HORACE MANN EDUCATORS CORP /DE/ (HMN)

ITEM 2. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

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 Quarterly Report on Form 10-Q.

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 Second Quarter 2026 Investor Supplement.

Increases or decreases in this MD&A that are not meaningful are marked "N.M.".

Statements made in this Quarterly Report on Form 10-Q that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to known and unknown risks, uncertainties and other factors. Horace Mann Educators Corporation (referred to in this Quarterly Report on Form 10-Q 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. Also, see Part I - Items 1 and 1A in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding risks and uncertainties.

Corporate Strategy

Our vision is to be the company of choice to provide insurance and financial solutions for all educators and others who serve their communities, whether they engage with Horace Mann directly or through their district/employer. We believe the unique value of Horace Mann is providing solutions tailored for educators at each stage of their lives, empowering them to achieve lifelong financial success. Our motivation stems from our gratitude for educators: They are looking after our children's futures, and we believe they deserve someone to look after theirs. Our commitment to having a positive impact on our customers' lives extends to all our corporate stakeholders, including employees, agents, investors and the communities where we live and work.

We conduct and manage our business in four reporting segments. The three reporting segments representing our major lines of business are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). We do not allocate the impact of corporate-level transactions to these reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in the fourth reporting segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. See Part I - Item 1, Note 7 of the Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information.

Consolidated Financial Highlights

(All comparisons vs. same periods in 2025, unless noted otherwise)

For the three and six months ended June 30, 2026, net income increased $12.2 million and $15.2 million, respectively, primarily due to improved Property & Casualty segment results reflecting the impact of improved underlying results and lower catastrophe losses.

Consolidated Results of Operations

(All comparisons vs. same periods in 2025, unless noted otherwise)

Net Premiums and Contract Charges Earned

For the three and six months ended June 30, 2026, net premiums and contract charges earned increased $14.3 million and $29.0 million as the Property & Casualty segment had higher sales* in the Property business lines and the Company experienced strong growth in our Supplemental and Group Benefits segment.

Net Investment Income

For the three and six months ended June 30, 2026, total net investment income increased $9.7 million and $4.5 million. The increase for the quarter is primarily due to continued strong returns from our fixed income portfolio. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

During the three and six months ended June 30, 2026, we continued to identify and purchase investments with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines. The Company continues to deploy capital in accordance with its strategic asset allocation framework, with the objective of maintaining diversification while balancing risk and return. Investments are allocated across public and private fixed income strategies, commercial mortgage loan funds, and limited partnership interests based on relative value considerations, portfolio capacity, and income objectives.

Net Investment Gains (Losses)

For the three and six months ended June 30, 2026, total net investment losses decreased by $5.8 million and $6.9 million, respectively. The breakdown of net investment gains (losses) by transaction type were as follows:

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer-specific events occurring subsequent to the reporting date that result in a change in our intent to sell a fixed maturity security.

Other Income

For the three and six months ended June 30, 2026, other income increased $2.0 million and $4.3 million, respectively.

Benefits, Claims and Settlement Expenses

For the three and six months ended June 30, 2026, benefits, claims and settlement expenses increased $2.8 million and decreased $4.0 million, primarily due to the Property & Casualty segment having lower catastrophe and underlying losses while the Supplemental and Group Benefits segment benefits increas

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

($ in millions, except per share data)

Measures within this MD&A that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within this Part II - Item 7. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Annual Report on Form 10-K and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Fourth Quarter 2025 Investor Supplement.

Increases or decreases in this MD&A that are not meaningful are marked "N.M.".

This MD&A covers the following:

Introduction

The purpose of our MD&A is to provide an understanding of our consolidated results of operations and financial condition and should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part II - Item 8 of this Annual Report on Form 10-K. Our MD&A generally discusses the results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of the results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II - Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission (SEC) on February 27, 2025.

HMEC is an insurance holding company focused on helping America’s educators and others who serve the community achieve lifelong financial success. Through our subsidiaries, we market and underwrite individual and group insurance and financial solutions tailored to the needs of the educational community including:

•personal lines of property and casualty insurance, primarily auto and property coverages

•retirement products, primarily tax-qualified fixed, variable and fixed indexed annuities

•life insurance, primarily traditional term, whole life, and indexed universal life insurance products

•individual supplemental insurance products, including accident, cancer, critical illness, hospital, and supplemental disability

•group benefits insurance products, primarily group disability, group life, and group supplemental health

We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families, whether they engage with Horace Mann directly or through their district/employer, as well as other markets of those who serve the community.

We conduct and manage our business in four reporting segments. The three reporting segments representing the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). We do not allocate the impact of corporate-level transactions to these reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in the fourth reporting segment, Corporate & Other. Corporate & Other includes capital raising activities (including debt financing and related interest expense), net investment gains (losses), certain public company expenses and other corporate-level transactions including expenses related to business acquisition activity and termination of defined benefit plans. In addition to these transactions, Corporate & Other also includes legacy commercial claims. See Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.

Consolidated Financial Highlights

For 2025, net income increased $59.3 million compared to the prior year primarily due to improved underlying auto and property loss ratios*.

Consolidated Results of Operations

(1) In the second quarter of 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error. See additional disclosure contained in Note 1 of the December 31, 2025 Form 10-K.

Net Premiums and Contract Charges Earned

For 2025, net premiums and contract charges earned increased $82.4 million due to sales* growth and implemented rate and inflation adjustments in the Property & Casualty segment and strong growth from higher sales* in Supplemental and Group Benefits.

Net Investment Income

Total net investment income in 2025 increased $18.6 million, primarily due to improved core fixed income, commercial mortgage loan fund results, and strong limited partnership returns. Excluding the reduction in net investment income due to an immaterial out-of period correction of an error of $10.2 million, net investment income increased $28.8 million. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:

(1) In the second quarter of 2025, the Company recorded a reduction in net investment income due to an immaterial out-of-period correction of an error. See additional disclosure contained in Note 1 of the December 31, 2025 Form 10-K.

During 2025, we continued to identify and purchase investments with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines. The company continues to deploy capital in accordance with its strategic asset allocation framework, with the objective of maintaining diversification while balancing risk and return. Investments are allocated across public and private fixed income strategies, commercial mortgage loan funds, and limited partnership interests based on relative value considerations, portfolio capacity, and income objectives.

Net Investment Losses

For 2025, net investment losses decreased $4.3 million. The breakdown of net investment gains (losses) by transaction type were as follows:

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at the reporting date. Generally, such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in our intent to hold a fixed maturity security.

Other Income

For 2025, other income increased $0.9 million.

Benefits, Claims and Settlement Expenses

For 2025, benefits, claims and settlement expenses decreased $33.5 million due to lower catastrophe losses and improved underlying loss ratios* in the Property & Casualty segment.

Interest Credited

For 2025, interest credited increased $1.0 million, driven primarily by higher credited rates on the retained annuity block. This was mostly offset by lower interest rates on advances received from the Federal Home Loan Bank of Chicago (FHLB) and lower interest credited related to our reinsured annuity block.

Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be reported. The average deferred annuity credited rate, excluding the reinsured annuity block, was 3.4% for 2025 and 3.2% for 2024.

Operating Expenses

For 2025, operating expenses increased $51.1 million reflecting investments being made in technology, marketing, and distribution to help drive efficiencies and growth. 2025 operating expenses also reflected costs related to the termination of the Horace Mann Pension Plan and elevated donations to the Horace Mann Educators Foundation.

Deferred Policy Acquisition Costs (DAC) Amortization Expense

For 2025, DAC amortization expense increased $13.4 million, primarily due to premium increases in the Property & Casualty segment driving higher DAC asset levels.

Interest Expense

For 2025, interest expense increased $1.8 million, due to an increase in the level of debt associated with the issuance of the 2025 Senior Notes that were used to repay the 2015 Sen

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]