Intangible assets(1) |  | 59.4 |
Other assets |  | 23.2 |
Liabilities: |  |
Investment contract and policy reserves |  | 274.5 |
Unpaid claims and claim expenses |  | 48.2 |
Unearned premiums |  | 1.5 |
Other policyholder funds |  | 152.8 |
Other liabilities |  | 15.9 |
Total identifiable net assets acquired |  | 159.5 |
Goodwill(2) |  | 12.8 |
Purchase price |  | $ | 172.3 |

(1) Intangible assets consist of the value of business acquired, value of customer relationships and state licenses. The intangible assets that are amortizable have estimated lives of one to ten years. See Note 5 for further information.
(2) The amount of goodwill that is expected to be deductible for federal income tax purposes is $18.6 million.
NOTE 3 - Investments
Net Investment Income
The components of net investment income for the following periods were as follows:

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Fixed maturity securities |  |  |  |  |  | $ | 58.6 |  |  | $ | 58.0 |
Equity securities |  |  |  |  |  | 1.3 |  |  | 1.1 |
Limited partnership interests |  |  |  |  |  | 13.0 |  |  | 11.3 |
Short-term and other investments |  |  |  |  |  | 2.7 |  |  | 2.8 |
Investment expenses |  |  |  |  |  | (2.6) |  |  | (2.1) |
Net investment income - investment portfolio |  |  |  |  |  | 73.0 |  |  | 71.1 |
Investment income - deposit asset on reinsurance |  |  |  |  |  | 24.9 |  |  | 24.4 |
Total net investment income |  |  |  |  |  | $ | 97.9 |  |  | $ | 95.5 |

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

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Fixed maturity securities |  |  |  |  |  | $ | (2.3) |  |  | $ | (5.4) |
Equity securities |  |  |  |  |  | (15.5) |  |  | (2.7) |
Short-term investments and other |  |  |  |  |  | 2.3 |  |  | (0.9) |
Net investment losses |  |  |  |  |  | $ | (15.5) |  |  | $ | (9.0) |

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 to sell a fixed maturity security. The types of events that may result in a sale include significant changes in the economic facts and circumstances related to the invested asset, significant unforeseen changes in liquidity needs, or changes in the Company's investment strategy.

Horace Mann Educators Corporation | 8 | Quarterly Report on Form 10-Q

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

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Credit loss impairments(1) |  |  |  |  |  | $ | (0.9) |  |  | $ | (1.1) |
Intent-to-sell impairments |  |  |  |  |  | (0.9) |  |  | (2.1) |
Total impairments on investments recognized in net income |  |  |  |  |  | (1.8) |  |  | (3.2) |
Sales and other, net |  |  |  |  |  | 1.1 |  |  | (2.1) |
Change in fair value - equity securities |  |  |  |  |  | (17.1) |  |  | (2.8) |
Change in fair value and losses realized on settlements - derivatives |  |  |  |  |  | 2.3 |  |  | (0.9) |
Net investment losses |  |  |  |  |  | $ | (15.5) |  |  | $ | (9.0) |

(1) For the three months ended March 31, 2022 and 2021, the Company recognized a valuation allowance of $0.9 million and $1.1 million, respectively, for credit loss impairments with respect to fixed maturity securities available for sale.
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) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Beginning balance |  |  |  |  |  | $ | 7.7 |  |  | $ | — |
Credit losses on fixed maturity securities for which credit losses were not previously reported |  |  |  |  |  | — |  |  | 1.1 |
Net increase related to credit losses previously reported |  |  |  |  |  | 0.9 |  |  | — |
Reduction of credit allowances related to sales |  |  |  |  |  | — |  |  | — |
Write-offs |  |  |  |  |  | (0.3) |  |  | — |
Ending balance |  |  |  |  |  | $ | 8.3 |  |  | $ | 1.1 |

Horace Mann Educators Corporation | 9 | Quarterly Report on Form 10-Q

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

($ in millions) |  | Amortized Cost, net |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
March 31, 2022 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 613.4 |  |  | $ | 15.2 |  |  | $ | 13.1 |  |  | $ | 615.5 |
Other, including U.S. Treasury securities |  | 372.5 |  |  | 11.5 |  |  | 20.9 |  |  | 363.1 |
Municipal bonds |  | 1,530.9 |  |  | 72.2 |  |  | 23.6 |  |  | 1,579.5 |
Foreign government bonds |  | 41.3 |  |  | 1.4 |  |  | 0.1 |  |  | 42.6 |
Corporate bonds |  | 2,308.1 |  |  | 63.4 |  |  | 75.5 |  |  | 2,296.0 |
Other asset-backed securities |  | 1,104.5 |  |  | 7.1 |  |  | 20.9 |  |  | 1,090.7 |
Totals |  | $ | 5,970.7 |  |  | $ | 170.8 |  |  | $ | 154.1 |  |  | $ | 5,987.4 |
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 |

(1) Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $346.8 million and $376.7 million; Federal Home Loan Mortgage Corporation (FHLMC) of $303.7 million and $326.5 million; and Government National Mortgage Association (GNMA) of $100.7 million and $112.1 million as of March 31, 2022 and December 31, 2021, respectively.

Horace Mann Educators Corporation | 10 | Quarterly Report on Form 10-Q

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 March 31, 2022 and December 31, 2021, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses at March 31, 2022 — 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 March 31, 2022, 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 an 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 March 31, 2022.

($ 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
March 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 238.4 |  |  | $ | 10.7 |  |  | $ | 11.0 |  |  | $ | 2.4 |  |  | $ | 249.4 |  |  | $ | 13.1 |
Other |  | 116.2 |  |  | 9.2 |  |  | 50.4 |  |  | 11.7 |  |  | 166.6 |  |  | 20.9 |
Municipal bonds |  | 456.0 |  |  | 23.4 |  |  | 1.4 |  |  | 0.2 |  |  | 457.4 |  |  | 23.6 |
Foreign government bonds |  | 1.5 |  |  | 0.1 |  |  | — |  |  | — |  |  | 1.5 |  |  | 0.1 |
Corporate bonds |  | 1,012.5 |  |  | 66.7 |  |  | 74.9 |  |  | 8.8 |  |  | 1,087.4 |  |  | 75.5 |
Other asset-backed securities |  | 637.5 |  |  | 14.5 |  |  | 160.2 |  |  | 6.4 |  |  | 797.7 |  |  | 20.9 |
Total |  | $ | 2,462.1 |  |  | $ | 124.6 |  |  | $ | 297.9 |  |  | $ | 29.5 |  |  | $ | 2,760.0 |  |  | $ | 154.1 |
Number of positions with a gross unrealized loss |  | 1,756 |  |  |  |  | 189 |  |  |  |  | 1,945 |  |  |
Fair value as a percentage of total fixed maturity securities at fair value |  | 41.1 | % |  |  |  | 5.0 | % |  |  |  | 46.1 | % |  |
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 maturity securities at fair value |  | 12.6 | % |  |  |  | 3.4 | % |  |  |  | 16.0 | % |  |

Fixed maturity securities with an investment grade rating represented 90.6% of the gross unrealized losses as of March 31, 2022. 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.

Horace Mann Educators Corporation | 11 | Quarterly Report on Form 10-Q

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) |  | Percent of Total Fair Value |  | March 31, 2022
|  | March 31, 2022 |  | December 31, 2021 |  | Fair Value |  | Amortized Cost, net
Estimated expected maturity: |  |  |  |  |  |  |  |
Due in 1 year or less |  | 4.1 | % |  | 4.0 | % |  | $ | 248.0 |  |  | $ | 248.0 |
Due after 1 year through 5 years |  | 27.4 |  |  | 27.0 |  |  | 1,638.0 |  |  | 1,628.4 |
Due after 5 years through 10 years |  | 27.2 |  |  | 27.7 |  |  | 1,626.1 |  |  | 1,599.9 |
Due after 10 years through 20 years |  | 24.1 |  |  | 23.9 |  |  | 1,443.1 |  |  | 1,429.5 |
Due after 20 years |  | 17.2 |  |  | 17.4 |  |  | 1,032.2 |  |  | 1,064.9 |
Total |  | 100.0 | % |  | 100.0 | % |  | $ | 5,987.4 |  |  | $ | 5,970.7 |
Average option-adjusted duration, in years |  | 6.6 |  | 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 period were as follows:

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Fixed maturity securities |  |  |  |  |  |  |  |
Proceeds received |  |  |  |  |  | $ | 168.3 |  |  | $ | 95.5 |
Gross gains realized |  |  |  |  |  | 2.4 |  |  | 1.2 |
Gross losses realized |  |  |  |  |  | (2.9) |  |  | (3.4) |
Equity securities |  |  |  |  |  |  |  |
Proceeds received |  |  |  |  |  | $ | 5.8 |  |  | $ | 0.4 |
Gross gains realized |  |  |  |  |  | 1.7 |  |  | 0.1 |
Gross losses realized |  |  |  |  |  | (0.1) |  |  | — |

Net Unrealized Investment Gains (Losses) on Fixed Maturity Securities
The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in accumulated other comprehensive income (AOCI), before the impact of DAC:

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Net unrealized investment gains (losses) on fixed maturity securities, net of tax |  |  |  |  |  |  |  |
Beginning of period |  |  |  |  |  | $ | 348.9 |  |  | $ | 439.8 |
Change in net unrealized investment gains (losses) on fixed maturity securities |  |  |  |  |  | (349.8) |  |  | (159.0) |
Reclassification of net investment (gains) losses on fixed maturity securities to net income |  |  |  |  |  | 14.1 |  |  | 6.4 |
End of period |  |  |  |  |  | $ | 13.2 |  |  | $ | 287.2 |

Horace Mann Educators Corporation | 12 | Quarterly Report on Form 10-Q

NOTE 3 - Investments (continued)
Limited Partnership Interests
Investments in limited partnership interests are accounted for using the equity method of accounting (EMA) and include interests in commercial mortgage loan funds, private equity funds, infrastructure 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 EMA 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 EMA limited partnership interests were as follows:

($ in millions) |  |  |  |
|  | March 31, 2022 |  | December 31, 2021
Commercial mortgage loan funds |  | $ | 429.2 |  |  | $ | 346.8 |
Private equity funds |  | 70.2 |  |  | 74.0 |
Infrastructure debt funds |  | 62.8 |  |  | 62.4 |
Infrastructure equity funds |  | 67.2 |  |  | 58.3 |
Other funds(1) |  | 172.5 |  |  | 171.3 |
Total |  | $ | 801.9 |  |  | $ | 712.8 |

(1)Other funds consist primarily of limited partnership interests in hedge funds, real estate equity and corporate mezzanine funds.
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. Information regarding the Company's derivatives is contained in Part II - Item 8, Note 5 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The following table presents instruments that were subject to a master netting arrangement for the Company.

($ in millions) |  |  |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |
|  | Gross Amounts |  |  |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
March 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 6.0 |  |  | $ | — |  |  | $ | 6.0 |  |  | $ | 1.5 |  |  | $ | 5.2 |  |  | $ | (0.7) |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 10.7 |  |  | $ | — |  |  | $ | 10.7 |  |  | $ | 4.5 |  |  | $ | 6.4 |  |  | $ | (0.2) |

Deposits
At March 31, 2022 and December 31, 2021, fixed maturity securities with a fair value of $29.1 million and $26.2 million, respectively, were on deposit with governmental agencies as required by law in various states for which the insurance subsidiaries of HMEC conduct business. In addition, at March 31, 2022 and December 31, 2021, fixed maturity securities with a fair value of $921.0 million and $870.1 million, respectively, were on deposit with the Federal Home Loan Bank of Chicago (FHLB) as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $847.5 million at March 31, 2022 and $787.5 million at December 31, 2021. The deposited securities are reported as Fixed maturity securities on the Company’s Consolidated Balance Sheets.

Horace Mann Educators Corporation | 13 | Quarterly Report on Form 10-Q

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 EMA 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.
Information regarding the three-level hierarchy presented below and the valuation methodologies utilized by the Company to estimate fair values at each reporting date is included in Part II - Item 8, Note 4 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Horace Mann Educators Corporation | 14 | Quarterly Report on Form 10-Q

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. During the three months ended March 31, 2022 and 2021, there were no transfers between Level 1 and Level 2. At March 31, 2022, Level 3 invested assets comprised 5.9% 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
March 31, 2022 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 615.5 |  |  | $ | 615.5 |  |  | $ | — |  |  | $ | 615.5 |  |  | $ | — |
Other, including U.S. Treasury securities |  | 363.1 |  |  | 363.1 |  |  | 25.2 |  |  | 337.9 |  |  | — |
Municipal bonds |  | 1,579.5 |  |  | 1,579.5 |  |  | — |  |  | 1,525.4 |  |  | 54.1 |
Foreign government bonds |  | 42.6 |  |  | 42.6 |  |  | — |  |  | 42.6 |  |  | — |
Corporate bonds |  | 2,296.0 |  |  | 2,296.0 |  |  | 14.0 |  |  | 2,056.0 |  |  | 226.0 |
Other asset-backed securities |  | 1,090.7 |  |  | 1,090.7 |  |  | — |  |  | 1,000.9 |  |  | 89.8 |
Total fixed maturity securities |  | 5,987.4 |  |  | 5,987.4 |  |  | 39.2 |  |  | 5,578.3 |  |  | 369.9 |
Equity securities |  | 126.8 |  |  | 126.8 |  |  | 25.6 |  |  | 99.9 |  |  | 1.3 |
Short-term investments |  | 126.9 |  |  | 126.9 |  |  | 122.0 |  |  | 4.9 |  |  | — |
Other investments |  | 38.1 |  |  | 38.1 |  |  | — |  |  | 38.1 |  |  | — |
Totals |  | $ | 6,279.2 |  |  | $ | 6,279.2 |  |  | $ | 186.8 |  |  | $ | 5,721.2 |  |  | $ | 371.2 |
Separate Account (variable annuity) assets(1) |  | $ | 3,221.9 |  |  | $ | 3,221.9 |  |  | $ | 3,221.9 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, embedded derivatives |  | $ | 1.5 |  |  | $ | 1.5 |  |  | $ | — |  |  | $ | 1.5 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 99.1 |  |  | $ | 99.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 99.1 |
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 policy reserves, embedded derivatives |  | $ | 2.1 |  |  | $ | 2.1 |  |  | $ | — |  |  | $ | 2.1 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 106.6 |  |  | $ | 106.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 106.6 |

(1) Separate Account (variable annuity) liabilities are equal to the estimated fair value of the Separate Account (variable annuity) assets.

Horace Mann Educators Corporation | 15 | Quarterly Report on Form 10-Q

NOTE 4 - Fair Value of Financial Instruments (continued)
Changes in Level 3 Fair Value Measurements
The reconciliation for all financial assets and financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows:

($ 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, 2022 |  | $ | 60.8 |  |  | $ | 210.3 |  |  | $ | 98.9 |  |  | $ | 370.0 |  |  | $ | 1.4 |  |  | $ | 371.4 |  |  | $ | 106.6 |
Transfers into Level 3(3) |  | — |  |  | 67.5 |  |  | 4.7 |  |  | 72.2 |  |  | — |  |  | 72.2 |  |  | — |
Transfers out of Level 3(3) |  | (3.2) |  |  | — |  |  | (4.8) |  |  | (8.0) |  |  | — |  |  | (8.0) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | (0.9) |  |  | (0.9) |  |  | (0.1) |  |  | (1.0) |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5.2) |
Net unrealized investment gains (losses) included in OCI |  | (3.4) |  |  | (6.4) |  |  | (4.1) |  |  | (13.9) |  |  | — |  |  | (13.9) |  |  | — |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.9 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.1) |  |  | (45.4) |  |  | (4.0) |  |  | (49.5) |  |  | — |  |  | (49.5) |  |  | (3.2) |
Ending balance, March 31, 2022 |  | $ | 54.1 |  |  | $ | 226.0 |  |  | $ | 89.8 |  |  | $ | 369.9 |  |  | $ | 1.3 |  |  | $ | 371.2 |  |  | $ | 99.1 |
Beginning balance, January 1, 2021 |  | $ | 59.6 |  |  | $ | 155.8 |  |  | $ | 139.4 |  |  | $ | 354.8 |  |  | $ | 0.3 |  |  | $ | 355.1 |  |  | $ | 104.5 |
Transfers into Level 3(3) |  | — |  |  | 24.1 |  |  | 3.1 |  |  | 27.2 |  |  | — |  |  | 27.2 |  |  | — |
Transfers out of Level 3(3) |  | — |  |  | (27.3) |  |  | (5.9) |  |  | (33.2) |  |  | — |  |  | (33.2) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4.3 |
Net unrealized investment gains (losses) included in OCI |  | (0.9) |  |  | (2.0) |  |  | (0.3) |  |  | (3.2) |  |  | — |  |  | (3.2) |  |  | — |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.7 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.1) |  |  | (1.5) |  |  | (4.1) |  |  | (5.7) |  |  | — |  |  | (5.7) |  |  | (1.9) |
Ending balance, March 31, 2021 |  | $ | 58.6 |  |  | $ | 149.1 |  |  | $ | 132.2 |  |  | $ | 339.9 |  |  | $ | 0.3 |  |  | $ | 340.2 |  |  | $ | 107.6 |

(1)Represents embedded derivatives, all related to the Company's fixed indexed annuity 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 three months ended March 31, 2022 and 2021 were attributable to changes in the availability of observable market information for individual fixed maturity securities. 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.
For the three months ended March 31, 2022, the Company had net investment losses of $1.0 million and no net investment losses for the three months ended March 31, 2021, that were included in net income and were primarily attributable to credit loss impairments for Level 3 financial assets. For the three months ended March 31, 2022, the Company had net investment gains of $5.2 million that were included in net income and were attributable to changes in the fair value of Level 3 financial liabilities; for the three months ended March 31, 2021, the respective net investment losses were $4.3 million.

Horace Mann Educators Corporation | 16 | Quarterly Report on Form 10-Q

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 March 31, 2022 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Municipal bonds |  | $ | 54.1 |  |  | discounted cash flow |  | option adjusted spread |  | 360 - 409 bps
Corporate bonds |  | 226.0 |  |  | discounted cash flow |  | N spread(2) |  | 213 - 379 bps
|  |  |  | discounted cash flow |  | T spread(3) |  | 100 - 560 bps
|  |  |  | discounted cash flow |  | yield |  | 2.7% - 10.7%
|  |  |  | discounted cash flow |  | discount rate |  | 11.3% - 12.0%
|  |  |  | market comparable |  | option adjusted spread |  | 12.5%
Mortgage-backed and other asset-backed securities |  | 89.8 |  |  | 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 |  | 10.0% - 22.0%
|  |  |  | market comparable |  | median price |  | $28.54 - $92.06
|  |  |  | discounted cash flow |  | N spread(2) |  | 213 - 379 bps
|  |  |  | discounted cash flow |  | T spread(3) |  | 100 - 560 bps
Equity securities |  | 1.3 |  |  | Black-Scholes |  | volatility |  | low 30.0% - high 42.1%
|  |  |  | discounted cash flow |  | variable |  | $100.00 - $121.95

($ in millions)
Financial Liabilities |  | Fair Value at March 31, 2022 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Derivatives embedded in fixed indexed annuity products |  | $ | 99.1 |  |  | discounted cash flow |  | lapse rate |  | 5.3%
|  |  |  |  |  | mortality multiplier(4) |  | 66.8%
|  |  |  |  |  | option budget |  | 0.9% - 2.5%
|  |  |  |  |  | non-performance adjustment(5) |  | 5.0%

(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
(2) "N spread" is the interpolated weighted average life point on the swap curve.
(3) "T spread" is a specific point on the OTR curve.
(4) Mortality multiplier is applied to the Annuity 2000 table.
(5) 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 described in Part II - Item 8, Note 4 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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.

Horace Mann Educators Corporation | 17 | Quarterly Report on Form 10-Q

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. These financial assets and financial liabilities are further described in Part II - Item 8, Note 4 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. 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
March 31, 2022 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 172.0 |  |  | $ | 175.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 175.5 |
Deposit asset on reinsurance |  | 2,491.8 |  |  | 2,628.4 |  |  | — |  |  | — |  |  | 2,628.4 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, fixed annuity contracts |  | 4,958.0 |  |  | 5,021.8 |  |  | — |  |  | — |  |  | 5,021.8 |
Investment contract and policy reserves, account values on life contracts |  | 106.9 |  |  | 116.9 |  |  | — |  |  | — |  |  | 116.9 |
Other policyholder funds |  | 910.7 |  |  | 910.7 |  |  | — |  |  | 842.9 |  |  | 67.8 |
Short-term debt |  | 249.0 |  |  | 249.0 |  |  | — |  |  | — |  |  | 249.0 |
Long-term debt |  | 253.7 |  |  | 265.8 |  |  | — |  |  | 265.8 |  |  | — |
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 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 |  |  | — |

Horace Mann Educators Corporation | 18 | Quarterly Report on Form 10-Q

NOTE 5 - Goodwill and Intangible Assets
The Company conducts impairment testing for goodwill and intangible assets at least annually, or more often if events, changes or circumstances indicate that the carrying amount may not be recoverable. See Part II - Item 8, Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding impairment testing.
The carrying amount of goodwill by reporting unit as of March 31, 2022 was as follows:

($ in millions) |  | December 31, 2021 |  | Impairment |  | Acquisition |  | March 31, 2022
Property & Casualty |  | $ | 9.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 9.5 |
Life & Retirement |  | 14.4 |  |  | — |  |  | — |  |  | 14.4 |
Supplemental & Group Benefits |  | 19.6 |  |  | — |  |  | 12.8 |  |  | 32.4 |
Total |  | $ | 43.5 |  |  | $ | — |  |  | $ | 12.8 |  |  | $ | 56.3 |

As of March 31, 2022, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of Benefit Consultants Group, Inc. (BCG) and NTA Life Enterprises, LLC (NTA) during 2019, as well as the acquisition of Madison National during 2022. The acquisitions of BCG, NTA and Madison National resulted in initial recognition of definite-lived intangible assets subject to amortization in the amounts of $14.1 million, $160.4 million and $56.5 million, respectively. As of March 31, 2022 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 |  | 28 |  | $ | 100.1 |
Value of distribution acquired |  | 17 |  | 54.0 |
Value of agency relationships |  | 14 |  | 17.0 |
Value of customer relationships |  | 10 |  | 59.9 |
Total |  | 20 |  | 231.0 |
Accumulated amortization and impairments: |  |  |  |
Value of business acquired |  |  |  | (20.5) |
Value of distribution acquired |  |  |  | (12.4) |
Value of agency relationships |  |  |  | (6.7) |
Value of customer relationships |  |  |  | (4.5) |
Total |  |  |  | (44.1) |
Net intangible assets subject to amortization: |  |  |  | $ | 186.9 |

With regards to the definite-lived intangible assets in the table above, the value of business acquired intangible asset represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of distribution acquired intangible asset represents the present value of future business to be written by the existing agency force. The value of agency relationships intangible asset represents the present value of the commission overrides retained by NTA. The value of customer relationships intangible asset represents the present value of the expected profits from existing BCG customers in force at the date of acquisition as well as the present value of future business to be produced by Madison National's existing independent producing brokers. All of the aforementioned definite-lived intangible assets were valued using the income approach.

Horace Mann Educators Corporation | 19 | Quarterly Report on Form 10-Q

NOTE 5 - Goodwill and Intangible Assets (continued)
Estimated future amortization of the Company's definite-lived intangible assets were as follows:

($ in millions) |  |
Year Ending December 31, |  |
2022 (excluding the three months ended March 31, 2022) |  | $ | 12.6 |
2023 |  | 15.5 |
2024 |  | 15.1 |
2025 |  | 14.8 |
2026 |  | 14.5 |
Thereafter |  | 114.4 |
Total |  | $ | 186.9 |

The value of business acquired intangible asset is being amortized by product based on the present value of future premiums to be received. The value of distribution acquired intangible asset is being amortized on a straight-line basis. The value of agency relationships intangible asset is being amortized based on the present value of future premiums to be received. The value of customer relationships intangible assets are being amortized based on the present value of future profits to be received for BCG and based on the present value of future premiums for Madison National.
Indefinite-lived intangible assets (not subject to amortization) as of March 31, 2022 were as follows:

($ in millions) |  |
Trade names |  | $ | 7.9 |
State licenses |  | 5.8 |
Total |  | $ | 13.7 |

The trade names intangible asset 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. The state licenses intangible asset represents the regulatory licenses held by NTA and Madison National that were valued using the cost approach.

Horace Mann Educators Corporation | 20 | Quarterly Report on Form 10-Q

NOTE 6 - 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 period gross reserve (before reinsurance) balances and the reinsurance recoverable balances are reflected on a gross basis in the Consolidated Balance Sheets.

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Property & Casualty |  |  |  |  |  |  |  |
Beginning gross reserves(1) |  |  |  |  |  | $ | 362.4 |  |  | $ | 372.2 |
Less: reinsurance recoverables |  |  |  |  |  | 110.3 |  |  | 112.9 |
Net reserves, beginning of period(2) |  |  |  |  |  | 252.1 |  |  | 259.3 |
Incurred claims and claim expenses: |  |  |  |  |  |  |  |
Claims occurring in the current period |  |  |  |  |  | 108.3 |  |  | 94.8 |
Decrease in estimated reserves for claims occurring in prior periods(3) |  |  |  |  |  | — |  |  | — |
Total claims and claim expenses incurred(4) |  |  |  |  |  | 108.3 |  |  | 94.8 |
Claims and claim expense payments for claims occurring during: |  |  |  |  |  |  |  |
Current period |  |  |  |  |  | 33.8 |  |  | 34.4 |
Prior periods |  |  |  |  |  | 78.4 |  |  | 58.1 |
Total claims and claim expense payments |  |  |  |  |  | 112.2 |  |  | 92.5 |
Net reserves, end of period(2) |  |  |  |  |  | 248.2 |  |  | 261.6 |
Plus: reinsurance recoverables |  |  |  |  |  | 108.0 |  |  | 112.5 |
Ending gross reserves(1) |  |  |  |  |  | $ | 356.2 |  |  | $ | 374.1 |

(1)Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Life & Retirement and Supplemental & Group Benefits of $119.5 million and $78.4 million as of March 31, 2022 and 2021, respectively, in addition to Property & Casualty reserves.
(2)Reserves 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.
(4)Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for Life & Retirement and Supplemental & Group Benefits of $68.7 million and $39.5 million for the three months ended March 31, 2022 and 2021, respectively, in addition to Property & Casualty amounts.
There were no net favorable development of total reserves for Property & Casualty claims occurring in prior years for the three months ended March 31, 2022 and 2021, respectively.

Horace Mann Educators Corporation | 21 | Quarterly Report on Form 10-Q

NOTE 7 - Reinsurance
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, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:

($ in millions) |  | Direct Amount |  | Ceded to Other Companies(1) |  | Assumed from Other Companies |  | Net Amount
Three months ended March 31, 2022 |  |  |  |  |  |  |  |
Net premiums written and contract deposits(2) |  | $ | 359.6 |  |  | $ | 14.9 |  |  | $ | 12.4 |  |  | $ | 357.1 |
Net premiums and contract charges earned |  | 260.5 |  |  | 17.2 |  |  | 12.6 |  |  | 255.9 |
Benefits, claims and settlement expenses |  | 179.5 |  |  | 11.5 |  |  | 9.0 |  |  | 177.0 |
Three months ended March 31, 2021 |  |  |  |  |  |  |  |
Net premiums written and contract deposits(2) |  | $ | 320.6 |  |  | $ | 5.9 |  |  | $ | 1.5 |  |  | $ | 316.2 |
Net premiums and contract charges earned |  | 234.2 |  |  | 8.4 |  |  | 1.8 |  |  | 227.6 |
Benefits, claims and settlement expenses |  | 135.6 |  |  | 2.5 |  |  | 1.2 |  |  | 134.3 |

(1) Excludes the annuity reinsurance transaction accounted for using the deposit method.
(2) This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as Exhibit 99.1 in the Company's reports filed with the SEC.
NOTE 8 - Commitments
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $790.4 million and $858.1 million as of March 31, 2022 and December 31, 2021, respectively.

Horace Mann Educators Corporation | 22 | Quarterly Report on Form 10-Q

NOTE 9 - Segment Information
The Company conducts and manages its business through four segments. The three operating segments, representing the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management's evaluation of the results of those segments, but classifies those items in the fourth segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items in Corporate & Other have also included corporate debt retirement costs, when applicable.
In 2021 and prior, the Company conducted and managed its business through four operating segments: (1) Property & Casualty, (2) Supplemental, (3) Retirement, and (4) Life. The change in operating segments in 2022 aligns with leadership assignments and how the Company makes operating decisions and assesses performance as well as maintaining discrete financial information to evaluate performance and allocate resources. Accordingly, the presentation of prior period segment information has been reclassified to conform to the current year's presentation.
Summarized financial information for these segments is as follows:

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Net premiums and contract charges earned |  |  |  |  |  |  |  |
Property & Casualty |  |  |  |  |  | $ | 150.2 |  |  | $ | 155.8 |
Life & Retirement |  |  |  |  |  | 35.8 |  |  | 39.4 |
Supplemental & Group Benefits |  |  |  |  |  | 69.9 |  |  | 32.4 |
Total |  |  |  |  |  | $ | 255.9 |  |  | $ | 227.6 |
Net investment income |  |  |  |  |  |  |  |
Property & Casualty |  |  |  |  |  | $ | 7.2 |  |  | $ | 10.8 |
Life & Retirement |  |  |  |  |  | 84.2 |  |  | 79.9 |
Supplemental & Group Benefits |  |  |  |  |  | 7.1 |  |  | 5.4 |
Corporate & Other |  |  |  |  |  | — |  |  | — |
Intersegment eliminations |  |  |  |  |  | (0.6) |  |  | (0.6) |
Total |  |  |  |  |  | $ | 97.9 |  |  | $ | 95.5 |
Net income (loss) |  |  |  |  |  |  |  |
Property & Casualty |  |  |  |  |  | $ | 8.5 |  |  | $ | 27.9 |
Life & Retirement |  |  |  |  |  | 11.8 |  |  | 11.4 |
Supplemental & Group Benefits |  |  |  |  |  | 11.2 |  |  | 11.3 |
Corporate & Other |  |  |  |  |  | (17.0) |  |  | (11.3) |
Total |  |  |  |  |  | $ | 14.5 |  |  | $ | 39.3 |

($ in millions) |  | March 31, 2022 |  | December 31, 2021
Assets |  |  |  |
Property & Casualty |  | $ | 1,116.3 |  |  | $ | 1,243.4 |
Life & Retirement |  | 11,707.5 |  |  | 12,064.7 |
Supplemental & Group Benefits |  | 1,484.8 |  |  | 858.8 |
Corporate & Other |  | 183.8 |  |  | 281.8 |
Intersegment eliminations |  | (65.0) |  |  | (64.8) |
Total |  | $ | 14,427.4 |  |  | $ | 14,383.9 |

Horace Mann Educators Corporation | 23 | Quarterly Report on Form 10-Q

NOTE 10 - Accumulated Other Comprehensive Income (Loss)
AOCI represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, AOCI includes 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. The following table reconciles these components.

($ in millions) |  | Net Unrealized Investment Gains (Losses) on Securities(1) |  | Net Funded Status of Benefit Plans(1) |  | Total(1)
Beginning balance, January 1, 2022 |  | $ | 290.7 |  |  | $ | (10.2) |  |  | $ | 280.5 |
Other comprehensive income (loss) before reclassifications |  | (284.8) |  |  | — |  |  | (284.8) |
Amounts reclassified from AOCI(2) |  | 14.1 |  |  | — |  |  | 14.1 |
Net current period other comprehensive income (loss) |  | (270.7) |  |  | — |  |  | (270.7) |
Ending balance, March 31, 2022 |  | $ | 20.0 |  |  | $ | (10.2) |  |  | $ | 9.8 |
Beginning balance, January 1, 2021 |  | $ | 366.3 |  |  | $ | (11.2) |  |  | $ | 355.1 |
Other comprehensive income (loss) before reclassifications |  | (129.1) |  |  | — |  |  | (129.1) |
Amounts reclassified from AOCI(2) |  | 6.4 |  |  | — |  |  | 6.4 |
Net current period other comprehensive income (loss) |  | (122.7) |  |  | — |  |  | (122.7) |
Ending balance, March 31, 2021 |  | $ | 243.6 |  |  | $ | (11.2) |  |  | $ | 232.4 |

(1)All amounts are net of tax.
(2)The pretax amounts reclassified from AOCI, $(17.9) million and $(8.1) million, are included in Net investment losses and the related income tax expenses, $(3.8) million and $(1.7) million, are included in income tax expense in the Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, respectively.
Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is disclosed in Note 3.
NOTE 11 - Supplemental Consolidated Cash and Cash Flow Information

($ in millions) |  |  |  |
|  | March 31, 2022 |  | December 31, 2021
Cash |  | $ | 48.3 |  |  | $ | 133.0 |
Restricted cash |  | 0.8 |  |  | 0.7 |
Total cash and restricted cash reported in the Consolidated Balance Sheets |  | $ | 49.1 |  |  | $ | 133.7 |

($ in millions) |  | Three Months Ended March 31,
|  | 2022 |  | 2021
Cash paid (recovered) for: |  |  |  |
Interest |  | $ | 0.6 |  |  | $ | 0.6 |
Income taxes |  | (0.3) |  |  | (0.1) |

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 three months ended March 31, 2022 and 2021, respectively.

Horace Mann Educators Corporation | 24 | Quarterly Report on Form 10-Q

ITEM 2. 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 I - Item 2. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Quarterly Report on Form 10-Q 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 First Quarter 2022 Investor Supplement.
Increases or decreases in this 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 Part I - Items 2 - 4 and Part II of 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 in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding risks and uncertainties.
This MD&A covers the following:

|  | Page
Introduction |  | 26
Consolidated Financial Highlights |  | 27
Consolidated Results of Operations |  | 27
Outlook for 2022 |  | 29
Application of Critical Accounting Estimates |  | 30
Results of Operations by Segment |  | 31
Property & Casualty |  | 31
Life & Retirement |  | 34
Supplemental & Group Benefits |  | 37
Corporate & Other |  | 38
Investment Results |  | 38
Liquidity and Capital Resources |  | 41

Horace Mann Educators Corporation | 25 | Quarterly Report on Form 10-Q

Introduction
The purpose of this MD&A is to provide an understanding of our consolidated results of operations and financial condition. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part I - Item 1 of this report.
HMEC is an insurance holding company focused on helping America’s educators and others who serve the community achieve lifelong financial success. Through our subsidiaries, we market and underwrite individual and group insurance and financial solutions tailored to the needs of the educational community including:
•personal lines of property and casualty insurance, primarily auto and property coverages
•voluntary insurance products, including cancer, heart, hospital, supplemental disability and accident
•employer-sponsored insurance products, primarily long-term disability and short-term disability
•retirement products, primarily tax-qualified fixed and variable annuities
•life insurance, primarily traditional term and whole life insurance products
We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families.
Effective January 1, 2022, we acquired all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (Madison National), for $172.3 million. 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. As a result of the acquisition, Madison National became a wholly owned subsidiary of HMEC.
Beginning in 2022, we are conducting and managing our business in three operating segments: (1) Property & Casualty, (2) Life & Retirement, and (3) Supplemental & Group Benefits. The Supplemental & Group Benefits segment includes the results of Madison National. 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. See Part I - Item 1, Note 9 of the Consolidated Financial Statements in this report for more information.
Coronavirus Disease (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 Annual Report on Form 10-K for the year ended December 31, 2021, we successfully met the challenges of the pandemic environment and are now operating in a hybrid model. 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.
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 Part I - Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021.

Horace Mann Educators Corporation | 26 | Quarterly Report on Form 10-Q

Consolidated Financial Highlights
(All comparisons vs. same periods in 2021, unless noted otherwise)

($ in millions) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change %
Total revenues |  |  |  |  |  |  |  | $ | 346.8 |  |  | $ | 322.0 |  |  | 7.7 | %
Net income |  |  |  |  |  |  |  | 14.5 |  |  | 39.3 |  |  | -63.1 | %
Per diluted share: |  |  |  |  |  |  |  |  |  |  |  |
Net income |  |  |  |  |  |  |  | 0.35 |  |  | 0.93 |  |  | -62.4 | %
Net investment losses after tax |  |  |  |  |  |  |  | (0.29) |  |  | (0.17) |  |  | N.M.
Book value per share |  |  |  |  |  |  |  | $ | 37.14 |  |  | $ | 40.83 |  |  | -9.0 | %
Net income return on equity - last twelve months |  |  |  |  |  |  |  | 6.8 | % |  | 9.3 | % |  |
Net income return on equity - annualized |  |  |  |  |  |  |  | 3.5 | % |  | 9.0 | % |  |

For the three months ended March 31, 2022, net income decreased $24.8 million primarily due to an increase in auto loss frequency that is approaching pre-pandemic levels and higher auto severity due to inflation as well as higher net investment losses from changes in fair values of equity securities.
Consolidated Results of Operations
(All comparisons vs. same periods in 2021, unless noted otherwise)

($ in millions) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change %
Net premiums and contract charges earned |  |  |  |  |  |  |  | $ | 255.9 |  |  | $ | 227.6 |  |  | 12.4 | %
Net investment income |  |  |  |  |  |  |  | 97.9 |  |  | 95.5 |  |  | 2.5 | %
Net investment losses |  |  |  |  |  |  |  | (15.5) |  |  | (9.0) |  |  | N.M.
Other income |  |  |  |  |  |  |  | 8.5 |  |  | 7.9 |  |  | 7.6 | %
Total revenues |  |  |  |  |  |  |  | 346.8 |  |  | 322.0 |  |  | 7.7 | %
Benefits, claims and settlement expenses |  |  |  |  |  |  |  | 177.0 |  |  | 134.3 |  |  | 31.8 | %
Interest credited |  |  |  |  |  |  |  | 40.8 |  |  | 50.6 |  |  | -19.4 | %
Operating expenses |  |  |  |  |  |  |  | 76.8 |  |  | 58.0 |  |  | 32.4 | %
DAC unlocking and amortization expense |  |  |  |  |  |  |  | 26.4 |  |  | 24.1 |  |  | 9.5 | %
Intangible asset amortization expense |  |  |  |  |  |  |  | 4.2 |  |  | 3.3 |  |  | 27.3 | %
Interest expense |  |  |  |  |  |  |  | 3.9 |  |  | 3.5 |  |  | 11.4 | %
Total benefits, losses and expenses |  |  |  |  |  |  |  | 329.1 |  |  | 273.8 |  |  | 20.2 | %
Income before income taxes |  |  |  |  |  |  |  | 17.7 |  |  | 48.2 |  |  | -63.3 | %
Income tax expense |  |  |  |  |  |  |  | 3.2 |  |  | 8.9 |  |  | -64.0 | %
Net income |  |  |  |  |  |  |  | $ | 14.5 |  |  | $ | 39.3 |  |  | -63.1 | %

Net Premiums and Contract Charges Earned
For the three months ended March 31, 2022, net premiums and contract charges earned increased $28.3 million, primarily due to the inclusion of Madison National partially offset by lower net premiums earned by Property & Casualty.
Net Investment Income
Excluding accreted investment income on the deposit asset on reinsurance, for the three months ended March 31, 2022, net investment income increased $1.9 million, primarily due to an increase in commercial mortgage fund income, partially offset by lower returns on other limited partnership interests. Investment yields

Horace Mann Educators Corporation | 27 | Quarterly Report on Form 10-Q

continue to be impacted by the low interest rate environment of recent years. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

|  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Investment yield, excluding limited partnership interests, pretax - annualized* |  |  |  |  |  | 4.3% |  | 4.2%
Investment yield, excluding limited partnership interests, after tax - annualized* |  |  |  |  |  | 3.4% |  | 3.3%

During the three months ended March 31, 2022, we continued to identify and purchase investments with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines for the core portfolio. We continue to fund 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 principal protection and risk.
Net Investment Losses
For the three months ended March 31, 2022, pretax net investment losses increased $6.5 million, primarily due to changes in fair values of equity securities. The breakdown of net investment losses by transaction type were as follows:

($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Impairments on investments recognized in net income |  |  |  |  |  | $ | (1.8) |  |  | $ | (3.2) |
Sales and other, net |  |  |  |  |  | 1.1 |  |  | (2.1) |
Change in fair value - equity securities |  |  |  |  |  | (17.1) |  |  | (2.8) |
Change in fair value and losses realized on settlements - derivatives |  |  |  |  |  | 2.3 |  |  | (0.9) |
Net investment losses |  |  |  |  |  | $ | (15.5) |  |  | $ | (9.0) |

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in our intent to sell a fixed maturity security.
Other Income
For the three months ended March 31, 2022, other income increased $0.6 million, primarily due to the inclusion of Madison National.
Benefits, Claims and Settlement Expenses
For the three months ended March 31, 2022, benefits, claims and settlement expenses increased $42.7 million, primarily due to an increase in underlying auto loss experience and the inclusion of Madison National, partially reduced by an offsetting $10.3 million change in interest credited.
Interest Credited
For the three months ended March 31, 2022, interest credited decreased $9.8 million driven primarily by an offsetting $10.3 million change in benefits, claims and settlement expenses. Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be reported. The average deferred annuity credited rate, excluding the reinsured annuity block, was 2.4% as of March 31, 2022 and March 31, 2021, respectively.
Operating Expenses
For the three months ended March 31, 2022, operating expenses increased $18.8 million, primarily due to the inclusion of Madison National.

Horace Mann Educators Corporation | 28 | Quarterly Report on Form 10-Q

Deferred Policy Acquisition Costs (DAC) Unlocking and Amortization Expense
For the three months ended March 31, 2022, DAC unlocking and amortization expense increased $2.3 million, primarily due to unfavorable market-related DAC unlocking in the Life & Retirement segment.
Intangible Asset Amortization Expense
For the three months ended March 31, 2022, intangible asset amortization expense increased $0.9 million, due to the inclusion of Madison National.
Interest Expense
For the three months ended March 31, 2022, interest expense increased $0.4 million.
Income Tax Expense
The effective income tax rate, including net investment (losses) gains, was 18.1% and 18.5% for the three months ended March 31, 2022 and 2021, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 6.3 and 3.9 percentage points for the three months ended March 31, 2022 and 2021, respectively.
We record liabilities for uncertain tax filing positions where it is more likely than not that the position will not be sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted appropriately based on changes in facts or law. We have no unrecorded liabilities from uncertain tax filing positions.
At March 31, 2022, 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.
Outlook for 2022
The following discussion provides outlook information for our results of operations and capital position.
At the time of issuance of this Quarterly Report on Form 10-Q, due to the impact of inflation on our nearer-term auto results as well as the potential impact of market volatility on DAC unlocking, we now believe our 2022 core earnings per share is more likely to be at the lower end of the guidance range of $3.45-$3.65 discussed in our Outlook for 2022 in the Annual Report on Form 10-K for the year ended December 31, 2021. The outlook assumes a federal statutory corporate tax rate of 21%.
Horace Mann’s outlook for 2022 reflects accretion from newly acquired Madison National as well as estimates of the initial contributions of strategic growth initiatives. Full-year net investment income from the managed portfolio is estimated to be in line with 2021, with limited partnership portfolio returns modeled closer to the historical averages. We expect that the increase of interest rates in the capital markets that are being experienced may have a significant impact to net unrealized investment gains (losses) on fixed maturity securities reported in our Consolidated Balance Sheets. Results for each segment will reflect different considerations:
Property & Casualty Segment
In 2022, the underlying auto loss ratio is now expected to be higher in the near term than anticipated in the original guidance due to inflation. The longer-term combined ratio target remains 95-96%. The assumption for catastrophe losses continues to be approximately 9.5 points on the combined ratio, in line with the 10-year average. Net investment income in 2022 is expected to be lower than prior year in this segment, as it benefited from strong limited partnership returns in 2021.
Life & Retirement Segment
Net investment income is expected to be up slightly compared to 2021, maintaining the net investment spread near the 2021 level. Market volatility may cause DAC unlocking to have an outsized impact on segment earnings. The assumption for mortality is a return to actuarial expectations.

Horace Mann Educators Corporation | 29 | Quarterly Report on Form 10-Q

Supplemental & Group Benefits Segment
Claims utilization is expected to be near pre-pandemic levels leading to full-year benefit ratios of about 35% for voluntary products and about 50% for employer-sponsored products. Amortization of intangible assets is expected to be approximately $13 million, or 30 cents per share (after tax).
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.
Application of Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions based on information available at the time the consolidated financial statements are prepared. These estimates and assumptions affect the reported amounts of our consolidated assets, liabilities, shareholders' equity and net income. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that subsequent events and available information may differ markedly from management's judgments at the time the consolidated financial statements were prepared. We have discussed with the Audit Committee the quality, not just the acceptability, of our accounting principles as applied in our financial reporting. The discussions generally included such matters as the consistency of our accounting policies and their application, and the clarity and completeness of our consolidated financial statements, which include related disclosures.
Information regarding our accounting policies pertaining to these topics is located in the Notes to the Consolidated Financial Statements contained in Part II - Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021. In addition, discussion of accounting policies, including certain sensitivity information, was presented in Management's Discussion and Analysis of Financial Condition and Results of Operations -- Application of Critical Accounting Estimates in that Form 10-K within which 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 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 contract and policy reserves
Except as noted below, as of March 31, 2022, there were no material changes to accounting policies for areas most subject to significant management judgments identified above.
Valuation of Assets Acquired and Liabilities Assumed under Purchase Accounting and Purchase Price Allocation
In accounting for the acquisition of Madison National Life Insurance Company, Inc. (Madison National), assets acquired and liabilities assumed are recognized based on estimated fair values as of the date of acquisition. The excess of the purchase price when compared to the fair value of the net tangible and identifiable intangible assets acquired is recognized as goodwill. A significant amount of judgment is involved in estimating the individual fair values of tangible assets, intangible assets, and other assets and liabilities. We used all available information to make these fair value determinations and engaged third-party consultants for valuation assistance. The fair value of assets and liabilities as of the acquisition date were estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an

Horace Mann Educators Corporation | 30 | Quarterly Report on Form 10-Q

appropriate discount rate; the cost approach, which required estimates of replacement costs and depreciation and obsolescence estimates; and the market approach. The estimates used in determining fair values were based on assumptions believed to be reasonable but which are inherently uncertain. Accordingly, actual results may differ materially from the projected results used to determine fair value.
The value of business acquired intangible asset (VOBA) represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of relationships acquired intangible asset was valued based on the actuarial appraisal method net of VOBA. This represents expected future premiums arising from ongoing relationships and includes assumed growth in premium in the first projection year as well as all premiums in projection years two through ten. The state licenses intangible asset represents the regulatory licenses held by Madison National that were valued using the cost approach. The valuation of Madison National's policy reserves represents the present value of expected future benefits and expenses associated with the policies, valued using the actuarial appraisal approach.
The valuation of the assets acquired and liabilities assumed of Madison National noted above required management to make multiple judgments and assumptions to project future cash flows. Assumptions included future policy and contract charges, premiums, morbidity and mortality, and persistency by product, as well as expenses, investment returns, growth rates and other factors. One of the most significant inputs in these calculations is the discount rate used to arrive at the present value of the net cash flows. Actual experience on the purchased business may vary from these projections and the recovery of the net assets recorded is dependent upon the future profitability of the related business.
Results of Operations by Segment
Consolidated financial results primarily reflect the results of three operating segments (Property & Casualty, Life & Retirement, and Supplemental & Group Benefits) as noted in the Introduction and Outlook for 2022 sections of this MD&A, 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.
The determination of segment data is described in more detail in Part I - Item 1, Note 9 of the Consolidated Financial Statements in this report. The following sections provide analysis and discussion of the results of operations for each of the reporting segments as well as investment results.
Property & Casualty
(All comparisons vs. same periods in 2021, unless noted otherwise)
For the three months ended March 31, 2022, net income reflected the following factors:
•Auto loss frequency closer to pre-pandemic levels and higher auto loss severity due to inflation
•A decrease in net investment income due to less favorable returns on limited partnership interests
•Higher underlying property loss ratio* due to higher fire losses offset by lower levels of catastrophe losses
•No recognition of prior years' reserve development for the current and prior year periods

Horace Mann Educators Corporation | 31 | Quarterly Report on Form 10-Q

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

($ in millions, unless otherwise indicated) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change
Financial Data: |  |  |  |  |  |  |  |  |  |  |  |
Net premiums written*: |  |  |  |  |  |  |  |  |  |  |  |
Auto |  |  |  |  |  |  |  | $ | 94.5 |  |  | $ | 99.2 |  |  | -4.7 | %
Property and other |  |  |  |  |  |  |  | 45.1 |  |  | 42.6 |  |  | 5.9 | %
Total net premiums written |  |  |  |  |  |  |  | 139.6 |  |  | 141.8 |  |  | -1.6 | %
Change in unearned net premiums |  |  |  |  |  |  |  | 10.6 |  |  | 14.0 |  |  | -24.3 | %
Total net premiums earned |  |  |  |  |  |  |  | 150.2 |  |  | 155.8 |  |  | -3.6 | %
Incurred claims and claims expenses: |  |  |  |  |  |  |  |  |  |  |  |
Claims occurring in the current year |  |  |  |  |  |  |  | 108.3 |  |  | 94.7 |  |  | 14.4 | %
Prior years' reserve development(1) |  |  |  |  |  |  |  | — |  |  | — |  |  | — | %
Total claims and claim expenses incurred |  |  |  |  |  |  |  | 108.3 |  |  | 94.7 |  |  | 14.4 | %
Operating expenses, including DAC amortization |  |  |  |  |  |  |  | 39.4 |  |  | 39.5 |  |  | -0.3 | %
Underwriting gain |  |  |  |  |  |  |  | 2.5 |  |  | 21.6 |  |  | -88.4 | %
Net investment income |  |  |  |  |  |  |  | 7.2 |  |  | 10.8 |  |  | -33.3 | %
Income before income taxes |  |  |  |  |  |  |  | 10.5 |  |  | 34.4 |  |  | -69.5 | %
Net income / Core earnings* |  |  |  |  |  |  |  | 8.5 |  |  | 27.9 |  |  | -69.5 | %
Operating Statistics: |  |  |  |  |  |  |  |  |  |  |  |
Auto |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss adjustment expense ratio |  |  |  |  |  |  |  | 76.0 | % |  | 59.1 | % |  | 16.9 | pts
Expense ratio |  |  |  |  |  |  |  | 25.8 | % |  | 25.1 | % |  | 0.7 | pts
Combined ratio: |  |  |  |  |  |  |  | 101.8 | % |  | 84.2 | % |  | 17.6 | pts
Prior years' reserve development(1) |  |  |  |  |  |  |  | — | % |  | — | % |  | — | pts
Catastrophe losses |  |  |  |  |  |  |  | 0.5 | % |  | 0.3 | % |  | 0.2 | pts
Underlying combined ratio* |  |  |  |  |  |  |  | 101.3 | % |  | 83.9 | % |  | 17.4 | pts
Property |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss adjustment expense ratio |  |  |  |  |  |  |  | 65.0 | % |  | 64.1 | % |  | 0.9 | pts
Expense ratio |  |  |  |  |  |  |  | 27.3 | % |  | 26.0 | % |  | 1.3 | pts
Combined ratio: |  |  |  |  |  |  |  | 92.3 | % |  | 90.1 | % |  | 2.2 | pts
Prior years' reserve development(1) |  |  |  |  |  |  |  | — | % |  | — | % |  | — | pts
Catastrophe losses |  |  |  |  |  |  |  | 12.7 | % |  | 20.1 | % |  | -7.4 | pts
Underlying combined ratio* |  |  |  |  |  |  |  | 79.6 | % |  | 70.0 | % |  | 9.6 | pts
Risks in force (in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Auto(2) |  |  |  |  |  |  |  | 372 |  |  | 393 |  |  | -5.3 | %
Property |  |  |  |  |  |  |  | 175 |  |  | 182 |  |  | -3.8 | %
Total |  |  |  |  |  |  |  | 547 |  |  | 575 |  |  | -4.9 | %

(1) (Favorable) unfavorable.
(2) Includes assumed risks in force of 4.
On a reported basis, the 17.6 point increase in the auto combined ratio for the three months ended March 31, 2022 was mainly attributable to a 16.7 point increase in the auto underlying loss ratio*. The increase in the auto underlying loss ratio reflects a return to more normal driving patterns as well as an increase in severity trends due to inflation. The reported property combined ratio increased 2.2 points and the property underlying loss ratio* increased 8.3 points for the three months ended March 31, 2022 reflecting higher non-catastrophe fire

Horace Mann Educators Corporation | 32 | Quarterly Report on Form 10-Q

losses, while the reported loss ratio increased 0.9 pts as the increases in fire losses were offset by lower catastrophe losses.
For the three months ended March 31, 2022, total net premiums written* decreased $2.2 million as the benefit of stronger retention is being offset by new business volumes that remain below historical levels due to the lingering effect of the pandemic on sales*.
For the three months ended March 31, 2022, auto net premiums written* decreased $4.7 million, as the number of auto risks in force continues to decline. Average net premium written and average net premium earned were flat. The auto rate plan for 2022 now reflects rate increases in the high single digit to low double digit range in states representing almost 80% of our auto premiums. The number of educator risks has been over 80% relative to overall auto risks in force over the past two years.
For the three months ended March 31, 2022, property and other net premiums written* increased $2.5 million, due to increases in average net premium written and average net premium earned which increased 6.5% and 4.0%, respectively, as inflation adjustments to coverage values began to take effect. With inflationary pressure continuing, adjustments to coverage values and rates are expected to continue to play a role in the coming quarters. We anticipate average rate increases in the low single digits for property. 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 exposure in catastrophe-prone areas of the country. Such actions could include, but are not limited to, non-renewal of property policies, 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 | 33 | Quarterly Report on Form 10-Q

Life & Retirement
(All comparisons vs. same periods in 2021, unless noted otherwise)
For the three months ended March 31, 2022, net income reflected the following factors:
•Strong annualized net interest spread on fixed annuities of 286 bps for the three months ended March 31, 2022
•Continued growth in net annuity contract deposits* that increased $6.2 million for the three months ended March 31, 2022
•Lower mortality costs benefiting Life results

Horace Mann Educators Corporation | 34 | Quarterly Report on Form 10-Q

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

($ in millions) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change
Life & Retirement |  |  |  |  |  |  |  |  |  |  |  |
Net premiums written and contract deposits* |  |  |  |  |  |  |  | $ | 136.4 |  |  | $ | 130.3 |  |  | 4.7 | %
Net premiums and contract charges earned |  |  |  |  |  |  |  | 35.8 |  |  | 39.4 |  |  | -9.1 | %
Net investment income |  |  |  |  |  |  |  | 84.2 |  |  | 79.9 |  |  | 5.4 | %
Other income |  |  |  |  |  |  |  | 4.9 |  |  | 4.8 |  |  | 2.1 | %
Life mortality costs |  |  |  |  |  |  |  | 12.2 |  |  | 14.6 |  |  | -16.4 | %
Interest credited |  |  |  |  |  |  |  | 40.7 |  |  | 50.5 |  |  | -19.4 | %
Change in reserves |  |  |  |  |  |  |  | 21.7 |  |  | 15.0 |  |  | 44.7 | %
Operating expenses |  |  |  |  |  |  |  | 25.8 |  |  | 23.7 |  |  | 8.9 | %
DAC amortization expense, excluding unlocking |  |  |  |  |  |  |  | 7.4 |  |  | 6.9 |  |  | 7.2 | %
DAC unlocking |  |  |  |  |  |  |  | 2.5 |  |  | (0.6) |  |  | N.M.
Intangible asset amortization expense |  |  |  |  |  |  |  | 0.3 |  |  | 0.4 |  |  | -25.0 | %
Income before income taxes |  |  |  |  |  |  |  | 14.3 |  |  | 13.6 |  |  | 5.1 | %
Income tax expense |  |  |  |  |  |  |  | 2.5 |  |  | 2.2 |  |  | 13.6 | %
Net income |  |  |  |  |  |  |  | 11.8 |  |  | 11.4 |  |  | 3.5 | %
Core earnings* |  |  |  |  |  |  |  | 11.8 |  |  | 11.4 |  |  | 3.5 | %
Life policies in force (in thousands) |  |  |  |  |  |  |  | 163 |  |  | 163 |  |  | — | %
Life insurance in force |  |  |  |  |  |  |  | $ | 19,595 |  |  | $ | 19,028 |  |  | 3.0 | %
Life persistency - LTM |  |  |  |  |  |  |  | 96.2 | % |  | 96.1 | % |  | 0.1 | pts
Annuity contracts in force (in thousands) |  |  |  |  |  |  |  | 229 |  |  | 230 |  |  | -0.4 | %
Retirement Advantage® contracts in force (in thousands) |  |  |  |  |  |  |  | 16 |  |  | 13 |  |  | 23.1 | %
Cash value persistency - LTM |  |  |  |  |  |  |  | 94.3 | % |  | 95.0 | % |  | -0.7 | pts

For the three months ended March 31, 2022, life annualized sales* were slightly below the prior year period with persistency for life products of 96.2% remaining in line with prior year periods.
For the three months ended March 31, 2022, net annuity contract deposits for variable and fixed annuities increased $6.2 million. Our relationship with educators often begins with our 403(b) retirement savings products, including our attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency remained strong at 94.3%.
As of March 31, 2022, annuity assets under management were up $193.9 million, or 3.9%, 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 $152.7 million, or 1.7%, from a year ago, as assets under management also rose primarily due to market appreciation over the past 12 months. The year-to-date annualized net interest spread on fixed annuities, excluding reinsurance, increased 33 basis points, primarily reflecting higher net investment income.
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 $802.6 million of the Life & Retirement 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

Horace Mann Educators Corporation | 35 | Quarterly Report on Form 10-Q

reduce Life & Retirement net investment income by approximately $3.1 million in year one and $9.2 million in year two, further reducing the annualized net interest spread on fixed annuities by approximately 11 basis points and 30 basis points in the respective periods, compared to the current period annualized net interest spread on fixed annuities. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to guaranteed minimum crediting rates.
The expectation for future annualized net interest spreads on fixed annuities is also an important component in the amortization of DAC. In terms of the sensitivity of this amortization to the annualized net interest spread on fixed annuities, based on DAC as of March 31, 2022 and assuming all other assumptions are met, a 10 basis point deviation in the current year targeted annualized net interest rate spread on the fixed annuities 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 guaranteed minimum crediting rates for deferred annuity account values excluding the reinsured block is shown below.

($ in millions) |  | March 31, 2022
|  | 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
Guaranteed minimum crediting rates: |  |  |  |  |  |  |  |  |  |
Less than 2% |  | 55.8 | % |  | $ | 1,411.1 |  |  | 74.8 | % |  | 49.6 | % |  | $ | 1,056.2 |
Equal to 2% but less than 3% |  | 11.2 |  |  | 283.5 |  |  | 83.6 |  |  | 11.1 |  |  | 236.9 |
Equal to 3% but less than 4% |  | 24.6 |  |  | 622.8 |  |  | 99.9 |  |  | 29.2 |  |  | 622.4 |
Equal to 4% but less than 5% |  | 6.5 |  |  | 165.7 |  |  | 100.0 |  |  | 7.8 |  |  | 165.7 |
5% or higher |  | 1.9 |  |  | 48.0 |  |  | 100.0 |  |  | 2.3 |  |  | 48.0 |
Total |  | 100.0 | % |  | $ | 2,531.1 |  |  | 84.1 | % |  | 100.0 | % |  | $ | 2,129.2 |

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 in our Annual Report on Form 10-K for the year ended December 31, 2021 and other factors in this report.

Horace Mann Educators Corporation | 36 | Quarterly Report on Form 10-Q

Supplemental & Group Benefits
(All comparisons vs. same periods in 2021, unless noted otherwise)
For the three months ended March 31, 2022, net income reflected the following factors:
•Inclusion of Madison National's results
•Improved net investment income driven by favorable returns on limited partnership interests
The following table provides certain information for Supplemental & Group Benefits for the periods indicated.

($ in millions) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change
Supplemental & Group Benefits |  |  |  |  |  |  |  |  |  |  |  |
Net premiums and contract charges earned |  |  |  |  |  |  |  | $ | 69.9 |  |  | $ | 32.4 |  |  | 115.7 | %
Net investment income |  |  |  |  |  |  |  | 7.1 |  |  | 5.4 |  |  | 31.5 | %
Other income |  |  |  |  |  |  |  | 1.6 |  |  | 0.7 |  |  | 128.6 | %
Benefits, settlement expenses and change in reserves |  |  |  |  |  |  |  | 34.8 |  |  | 10.0 |  |  | 248.0 | %
Interest credited |  |  |  |  |  |  |  | 0.1 |  |  | 0.1 |  |  | — | %
Operating expenses (includes DAC unlocking and amortization expense) |  |  |  |  |  |  |  | 25.5 |  |  | 11.0 |  |  | 131.8 | %
Intangible asset amortization expense |  |  |  |  |  |  |  | 3.9 |  |  | 2.9 |  |  | 34.5 | %
Income before income taxes |  |  |  |  |  |  |  | 14.3 |  |  | 14.5 |  |  | -1.4 | %
Net income / Core earnings* |  |  |  |  |  |  |  | 11.2 |  |  | 11.3 |  |  | -0.9 | %
Benefits ratio(1) |  |  |  |  |  |  |  | 49.9 | % |  | 31.2 | % |  | 18.7 | pts
Operating expense ratio(2) |  |  |  |  |  |  |  | 32.4 | % |  | 28.6 | % |  | 3.8 | pts
Pretax profit margin(3) |  |  |  |  |  |  |  | 18.2 | % |  | 37.7 | % |  | -19.5 | pts
Voluntary products benefits ratio |  |  |  |  |  |  |  | 29.3 | % |  | 30.9 | % |  | -1.6 | pts
Voluntary premium persistency (rolling 12 months) |  |  |  |  |  |  |  | 92.1 | % |  | 91.5 | % |  | 0.6 | pts
Employer-sponsored products benefits ratio |  |  |  |  |  |  |  | 66.1 | % |  | — | % |  | N.M.

(1) Ratio of benefits to net premiums earned.
(2) Ratio of operating expenses to total revenues.
(3) Ratio of income before taxes to total revenues.
For the three months ended March 31, 2022, total sales* were $3.7 million. Sales of voluntary products* were $1.4 million, a 40.0% increase from the prior year period, with persistency up 0.6 pts at 92.1%. Sales of employer-sponsored products* added another $2.3 million, in line with management's expectations.
Net income was flat compared to the prior year period. The current period includes the results of Madison National which is driving the increases in (1) benefits, settlement expenses and change in reserves, (2) operating expenses (includes DAC unlocking and amortization), and (3) intangible asset amortization expense. The non-cash impact of amortization of intangible assets under purchase accounting reduced net income by $3.9 million

Horace Mann Educators Corporation | 37 | Quarterly Report on Form 10-Q

pretax for the three months ended March 31, 2022. Pretax profit margin declined because of the newly acquired employer-sponsored products, which are expected to generate a lower margin than voluntary products. For the three months ended March 31, 2022, benefits paid also reflected normal seasonality for the employer-sponsored products.
Corporate & Other
(All comparisons vs. same periods in 2021, unless noted otherwise)
The following table provides certain financial information for Corporate & Other for the periods indicated.

($ in millions) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change %
Interest expense |  |  |  |  |  |  |  | $ | 3.9 |  |  | $ | 3.4 |  |  | 14.7 | %
Net investment losses pretax |  |  |  |  |  |  |  | (15.5) |  |  | (9.0) |  |  | N.M.
Operating expenses |  |  |  |  |  |  |  | (2.0) |  |  | (1.9) |  |  | -5.3 | %
Net investment losses after tax |  |  |  |  |  |  |  | (12.2) |  |  | (7.1) |  |  | N.M.
Net loss |  |  |  |  |  |  |  | (17.0) |  |  | (11.3) |  |  | -50.4 | %
Core earnings loss* |  |  |  |  |  |  |  | (4.8) |  |  | (4.2) |  |  | -14.3 | %

For the three months ended March 31, 2022, the net loss increased primarily due to an increase in net investment losses. This was mainly due to changes in fair values of equity securities.
Investment Results
(All comparisons vs. same periods in 2021, unless noted otherwise)
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 policies written in 2002 or earlier.

($ in millions) |  |  |  |  |  | Three Months Ended March 31, |  | 2022-2021
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Change %
Net investment income - investment portfolio |  |  |  |  |  |  |  | $ | 73.0 |  |  | $ | 71.1 |  |  | 2.7 | %
Investment income - deposit asset on reinsurance |  |  |  |  |  |  |  | 24.9 |  |  | 24.4 |  |  | 2.0 | %
Total net investment income |  |  |  |  |  |  |  | 97.9 |  |  | 95.5 |  |  | 2.5 | %
Pretax net investment losses |  |  |  |  |  |  |  | (15.5) |  |  | (9.0) |  |  | N.M.
Pretax net unrealized investment gains on fixed maturity securities |  |  |  |  |  |  |  | 16.7 |  |  | 363.6 |  |  | -95.4 | %

Excluding accreted investment income on the deposit asset on reinsurance, net investment income increased $1.9 million for the three months ended March 31, 2022, primarily due to an increase in commercial mortgage fund income, partially offset by lower returns on other limited partnership interests.
For the three months ended March 31, 2022, pretax net investment losses increased $6.5 million, primarily due to the change in fair value of equity securities. Pretax net unrealized investment gains on fixed maturity securities were down $424.9 million, or 96.2%, compared to December 31, 2021, reflecting an 83 basis point increase in the 10-year U.S. Treasury yield and wider credit spreads across most asset classes.

Horace Mann Educators Corporation | 38 | Quarterly Report on Form 10-Q

Fixed Maturity and Equity Securities Portfolios
The table below presents our fixed maturity and equity securities portfolios by major asset class, including the 10 largest sectors of our corporate bond holdings (based on fair value).

($ in millions) |  | March 31, 2022
|  | Number of Issuers |  | Fair Value |  | Amortized Cost, net |  | Pretax Net Unrealized Gain (Loss)
Fixed maturity securities |  |  |  |  |  |  |  |
Corporate bonds |  |  |  |  |  |  |  |
Banking & Finance |  | 170 |  |  | $ | 531.8 |  |  | $ | 535.2 |  |  | $ | (3.4) |
Energy |  | 94 |  |  | 179.0 |  |  | 177.4 |  |  | 1.6 |
Insurance |  | 56 |  |  | 173.2 |  |  | 165.9 |  |  | 7.3 |
Healthcare, Pharmacy |  | 89 |  |  | 160.8 |  |  | 163.7 |  |  | (2.9) |
Miscellaneous |  | 37 |  |  | 144.9 |  |  | 146.1 |  |  | (1.2) |
Utilities |  | 78 |  |  | 138.8 |  |  | 141.5 |  |  | (2.7) |
Transportation |  | 51 |  |  | 107.9 |  |  | 109.5 |  |  | (1.6) |
Real Estate |  | 45 |  |  | 105.0 |  |  | 106.4 |  |  | (1.4) |
Food and Beverage |  | 36 |  |  | 86.6 |  |  | 84.2 |  |  | 2.4 |
Consumer Products |  | 56 |  |  | 79.7 |  |  | 83.3 |  |  | (3.6) |
All other corporates(1) |  | 362 |  |  | 588.3 |  |  | 594.9 |  |  | (6.6) |
Total corporate bonds |  | 1,074 |  |  | 2,296.0 |  |  | 2,308.1 |  |  | (12.1) |
Mortgage-backed securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agencies |  | 256 |  |  | 419.3 |  |  | 422.4 |  |  | (3.1) |
Commercial(2) |  | 137 |  |  | 297.5 |  |  | 296.0 |  |  | 1.5 |
Other |  | 31 |  |  | 17.6 |  |  | 17.8 |  |  | (0.2) |
Municipal bonds(3) |  | 613 |  |  | 1,579.5 |  |  | 1,530.9 |  |  | 48.6 |
Government bonds |  |  |  |  |  |  |  |
U.S. |  | 43 |  |  | 365.9 |  |  | 375.3 |  |  | (9.4) |
Foreign |  | 8 |  |  | 42.5 |  |  | 41.3 |  |  | 1.2 |
Collateralized loan obligations(4) |  | 210 |  |  | 679.4 |  |  | 680.6 |  |  | (1.2) |
Asset-backed securities |  | 106 |  |  | 289.7 |  |  | 298.3 |  |  | (8.6) |
Total fixed maturity securities |  | 2,478 |  |  | $ | 5,987.4 |  |  | $ | 5,970.7 |  |  | $ | 16.7 |
Equity securities |  |  |  |  |  |  |  |
Non-redeemable preferred stocks |  | 28 |  |  | $ | 108.3 |  |  |  |  |
Common stocks |  | 17 |  |  | 0.5 |  |  |  |  |
Closed-end fund |  | 1 |  |  | 18.0 |  |  |  |  |
Total equity securities |  | 46 |  |  | $ | 126.8 |  |  |  |  |
Total |  | 2,524 |  |  | $ | 6,114.2 |  |  |  |  |

(1)The All other corporates category contains 18 additional industry sectors. Technology, telecommunications, industry manufacturing, broadcasting and media and leisure entertainment represented $319.8 million of fair value at March 31, 2022, with the remaining 13 sectors each representing less than $268.5 million.
(2)At March 31, 2022, 100% were investment grade, with an overall credit rating of AA+, and the positions were well diversified by property type, geography and sponsor.
(3)Holdings are geographically diversified, 47.7% are tax-exempt and 76.5% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- at March 31, 2022.
(4)Based on fair value, 93.6% of the collateralized loan obligation securities were rated investment grade based on ratings assigned by a nationally recognized statistical ratings organization (NRSO).

Horace Mann Educators Corporation | 39 | Quarterly Report on Form 10-Q

As of March 31, 2022, our diversified fixed maturity securities portfolio consisted of 3,818 investment positions, issued by 2,478 entities, and totaled approximately $6.0 billion in fair value. This portfolio was 85.4% investment grade, based on fair value, with an average 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. As of March 31, 2022, 85.1% of these combined portfolios were investment grade, based on fair value, with an overall average 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) |  | Percent of Portfolio Fair Value |  | March 31, 2022
|  | December 31, 2021 |  | March 31, 2022 |  | Fair Value |  | Amortized Cost, net
Fixed maturity securities |  |  |  |  |  |  |  |
AAA |  | 10.1 | % |  | 10.0 | % |  | $ | 595.8 |  |  | $ | 599.3 |
AA(2) |  | 36.7 |  |  | 37.2 |  |  | 2,230.0 |  |  | 2,221.4 |
A |  | 17.4 |  |  | 16.9 |  |  | 1,014.1 |  |  | 991.7 |
BBB |  | 21.3 |  |  | 21.3 |  |  | 1,272.7 |  |  | 1,274.9 |
BB |  | 3.1 |  |  | 3.0 |  |  | 180.2 |  |  | 183.0 |
B |  | 1.3 |  |  | 1.4 |  |  | 84.5 |  |  | 86.0 |
CCC or lower |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
Not rated(3) |  | 10.1 |  |  | 10.2 |  |  | 609.3 |  |  | 613.6 |
Total fixed maturity securities |  | 100.0 | % |  | 100.0 | % |  | $ | 5,987.4 |  |  | $ | 5,970.7 |
Equity securities |  |  |  |  |  |  |  |
AAA |  | — |  |  | — |  |  | $ | — |  |  |
AA |  | — |  |  | — |  |  | — |  |  |
A |  | 0.5 | % |  | 0.5 | % |  | 0.7 |  |  |
BBB |  | 67.3 |  |  | 70.4 |  |  | 89.3 |  |  |
BB |  | 12.7 |  |  | 13.6 |  |  | 17.2 |  |  |
B |  | — |  |  | — |  |  | — |  |  |
CCC or lower |  | — |  |  | — |  |  | — |  |  |
Not rated |  | 19.5 |  |  | 15.5 |  |  | 19.6 |  |  |
Total equity securities |  | 100.0 | % |  | 100.0 | % |  | $ | 126.8 |  |  |
Total |  |  |  |  |  | $ | 6,114.2 |  |  |

(1)Ratings are assigned by an NRSRO when available, If no rating is available from an NRSRO, then an internally developed rating is used. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.
(2)At March 31, 2022, the AA rated fair value amount included $356.2 million of U.S. Government and federally sponsored agency securities and $605.0 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 an NRSRO.
As of March 31, 2022, the fixed maturity securities portfolio had $154.1 million of pretax gross unrealized investment losses on $2,760.0 million of fair value related to 1,945 positions. Of the investment positions with gross unrealized losses, there were 36 trading below 80.0% of the carrying value as of March 31, 2022.
We view the pretax gross unrealized investment losses of all our fixed maturity securities as of March 31, 2022 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of impairment.

Horace Mann Educators Corporation | 40 | Quarterly Report on Form 10-Q

Liquidity and Capital Resources
Off-Balance Sheet Arrangements
As of March 31, 2022 and 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we engaged in such relationships.
Investments
Information regarding our investment portfolio, which is comprised primarily of investment grade fixed maturity securities, is presented in Part I - Item 1, Note 3 of the Consolidated Financial Statements as well as Part I - Item 2 - Investment Results 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, 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) |  | Three Months Ended March 31, |  | 2022-2021
|  | 2022 |  | 2021 |  | Change %
Net cash provided by operating activities |  | $ | 95.7 |  |  | $ | 142.0 |  |  | -32.6 | %
Net cash used in investing activities |  | (217.7) |  |  | (239.5) |  |  | 9.1 | %
Net cash provided by financing activities |  | 37.4 |  |  | 114.6 |  |  | -67.4 | %
Net (decrease) increase in cash |  | (84.6) |  |  | 17.1 |  |  | N.M.
Cash at beginning of period |  | 133.7 |  |  | 22.3 |  |  | N.M.
Cash at end of period |  | $ | 49.1 |  |  | $ | 39.4 |  |  | 24.6 | %

Operating Activities
As a holding company, we conduct our principal operations in the personal lines segment 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 the three months ended March 31, 2022, net cash provided by operating activities decreased $46.3 million, primarily due to higher claims paid on insurance policies.
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.
Investing activities includes our acquisition of Madison National for the three months ended March 31, 2022.

Horace Mann Educators Corporation | 41 | Quarterly Report on Form 10-Q

Financing Activities
Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, changes in the deposit asset on reinsurance, repurchases of our common stock, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
For the three months ended March 31, 2022, net cash provided by financing activities decreased $77.2 million compared to the prior year period, primarily due to a $70.0 million net decrease in cash inflows from advances received under Federal Home Loan Bank of Chicago (FHLB) funding agreements.
The following table shows activity from FHLB funding agreements for the periods indicated.

($ in millions) |  | Three Months Ended March 31, |  | 2022-2021 |  | 2022-2021
|  | 2022 |  | 2021 |  | Change $ |  | Change %
Balance at beginning of the period |  | $ | 782.5 |  |  | $ | 590.5 |  |  | $ | 192.0 |  |  | 32.5 | %
Advances received from FHLB funding agreements |  | 60.0 |  |  | 130.0 |  |  | (70.0) |  |  | -53.8 | %
Principal repayments on FHLB funding agreements |  | — |  |  | — |  |  | — |  |  | N.M.
Balance at end of the period |  | $ | 842.5 |  |  | $ | 720.5 |  |  | $ | 122.0 |  |  | 16.9 | %

Horace Mann Educators Corporation | 42 | Quarterly Report on Form 10-Q

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

|  | Property & Casualty |  | Life & Retirement |  | Supplemental & Group Benefits |  | Corporate & Other
Activities for potential sources of funds |  |  |  |  |  |  |  |
Receipt of insurance premiums, contractholder charges and fees |  | ☑ |  | ☑ |  | ☑ |  |
Recurring service fees, commissions and overrides |  | ☑ |  | ☑ |  | ☑ |  | ☑
Contractholder fund deposits |  |  |  | ☑ |  | ☑ |  |
Reinsurance and indemnification program recoveries |  | ☑ |  | ☑ |  | ☑ |  |
Receipts of principal, interest and dividends on investments |  | ☑ |  | ☑ |  | ☑ |  | ☑
Sales of investments |  | ☑ |  | ☑ |  | ☑ |  | ☑
Funds from FHLB 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 |  |  |  |  |  |  |  | ☑
Proceeds from senior revolving credit facility |  | ☑ |  | ☑ |  | ☑ |  | ☑
Receipt of intercompany settlements related to employee benefit plans |  |  |  |  |  |  |  | ☑
Activities for potential uses of funds |  |  |  |  |  |  |  |
Payment of claims and related expenses |  | ☑ |  | ☑ |  | ☑ |  |
Payment of contract benefits, surrenders and withdrawals |  |  |  | ☑ |  | ☑ |  |
Reinsurance cessions and indemnification program payments |  | ☑ |  | ☑ |  | ☑ |  |
Operating costs and expenses |  | ☑ |  | ☑ |  | ☑ |  | ☑
Purchase of investments |  | ☑ |  | ☑ |  | ☑ |  | ☑
Repayment of FHLB 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 |  |  |  |  |  |  |  | ☑
Repayment on senior revolving credit facility |  | ☑ |  | ☑ |  | ☑ |  | ☑
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, we have existing intercompany agreements in place that facilitate liquidity management across HMEC to enhance flexibility.
As of March 31, 2022, we held $997.2 million 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

Horace Mann Educators Corporation | 43 | Quarterly Report on Form 10-Q

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 that is needed to adequately fund and support business growth, primarily based on risk-based capital formulas, including those developed by the National Association of Insurance Commissioners. 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 fund growth initiatives, service and retire debt, pay dividends to our shareholders, 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, including a revolving line of credit, as well as issuances of various securities.
The insurance subsidiaries are subject to various regulatory restrictions that 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 without prior regulatory approval is $131.9 million, excluding the impact and timing of prior dividends, of which $82.0 million was paid during the three months ended March 31, 2022. 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 our Annual Report on Form 10-K for the year ended December 31, 2021.
Total capital was $2,039.5 million as of March 31, 2022, including $502.7 million of short-term and long-term debt. Total debt represented 24.6% of total capital including net unrealized investment gains on fixed maturity securities (24.9% excluding net unrealized investment gains on fixed maturity securities*) at March 31, 2022, which was below our long-term target of 25%.
Shareholders' equity was $1,536.8 million as of March 31, 2022, including net unrealized investment gains on fixed maturity securities of $20.0 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 $1,731.0 million and $41.83, respectively, as of March 31, 2022. Book value per share and adjusted book value per share* was $37.14 and $36.65, respectively, as of March 31, 2022.
Additional information regarding net unrealized investment gains on fixed maturity securities as of March 31, 2022 is included in Part I - Item 1, Note 3 of the Consolidated Financial Statements as well as in Part I - Item 2 - Investment Results in this report.
Total shareholder dividends paid was $13.2 million for the three months ended March 31, 2022. In March 2022, the Board of Directors (Board) approved regular quarterly dividends of $0.32 per share.
For the three months ended March 31, 2022, we repurchased 59,746 shares of our common stock at an average price per share of $37.14 under our share repurchase program, which is further described in Part II - Item 8, Note 13 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. As of March 31, 2022, $13.1 million remained authorized for future share repurchases under the share repurchase program.

Horace Mann Educators Corporation | 44 | Quarterly Report on Form 10-Q

The following table summarizes our debt obligations.

($ in millions) |  | Interest Rates |  | Final Maturity |  | March 31, 2022 |  | December 31, 2021
Short-term debt |  |  |  |  |  |  |  |
Bank Credit Facility |  | Variable |  | 2026 |  | $ | 249.0 |  |  | $ | 249.0 |
Long-term debt(1) |  |  |  |  |  |  |  |
4.50% Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.3 and $0.3 and unamortized debt issuance costs of $1.0 and $1.1 |  | 4.50% |  | 2025 |  | 248.7 |  |  | 248.6 |
FHLB borrowings |  | 0.00% |  | 2022 |  | 5.0 |  |  | 5.0 |
Total |  |  |  |  |  | $ | 502.7 |  |  | $ | 502.6 |

(1) We designate debt obligations as "long-term" based on maturity date at issuance.
As of March 31, 2022, we 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 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 the Part II - Item 8, Note 9 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. The Senior Notes are traded in the open market (HMN 4.50).
As of March 31, 2022, 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 under the senior revolving credit facility. 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 March 31, 2022.
To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form S-3 with the Securities and Exchange Commission (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 Quarterly Report on Form 10-Q.
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 will remain effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.

Horace Mann Educators Corporation | 45 | Quarterly Report on Form 10-Q

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 and our Madison National subsidiary is rated A- (Excellent). Assigned ratings and respective affirmation/review dates as of April 30, 2022 were as follows:

|  | Insurance Financial |  |  |  | Affirmed/
|  | Strength Ratings (Outlook) |  | Debt Ratings (Outlook) |  | 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. |  |  |  | 2/9/2022
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 is located in Part II - Item 8, Note 6 and Note 9 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 3. 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 Consolidated Results of Operations in Part I - Item 2 of this report regarding net investment gains (losses).

Horace Mann Educators Corporation | 46 | Quarterly Report on Form 10-Q

Significant changes in interest rates expose us to the risk of experiencing losses or earning a reduced level of income based on the difference between the interest rates earned on our investments and the credited interest rates on our insurance and investment contract liabilities. Also see Consolidated Results of Operations in Part I - Item 2 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 of 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 those contractholders, and not by us. Certain fees that we earn from variable annuity deposits are based on the market value of the funds deposited.
More detailed descriptions of our exposure to market value risks and the management of those risks is contained in Part II - Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 4. 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 in Rule 13a-15(e) of the Securities Exchange Act of 1934 as amended (Exchange Act), as of March 31, 2022. Based on this evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) that is required to be included in our periodic SEC filings. No material weaknesses in our disclosure controls and procedures were identified in the evaluation and therefore, no corrective actions were taken. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
Changes in Internal Control Over Financial Reporting
Except as noted below, there were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Effective January 1, 2022, we completed our acquisition of Madison National Life Insurance Company, Inc. (Madison National). We are in the process of integrating Madison National and our controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Therefore, we have elected to exclude Madison National from our assessment of internal control over financial reporting as of March 31, 2022.
Concurrent with the acquisition of Madison National, changes were made to the relevant business processes and the related control activities over purchase accounting in order to monitor and maintain appropriate controls over financial reporting.

Horace Mann Educators Corporation | 47 | Quarterly Report on Form 10-Q

PART II: OTHER INFORMATION
ITEM 1A. I Risk Factors
At the time of issuance of this Quarterly Report on Form 10-Q, we believe there are no material changes from the risk factors as previously disclosed in Part I - Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 2. I Unregistered Sales of Equity Securities and Use of Proceeds
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 our 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. During the three months ended March 31, 2022, 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
January 1 - 31 |  | 53,874 |  |  | $ | 37.13 |  |  | 53,874 |  |  | $ | 13.3 | million
February 1 - 28 |  | 5,872 |  |  | 37.21 |  |  | 5,872 |  |  | $ | 13.1 | million
March 1 - 31 |  | — |  |  | — |  |  | — |  |  | $ | 13.1 | million
Total |  | 59,746 |  |  | $ | 37.14 |  |  | 59,746 |  |  | $ | 13.1 | million

ITEM 5. I Other Information
Not applicable.
ITEM 6. I Exhibits
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.

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(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.
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.

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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* |  | HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective March 3, 2021), incorporated by reference to Exhibit 1 (beginning on page 59) to HMEC’s Proxy Statement, filed with the SEC on April 8, 2021.
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.
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.
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 Unit Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.17(a) to HMEC’s Current Report on Form 8-K dated May 27, 2010, filed with the SEC on June 2, 2010.
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.

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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.
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.
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.
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.
(15) KPMG LLP letter regarding unaudited interim financial information.
(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.

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(99) Additional exhibits:
99.1 |  | Glossary of Selected Terms.
(101) Interactive Data File:
101.INS |  | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH |  | XBRL Taxonomy Extension Schema
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase
101.LAB |  | XBRL Taxonomy Extension Label Linkbase
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  |  | HORACE MANN EDUCATORS CORPORATION
|  |  | (Registrant)
Date | May 9, 2022 |  | /s/ Marita Zuraitis
|  |  | Marita Zuraitis
|  |  | President and Chief Executive Officer
Date | May 9, 2022 |  | /s/ Bret A. Conklin
|  |  | Bret A. Conklin
|  |  | Executive Vice President and
|  |  | Chief Financial Officer
Date | May 9, 2022 |  | /s/ Kimberly A. Johnson
|  |  | Kimberly A. Johnson
|  |  | Senior Vice President, Controller and
|  |  | Principal Accounting Officer

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