The following measures are used by the Company’s management to evaluate performance against historical results and establish targets on a consolidated basis. A number of these measures are components of net income or the balance sheet but, in some cases, are not based on accounting principles generally accepted in the United States of America (non-GAAP) under applicable SEC rules because they are not displayed as separate line items in the Consolidated Statements of Operations or Consolidated Balance Sheets or are not required to be disclosed in the Notes to the Consolidated Financial Statements or, in some cases, there is inclusion or exclusion of certain items not ordinarily included or excluded in accordance with accounting principles generally accepted in the United States of America (GAAP).

In the opinion of the Company’s management, a discussion of these measures provides investors, financial analysts, rating agencies and other financial statement users with a better understanding of the significant factors that comprise the Company’s periodic results of operations and how management evaluates the Company's financial performance. Internally, the Company's management uses the measures to evaluate performance against historical results, to establish financial targets on a consolidated basis and for other reasons.

Some of these measures exclude net investment gains (losses), net of tax, and/or net unrealized investment gains on fixed maturity securities, net of tax, which can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends. Also, some of these measures exclude goodwill and intangible asset impairments, net of tax, deferred policy acquisition costs (DAC) unlocking, net of tax, and intangible asset amortization, net of tax.

Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by the Company’s management.

Adjusted book value per share - The result of dividing (1) total shareholders’ equity excluding after tax net unrealized investment gains (losses) on fixed maturity securities (including the related effect from DAC) by (2) ending shares outstanding. Book value per share is the most directly comparable GAAP measure. Management believes it is useful to consider the trend in book value per share excluding net unrealized investment gains (losses) on fixed maturity securities in conjunction with book value per share to identify and analyze the change in net worth. Management also believes the non-GAAP measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily financial market conditions, the magnitude and timing of which are generally not influenced by the Company’s underlying insurance operations.

Tangible book value per share - The result of dividing (1) total shareholders’ equity excluding after tax net unrealized investment gains (losses) on fixed maturity securities (including the related effect from DAC), goodwill and other intangible assets (including the related impact of deferred taxes) by (2) ending shares outstanding. Book value per share is the most directly comparable GAAP measure.

Debt to total capitalization ratio, excluding net unrealized investment gains (losses) on fixed maturity securities - The result of dividing (1) total debt by (2) total debt plus common shareholders' equity excluding after tax net unrealized investment gains (losses) on fixed maturity securities (including the related effect from DAC) from common shareholders' equity. The debt to total capitalization ratio is the most directly comparable GAAP measure.

Catastrophe costs - The sum of catastrophe losses, net of reinsurance and before income tax benefits that includes allocated loss adjustment expenses and reinsurance reinstatement premiums, excluding unallocated loss adjustment expenses.

Catastrophe losses - In categorizing property and casualty claims as being from a catastrophe, the Company utilizes the designations of the Property Claim Services, a subsidiary of Insurance Services Office, Inc., and additionally beginning in 2007, includes losses from all such events that meet the definition of covered loss in the Company’s primary catastrophe excess of loss reinsurance contract, and reports claims and claim expense amounts net of reinsurance recoverables. A catastrophe is a severe loss resulting from natural and man-made events within a particular territory, including risks such as hurricane, fire, earthquake, windstorm, explosion, terrorism and other similar events, that causes $25 million or more in insured property and casualty losses for the industry and affects a significant number of property and casualty insurers and policyholders. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or amount of loss in advance.

Their effects are not included in earnings or claim and claim expense reserves prior to occurrence. In the opinion of the Company’s management, a discussion of the impact of catastrophes is meaningful for investors to understand the variability in periodic earnings.

Core earnings (loss) - Consolidated net income (loss) excluding the after-tax impact of net investment gains (losses), discontinued operations, the after-tax impact of goodwill and intangible asset impairments, the effect of changes in tax laws and tax rates at enactment date, and the cumulative effect of changes in accounting principles when applicable. Net income is the most directly comparable GAAP measure.

•Pretax core earnings (loss) - Pretax net income (loss) excluding the pretax impact of net investment gains (losses), discontinued operations, the pretax impact of goodwill and intangible asset impairments and cumulative effect of changes in accounting principles when applicable. Income before income taxes is the most directly comparable GAAP measure.

•Segment core earnings - Determined in the same manner as core earnings (loss) on a consolidated basis. Management uses segment core earnings to analyze each segment's performance and as a tool in making business decisions. Financial statement users also consider core earnings when analyzing the results and trends of insurance companies.

Core earnings (loss) per share - Core earnings on a per common share basis. Earnings per share is the most directly comparable GAAP measure.

Adjusted core earnings (loss) – Determined in the same manner as core earnings (loss) but this measure is further adjusted to exclude DAC unlocking and intangible asset amortization to calculate adjusted core earnings (loss). Net income is the most directly comparable GAAP measure.

•Pretax adjusted core earnings (loss) – Determined in the same manner as pretax core earnings (loss) but this measure is further adjusted to exclude pretax DAC unlocking and pretax intangible asset amortization to calculate pretax adjusted core earnings (loss). Income before income taxes is the most directly comparable GAAP measure.

Net premiums written and contract deposits – Management utilizes this non-GAAP measure, which is based on statutory accounting principles, in analyzing and evaluating business growth. Premiums and contract charges earned is the most directly comparable GAAP measure.

Net premiums written and contract deposits for the Company’s operating segments are as follows:

Net premiums written: Reflects the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the contract and reflect gross premiums written less premiums ceded to reinsurers. The difference between premiums written and premiums earned is premiums unearned.

•Net premiums written and contract deposits: Reflects (1) the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the contract and reflect gross premiums written less premiums ceded to reinsurers, and (2) the amount charged for policies in force during a fiscal period for traditional life business. Contract deposits include amounts received from customers on deposit-type contracts.

Retirement Product Lines:

•Net annuity contract deposits: Reflects total recurring deposits and single deposits/rollovers – net of contract deposits ceded to reinsurers.

•Net premiums written and contract deposits: Reflects (1) the direct and assumed contractually determined amounts charged to policyholders/certificate holders for the effective period of the contract based on the terms and conditions of the contract and reflect gross premiums written less premiums ceded to reinsurers, and (2) the amount charged for policies in force during a fiscal period for traditional life business. Contract deposits include amounts received from customers on deposit-type contracts.

•Net premiums written: Reflects (1) the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the contract and reflect gross premiums written less premiums ceded to reinsurers, and (2) the amount charged for policies in force during a fiscal period for traditional life business.

Investment yield, excluding limited partnership interests - annualized, pretax and after tax - For the three month periods presented, investment yields are calculated by annualizing the result of year-to-date total net investment income, pretax adjusted to exclude (1) investment income on deposit asset on reinsurance, (2) investment income from limited partnership interests (excluding investment income on commercial mortgage loan funds) and (3) FHLB interest credited for the corresponding periods, divided by the average quarter-end and beginning of quarter carrying amount of the total investment portfolio as presented in the Consolidated Balance Sheets adjusted to exclude (1) FHLB funding agreements, (2) the carrying amount of limited partnership interests (excluding the carrying amount of commercial mortgage loan funds, and (3) gross unrealized investment gains (losses) on fixed maturity securities. For full year periods presented, investment yields are calculated by (i) summing the investment yields for each respective three-month period applicable to the year and (ii) dividing that sum per the calculation in (i) by four. Net investment income is the most directly comparable GAAP measure.

Net income return on equity - LTM: The ratio of (1) trailing 12 month net income to (2) the average of ending shareholders’ equity for the current quarter end and the preceding four quarter ends - referred to as the 5 quarter average of shareholder's equity.

•Net income return on equity - Annualized: The ratio of (1) annualized net income to (2) the 2 quarter average of shareholders' equity.

•Core return on equity - LTM: The ratio of (1) trailing 12 month core earnings to (2) the 5 quarter average of shareholders’ equity excluding net unrealized investment gains (losses) on fixed maturity securities and the effect of changes in tax laws and tax rates at enactment date. Net income return on equity - LTM is the most directly comparable GAAP measure.

•Core return on equity - Annualized: The ratio of (1) annualized core earnings to (2) the 2 quarter average of shareholders’ equity excluding net unrealized investment gains (losses) on fixed maturity securities and the effect of changes in tax laws and tax rates at enactment date. Net income return on equity - Annualized is the most directly comparable GAAP measure.

•Adjusted core return on equity - LTM: The ratio of (1) trailing 12 month adjusted core earnings to (2) the 5 quarter average of shareholders’ equity excluding net unrealized investment gains (losses) on fixed maturity securities and the effect of changes in tax laws and tax rates at enactment date. Net income return on equity - LTM is the most directly comparable GAAP measure.

•Adjusted core return on equity - Annualized: The ratio of (1) annualized adjusted core earnings to (2) the 2 quarter average of shareholders’ equity excluding net unrealized investment gains (losses) on fixed maturity securities and the effect of changes in tax laws and tax rates at enactment date. Net income return on equity - Annualized is the most directly comparable GAAP measure.

Net reserves - Property and casualty unpaid claim and claim expense reserves net of anticipated reinsurance recoverables.

Prior years’ reserve development - A measure which the Company reports for its Property & Casualty segment which identifies the increase or decrease in net incurred claim and claim expense reserves at successive valuation dates for claims which occurred in previous calendar years.

In the opinion of management, a discussion of prior years’ loss reserve development is useful to investors as it allows them to assess the impact on current period earnings of incurred claims experience from the current calendar year and previous calendar years.

Property & Casualty operating statistics - Operating measures utilized by the Company and the insurance industry regarding the relative profitability of property and casualty underwriting results.

•Loss ratio - The ratio of (1) the sum of net incurred losses and loss adjustment expenses to (2) net earned premiums.

•Underlying loss ratio - The sum of the loss ratio adjusted to remove the effect of catastrophe losses and prior years' reserve development. The loss ratio is the most directly comparable GAAP measure. Management believes this ratio provides a valuable measure of the Company's underlying underwriting performance that may be obscured by the effects of catastrophe losses and prior years' reserve development, the amounts of which may be significant and may vary significantly between periods.

•Expense ratio - The ratio of (1) the sum of operating expenses and the amortization of policy acquisition costs to (2) net earned premiums.

•Combined ratio - The sum of the loss ratio and the expense ratio. A combined ratio less than 100% generally indicates profitable underwriting prior to the consideration of net investment income.

•Underlying combined ratio or combined ratio excluding catastrophe costs and prior years’ reserve development - The sum of the loss ratio and the expense ratio adjusted to remove the effect of catastrophe losses and prior years’ reserve development. The combined ratio is the most directly comparable GAAP measure. Management believes this ratio provides a valuable measure of the Company’s underlying underwriting performance that may be obscured by the effects of catastrophe losses and prior years’ reserve development, the amounts of which may be significant and may vary significantly between periods.

Sales – Sales data pertains to Horace Mann products and excludes authorized products sold by exclusive agents that are underwritten by third-party vendors. Sales should not be viewed as a substitute for any GAAP measure, including "sales" as it relates to non-insurance companies, and the Company’s definition of sales, sales deposits or new annualized sales might differ from that used by other companies. The Company utilizes sales information as a performance measure that indicates the productivity of its agency force. Sales are also a leading indicator of future revenue trends.

Sales for the Company’s operating segments are as follows:

•Sales: Sales are measured as premiums to be collected over the 12 months following the sale of new automobile and property policies.

•Annualized sales: Annualized sales are based on the total yearly premium that the Company would expect to receive if all first year recurring premium policies would remain in-force, plus 10% of single and indexed universal life excess premiums. Annualized sales measure activity associated with gaining new insurance business in the current period, and includes deposits received related to universal-life-type products.

•Sales: Based on application received date on the submitted policy and measured as the submitted annual premium.

•Sales: Sales are measured based on the first year annualized premium on the effective date of sale.

Contact information:
Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | investorrelations@horacemann.com

•Net loss of $2.6 million, or $0.06 per share, for the full year and net loss of $18.5 million, $0.45 per share, for the fourth quarter impacted by realized investment losses

•Core earnings* of $45.7 million, or $1.09 per share, for the full year with core loss* of $4.7 million, or $0.11 per share, for the fourth quarter

◦Property & Casualty segment results consistent with pre-announcement, reflecting continued emergence of elevated loss costs across property & casualty industry

◦Inflationary trends combined with impact of financial market volatility on Life & Retirement segment earlier in 2022 to offset benefits of education market focus, sales momentum and business diversification

◦$59 million in full-year earnings from Supplemental & Group Benefits segment, which includes employer-sponsored benefit products for K-12 school districts added in 2022

•Household acquisition momentum strengthened again in fourth quarter with strong sales across segments, helping increase share of education market

•Expecting 2023 EPS in range of $2.00-$2.30 with full-year 2023 core return on equity targeted at approximately 6% as trajectory toward sustainable double-digit ROEs resumes

◦Guidance reflects 11% to 14% increase in managed portfolio net investment income to $330 million to $340 million

◦Anticipating 2024 ROE at 10% with core EPS approaching $4; average annual EPS growth targeted at 10% in 2025 and beyond

SPRINGFIELD, Ill., Feb. 7, 2023 — Horace Mann Educators Corporation (NYSE:HMN) today reported financial results for the three months and full-year ended December 31, 2022:

(1) Calculated using basic shares when in a net loss or core loss position.

* These measures are not based on accounting principles generally accepted in the United States of America (non-GAAP). They are reconciled to the most directly comparable GAAP measures in the Appendix to the Investor Supplement. An explanation of these measures is contained in the Glossary of Selected Terms included as an exhibit in the Company’s reports filed with the Securities and Exchange Commission.

“The temporary impact of industry-wide 2022 events on our financial performance, including inflationary pressure and market volatility, does not detract from our unwavering commitment to be a trusted partner to the educational community,” said President and CEO Marita Zuraitis. “Our optimism for Horace Mann’s long-term success is underscored by the progress we made in 2022 to further diversify our business base and cement our position as the leading provider of education market solutions for both school districts and individual educators.

“The strong sales momentum we saw in the fourth quarter built on our successful back-to-school season, supporting our ability to resume our trajectory toward a double-digit return on equity in 2023,” Zuraitis added. “In our new Worksite Division, 2022 sales rose almost two and a half times over last year, bolstered by the newly acquired employer-sponsored products added in the Madison National acquisition, which continues to exceed our expectations. Sales of worksite direct supplemental products are reflecting improved school access. In the fourth quarter, sales reached their highest quarterly level since before the pandemic.

“In our Retail Division, educators continued to respond favorably to the solutions offered by our Life & Retirement business with annualized Life sales up 7%. Retirement results also remain strong, even as financial market volatility has been a headwind,” said Zuraitis. “In our Property & Casualty business, our focus has been on the acceleration of our rate plan, along with implementation of non-rate underwriting actions, so we can remain on track to our longer-term profitability targets for this business. Auto sales are up again in the fourth quarter, largely in states where we are confident in the outlook for pricing, reflecting the strength of our relationships within the education market.

“In addition to the overall 5.4% in rate actions in 2022, we now expect auto rates to increase in the range of 18% to 20% over the next four quarters,” Zuraitis said. “We believe this plan - bolstered by non-rate actions - should result in an auto combined ratio between 97% and 98% in 2024. Further, we expect property rate increases in the range of 12% to 15% over the next four quarters. Combined with the impact of ‘inflation guard’ increases to raise coverage values, we expect average renewal premiums for property to increase by 17% to 20% in 2023. This puts us on track to our targeted property combined ratio between 92% and 93% for 2024.

“We remain confident that we will increase our share of the education market as we grow through all channels over the course of the next several years,” Zuraitis said. “As we return to our longer-term profitability targets in the Property & Casualty segment, we believe our 2023 core EPS will be in the range of $2.00 to $2.30. We are assuming a full-year limited partnerships portfolio contribution in line with our average historical returns and a full-year catastrophe loss contribution of about 10 points to the combined ratio. In 2024, we believe we will return to a double-digit return on equity as core EPS approaches $4, driven by our profitable growth.”

2023 core EPS guidance of $2.00 to $2.30 (or core earnings of $84 million to $96 million, after tax) includes full-year net investment income from the managed portfolio between $330 million and $340 million, reflecting stronger returns from our commercial mortgage loan portfolio as well as the benefits of the rising rate environment over the past 12 months. Limited partnership returns are estimated near their 10-year average of 8.5%. 2023 total net investment income is expected to be between $434 million and $444 million.

Guidance for each segment reflects the following:

•Property & Casualty segment core earnings of between $5 million to $10 million in 2023 from a loss of $44.4 million in 2022, reflecting the growing benefit of rate and non-rate underwriting actions. The longer-term combined ratio target for the segment remains 95-96%.

•Life & Retirement segment core earnings of $67 million to $70 million in 2023, compared to $52.6 million in 2022. The guidance takes into account the adoption of LDTI effective Jan. 1, 2023. In 2023, the spread on the fixed annuity business is expected to be in the range of 220 to 230 basis points, above the target threshold for this business.

•Supplemental & Group Benefits segment core earnings of $40 million to $44 million in 2023, compared to $58.5 million in 2022. The segment benefit ratio is expected to be near the longer-term target of 43% compared with 36.7% in 2022 as utilization returns to pre-pandemic levels. In addition, the pretax profit margin will reflect the investment being made in this segment’s infrastructure as well as a higher allocation of corporate expenses to reflect the segment’s utilization of shared staff, distribution and other resources.

Beginning with first quarter 2022, Horace Mann is reporting financial results in three reporting segments: (1) Property & Casualty, (2) Life & Retirement, and (3) Supplemental & Group Benefits. The retail business, consisting of the Property & Casualty and Life & Retirement segments, provides insurance and financial services to individual educators through agency and direct channels. The Supplemental & Group Benefits segment provides worksite direct and employer-sponsored benefits through school district employers. These worksite offerings help school districts attract and retain staff. This segment includes the results of Madison National Life Insurance Company, Inc. (Madison National) that was acquired effective January 1, 2022.

Property & Casualty segment results reflected impact of inflation
(All comparisons vs. same period in 2021, unless noted otherwise)

The Property & Casualty insurance segment primarily markets private passenger auto insurance and residential home insurance. Horace Mann offers standard auto coverages, including liability, collision and comprehensive. Property coverage includes both homeowners and renters policies. For both auto and property coverage, Horace Mann offers educators a discounted rate and the Educator Advantage® package of features. The Property & Casualty segment represented 47% of total revenues for the year ended 2022.

The Property & Casualty segment core loss for the fourth quarter and full-year were in line with the company’s preliminary announcement. As expected, Property & Casualty net premiums written were up slightly for the year with average written premiums rising for both property and auto over the course of the year. In addition, segment net investment income for the year and quarter was well below the prior year when outsized returns in the limited partnership fund portfolio benefited this segment.

The combined ratio rose for both periods, largely due to recognition of continued elevated industry-wide loss costs driven by inflation. The company continues to implement rate and other underwriting actions that address these trends. Catastrophe losses for the year were in line with the prior year, while catastrophe losses for the quarter were $12.4 million, pretax. Winter Storm Elliott, which spanned more than 30 states between December 21-25, represented $8 million of the total.

The year-over-year increase in average written premiums for property policies continued to improve throughout 2022, reaching 10.1% in the fourth quarter, as rate increases of 4.9% and inflation adjustments to coverage values took effect. The full-year property underlying loss ratio was 50.1%, reflecting non-catastrophe water and fire losses above the prior year. The full-year property loss ratio included $6.0 million in favorable prior-accident year reserve development.

The year-over-year increase in average written premiums for auto policies also improved throughout 2022, reaching 4.8% in the fourth quarter, reflecting rate actions averaging 5.4% in 2022. The full-year auto underlying loss ratio was 82.8%, reflecting higher severity due to the ongoing impact of inflation and other loss cost factors. In addition, auto frequency moved closer to pre-pandemic levels. The full-year auto loss ratio included $28.0 million in unfavorable prior-accident year reserve development, recognizing the impact on severity of overall inflation, including higher medical costs, increased usage of medical services and the current judicial environment.

Life & Retirement segment core earnings of $53 million in 2022
(All comparisons vs. same period in 2021, unless noted otherwise)

The Life & Retirement segment markets 403(b) tax-qualified fixed, fixed indexed and variable annuities; the Horace Mann Retirement Advantage® open architecture platform for 403(b)(7) and other defined contribution plans; and other retirement products to educators as well as traditional term and whole life insurance products. Horace Mann is one of the largest participants in the K-12 educator portion of the 403(b) tax-qualified annuity market, measured by 403(b) net premiums written on a statutory accounting basis. The Life & Retirement segment represented 36% of total revenues for the year ended 2022.

(1)     Amount reported as of December 31, 2022 excludes $637.7 million of assets under management held under modified coinsurance reinsurance.

(2)    Includes Annuity AUM, Brokerage and Advisory AUA, and Recordkeeping AUA.

Life & Retirement segment core earnings, which excludes an after-tax impairment charge of $3.8 million for goodwill and intangible assets, were $52.6 million for the year. Adjusted core earnings, which further excludes DAC unlocking and intangible asset amortization, were $57.5 million for the year. For the segment, net investment income reflected full-year limited partnership returns slightly below their 10-year average compared to the unusually high returns seen in 2021 while commercial mortgage loan portfolio returns declined due to rising interest rates. Operating expenses were in line with 2021.

The net interest spread on our fixed annuity business was 246 basis points in 2022 compared to 290 basis points in 2021. Charges and fees declined for the year due to market volatility. For the life products, mortality experience improved from 2021.

For the Retirement business, net annuity contract deposits were $429.3 million for the year and $105.0 million for the fourth-quarter. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, including the company’s attractive annuity products, which provide encouraging cross-sell opportunities. Total cash value persistency remained strong at 93.7%.

Horace Mann currently has $4.9 billion in annuity assets under management, including $2.2 billion of fixed annuities, $2.2 billion of variable annuities and $0.5 billion of fixed indexed annuities. Assets under administration, which includes Horace Mann Retirement Advantage® and other advisory and recordkeeping assets, were down from a year ago as equity market performance affects assets under management. Life insurance in force rose to $20.0 billion at year-end 2022.

Supplemental & Group Benefits segment core earnings of $59 million in 2022
(All comparisons vs. same period in 2021, unless noted otherwise)

The Supplemental & Group Benefits segment markets employer-sponsored group worksite solutions for districts and other public employers, as well as worksite direct products typically distributed through the worksite channel. The worksite business provides group term life, disability and specialty health insurance along with worksite supplemental products including cancer, heart, hospital, supplemental disability and accident coverages. The Supplemental & Group Benefits segment represented 21% of total revenues for the year ended 2022.

($ in millions)						Three Months Ended December 31,																		Twelve Months Ended December 31,
						2022						2021						Change						2022						2021						Change
Supplemental & Group Benefits net income /      core earnings*						14.9						11.2						33.0		%				$	58.5					$	46.0					27.2		%
Supplemental & Group Benefits adjusted      core earnings*						18.0						13.5						33.3		%				70.9						55.3						28.2		%
Pretax profit margin(1)						27.3		%				36.6		%				-9.3		pts				25.3		%				37.6		%				-12.3		pts
Net premiums earned						$	68.2					$	31.6					115.8		%				$	275.5					$	128.0					115.2		%
Worksite direct products sales*						3.4						2.3						47.8		%				9.2						6.5						41.5		%
Employer-sponsored products sales*						1.1						—						N.M.						6.9						—						N.M.
Worksite direct products benefits ratio						25.3		%				31.7		%				-6.4		pts				30.1		%				31.9		%				-1.8		pts
Employer-sponsored products benefits ratio						33.2		%				—						N.M.						41.9		%				—						N.M.

(1)    Measured to total revenues.

Supplemental & Group Benefits segment core earnings were up 27.2% while adjusted core earnings were up 28.2% for the year, reflecting the strong pretax profit margin due to the addition of the newly acquired employer-sponsored products. Benefit ratios for the worksite direct and employer-sponsored products lines for the year were below longer-term targets largely due to continued strong performance across the product lines as well as the release of reserves related to lapsed policies. Fourth-quarter benefit ratios continued to reflect expected quarterly fluctuations due to seasonality and other factors.

The non-cash impact of amortization of intangible assets under purchase accounting reduced full-year core earnings by $15.7 million pretax vs. $11.7 million in 2021 due to the Madison National transaction. Segment net investment income rose 32.1% for the year, largely due to the addition of the Madison National portfolio in 2022.

Total sales for the segment were $16.1 million for the year, with fourth-quarter sales of $4.5 million. Fourth-quarter sales of worksite direct supplemental products were up 47.8%, with full-year sales up 41.5% to $9.2 million, with persistency remaining very strong at 90.4%. Full-year sales of employer-sponsored products were $6.9 million.

Horace Mann’s 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 on the investment portfolio managed by Horace Mann, as well as accreted investment income on the deposit asset on reinsurance related to the company’s reinsurance of policy liabilities related to legacy individual annuities written in 2002 or earlier. The Corporate segment reduced total revenues by $56.1 million for the year ended 2022 largely due to realized investment losses.

Full-year net investment income of $401 million
(All comparisons vs. same period in 2021, unless noted otherwise)

Full-year total net investment income and net investment income on the managed portfolio was below last year. For full-year 2022, limited partnership returns were 7.9%. In 2021, limited partnership returns were 20.3%, well above the 10-year average. Investment yield on the portfolio excluding limited partnership interests remained near 4.25%, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.

The fixed maturity securities portfolio was in a net unrealized investment loss position of $571.9 million pretax at December 31, 2022, primarily due to the rising interest rate environment. Realized investment losses were largely due to portfolio repositioning activities to improve book yield as well as declines in the fair value of equity securities.

At December 31, 2022, shareholders’ equity was $1.09 billion, or $26.60 per share, as higher interest rates resulted in net unrealized investment losses on fixed maturity securities. Excluding the unrealized losses, shareholders’ equity was $1.45 billion, or $35.33 per share*. Share repurchases in 2022 totaled 670,816 shares, with $24.0 million returned to shareholders. As of December 31, 2022, $41.3 million remained authorized for future repurchases under the share repurchase program authorized in 2022. Between Jan. 1 and Feb. 3, 2023, the company repurchased 68,550 shares for a total of $2.3 million.

At December 31, 2022, total debt was $498.0 million, with $249.0 million outstanding on the company’s line of credit. Interest expense was $19.4 million in 2022 compared to $13.9 million in 2021 due to higher interest expense on the line of credit. The ratio of debt-to-capital excluding net unrealized investment gains/losses* was 25.6% at December 31, 2022, which aligns with levels appropriate for the company’s current financial strength ratings.

Horace Mann’s senior management will discuss the company’s fourth-quarter financial results with investors on Feb. 8, 2023 at 12 p.m. Eastern Time. The conference call will be webcast live at investors.horacemann.com and archived later in the day for replay.

Horace Mann Educators Corporation (NYSE: HMN) is the largest financial services company focused on helping America’s educators and others who serve the community achieve lifelong financial success. The company offers individual and group insurance and financial solutions tailored to the needs of the educational community. Founded by Educators for Educators® in 1945, Horace Mann is headquartered in Springfield, Illinois. For more information, visit horacemann.com.

Certain statements included in this news release, including those regarding our earnings outlook, expected catastrophe losses, our investment strategies, our plans to implement additional rate actions, our plans relating to share repurchases and dividends, our efforts to enhance customer experience and expand our products and solutions to more educators, our strategies to create sustainable long-term growth and double-digit ROEs, our strategy to achieve a larger share of the education market, and other business strategies, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Horace Mann and its subsidiaries. Horace Mann cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond Horace Mann’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements included in this document. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” and “Forward-Looking Information” sections included in Horace Mann’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC). The forward-looking statements herein are subject to the risk, among others, that we will be unable to execute our strategy because of market or competitive conditions or other factors. Horace Mann does not undertake to update any particular forward-looking statement included in this document if we later become aware that such statement is not likely to be achieved.

Information contained in this news release include measures which are based on methodologies other than accounting principles generally accepted in the United States of America (GAAP). Reconciliations of non-GAAP measures to the closest GAAP measures are contained in the Appendix to the Investor Supplement and additional descriptions of the non-GAAP measures are contained in the Glossary of Selected Terms included as an exhibit to Horace Mann’s SEC filings.

# # #

(1)    Calculated using basic shares when in a net loss or core loss position.

(2)    Based on last twelve months net income and average quarter-end shareholders’ equity.

(3)    Based on last twelve months core earnings and average quarter-end shareholders’ equity which has been adjusted to exclude the fair value adjustment for investments, net of the related impact on deferred policy acquisition costs and applicable deferred taxes.

(4)    Based on last twelve months adjusted core earnings and average quarter-end shareholders’ equity which has been adjusted to exclude the fair value adjustment for investments, net of the related impact on deferred policy acquisition costs and applicable deferred taxes.

(5)    Ending shares outstanding were 40,904,312 at December 31, 2022 and 41,393,484 at December 31, 2021.

(6)    Net of the related impact on deferred policy acquisition costs and applicable deferred taxes.

(1)    Corporate & Other includes interest expense on debt and the impact of net investment gains and losses and other Corporate level items. The Company does not allocate the impact of corporate level transactions to the insurance segments consistent with how management evaluates the results of those segments. See detail for this segment on page 12.

(1)    (Favorable) unfavorable.

(2)    Includes assumed risks in force of 4.

(3)    Retention is based on retained households. History has been restated to reflect this change.

(1)    Ordinary life insurance.

(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.

(1)    The Corporate & Other segment includes interest expense on debt and the impact of investment gains and losses and other corporate level items. The Company does not allocate the impact of corporate level transactions to the insurance segments consistent with how management evaluates the results of those segments.