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What changed in HORACE MANN EDUCATORS CORP /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HORACE MANN EDUCATORS CORP /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+504 added−560 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in HORACE MANN EDUCATORS CORP /DE/'s 2023 10-K

504 paragraphs added · 560 removed · 350 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

111 edited+52 added−21 removed75 unchanged
Biggest changeTreasury securities 5.2 342.6 296.5 34.2 11.9 411.1 Investment grade corporate and public utility bonds 19.2 1,262.6 897.0 226.4 139.2 1,443.1 Non-investment grade corporate and public utility bonds (2) 1.8 118.4 92.7 9.5 16.2 131.7 Investment grade municipal bonds 18.2 1,199.4 831.9 120.7 246.8 1,303.3 Non-investment grade municipal bonds (2) 0.5 32.9 20.8 2.9 9.2 35.8 Investment grade other asset-backed securities (3) 15.2 1,000.3 781.3 123.2 95.8 1,058.7 Non-investment grade other asset-backed securities (2)(3) 0.3 20.4 20.1 0.3 — 20.7 Foreign government bonds 0.5 33.6 32.6 1.0 — 35.1 Redeemable preferred stock 0.3 23.4 22.0 1.4 — 27.9 Equity securities: Non-redeemable preferred stocks, investment grade 1.0 68.5 63.0 5.5 — 68.5 Non-redeemable preferred stocks, non-investment grade 0.2 13.4 11.7 0.7 1.0 13.4 Common stocks — 0.8 0.8 — — 0.8 Closed-end fund 0.3 16.7 — — 16.7 16.7 Short-term investments (4) 1.7 109.4 70.4 20.0 19.0 109.4 Total publicly traded securities 73.1 4,812.9 3,577.8 646.9 588.2 5,314.4 Other Invested Assets: Investment grade private placements 7.7 505.3 465.4 39.9 — 575.6 Non-investment grade private placements (2) 1.1 75.8 63.0 12.8 — 75.9 Mortgage loans (5) 0.5 32.0 28.1 3.9 — 32.0 Policy loans (5) 2.1 139.3 138.4 0.9 — 139.3 Limited partnership interests (8) 14.9 983.7 697.2 96.4 190.1 983.7 Other 0.6 38.6 33.8 3.8 1.0 38.6 Total other invested assets 26.9 1,774.7 1,425.9 157.7 191.1 1,845.1 Total investments (6) 100.0 % $ 6,587.6 $ 5,003.7 $ 804.6 $ 779.3 $ 7,159.5 (1) All investment grade that includes $309.0 million fair value of investments guaranteed by the full faith and credit of the U.S.
Biggest changeTreasury securities 5.7 388.7 320.3 35.8 32.6 452.0 Investment grade corporate and public utility bonds 17.1 1,168.6 828.8 178.7 161.1 1,298.3 Non-investment grade corporate and public utility bonds (2) 1.3 91.7 68.0 6.7 17.0 95.2 Investment grade municipal bonds 17.6 1,202.7 847.4 115.1 240.2 1,267.0 Non-investment grade municipal bonds (2) 0.4 29.8 18.3 2.7 8.8 31.1 Investment grade other asset-backed securities (3) 15.8 1,080.1 853.9 136.1 90.1 1,112.1 Non-investment grade other asset-backed securities (2)(3) 0.3 18.3 18.1 0.2 — 16.8 Foreign government bonds 0.3 22.0 22.0 — — 23.1 Redeemable preferred stock 0.1 15.4 14.6 0.8 — 16.3 Equity securities: Non-redeemable preferred stocks, investment grade 0.8 54.5 49.4 5.1 — 54.5 Non-redeemable preferred stocks, non-investment grade 0.2 13.9 12.1 0.8 1.0 13.9 Common stocks — 1.1 1.1 — — 1.1 Closed-end fund 0.2 16.5 — — 16.5 16.5 Short-term investments (4) 1.9 132.9 36.4 45.3 51.2 132.9 Total publicly traded securities 71.6 4,889.4 3,547.7 632.1 709.6 5,244.2 Other Invested Assets: Investment grade private placements 7.4 503.9 461.0 42.9 — 556.4 Non-investment grade private placements (2) 0.8 61.2 51.0 10.2 — 71.4 Mortgage loans (5) 0.6 43.2 39.3 3.9 — 43.2 Policy loans (5) 2.1 141.4 140.5 0.9 — 141.4 Limited partnership interests (8) 16.7 1,138.8 816.1 122.1 200.6 1,138.8 Other 0.8 52.6 47.3 4.3 1.0 42.7 Total other invested assets 28.4 1,941.1 1,555.2 184.3 201.6 1,993.9 Total investments (6) 100.0 % $ 6,830.5 $ 5,102.9 $ 816.4 $ 911.2 $ 7,238.1 (1) All investment grade that include s $341.3 million fair value of investments guaranteed by the full faith and credit of the U.S.
Competition Competition in this market for personal protection products is from a number of national providers of personal lines insurance, including State Farm, Allstate, Farmers, Liberty Mutual and Nationwide, as well as a number of regional companies. We also compete for auto business with other companies such as GEICO, Progressive and USAA, many of which feature direct marketing distribution.
Competition Competition in this market for personal protection products is from a number of national providers of personal lines insurance, including Allstate, Farmers, Liberty Mutual, Nationwide and State Farm, as well as a number of regional companies. We also compete for auto business with other companies such as GEICO, Progressive and USAA, many of which feature direct marketing distribution.
The ability of our insurance subsidiaries to pay cash dividends to us is subject to state insurance department regulations which generally permit dividends to be paid for any 12 month period in amounts equal to the greater of (i) net income for the preceding calendar year or (ii) 10% of surplus, determined in conformity with statutory accounting principles, as of the preceding December 31 st .
The ability of our insurance subsidiaries to pay cash dividends to us is subject to state insurance department regulations which generally permit dividends to be paid for any 12 month period in amounts equal to the greater of (i) net income for the preceding calendar year or (ii) 10% of surplus, determined in conformity with statutory accounting principles, as of the preceding December 31.
Over the past several years, legislation, regulatory measures, and voter initiatives have been introduced, and in some cases adopted, which deal with use of non-public consumer information, cybersecurity, use of credit information in underwriting and rating, insurance rate development, rate of return limitations, and the ability of insurers to cancel or non-renew insurance policies.
Over the past several years, legislation, regulatory measures, and voter initiatives have been introduced, and in some cases adopted, which deal with use of non-public consumer information, use of credit information in underwriting and rating, insurance rate development, rate of return limitations, and the ability of insurers to cancel or non-renew insurance policies.
This division includes the Supplemental & Group Benefits reporting segment, which includes the results of NTA and Madison National. We do not allocate the impact of corporate-level transactions to the three reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in a separate reporting segment, Corporate & Other.
This division represents the Supplemental & Group Benefits reporting segment, which includes the results of NTA and Madison National. We do not allocate the impact of corporate-level transactions to the three reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in a separate reporting segment, Corporate & Other.
The ERM Committee objectives include the following: • Apply appropriate consideration to risk in strategic and operational decision-making • Define and communicate risk appetite and risk management policies • Approve and oversee processes aimed at identifying, evaluating, and managing risk • Monitor and discuss emerging risks and risk management capabilities 20 Annual Report on Form 10-K Horace Mann Educators Corporation The ERM Committee is composed of senior executives from across Horace Mann and has ultimate oversight over the risk management process, with each leader having ownership and accountability over certain identified key risks.
The ERM Committee objectives include the following: 22 Annual Report on Form 10-K Horace Mann Educators Corporation • Apply appropriate consideration to risk in strategic and operational decision-making • Define and communicate risk appetite and risk management policies • Approve and oversee processes aimed at identifying, evaluating, and managing risk • Monitor and discuss emerging risks and risk management capabilities The ERM Committee is composed of senior executives from across Horace Mann and has ultimate oversight over the risk management process, with each leader having ownership and accountability over certain identified key risks.
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 2022 Investor Supplement.
An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Annual Report on Form 10-K and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Fourth Quarter 2023 Investor Supplement.
For additional information regarding the process used to estimate Property & Casualty reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending Property & Casualty insurance claims and claim expense reserves and prior years' reserve development recorded in each of the three years ended December 31, 2022, see Part I - Item 1A - Risk Factors - "Our property and casualty loss reserves may not be adequate", Part II - Item 7, Application of Critical Accounting Estimates and Results of Operations for the Property & Casualty Segment, and Part II - Item 8, Note 8 in the Consolidated Financial Statements of this Annual Report on Form 10-K.
For additional information regarding the process used to estimate Property & Casualty reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending Property & Casualty insurance claims and claim expense reserves and prior years' reserve development recorded in each of the three years ended December 31, 2023, see Part I - Item 1A - Risk Factors - "Our property and casualty loss reserves may not be adequate", Part II - Item 7, Application of Critical Accounting Estimates and Results of Operations for the Property & Casualty Segment, and Part II - Item 8, Note 5 in the Consolidated Financial Statements of this Annual Report on Form 10-K.
By using reinsurance, we are able to write policies in amounts larger than we could otherwise accept. The amount reinsured is the portion of each policy in excess of the retention limit on a particular policy. The following reinsurers represent approximately 98.0% of total ceded premium for the year ended December 31, 2022: A.M.
By using reinsurance, we are able to write policies in amounts larger than we could otherwise accept. The amount reinsured is the portion of each policy in excess of the retention limit on a particular policy. The following reinsurers represent approximately 98.0% of total ceded premium for the year ended December 31, 2023: A.M.
We also have in place a conservative reinsurance program as an additional layer of protection against large property and casualty catastrophe losses. Our 2023 coverage for $30 million to $175 million of losses shares the risk with other insurance companies. We also are working to mitigate the impact of climate risks on our results.
We also have in place a conservative reinsurance program as an additional layer of protection against large property and casualty catastrophe losses. Our 2024 coverage for $30 million to $175 million of losses shares the risk with other insurance companies. We also are working to mitigate the impact of climate risks on our results.
For liability coverages in 2022, we reinsured each loss above a retention of $5.0 million per occurrence up to $20.0 million in a clash event. A clash cover is a reinsurance casualty excess contract requiring two or more casualty coverages or risks issued by us to be involved in the same loss occurrence for coverage to apply.
For liability coverages in 2023, we reinsured each loss above a retention of $5.0 million per occurrence up to $20.0 million in a clash event. A clash cover is a reinsurance casualty excess contract requiring two or more casualty coverages or risks issued by us to be involved in the same loss occurrence for coverage to apply.
Our Chief Risk Officer (CRO) in conjunction with the ERM Committee, is responsible for working with the business leaders to ensure that they are actively monitoring and managing their key risks. The CRO is also responsible for developing and monitoring key corporate level risks that encompass more than one business/division. There is ongoing and regular communication within the ERM Committee.
Our Chief Risk Officer (CRO), in conjunction with the ERM Committee, is responsible for working with the business leaders to ensure that they are actively monitoring and managing their key risks. The CRO is also responsible for identifying and monitoring key corporate level risks that encompass more than one business/division. There is ongoing and regular communication within the ERM Committee.
Worksite Division strategy We provide protection products through the workplace as employee benefits or directly. The product set includes life insurance, group long- and short-term disability, supplemental cancer, supplemental heart, supplemental disability, supplemental accident and supplemental hospital indemnity. Group products may be paid for by the school district employer, or provided as optional benefits for employee purchase.
Worksite Division strategy We provide protection products through the workplace as employee benefits or directly. The product set includes life insurance, group long- and short-term disability, supplemental cancer, supplemental heart, supplemental disability, supplemental accident and supplemental hospital indemnity. Group products may be paid for by the employer, or provided as optional benefits for employee purchase.
Our Property & Casualty subsidiaries are licensed to write business in 48 states and the District of Columbia. Horace Mann Educators Corporation Annual Report on Form 10-K 5 Catastrophe Losses (Pretax) (1) The number of catastrophe events and the level of catastrophe losses can fluctuate significantly from year to year.
Our Property & Casualty subsidiaries are licensed to write business in 48 states and the District of Columbia. Horace Mann Educators Corporation Annual Report on Form 10-K 7 Catastrophe Losses (Pretax) (1) The number of catastrophe events and the level of catastrophe losses can fluctuate significantly from year to year.
Horace Mann Educators Corporation Annual Report on Form 10-K 17 Regulation General Regulation at State Level As an insurance holding company, we are subject to extensive regulation by the states in which our insurance subsidiaries are domiciled or transact business.
Horace Mann Educators Corporation Annual Report on Form 10-K 19 Regulation General Regulation at State Level As an insurance holding company, we are subject to extensive regulation by the states in which our insurance subsidiaries are domiciled or transact business.
The calculations of segment data are described in more detail in Part II - Item 8, Note 19 of the Consolidated Financial Statements in this Annual Report on Form 10-K. Additionally, the business operations of each segment are explained in this section.
The calculations of segment data are described in more detail in Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K. Additionally, the business operations of each segment are explained in this section.
The clash event coverage is unchanged for 2023. We market personal lines excess liability risks. The limits of these risks are $1.0 million to $5.0 million in excess of $0.5 million of underlying auto and homeowners liability coverage.
The clash event coverage is unchanged for 2024. We market personal lines excess liability risks. The limits of these risks are $1.0 million to $5.0 million in excess of $0.5 million of underlying auto and homeowners liability coverage.
The separate account assets and liabilities of approximately $0.6 billion are reinsured on a modified coinsurance basis and thus, remain on our consolidated financial statements, but the related results of operations are fully reinsured.
The separate account assets and liabilities of approximately $0.7 billion are reinsured on a modified coinsurance basis and thus, remain on our consolidated financial statements, but the related results of operations are fully reinsured.
By utilizing tools that provide assistance in determining needs and making asset allocation decisions, contractholders are able to choose the investment mix that matches their personal risk tolerance and retirement goals. As of December 31, 2022, we had 119 variable sub-account options including funds managed by some of the larger participants in the mutual fund industry.
By utilizing tools that provide assistance in determining needs and making asset allocation decisions, contractholders are able to choose the investment mix that matches their personal risk tolerance and retirement goals. As of December 31, 2023, we had 118 variable sub-account options including funds managed by some of the larger participants in the mutual fund industry.
(BCG) and we migrated the administration of our Horace Mann Retirement Advantage ® platform from a third-party vendor to the BCG platform. We offer our group unallocated fixed annuity and Horace Mann Stable Value Solution, as an option within a number of the 401(k) plans BCG administers.
(BCG) and we migrated the administration of our Horace Mann Retirement Advantage ® platform from a third-party vendor to the BCG platform. We offer our group unallocated fixed annuity and Horace Mann Stable Value Solution, as an option within a number of the 401(k) plans administered by BCG.
As we discuss in Part I - Item 1A—Risk Factors—“Climate change may adversely affect our financial position, results of operations and cash flows" of this Annual Report on Form 10-K, several factors make increased losses more likely: • More people living in high-risk areas combined with population growth in areas with weaker enforcement of building codes, urban expansion and an increase in the average size of a house.
Horace Mann Educators Corporation Annual Report on Form 10-K 21 As we discuss in Part I - Item 1A—Risk Factors—“Climate change may adversely affect our financial position, results of operations and cash flows" of this Annual Report on Form 10-K, several factors make increased losses more likely: • More people living in high-risk areas combined with population growth in areas with weaker enforcement of building codes, urban expansion and an increase in the average size of a house.
On June 21, 2022, our Chief Executive Officer (CEO) submitted the Annual Section 12(a) CEO Certification to the NYSE without any qualifications. We filed with the SEC, as exhibits to the Annual Report on Form 10-K for the year ended December 31, 2021, the CEO and Chief Financial Officer (CFO) certifications required under Section 302 of the Sarbanes-Oxley Act.
On June 15, 2023, our Chief Executive Officer (CEO) submitted the Annual Section 12(a) CEO Certification to the NYSE without any qualifications. We filed with the SEC, as exhibits to the Annual Report on Form 10-K for the year ended December 31, 2022, the CEO and Chief Financial Officer (CFO) certifications required under Section 302 of the Sarbanes-Oxley Act.
A number of technology start-ups have also entered the market. In our target market, we believe that our principal competitive advantages in the sale of property and casualty products are overall service, school partnerships, price, and name recognition. $612.6 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles.
A number of technology start-ups have also entered the market. In our target market, we believe that our principal competitive advantages in the sale of property and casualty products are overall service, school partnerships, price, and name recognition. $650.4 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles.
We believe that our principal competitive advantages in the sale of retirement products and life insurance are school-based sales and service, product features, perceived stability of the insurer, price, overall service and name recognition. $599.2 million in direct premiums and contract deposits, defined as premiums collected before reinsurance as determined under statutory accounting principles.
We believe that our principal competitive advantages in the sale of retirement products and life insurance are school-based sales and service, product features, perceived stability of the insurer, price, overall service and name recognition. $610.7 million in direct premiums and contract deposits, defined as premiums collected before reinsurance as determined under statutory accounting principles.
Sound underwriting strategies and disciplined underwriting methods help ensure loss experience is commensurate with pricing expectations. $145.8 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our principal employer-sponsored insurance subsidiary is licensed to write business in 49 states, the U.S.
Sound underwriting strategies and disciplined underwriting methods help ensure loss experience is commensurate with pricing expectations. $153.9 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our principal employer-sponsored insurance subsidiary is licensed to write business in 49 states, the U.S.
Horace Mann Educators Corporation Annual Report on Form 10-K 15 Investment Portfolio as of December 31, 2022 ($ in millions) % of Total Fair Value Fair Value Total Life & Retirement Supplemental & Group Benefits Property & Casualty (7) Amortized Cost, net Publicly Traded Fixed Maturity Securities, Equity Securities and Short-term Investments: U.S.
Horace Mann Educators Corporation Annual Report on Form 10-K 17 Investment Portfolio as of December 31, 2023 ($ in millions) % of Total Fair Value Fair Value Total Life & Retirement Supplemental & Group Benefits Property & Casualty (7) Amortized Cost, net Publicly Traded Fixed Maturity Securities, Equity Securities and Short-term Investments: U.S.
For additional information regarding the process used to estimate employer-sponsored reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending employer-sponsored insurance claims and claim expense reserves and prior years' reserve development recorded for the year ended December 31, 2022, see Part I - Item 1A - Risk Factors - "Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition", Part II - Item 7, Application of Critical Accounting Estimates and Results of Operations for the Supplemental & Group Benefits Segment, and Part II - Item 8, Note 8 of the Consolidated Financial Statements of this Annual Report on Form 10-K.
For additional information regarding the process used to estimate employer-sponsored reserves and the risk factors involved, as well as a summary reconciliation of the beginning and ending employer-sponsored insurance claims and claim expense reserves and prior years' reserve development recorded for the year ended December 31, 2023, see Part I - Item 1A - Risk Factors - "Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition", Part II - Item 7, Results of Operations for the Supplemental & Group Benefits Segment, and Part II - Item 8, Note 5 of the Consolidated Financial Statements of this Annual Report on Form 10-K.
The financial performance of each segment is discussed in Part II - Item 7 of this Annual Report on Form 10-K. 4 Annual Report on Form 10-K Horace Mann Educators Corporation Property & Casualty segment Within the Retail Division, the Property & Casualty segment's primary insurance products include private passenger auto insurance and residential home insurance.
The financial performance of each segment is discussed in Part II - Item 7 of this Annual Report on Form 10-K. 6 Annual Report on Form 10-K Horace Mann Educators Corporation Property & Casualty segment Within the Retail Division, the Property & Casualty segment's primary insurance products include private passenger auto insurance, residential home insurance, and personal umbrella insurance.
Competition National providers of annuities and other financial service platforms that serve the retirement needs of educators and others that serve the community, include The Variable Annuity Life Insurance Company, a subsidiary of American International Group, Inc.; AXA, Voya Financial, Inc., Life Insurance Company of the Southwest, a subsidiary of National Life Insurance Company; Security Benefit, and Teachers Insurance and Annuity Association – College Retirement Equities Fund.
Competition National providers of annuities and other financial service platforms that serve the retirement needs of educators and others that serve the community, include AXA; Life Insurance Company of the Southwest, a subsidiary of National Life Insurance Company; Security Benefit; Teachers Insurance and Annuity Association – College Retirement Equities Fund; The Variable Annuity Life Insurance Company, a subsidiary of Corebridge Financial.; and Voya Financial, Inc.
Virgin Islands and the District of Columbia. $121.5 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our principal worksite direct insurance subsidiary is licensed to write business in all 50 states, the U.S. Virgin Islands and the District of Columbia.
Virgin Islands and the District of Columbia. $120.1 million in direct premiums, defined as premiums earned before reinsurance as determined under statutory accounting principles. Our principal worksite direct insurance subsidiary is licensed to write business in all 50 states, the U.S. Virgin Islands and the District of Columbia.
For the year ended December 31, 2022, based on direct premiums and contract deposits for all product lines, the top five states and their portion of total direct insurance premiums and contract deposits for the worksite direct business were California, 28.7%; Texas, 13.7%; Florida, 6.3%; North Carolina, 5.7%; and Louisiana, 5.4%.
For the year ended December 31, 2023, based on direct premiums and contract deposits for all product lines, the top five states and their portion of total direct insurance premiums and contract deposits for the worksite direct business were California, 28.7%; Texas, 13.1%; Florida, 6.7%; North Carolina, 5.7%; and Louisiana, 5.5%.
Best Rating % of Reinsurer Ceded Premiums A National Guardian Life Insurance Company 61.0 % A- Clear Spring Life and Annuity Company 25.0 % A+ RGA Reinsurance Company 12.0 % Total: 98.0 % We remain liable with respect to the insurance in force, which has been reinsured in the unlikely event that the assuming reinsurers are unable to satisfy their obligations.
Best Rating % of Reinsurer Ceded Premiums A National Guardian Life Insurance Company 59.0 % A- Clear Spring Life and Annuity Company 26.0 % A+ RGA Reinsurance Company 13.0 % Total: 98.0 % We remain liable with respect to the insurance in force, which has been reinsured in the unlikely event that the assuming reinsurers are unable to satisfy their obligations.
We reinsure these risks on a quota share basis with General Reinsurance Corporation who assumes 95% of losses, including allocated loss adjustment expenses and premiums for all states except Massachusetts. For business written in Massachusetts, the quota share portion is 75%.
In 2023, we reinsured these risks on a quota share basis with General Reinsurance Corporation who assumes 95% of losses, including allocated loss adjustment expenses and premiums for all states except Massachusetts and Rhode Island. For business written in Massachusetts and Rhode Island, the quota share portion is 75%.
Employer-Sponsored Reinsurance We retained approximately 72.6% of gross and assumed group disability and specialty health benefits in 2022. We have legacy blocks of individual life, annuity and long term care benefits that are effectively 100% ceded and are in run off. We purchase quota share reinsurance and excess reinsurance in amounts deemed appropriate by our risk committee.
Employer-Sponsored Reinsurance We retained approximately 73.5% of gross and assumed group disability and specialty health benefits in 2023. We have legacy blocks of individual life, annuity and long term care benefits that are effectively 100% ceded and are in run off. We purchase quota share reinsurance and excess reinsurance in amounts deemed appropriate by our risk committee.
We calculate and record a single best estimate of the reserve as of each reporting date in conformity with generally accepted actuarial standards. We engage an independent property and casualty actuarial consulting firm to prepare an independent study of our Property & Casualty reserves at December 31 st of each year.
We calculate and record a single best estimate of the reserve as of each reporting date in conformity with actuarial standards of practice. We engage an independent property and casualty actuarial consulting firm to prepare an independent study of our Property & Casualty reserves as of December 31 of each year.
Fixed Maturity Securities Portfolio as of December 31, 2022 % of Fixed Maturity Securities Portfolio % of Total Investment Portfolio Investment grade 92.0 % 72.4 % Non-investment grade 8.0 % 6.3 % Average credit quality A+ A+ Average option-adjusted duration 6.4 6.4 Percent maturing in next 5 years 30.6 % 24.1 % Cash Flow Information regarding our sources and uses of cash, including payment of principal and interest with respect to our indebtedness, and payment of dividends to our shareholders, is contained in Part II - Item 8, Note 14 of the Consolidated Financial Statements and in Part II - Item 7, Liquidity and Capital Resources — Cash Flow, Liquidity Sources and Uses and — Capital Resources of this Annual Report on Form 10-K.
Fixed Maturity Securities Portfolio as of December 31, 2023 % of Fixed Maturity Securities Portfolio % of Total Investment Portfolio Investment grade 92.6 % 71.0 % Non-investment grade 7.4 % 6.0 % Average credit quality A+ A+ Average option-adjusted duration (years) 6.0 6.4 Percent maturing in next 5 years 33.0 % 25.3 % Cash Flow Information regarding our sources and uses of cash, including payment of principal and interest with respect to our indebtedness, and payment of dividends to our shareholders, is contained in Part II - Item 8, Note 13 of the Consolidated Financial Statements and in Part II - Item 7, Liquidity and Capital Resources of this Annual Report on Form 10-K.
Fluctuations in catastrophe losses impact a property and casualty insurance company's claims and claim adjustment expenses incurred. 6 Annual Report on Form 10-K Horace Mann Educators Corporation Claims and Claim Expenses Incurred (1) , 2020 - 2022 ($ in millions) (1) Claims and claim expenses incurred include the impact of prior years' reserve development as quantified in Property & Casualty reserves.
Fluctuations in catastrophe losses impact a property and casualty insurance company's claims and claim adjustment expenses incurred. 8 Annual Report on Form 10-K Horace Mann Educators Corporation Claims and Claim Expenses Incurred (1) , 2021 - 2023 ($ in millions) (1) Claims and claim expenses incurred include the impact of prior years' reserve development as quantified in Property & Casualty reserves.
We also offer fixed indexed annuity (FIA) products with interest crediting strategies linked to the S&P 500 Index and the DJIA. 227,539 annuity contracts in force at December 31, 2022. Variable annuities combine a fixed account option with equity-linked and bond-linked sub-account options.
We also offer fixed indexed annuity (FIA) products with interest crediting strategies linked to the S&P 500 Index and the DJIA. 223,118 annuity contracts in force at December 31, 2023. Variable annuities combine a fixed account option with equity-linked and bond-linked sub-account options.
Some changes arise as a result of economic developments, such as changes in investment laws made to recognize new investment products or to respond to perceived investment risks, while others reflect concerns about consumer privacy, insurance availability, prices, allegations of unfair-discriminatory pricing, underwriting practices, or solvency concerns.
Some changes arise as a result of economic developments, such as changes in investment laws made to recognize new investment products or to respond to perceived investment risks, while others reflect concerns about insurance availability, prices, enterprise risk management guidelines, allegations of unfair-discriminatory pricing, underwriting practices, or solvency concerns.
In 2022, 47.2% of net annuity contract deposits* were for 403(b) tax-qualified annuities. At year-end 2022, 55.5% of accumulated annuity value on deposit was 403(b) tax-qualified. To further assist registered representatives in delivering our value proposition, we have entered into third-party vendor agreements to market 529 college savings programs and provide brokerage clearing arrangements.
In 2023, 45.2% of net annuity contract deposits* were for 403(b) tax-qualified annuities. At year-end 2023, 56.1% of accumulated annuity value on deposit was 403(b) tax-qualified. To further assist registered representatives in delivering our value proposition, we have entered into third-party vendor agreements to market 529 college savings programs and provide brokerage clearing arrangements.
For the year ended December 31, 2022, based on direct premiums for all product lines, the top five states and their portion of total direct insurance premiums were California, 12.2%; Texas, 8.2%; North Carolina, 7.9%; Minnesota, 6.0%; and South Carolina, 4.8%.
For the year ended December 31, 2023, based on direct premiums for all product lines, the top five states and their portion of total direct insurance premiums were California, 12.2%; Texas, 8.9%; North Carolina, 7.9%; Minnesota, 6.1%; and Georgia, 4.8%.
The reserves are a single best estimate calculated in accordance with generally accepted actuarial standards. Unpaid claims and claim expenses provide provisions for claims reported to us plus an estimated accrual for claims that are IBNR.
The reserves are a single best estimate calculated in accordance with actuarial standards of practice. Unpaid claims and claim expenses provide provisions for claims reported to us plus an estimated accrual for claims IBNR.
Horace Mann Educators Corporation Annual Report on Form 10-K 9 Retirement assets under management We market both fixed and variable annuity contracts, primarily on a tax-qualified basis. Total accumulated fixed and variable annuity cash value on deposit at December 31, 2022 was $4.9 billion, net of reinsurance.
Horace Mann Educators Corporation Annual Report on Form 10-K 11 Retirement assets under management We market both fixed and variable annuity contracts, primarily on a tax-qualified basis. Total accumulated fixed and variable annuity cash value on deposit at December 31, 2023 was $5.2 billion, net of reinsurance.
BCG had $1.2 billion of recordkeeping assets under administration as of December 31, 2022. 10 Annual Report on Form 10-K Horace Mann Educators Corporation Retirement Assets Under Administration, 2020 - 2022 ($ in billions) Geographic distribution Our Life & Retirement business is geographically diversified.
BCG had $1.1 billion of recordkeeping assets under administration as of December 31, 2023. 12 Annual Report on Form 10-K Horace Mann Educators Corporation Retirement Assets Under Administration, 2021 - 2023 ($ in billions) Geographic distribution Our Life & Retirement business is geographically diversified.
Government and $604.1 million fair value of federally sponsored agency securities which are not backed by the full faith and credit of the U.S. Government.
Government and $700.7 million fair value of federally sponsored agency securities which are not backed by the full faith and credit of the U.S. Government.
In our Worksite Division, our solutions are often delivered as employee benefits or as part of an annual enrollment process. • Modern, scalable infrastructure that is easy to do business with. 2 Annual Report on Form 10-K Horace Mann Educators Corporation Retail Division strategy We provide protection and savings products directly to educators through local, trusted agents or by centralized phone and online options.
In our Worksite Division, our solutions are often delivered as employee benefits or as part of an annual enrollment process. • Modern, scalable infrastructure that is easy to do business with. Retail Division strategy We provide protection and savings products directly to educators through local, trusted agents or by centralized phone and online options.
We partner with a diverse group of national, state and local education associations. Working closely with the educational community helps us to identify emerging educator financial wellness issues and build solutions to address them. We believe our niche market strategy, combined with our Company's more than 75-year history serving the education market, helps us succeed in a highly competitive environment.
Working closely with the educational community helps us to identify emerging educator financial wellness issues and build solutions to address them. We believe our niche market strategy, combined with our Company's more than 75-year history serving the education market, helps us succeed in a highly competitive environment.
The products we provide are part of a typical "total rewards" compensation package, including some products paid by the employer and provided to groups of employees, as well as products that employees can select as part of their benefit enrollment process. 268,037 total worksite direct policies in force an d 735,199 total employer-sponsored covered lives at December 31, 2022 Group products may be purchased by employers to include in benefit packages for all employees or offered as a voluntary option for employees to purchase.
The products we provide are part of a typical "total rewards" compensation package, including some products paid by the employer and provided to groups of employees, as well as products that employees can select as part of their benefit enrollment process. 269,337 t otal worksite direct policies in force an d 826,447 total employer-sponsored covered lives at December 31, 2023 Group products may be purchased by employers to include in benefit packages for all employees or offered as a voluntary option for employees to purchase.
The Retail Division focuses on providing individual insurance and financial products directly to educators and others who serve the community. It includes both the Property & Casualty and Life & Retirement reporting segments. The Worksite Division provides benefits to educators through their school district employers.
The Retail Division focuses on providing individual insurance and financial products directly to educators and others who serve the community. It includes both the Property & Casualty and Life & Retirement reporting segments. The Worksite Division provides benefits to educators and others who serve the community through their employers as well as supplemental products distributed through the worksite channel.
Similarly, we have increased our offering of third-party vendor products in many areas to meet additional educator needs such as coverage for small business owners or classic/collector autos. 366,602 a uto risks in force and 170,760 property risks in force at December 31, 2022. Geographic distribution Our Property & Casualty business is geographically diversified.
Similarly, we have increased our offering of third-party vendor products in many areas to meet additional educator needs such as coverage for small business owners or classic/collector autos. 358,215 a uto risks in force and 168,219 property risks in force at December 31, 2023. Geographic distribution Our Property & Casualty business is geographically diversified.
We manage interest rate exposure for our portfolios through asset/liability management techniques that attempt to coordinate the duration of the assets with the duration of the insurance policy liabilities.
We manage interest rate exposure for our portfolios through asset/liability management techniques that consider the duration of the assets compared to the duration of the insurance policy liabilities.
The aggregate amount of dividends that may be paid in 2023 from all of our insurance subsidiaries without prior regulatory approval is approximately $110.3 million, excluding the impact and timing of prior year dividends, of which $179.9 million was paid during the year ended December 31, 2022.
The aggregate amount of dividends that may be paid in 2024 from all of our insurance subsidiaries without prior regulatory approval is approximately $112.3 million, excluding the impact and timing of prior year dividends, of which $127.5 million was paid during the year ended December 31, 2023.
(8) Under the equity method of accounting, the carrying amounts of limited partnership interests approximate fair value. 16 Annual Report on Form 10-K Horace Mann Educators Corporation Fixed Maturity Securities For reporting purposes, we have classified the entire portfolio of fixed maturity securities as available for sale and the portfolio is carried at fair value.
(8) Limited partnership interests are accounted for using the equity method of accounting. 18 Annual Report on Form 10-K Horace Mann Educators Corporation Fixed Maturity Securities For reporting purposes, we have classified the entire portfolio of fixed maturity securities as available for sale and the portfolio is carried at fair value.
TX 5.1 August Hurricane Ida AL, AK, CT, DE, DC, FL, GA, KY, LA, MD, MA, MS, NJ, NU, NC, PA, RI, TN, VI, WV 24.0 December Wildfire Marshall CO 5.3 Other single events less than $5.0 million 43.8 2020 $ 84.4 August Derecho IA, IL, IN, KS, MI, MN, MO, NE, OH, SD, WI 6.5 August Hurricane Laura AR, LA, MS, TN, TX 9.5 October Hurricane Delta AL, AR, GA, LA, MS, NC, SC, TX 3.3 October Hurricane Zeta AL, GA, LA, MS, NC, SC 2.7 Other single events less than $5.0 million 62.4 2019 $ 52.0 May Wind and Hail CO, IA, IL, IN, KS, MO, NE, OH, OK, PA, WY 5.5 Other single events less than $5.0 million 46.5 2018 $ 114.1 June Wind and Hail CO, UT 8.2 July Carr Fire CA 5.9 September Hurricane Florence Southeast and Mid-Atlantic 11.4 October Hurricane Michael Southeastern U.S. 4.5 November Camp Fire (2) CA 31.2 Other single events less than $5.0 million 52.9 (1) Net of reinsurance and before income tax benefits.
TX 5.1 August Hurricane Ida AL, AK, CT, DE, DC, FL, GA, KY, LA, MD, MA, MS, NJ, NU, NC, PA, RI, TN, VI, WV 24.0 December Wildfire Marshall CO 5.3 Other single events less than $5.0 million 43.8 2020 $ 84.4 August Derecho IA, IL, IN, KS, MI, MN, MO, NE, OH, SD, WI 6.5 August Hurricane Laura AR, LA, MS, TN, TX 9.5 October Hurricane Delta AL, AR, GA, LA, MS, NC, SC, TX 3.3 October Hurricane Zeta AL, GA, LA, MS, NC, SC 2.7 Other single events less than $5.0 million 62.4 2019 $ 52.0 May Wind and Hail CO, IA, IL, IN, KS, MO, NE, OH, OK, PA, WY 5.5 Other single events less than $5.0 million 46.5 (1) Net of reinsurance and before income tax benefits.
These group products typically have minimum participation rates and are underwritten at the group level to account for population size, industry, gender and age distribution, and other applicable risk factors. Our typical worksite direct supplemental policies provide "HIPAA Excepted" benefits with simplified underwriting.
These group products typically have minimum participation rates and are underwritten at the group level to account for population size, industry, gender and age distribution, and other applicable risk factors. 14 Annual Report on Form 10-K Horace Mann Educators Corporation Our typical worksite direct supplemental policies provide "HIPAA Excepted" benefits with simplified underwriting.
This platform provides us with greater flexibility to offer customized 403(b)(7) and other qualified plan solutions to better meet the needs of school districts and other non-for-profit plan sponsors. In 2019, we acquired a recordkeeping administrator, Benefit Consultants Group, Inc.
This platform combines a wide array of mutual funds integrated with a group unallocated fixed annuity stable value fund. This platform provides us with greater flexibility to offer customized 403(b)(7) and other qualified plan solutions to better meet the needs of school districts and other non-for-profit plan sponsors. In 2019, we acquired a recordkeeping administrator, Benefit Consultants Group, Inc.
For the year ended December 31, 2022, based on direct premiums and contract deposits for all product lines, the top five states and their portion of total direct premiums and contract deposits were Pennsylvania 9.2%; North Carolina, 6.1%; Minnesota 5.5%; Indiana, 5.3%; and California, 5.3%.
For the year ended December 31, 2023, based on direct premiums and contract deposits for all product lines, the top five states and their portion of total direct premiums and contract deposits were Pennsylvania 10.3%; Minnesota, 6.3%; North Carolina 5.8%; Virginia, 5.4%; and Indiana, 5.3%.
These 12 Annual Report on Form 10-K Horace Mann Educators Corporation products offer defined benefit amounts that are paid directly to the insured, and are payable in addition to any other insurance coverages. An insured can use the supplemental payments to cover medical or non-medical costs.
These products offer defined benefit amounts that are paid directly to the insured, and are payable in addition to any other insurance coverages. An insured can use the supplemental payments to cover medical or non-medical costs.
All of our reserves for Property & Casualty unpaid claims and claim expenses are carried at the full value of estimated liabilities and are not discounted for interest expected to be earned on the reserves.
All of our reserves for Property & Casualty unpaid claims and claim expenses are carried at the full value of estimated liabilities and are not discounted for interest expected to be earned on the reserves. Property & Casualty Reinsurance All reinsurance is obtained through contracts which generally are entered into for each calendar year.
Year Month Event Description States/Region Total 2022 $ 80.0 May Wind and Thunderstorm MN, WI 5.5 May Wind and Thunderstorm MN, NE, SD, WI 7.0 May Wind and Thunderstorm MI, MN, NJ, OH, PA, TX, WI 7.4 December Winter Storm Elliott Northern Plains, Midwest and North East 8.1 Other single events less than $5.0 million 52.0 2021 $ 78.2 February Winter Storm Viola AR, IL, LA, MO, OK, TN.
Year Month Event Description States/Region Total 2023 $ 97.6 March Wind and Thunderstorm AL, GA, IN, KY, MS, NC, OH, OK, PA, TN, TX, VA 5.8 May Wind and Thunderstorm CO, FL, GA, KS, MO, NC, ND, OK, SC, TN, TX, VA 5.2 June Wind and Thunderstorm AL, AR, CO, FL, GA, KY, LA, MS, OK, SC, TN, TX 5.1 June Wind and Thunderstorm AR, CO, GA, IA, IN, KY, MD, MI, NC, NE, NH, NY, PA,TN, TX, VA, WY 7.6 Other single events less than $5.0 million 73.9 2022 $ 80.0 May Wind and Thunderstorm MN, WI 5.5 May Wind and Thunderstorm MN, NE, SD, WI 7.0 May Wind and Thunderstorm MI, MN, NJ, OH, PA, TX, WI 7.4 December Winter Storm Elliott Northern Plains, Midwest and North East 8.1 Other single events less than $5.0 million 52.0 2021 $ 78.2 February Winter Storm Viola AR, IL, LA, MO, OK, TN.
(Fitch) rating for such security, or if there is no S&P, Moody's or Fitch rating, the National Association of Insurance Commissioners' (NAIC) rating for such security. The rating agencies monitor securities and their issuers regularly, and make changes to the ratings as necessary. We incorporate rating changes on a monthly basis.
(Fitch) rating for such security, or if there is no S&P, Moody's or Fitch rating, the NAIC rating for such security. The rating agencies monitor securities and their issuers regularly, and make changes to the ratings as necessary. We incorporate rating changes on a monthly basis. (3) Includes commercial mortgage-backed securities, asset-backed securities, other mortgage-backed securities and collateralized loan obligations.
For example, we can package our student loan solutions offering with other worksite benefits. Following the integration of NTA and Madison National, we are focused on ensuring the infrastructure for our Worksite Division is responsive to the needs of our distribution partners, employers and educators. In 2023, one area of focus is enhancing the platforms used by marketing partners.
Following the integration of NTA and Madison National, we are focused on ensuring the infrastructure for our Worksite Division is responsive to the needs of our distribution partners, employers, educators and others who serve their communities. In 2023, one area of focus was enhancing the platforms used by marketing partners.
Best. 14 Annual Report on Form 10-K Horace Mann Educators Corporation 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.
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.
For many educators — particularly those new to the profession — student loan debt is often substantial. Among other challenges, that debt may preclude saving for retirement at the point when those savings would have the most time to grow and make a significant impact at retirement age.
Among other challenges, that debt may preclude early in career saving for retirement at the point when those savings would have the most time to grow and make a significant impact at retirement age.
Life Reinsurance The maximum individual life insurance risk retained by our Life segment is $500,000 on any individual life, while either $100,000 or $125,000 is retained on each group life policy depending on the type of coverage. The excess of the amounts retained are reinsured with life reinsurers that are rated A (Excellent) or above by A.M. Best.
Life Reinsurance The maximum individual life insurance risk retained by our Life segment is $500,000 on any individual life. The excess of the amounts retained are reinsured with life reinsurers that are rated A (Excellent) or above by A.M. Best. We also maintain a life catastrophe reinsurance program.
We want to be there for our customers in the event of a loss of our customers' property and help them recover from hurricanes, windstorms, hail, severe winter weather, wildfires and earthquakes. As we look ahead, we believe climate change risks should be understood, modeled and priced into our insurance products and services.
We want to be there for our customers in the event of a loss of our customers' property and help them recover from hurricanes, windstorms, hail, severe winter weather, wildfires and earthquakes.
For additional information regarding the process used to estimate worksite direct reserves and the risk factors involved, see Part I - Item 1A - Risk Factors - "Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition”and Part II - Item 7, Results of Operations for the Supplemental & Group Benefits Segment of this Annual Report on Form 10-K.
For additional information regarding the process used to estimate worksite direct reserves and the risk factors involved, see Part I - Item 1A - Risk Factors - "Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition”, Part II - Item 7, Results of Operations for the Supplemental & Group Benefits Segment, and Part II - Item 8, Note 6 of the Consolidated Financial Statements of this Annual Report on Form 10-K. 16 Annual Report on Form 10-K Horace Mann Educators Corporation Worksite Direct Reinsurance We retain all of the risk on our supplemental health product lines, including accidental death risk embedded within certain products.
This change has made the 403(b) market more attractive to some of the larger companies experienced in 401(k) plans, including both insurance and mutual fund companies, that had not previously been active competitors in this business. Annuity Reinsurance We reinsure a $3.1 billion block of in force fixed and variable annuity business with a minimum crediting rate of 4.5%.
This change has made the 403(b) market more attractive to some of the larger companies experienced in 401(k) plans, including both insurance and mutual fund companies, that had not previously been active competitors in this business.
Our product line is designed to help districts and other employers improve recruitment and retention. As the competition for top talent intensifies, public sector employers are increasingly looking to offer benefits that are competitive with those of the private sector.
As the competition for top talent intensifies, public sector employers are increasingly looking to offer benefits that are competitive with those of the private sector.
The following table identifies our most significant reinsurers under the catastrophe first event excess of loss reinsurance program, their percentage participation in this program and their ratings by A.M. Best Company (A.M. Best) and Standard & Poor's Global Inc. (S&P) as of January 1, 2023. No other single reinsurer's percentage participation in 2023 or 2022 exceeds 5%.
Horace Mann Educators Corporation Annual Report on Form 10-K 9 The following table identifies our most significant reinsurers under the catastrophe first event excess of loss reinsurance program, their percentage participation in this program and their ratings by A.M. Best Company (A.M. Best) and Standard & Poor's Global Inc. (S&P) as of January 1, 2024.
Of the securities with credit support. municipal bonds represented $330.0 million of the carrying amount. (7) Includes $0.2 million of fixed maturity securities, $1.0 million of equity securities and $0.8 million of short-term investments held in Corporate & Other.
(7) Includes $0.2 million of fixed maturity securities, $1.0 million of equity securities and $2.1 million of short-term investments held in Corporate & Other.
During 2022, the average face amount of individual life insurance policies issued by us was approximately $198,000 and the average face amount of individual life insurance policies in force at December 31, 2022 was approximately $123,000.
During 2023, the average face amount of individual life insurance policies issued by us was approximately $209,000 and the average face amount of individual life insurance policies in force at December 31, 2023 was approximately $127,000. Life insurance in force rose to $20.5 billion at year-end.
An adjustment for net unrealized investment gains (losses) on fixed maturity securities available for sale is recognized as a separate component of accumulated other comprehensive income (loss) (i.e., AOCI) within shareholders' equity, net of applicable deferred taxes and the related impact from deferred policy acquisition costs (DAC) associated with annuity contracts and life insurance products with account values.
An adjustment for net unrealized investment gains (losses) on fixed maturity securities available for sale is recognized as a separate component of accumulated other comprehensive income (loss) (AOCI) within shareholders' equity, net of applicable deferred taxes.
We also maintain a life catastrophe reinsurance program. In 2022, we reinsured 100% of the catastrophe risk in excess of $1.0 million up to $35.0 million per occurrence, with one reinstatement. For 2023, our catastrophe risk coverage is unchanged.
In 2023, we reinsured 100% of the catastrophe risk in excess of $1.0 million up to $35.0 million per occurrence, with one reinstatement. For 2024, our catastrophe risk coverage is unchanged. Our life catastrophe risk reinsurance program covers acts of terrorism and includes nuclear, biological and chemical explosions but excludes other acts of war.
Horace Mann Educators Corporation Annual Report on Form 10-K 1 Also available in the Investors section of our website are our corporate governance principles, Code of Conduct, and the charters of the HMEC Board of Directors (Board), Audit Committee, Compensation Committee, Executive Committee, Investment and Finance Committee and Nominating and Governance Committee.
Also available in the Investors section of our website are our Corporate Governance Principles, Code of Conduct, Vendor Code of Conduct and other corporate ESG commitments as well as the charters of the HMEC Board of Directors (Board), Audit Committee, Compensation Committee, Executive Committee, Investment and Finance Committee and Nominating and Governance Committee.
On an ongoing basis, various state legislators and insurance regulators examine the nature and scope of state insurance regulation. In addition to individual state monitoring and regulation, state regulators develop coordinated regulatory policies through the NAIC. States have adopted NAIC risk-based capital guidelines to evaluate the adequacy of statutory capital and surplus in relation to an insurance company's risks.
On an ongoing basis, various state legislators and insurance regulators examine the nature and scope of state insurance regulation. In addition to individual state monitoring and regulation, state regulators develop coordinated regulatory policies through the National Association of Insurance Commissioners (NAIC).
The reinsured fixed business represents approximately 50% of our in force fixed annuity account Horace Mann Educators Corporation Annual Report on Form 10-K 11 balances. The arrangement contains investment guidelines and a trust to help meet our risk management objectives. Under the annuity reinsurance agreement, approximately $2.5 billion of fixed annuity reserves are reinsured on a coinsurance basis.
The arrangement contains investment guidelines and a trust to help meet our risk management objectives. Under the annuity reinsurance agreement, approximately $2.4 billion of fixed annuity reserves are reinsured on a coinsurance basis.
Based on current guidelines, the risk-based capital statutory requirements are not expected to have a negative regulatory impact on our insurance subsidiaries. As of December 31, 2022 and 2021, statutory capital and surplus of each of our insurance subsidiaries were above required levels. States have also adopted the NAIC's U.S.
As of December 31, 2023 and 2022, statutory capital and surplus of each of our insurance subsidiaries were above required levels. States have also adopted the NAIC's U.S.
Overview, History and Available Information We are an insurance holding company incorporated in Delaware. Our headquarters is located in Springfield, Ill. We also operate corporate offices in Dallas; Madison, Wisc.; and Cherry Hill, N.J. Our common stock has traded on the New York Stock Exchange (NYSE) under the symbol HMN since our initial public offering in November 1991.
Overview, History and Available Information We are an insurance holding company incorporated in Delaware. Our headquarters is located in Springfield, Ill. We also operate corporate offices in Dallas, Tx., Madison, Wisc., and Cherry Hill, N.J.
(3) Includes commercial mortgage-backed securities, asset-backed securities, other mortgage-backed securities and collateralized loan obligations. (4) Short-term investments mature within one year of being acquired and are carried at cost, which approximates fair value. Short-term investments o f $109.4 million are all money market funds and are not rated.
(4) Short-term investments mature within one year of being acquired and are carried at cost, which approximates fair value. Short-term investments o f $132.9 million are all money market funds and are not rated. (5) Mortgage loans are carried at amortized cost, net and policy loans are carried at unpaid principal balances.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDue to the inherent uncertainty in estimating reserves for losses and loss adjustment expenses, we cannot be certain that the ultimate liability will not exceed amounts reserved, with a resulting adverse effect on our financial condition and results of operations. 24 Annual Report on Form 10-K Horace Mann Educators Corporation Risks Related to Life & Retirement Segment A sustained period of low interest rates or interest rate fluctuations could negatively affect net interest margin derived from the difference between interest earned on investments and interest paid under fixed annuity and life insurance products with account values.
Biggest changeDue to the inherent uncertainty in estimating reserves for losses and loss adjustment expenses, we cannot be certain that the ultimate liability will not exceed amounts reserved, with a resulting adverse effect on our financial condition and results of operations.
Included in this top ten group are certain states which are considered to be more prone to catastrophe occurrences: California, Texas, North Carolina, Minnesota, South Carolina, Georgia, and Louisiana. Our property and casualty loss reserves may not be adequate.
Included in this top ten group are certain states which are considered to be more prone to catastrophe occurrences: California, Texas, North Carolina, Minnesota, Georgia, South Carolina, and Louisiana. Our property and casualty loss reserves may not be adequate.
Significant reporting lags may exist between the occurrence of an insured event and the time it is actually reported. Our insurance subsidiaries adjust their reserve estimates regularly as experience develops and further claims are reported and settled. The rise in inflation in recent periods has significantly increased our loss costs in our auto and property businesses.
Significant reporting lags may exist between the occurrence of an insured event and the time it is reported. Our insurance subsidiaries adjust their reserve estimates regularly as experience develops and further claims are reported and settled. The rise in inflation in recent periods has significantly increased our loss costs in our auto and property businesses.
Our financial condition and results of operations could be adversely affected by changes in federal and state laws and regulations that affect the relative tax and other advantages of our life and retirement products to clients or the tax benefits of programs utilized by our customers.
Our financial condition and results of operations could be adversely affected by changes in federal and state laws and regulations that affect the relative tax and other advantages of our retirement products to clients or the tax benefits of programs utilized by our customers.
A downgrade in the ratings or adverse change in the ratings outlook of any of our insurance subsidiaries by a major rating agency could result in substantial loss of business for that subsidiary if school districts, policyholders or independent agents move their business to other companies having higher claims-paying ratings and financial strength ratings than we have.
A downgrade in the ratings or adverse change in the ratings outlook of any of our insurance subsidiaries by a major rating agency could result in substantial loss of business for that subsidiary if school districts, policyholders, distribution partners or independent agents move their business to other companies having higher claims-paying ratings and financial strength ratings than we have.
These changes have increased and could continue to increase the number of competitors in the 403(b) market, as it has become more attractive to some of the larger companies experienced in 401(k) plans, including both insurance and mutual fund companies, that had not previously been active competitors in this business.
These changes have increased and could continue to increase the number of competitors in the 403(b) market, as it has become more attractive to some of the larger companies experienced in 401(k) plans, including both insurance and mutual fund companies, which had not previously been active competitors in this business.
Our ability to provide accurate estimates of ultimate catastrophe losses is based on several factors, including: • the proximity of the catastrophe occurrence date to the date of our estimate; • potential inflation of property rep air costs in the affected area; • supply chain interruptions resulting in cost increases, including availability of services and materials; • the occurrence of multiple catastrophes in a geographic area over a relatively short period of time; and • the outcome of litigation which may be filed against us by policyholders, state attorneys general and other parties relative to loss coverage disputes and loss settlement payments.
Our ability to provide accurate estimates of ultimate catastrophe losses is based on several factors, including: • the proximity of the catastrophe occurrence date to the date of our estimate; • potential inflation of property and auto repair costs in the affected area; • supply chain interruptions resulting in cost increases, including availability of services and materials; • the occurrence of multiple catastrophes in a geographic area over a relatively short period of time; and • the outcome of litigation which may be filed against us by policyholders, state attorneys general and other parties relative to loss coverage disputes and loss settlement payments.
The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during volatile or uncertain economic conditions, due to unexpected changes in behavior of claimants and policyholders, including an increase in fraudulent reporting of exposures and/or losses, reduced maintenance of insured properties, increased frequency of small claims or delays in the reporting or adjudication of claims.
The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during volatile or uncertain economic conditions, due to unexpected changes in behavior of claimants and policyholders, including an increase in fraudulent reporting of exposures and/or losses, reduced maintenance of insured properties, increased frequency of small claims or delays in the reporting or adjudication of claims, and supply chain constraints.
We believe that for our market, the principal competitive factors in the sale of retirement products and life insurance products are worksite sales and service, product features, perceived stability of the insurer, price, overall service and name recognition. Particularly in the Property & Casualty business, our insurance subsidiaries have experienced pricing and profitability cycles.
We believe that for our market, the principal competitive factors in the sale of retirement products, life insurance products and supplemental group benefits are worksite sales and service, product features, perceived stability of the insurer, price, overall service and name recognition. Particularly in the Property & Casualty business, our insurance subsidiaries have experienced pricing and profitability cycles.
If we are unable to appoint additional agents, fail to retain high-producing agents, are unable to maintain the productivity of those agency operations or are unable to maintain market penetration in existing territories, sales of our products could likely decline and our financial condition and results of operations could be adversely affected.
If we are unable to recruit additional agents, fail to develop and retain high-producing agents, are unable to maintain the productivity of those agency operations, or are unable to maintain market penetration in existing territories, sales of our products could likely decline and our financial condition and results of operations could be adversely affected.
Impacts to our business have been and could continue to be widespread and may result in the following: • employees contracting effects from a global pandemic; • increased competition in hiring and retaining employees and agents; 28 Annual Report on Form 10-K Horace Mann Educators Corporation • sustained lack of access to schools and educators that could materially impact our sales and premium volumes; • public school systems facing budget constraints due to the economic impacts of the pandemic that could result in educator layoffs; • unprecedented volatility in financial markets that could materially affect our investment portfolio valuations and returns as well as our ability to generate targeted spreads on indexed products; • regulatory mandates and/or legislative changes, including premium grace periods and premium credits; • changes in frequency and/or severity of claims; • supply chain interruptions resulting in cost increases, including availability of services and materials; • increased credit risk; • business disruption for insurance agents who market and sell our insurance products; and, • business disruptions to third parties at which we outsource certain business functions to or on which we rely for technology.
Impacts to our business have been and could continue to be widespread and may result in the following: • employees contracting effects from a global pandemic; • increased competition in hiring and retaining employees and agents; • sustained lack of access to schools and educators that could materially impact our sales and premium volumes; • public school systems facing budget constraints due to the economic impacts of the pandemic that could result in educator layoffs; • unprecedented volatility in financial markets that could materially affect our investment portfolio valuations and returns as well as our ability to generate targeted spreads on indexed products; • regulatory mandates and/or legislative changes, including premium grace periods and premium credits; • changes in frequency and/or severity of claims; • supply chain interruptions resulting in cost increases, including availability of services and materials; • increased credit risk; • business disruption for insurance agents who market and sell our insurance products; and, • business disruptions to third parties at which we outsource certain business functions to or on which we rely for technology.
The full extent to which pandemics could affect the global economy, the financial markets and our business, our financial condition and our results of operations will depend on future developments and factors that cannot be predicted. Climate change may adversely affect our financial position, results of operations and cash flows.
The full extent to which pandemics or terrorist acts could affect the global economy, the financial markets and our business, our financial condition and our results of operations will depend on future developments and factors that cannot be predicted. Climate change may adversely affect our financial position, results of operations and cash flows.
Historical results may not be indicative of future performance due to, among other things, changes in our mix of business, regulatory actions or changes in legal doctrine impacting our products or lines of business, or any number of economic cyclical effects including inflation.
In addition, for our supplemental products, historical results may not be indicative of future performance due to, among other things, changes in our mix of business, regulatory actions or changes in legal doctrine impacting our products or lines of business, or any number of economic cyclical effects including inflation.
While this is especially true for the sale of 403(b) tax-qualified retirement products via payroll deduction and worksite direct sales, any significant decrease in access, either through fewer payroll slots, increased security measures, impacts of state or federal level pension reform initiatives, requirements of national and state Do Not Call registries, or for other reasons, could adversely affect the sale of all lines of business and require us to change our traditional approach to worksite marketing and promotion, as well as contact with potential customers.
While this is especially true for the sale of 403(b) tax-qualified retirement products via payroll deduction and worksite direct sales, any significant decrease in access, either through fewer payroll slots, increased security measures, impacts of state or federal level pension reform initiatives, or for other reasons, could adversely affect the sale of all lines of business and require us to change our traditional approach to worksite marketing and promotion, as well as contact with potential customers.
Based on 2022 direct premiums earned, 58.1 % of the total annual premiums for our Property & Casualty business were for policies issued in the ten largest states in which the insurance subsidiaries write property and casualty coverage.
Based on 2023 direct premiums earned, 58.9% of the total annual premiums for our Property & Casualty business were for policies issued in the ten largest states in which the insurance subsidiaries write property and casualty coverage.
This could also likely increase the risks of writing property insurance in coastal areas or areas susceptible to wildfires or flooding, particularly in jurisdictions that restrict pricing and underwriting flexibility.
This could also likely increase the risks of writing property insurance in coastal areas or areas susceptible to wildfires or hail and wind activity, particularly in jurisdictions that restrict pricing and underwriting flexibility.
Climate change presents risk to us and there are concerns that the increased frequency and severity of weather-related catastrophes and other losses is indicative of changing weather patterns, whether as a result of climate-warming trends (global climate change) caused by human activities or otherwise, which could cause such events to persist.
Climate change presents risk to us and there are concerns that the increased frequency, severity and geographic spread of weather-related catastrophes and other losses, as well as time of year of occurrence are indicative of changing weather patterns, whether as a result of climate-warming trends (global climate change) caused by human activities or otherwise, which could cause such events to persist.
If these loss reserves prove inadequate, a loss is recognized and measured by the amount of the shortfall and, as a result, the financial condition and results of operations of the insurance subsidiaries may be adversely affected, potentially affecting their ability to distribute cash to us. Reserves do not represent an exact calculation of liability.
If these loss reserves prove inadequate, a loss is recognized and measured by the amount of the shortfall and, as a result, the financial condition and results of operations of the insurance subsidiaries may be adversely affected, potentially affecting their ability to distribute cash to us.
During the current cycle, and potentially beyond, competition from direct writers and large, mass market carriers has been particularly aggressive, evidenced in part by their significant national advertising expenditures.
Competition from direct writers and large, mass market carriers has been particularly aggressive, evidenced in part by their significant national advertising expenditures.
In addition, advancements in vehicle technology and safety features, such as accident prevention technologies or the development of autonomous or partially autonomous vehicles — once widely available and utilized, as well as expanded availability of usage-based insurance, could materially alter the way that auto insurance is marketed, priced and underwritten.
Horace Mann Educators Corporation Annual Report on Form 10-K 25 In addition, advancements in vehicle technology and safety features, such as accident prevention technologies or the development of autonomous or partially autonomous vehicles — once widely available and utilized, as well as expanded availability of usage-based insurance, could materially alter the way that auto insurance is marketed, priced and underwritten.
Horace Mann Educators Corporation Annual Report on Form 10-K 29 Successful execution of our business growth strategy is dependent on effective implementation of new or enhanced technology systems and applications. Our ability to effectively execute our business growth strategy and leverage potential economies of scale is dependent on our ability to provide the requisite technology components for that strategy.
Successful execution of our business growth strategy is dependent on effective implementation of new or enhanced technology systems and applications. Our ability to effectively execute our business growth strategy and leverage potential economies of scale is dependent on our ability to provide the requisite technology components for that strategy.
Horace Mann Educators Corporation Annual Report on Form 10-K 31 Any downgrade in or adverse change in outlook for our claims-paying ratings, financial strength ratings or credit ratings could adversely affect our financial condition and results of operations. Claims-paying ratings and financial strength ratings have become an increasingly important factor in establishing the competitive position of insurance companies.
Any downgrade in or adverse change in outlook for our claims-paying ratings, financial strength ratings or credit ratings could adversely affect our financial condition and results of operations. Claims-paying ratings and financial strength ratings have become an increasingly important factor in establishing the competitive position of insurance companies.
Further, the Dodd-Frank Act enacted wide-ranging changes in the supervision and regulation of the financial industry providing greater oversight of financial industry participants, enhanced public company corporate governance practices and executive compensation disclosures, and greater protections to individual consumers and investors.
Further, the Dodd-Frank Act enacted wide-ranging changes in the supervision and regulation of the financial industry providing greater oversight of financial industry participants, enhanced public company corporate 34 Annual Report on Form 10-K Horace Mann Educators Corporation governance practices and executive compensation disclosures, and greater protections to individual consumers and investors.
As of December 31, 2022, the Company's Consolidated Balance Sheet reflected goodwill of $34.9 million and intangible assets of $171.8 million recognized in connection with the BCG, BCGS, NTA and Madison National acquisitions (see Part II - Item 8, Note 7 of the Consolidated Financial Statements for more information).
As of December 31, 2023, the Company's Consolidated Balance Sheet reflected goodwill of $34.9 million and intangible assets of $156.9 million recognized in connection with the recent acquisitions (see Part II - Item 8, Note 9 of the Consolidated Financial Statements for more information).
These parties may include the issuers whose securities we hold, customers, reinsurers, borrowers under mortgage loans, trading counterparties, derivative counterparties, clearing agents, exchanges, clearing houses and other financial intermediaries.
Third-party debtors may not pay or perform their obligations. These parties may include the issuers whose securities we hold, customers, reinsurers, borrowers under mortgage loans, trading counterparties, derivative counterparties, clearing agents, exchanges, clearing houses and other financial intermediaries.
The financial position of our insurance subsidiaries also may be affected by court decisions that expand insurance coverage beyond the intention of the insurer at the time it originally issued an insurance policy. Dodd-Frank created FIO within the U.S. Department of the Treasury.
The financial position of our insurance subsidiaries also may be affected by court decisions that expand insurance coverage beyond the intention of the insurer at the time it originally issued an insurance policy.
These changes may also affect the products and services we choose to offer to clients, as well as the compensation that we and our financial professionals receive in connection with such products and services, which could adversely impact our ability to recruit and retain key personnel.
These changes may also affect the products and services we choose to offer to clients, as well as the compensation that we and our financial professionals receive in connection with such products and services, which could adversely impact our profitability or ability to recruit and retain agents or distribution partners. Litigation may harm our financial strength or reduce our profitability.
Most recently, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies.
Companies in the insurance industry have been subject to substantial litigation resulting from claims, disputes and other matters. Most recently, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies.
As a result of persisting economic conditions, revenue challenges exist at federal, state and local government levels. These challenges could increase the risk of future adverse impacts on current tax-advantaged products or result in notable reforms to educator pension programs. Also, see Part I - Item 1, Regulation of this Annual Report on Form 10-K.
As a result of persisting economic conditions, revenue challenges exist at federal, state, and local government levels. These challenges could increase the risk of future adverse impacts on current tax-advantaged products or result in notable reforms to educator pension programs.
Consumer-related pressures to roll back rates, even if not enacted by legislation or upheld upon judicial appeal, may affect our ability to obtain timely rate increases or operate at desired levels of 32 Annual Report on Form 10-K Horace Mann Educators Corporation profitability.
Consumer-related pressures to roll back rates, even if not enacted by legislation or upheld upon judicial appeal, may affect our ability to obtain timely rate increases or operate at desired levels of profitability.
As an insurance company, we are paid to accept certain risks. Those who conduct our business, including executive officers and members of management, employees and independent agents, do so in part by making decisions that involve exposing us to risk.
Those who conduct our business, including executive officers and members of management, employees and independent agents, do so in part by making decisions that involve exposing us to risk.
The threat of rising sea levels or other catastrophe losses as a result of global climate change may also cause property values in coastal or such other communities to decrease, reducing the total amount of insurance coverage that is required.
The threat of rising sea levels or other catastrophe losses as a result of global climate change may also cause property values in coastal or such other communities to decrease, reducing the total amount of insurance coverage that is required. In the short term, extreme weather conditions cause financial impacts and disruptions in our daily Property & Casualty operations.
The effects of a global pandemic on the U.S. economy, our customers, our agents, our employees, our investments and our communities, as well as any preventative or protective actions that we, our employees and agency force, our third-party service providers and suppliers, or governments may take to mitigate the impact of a global pandemic could have an adverse effect on our ability to conduct business and on our financial condition and results of operations.
Additionally, a large-scale pandemic or terrorist act could have a material effect on sales, liquidity and operating results. 28 Annual Report on Form 10-K Horace Mann Educators Corporation The effects of a global pandemic on the U.S. economy, our customers, our agents, our employees, our investments and our communities, as well as any preventative or protective actions that we, our employees and agency force, our third-party service providers and suppliers, or governments may take to mitigate the impact of a global pandemic could have an adverse effect on our ability to conduct business and on our financial condition and results of operations.
I Risk Factors Index to Risk Factors Page Introduction 21 Risk s Related to Economic Conditions, Market Conditions and Investments 22 Risks Related to Property & Casualty Segment 23 Risk s Related to Life & Retirement Segment 25 Risks Related to Supplemental & Group Benefits Segment 26 Strategic Risks 26 Operational Risks 28 Financial Strength, Credit and Counterparty Risks 30 Regulatory and Legal Risks 32 Introduction We have identified what we believe reflect key significant risks to the organization, and in turn to our shareholders, which are outlined below.
I Risk Factors Index to Risk Factors Page Introduction 23 Risks Related to Economic Conditions, Market Conditions and Investments 24 Strategic Risks 25 Operational Risks 27 Financial Strength, Credit and Counterparty Risks 32 Regulatory and Legal Risks 33 Introduction We have identified what we believe reflect key significant risks to the organization, and in turn to our shareholders, which are outlined below.
These include, for example, vendors of computer hardware and software, including on-demand software, and vendors of services such as investment management advisement, information technology services — such as those associated with the Life, Retirement and Property & Casualty policy administrative systems — and delivery services for customer policy-level communications.
These include, for example, vendors of computer hardware and software, including on-demand software, and vendors of services such as investment management advisement, third-party administrators of our supplemental group benefit products, information technology services — such as those associated with policy administrative systems — and delivery services for customer policy-level communications.
We expect that these laws, regulations and proposals could negatively impact our business, including by increasing our legal, compliance and information technology costs, and potentially other costs, including greater Horace Mann Educators Corporation Annual Report on Form 10-K 33 risks of client lawsuits and enforcement activity by regulators.
We expect that changes in these laws, regulations and proposals could negatively impact our business, including by increasing our legal, compliance and information technology costs, and potentially other costs, including greater risks of client lawsuits and enforcement activity by regulators.
The inability of our insurance subsidiaries to compete successfully in these circumstances could adversely affect their financial condition and results of operations and the resulting ability to distribute cash to us.
The inability of our insurance subsidiaries to compete successfully in these circumstances could adversely affect their financial condition and results of operations and the resulting ability to distribute cash to us. The development and maintenance of our various distribution channels are critical to growth in product sales and profits.
The insurance industry is highly regulated. We are subject to extensive regulation and supervision in the jurisdictions in which we do business. Each jurisdiction has a unique and complex set of laws and regulations. Furthermore, certain federal laws impose additional requirements on businesses, including insurers.
We are subject to extensive regulation and supervision in the jurisdictions in which we do business. Each jurisdiction has a unique and complex set of laws and regulations. Furthermore, certain federal laws impose additional requirements on businesses, including insurers. Regulation generally is designed to protect the interests of policyholders, as opposed to stockholders and non-policyholder creditors.
A significant part of our retirement business involves fixed and variable 403(b) tax-qualified products, which are purchased voluntarily by individuals employed by public school systems or other tax-exempt organizations.
Regulatory and Legal Risks Changes in tax rates, laws or regulations could adversely impact our financial results. A significant part of our retirement business involves fixed and variable 403(b) tax-qualified products, which are purchased voluntarily by individuals employed by public school systems or other tax-exempt organizations.
The NAIC has adopted a system of assessing minimum capital adequacy that is applicable to our insurance subsidiaries. This system, known as risk-based capital, is used to identify companies that may merit further regulatory action by analyzing the adequacy of the insurer's surplus in relation to statutory requirements.
Our insurance subsidiaries are subject to a system of assessing minimum capital adequacy, known as risk-based capital (RBC). RBC is used to identify companies that may merit further regulatory action by analyzing the adequacy of the insurer's surplus in relation to statutory requirements. Our insurance subsidiaries could be adversely affected by regulations that change statutory surplus and RBC requirements.
Horace Mann Educators Corporation Annual Report on Form 10-K 21 Risks Related to Economic Conditions, Market Conditions and Investments Volatile financial markets and adverse economic environments can affect financial market risk as well as our financial condition and results of operations. Financial markets in the U.S. and elsewhere can experience extreme volatility and disruption for uncertain periods of time.
Horace Mann Educators Corporation Annual Report on Form 10-K 23 Risks Related to Economic Conditions, Market Conditions and Investments Volatile financial markets and adverse economic environments can affect financial market risk as well as our financial condition and results of operations.
The risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits. Financial Strength, Credit and Counterparty Risks Losses due to defaults by others could reduce our profitability or negatively affect the value of our investments. Third-party debtors may not pay or perform their obligations.
The risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits. Horace Mann Educators Corporation Annual Report on Form 10-K 31 Financial Strength, Credit and Counterparty Risks Losses due to defaults by others could reduce our profitability or negatively affect the value of our investments.
A large-scale pandemic, the occurrence of terrorism or military and other actions, may result in loss of life, property damage, and disruptions to commerce and reduced economic activity. Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets, changes in interest rates, reduced liquidity and economic activity caused by a large-scale pandemic.
Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets, changes in interest rates, reduced liquidity and economic activity caused by a large-scale pandemic.
We are subject to the credit risk of our counterparties, including reinsurers who reinsure business from our insurance companies. Our insurance subsidiaries may cede certain risks to third-party insurance companies through reinsurance.
We are subject to the credit risk of our counterparties, including reinsurers who reinsure business from our insurance companies. Our insurance subsidiaries may cede certain risks to third-party insurance companies through reinsurance. In the event of insolvency of a reinsurer, our financial condition and results of operation could be negatively impacted.
Events, including those external to our operations, could damage our reputation. There are many events which may harm our reputation, including, but not limited to, those discussed in this Item 1A regarding regulatory investigations, legal proceedings, and cyber or other information security incidents.
There are many events which may harm our reputation, including, but not limited to, those discussed in this Item 1A regarding regulatory investigations, legal proceedings, and cyber or other information security incidents. Any negative public perception, founded or otherwise, can be widely and rapidly shared over social media or other means, and could cause damage to our reputation.
With the change in administration, there are initiatives at the federal level to reverse the corporate tax cuts in the favorable Tax Cuts and Jobs Act of 2017 (TCJA), increasing the federal corporate income tax from the current rate of 21%. Any future legislative action could increase our costs, the impact of which could be significant.
Changes in administration could result in initiatives at the federal level increasing the federal corporate income tax from the current rate of 21%. Any future legislative action could increase our costs, the impact of which could be significant.
Our success in marketing and selling our products is largely dependent upon the efforts of our agent sales force and the success of their agency operations. As we expand our business, we may need to expand the number of agencies marketing our products.
Our success in marketing and selling our products is largely dependent upon the efforts of our independent exclusive agent sales force and the success of their agency operations.
The extent of losses from a catastrophe is a function of both the total amount of insured exposures in the area affected by the event and the severity of the event. Although catastrophes can cause losses in a variety of property and casualty lines, most of the catastrophe-related claims of our insurance subsidiaries are related to property coverages.
Although catastrophes can cause losses in a variety of property and casualty lines, most of the catastrophe-related claims of our insurance subsidiaries are related to property coverages.
Legislation and voter initiatives have expanded, in some instances, the states' regulation of rates and have increased data reporting requirements.
States also regulate the rates insurers may charge for certain property and casualty products. Legislation and voter initiatives have expanded, in some instances, the states' regulation of rates and have increased data reporting requirements.
Reserves represent estimates, generally involving actuarial projections at a given time, of what the insurance subsidiaries expect the ultimate settlement and adjustment of claims will cost, net of salvage and subrogation.
Horace Mann Educators Corporation Annual Report on Form 10-K 27 Reserves do not represent an exact calculation of liability. Reserves represent estimates, generally involving actuarial projections at a given time, of what the insurance subsidiaries expect the ultimate settlement and adjustment of claims will cost, net of salvage and subrogation.
This could have a material adverse effect upon the business volume and profitability of the insurance subsidiaries as well as result in increased regulatory scrutiny or action by state regulatory authorities.
If an insurer’s ratio falls below specified levels, the insurer is subject to different degrees of regulatory action depending on the magnitude of the deficiency. This could have a material adverse effect upon the business volume and profitability of the insurance subsidiaries as well as result in increased regulatory scrutiny or action by state regulatory authorities.
We are unable to predict the outcome or effects of any of these potential actions or any other legislative or regulatory proposals as they relate to our businesses.
We are unable to predict the outcome or effects of any of these potential actions or any other legislative or regulatory proposals as they relate to our businesses. Our business is subject to extensive regulation, which limits our operating flexibility and could negatively impact our financial results.
If we are not able to maintain secure access to educators, our financial condition and results of operations could be adversely affected. Our ability to successfully increase new business in the educator market is largely dependent on our ability to effectively access educators either in their school buildings or through other approaches.
Our ability to successfully increase new business in the educator market is largely dependent on our ability to effectively access educators either in their school buildings or through other approaches.
Increases in interest rates, or volatility in the U.S. financial markets could impede access to, or increase the cost of, financing our operations. Recent increases in interest rates have increased our cost of borrowing and volatility in U.S. financial markets could impact our access to, or further increase the cost of, financing.
Recent increases in interest rates have increased our cost of borrowing and volatility in U.S. financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms.
Upon RGA's material breach of the reinsurance agreement, deterioration of its risk-based capital ratio to a certain level, or certain other events, we may recapture the reinsured business. However, in the event of RGA's insolvency, our right to use the assets in the trust account may be delayed.
RGA's financial obligations for the general account liabilities of the reinsured annuity contracts are secured by its assets placed in a comfort trust for our sole use and benefit. Upon RGA's material breach of the reinsurance agreement, deterioration of its risk-based capital ratio to a certain level, or certain other events, we may recapture the reinsured business.
If our employees and independent agents take excessive risks and/or fail to comply with internal policies and practices, the impact of those events may damage our market position and reputation. Individual states may impose additional cybersecurity regulations, increasing the complexity of compliance. Our businesses must comply with regulations to control the privacy of customer, employee and third party data.
If our employees and independent agents take excessive risks and/or fail to comply with internal policies and practices, the impact of those events may damage our market position and reputation.
We accounted for the BCG, BCGS, NTA and Madison National acquisitions using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recognized on our consolidated balance sheet at their respective fair values as of the acquisition date, including recognition of intangible assets.
Lack of successful execution on acquisition integration strategies could result in impairment of goodwill and intangible assets that could adversely affect our results of operations. 26 Annual Report on Form 10-K Horace Mann Educators Corporation We accounted for the NTA and Madison National acquisitions using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recognized on our consolidated balance sheet at their respective fair values as of the acquisition date, including recognition of intangible assets.
However, federal legislation could possibly be enacted to allow states to declare bankruptcy in connection with deficit reductions or mounting unfunded pension liabilities, which could adversely impact the value of our municipal bond portfolio. The default of a major market participant could disrupt the securities markets or clearance and settlement systems in the U.S. or abroad.
States are currently barred from seeking protection in federal bankruptcy court. However, federal legislation could possibly be enacted to allow states to declare bankruptcy in connection with deficit reductions or mounting unfunded pension liabilities, which could adversely impact the value of our municipal bond portfolio.
While we have effectively upgraded our infrastructure technologies with improvements in our data center, a new communications platform and enhancements to our disaster recovery capabilities, our ability to replace or supplement dated, monolithic legacy business systems — such as our Life, Retirement and Property & Casualty policy administrative systems — with more flexible, maintainable, and customer accessible solutions will be necessary to achieve our plans.
Our ability to replace or supplement dated, legacy business systems — such as our Life & Retirement and Property & Casualty policy administrative systems, as well as our financial system — with more flexible, maintainable, and customer accessible solutions will be necessary to achieve our plans.
Because state legislatures remain concerned about the availability and affordability of property and casualty insurance and the protection of policyholders, our insurance subsidiaries expect that they will continue to face efforts by those legislatures to expand regulations to address these concerns. Resulting new legislation could adversely affect the financial condition and results of operations of our insurance subsidiaries.
Legal, statutory and regulatory developments could adversely impact our business by increasing costs or making our business less profitable. Because state legislatures remain concerned about the availability and affordability of property and casualty insurance and the protection of policyholders, our insurance subsidiaries expect that they will continue to face expanded regulations to address these concerns.
Additional regulations could adversely affect the efficiency and effectiveness of business processes, financial condition and results of operations of us, insurers of similar size and/or the insurance industry as a whole. Statutory and regulatory developments could adversely impact our business by increasing costs or making our business less profitable.
Additional federal regulations could adversely affect the efficiency and effectiveness of business processes, financial condition and results of operations of us, insurers of similar size and/or the insurance industry as a whole. Our insurance subsidiaries are regulated by a department of insurance in each state and territory in which we do business.
In some instances and geographic locations, competitors have specifically targeted the educator marketplace with specialized products and programs. We compete in our target market with a number of national providers of personal auto and property insurance and life insurance and retirement products.
We compete in our target market with a number of national providers of personal auto and property insurance, life insurance, retirement products and supplemental group benefits.
Our scale will require us to develop innovative solutions to address these challenges, including consideration of "software as a service" arrangements and other third-party based information technology capabilities.
Our scale will require us to develop innovative solutions to address these challenges, including consideration of "software as a service" arrangements and other third-party based information technology capabilities. More modern approaches to software development and utilization of third-party vendors can augment our internal capacity for these implementations but may not adequately reduce the operational risks of timely and cost-effective delivery.
Past disruptions in the U.S. credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations.
These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations. Changes in interest rates could have a material adverse effect on our financial condition and results of operations.
During or following an economic downturn, our municipal bond portfolio could be subject to a higher risk of default or impairment due to declining municipal tax bases and revenue. States are currently barred from seeking protection in federal bankruptcy court.
These parties may default on their obligations to us due to bankruptcy, lack of liquidity, downturns in the economy or real estate values, operational failure or other reasons. During or following an economic downturn, our municipal bond portfolio could be subject to a higher risk of default or impairment due to declining municipal tax bases and revenue.
More modern approaches to software development and utilization of third-party vendors can augment our internal capacity for these implementations, but may not adequately reduce the operational risks of timely and cost effective delivery. Loss of key vendor relationships could affect our operations. We increasingly rely on services and products provided by a number of vendors in the U.S. and abroad.
Loss of key vendor relationships could affect our operations. We increasingly rely on services and products provided by a number of vendors in the U.S. and abroad.
Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities and the period-to-period changes in fair value could vary significantly.
Further, rapidly changing, and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported in our financial statements, and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition. We evaluate our investment portfolio for credit losses.
These contacts and endorsements help to establish our brand name and presence in the educational community and to enhance access to educators. Operational Risks A large-scale pandemic, the occurrence of terrorism or military actions may have an adverse effect on our business.
These contacts and endorsements help to establish our brand name and presence in the educational community and to enhance access to educators.
Various events can cause catastrophes, including hurricanes, windstorms, hail, severe winter weather, wildfires, earthquakes, explosions and terrorism. The frequency and severity of these catastrophes are inherently Horace Mann Educators Corporation Annual Report on Form 10-K 23 unpredictable.
Various events can cause catastrophes, including hurricanes, windstorms, hail, severe winter weather, wildfires, earthquakes, explosions and terrorism. The frequency and severity of these catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposures in the area affected by the event and the severity of the event.
It is not possible to foresee which, if any, assets, industries or markets may be materially and adversely affected, nor is it possible to foresee the magnitude of such effect. Further, it is also possible that the legal, regulatory and social responses to climate change could have an adverse effect on our financial condition, results of operations and cash flows.
It is not possible to foresee which, if any, assets, Horace Mann Educators Corporation Annual Report on Form 10-K 29 industries or markets may be materially and adversely affected, nor is it possible to foresee the magnitude of such effect.
Underwriting results of property and casualty insurers are subject to weather and other conditions prevailing in an accident year.
Operational Risks A catastrophe event, a series of multiple catastrophe events or a series of non-catastrophe severe weather events could have a material adverse effect on our financial condition and results of operations. Underwriting results of property and casualty insurers are subject to weather and other conditions prevailing in an accident year.
Any negative public perception, founded or otherwise, can be widely and rapidly shared over social media or other means, and could cause damage to our reputation. Damage to our reputation could reduce demand for our insurance products, reduce our ability to recruit and retain employees, or lead to greater regulatory scrutiny of our operations.
Damage to our reputation could reduce demand for our insurance products, reduce our ability to recruit and retain employees, or lead to greater regulatory scrutiny of our operations. As an insurance company, we are paid to accept certain risks.
The personal lines insurance and retirement markets are highly competitive and our financial condition and results of operations may be adversely affected by competitive forces. We operate in a highly competitive environment and compete with numerous insurance companies, as well as mutual fund families, independent agent companies and financial planners.
We operate in a highly competitive environment and compete with numerous insurance companies, as well as mutual fund families, independent agent companies and financial planners. In some instances and geographic locations, competitors have specifically targeted the educator marketplace with specialized products and programs.
Because the reinsurance agreement covers a large volume of our in force annuity business, the transaction exposes us to a concentration of credit risk with respect to this counterparty. RGA's financial obligations for the general account liabilities of the reinsured annuity contracts are secured by its assets placed in a comfort trust for our sole use and benefit.
Because the reinsurance agreement covers a large volume of our in-force annuity 32 Annual Report on Form 10-K Horace Mann Educators Corporation business, the transaction exposes us to a concentration of credit risk with respect to this counterparty.
Risks Related to Supplemental & Group Benefits Segment Actual experience may differ from actuarial assumptions, which could adversely affect our results of operations and financial condition.
Actual experience differing significantly from our life pricing and reserving assumptions could negatively affect our results of operations and financial condition.
Removed
During such times, stresses affecting the global banking system can lead to economic volatility, which can exert significant downward pressure on prices of equity securities and many other investment asset classes and result in severely constrained credit and capital markets, particularly for financial institutions, and an overall loss of investor confidence.
Added
Our business and results of operations are materially affected by conditions in the capital markets and the U.S. economy, as well as by the global economy to the extent it affects the U.S. economy.
Removed
Many states and local governments can also be impacted by adverse economic conditions, which could have an impact on both our niche market and our investment portfolio. Like other financial institutions that face significant financial market risk in their operations, we have been adversely affected by these conditions and could be adversely impacted by similar circumstances in the future.
Added
Actual or perceived stressed conditions, volatility and disruptions in financial asset classes or various capital markets can have an adverse effect on us, both because we have a large investment portfolio and our benefit and claim liabilities are sensitive to changing market factors, including interest rates, credit spreads, derivative prices and availability, and volatility of capital markets.
Removed
Our ability to access the capital markets to refinance outstanding indebtedness or raise capital could be impaired during significant financial market disruptions. As discussed further in subsequent risk factors, in addition to the effects of financial markets volatility, a prolonged economic recession may have other adverse impacts on our financial condition and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeIn addition, we lease office space in suburban Dallas (approximately 114,000 of rentable square feet), suburban Raleigh, N.C., Cherry Hill, N.J and Madison, Wis. which are utilized by one or more of all four reporting segments, depending on the location.
Biggest changeIn addition, we lease office space in suburban Dallas, Tx., Cherry Hill, N.J, and Madison, Wisc. which are utilized by one or more of all four reporting segments, depending on the location. For more information regarding our reporting segments, see Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K.
ITEM 2. I Properties As of December 31, 2022, we owned four buildings located in Springfield, Ill. comprised of our headquarters of approximately 225,000 square feet, a warehouse of approximately 11,000 square feet and two other buildings of approximately 39,000 square feet in aggregate.
ITEM 2. I Properties As of December 31, 2023, we owned three buildings located in Springfield, Ill. comprised of our headquarters of approximately 225,000 square feet, a warehouse of approximately 11,000 square feet and one other building of approximately 12,000 square feet.
For more information regarding our reporting segments, see Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K. We believe our properties and facilities are suitable and adequate for current operations.
We believe our properties and facilities are suitable and adequate for current operations. 36 Annual Report on Form 10-K Horace Mann Educators Corporation

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−1 removed3 unchanged
Biggest changeFor the quarterly periods ended 2022 and 2021, we repurchased shares of our common stock under the Programs as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased under the Programs Approximate Dollar Value of Shares that may yet be Purchased under the Programs 2022: Fourth Quarter — $ — — $41.3 million Third Quarter 295,445 $ 33.87 295,445 $41.3 million Second Quarter 315,625 $ 37.40 315,625 $1.3 million First Quarter 59,746 $ 37.14 59,746 $13.1 million 2021: Fourth Quarter 96,073 $ 37.14 96,073 $15.3 million Third Quarter 5,000 $ 36.88 5,000 $18.9 million Second Quarter 200 $ 37.01 200 $19.1 million First Quarter 38,485 $ 38.44 39,485 $19.1 million
Biggest changeDuring the three months ended September 30, 2022, the 2015 Program was completed and we began repurchasing shares under the 2022 Program. 38 Annual Report on Form 10-K Horace Mann Educators Corporation For the quarterly periods ended 2023 and 2022, we repurchased shares of our common stock under the Programs as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased under the Programs Approximate Dollar Value of Shares that may yet be Purchased under the Programs 2023: Fourth Quarter — $ — — $34.9 million Third Quarter 33,000 $ 28.73 33,000 $34.9 million Second Quarter 35,394 $ 32.47 35,394 $35.8 million First Quarter 128,540 $ 34.01 128,540 $36.9 million 2022: Fourth Quarter — $ — — $41.3 million Third Quarter 295,445 $ 33.87 295,445 $41.3 million Second Quarter 315,625 $ 37.40 315,625 $1.3 million First Quarter 59,746 $ 37.14 59,746 $13.1 million
During 2022, no stock options were exercised for the issuance of our common stock. For information required by Item 201(d) of Regulation S-K regarding the equity compensation plan, see Part III - Item 12, of this Annual Report on Form 10-K.
For information required by Item 201(d) of Regulation S-K regarding the equity compensation plan, see Part III - Item 12, of this Annual Report on Form 10-K.
Horace Mann Educators Corporation Annual Report on Form 10-K 37 Issuer Purchases of Equity Securities On May 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (i.e., the 2022 Program) to begin following the completion of the current $50 million repurchase plan which was authorized on September 30, 2015 (i.e., the 2015 Program).
Issuer Purchases of Equity Securities On May 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (2022 Program) to begin following the completion of the $50 million repurchase plan which was authorized on September 30, 2015 (2015 Program).
Market Price Dividends Fiscal Period High Low Paid 2022: Fourth Quarter $ 40.13 $ 35.01 $ 0.32 Third Quarter 39.51 32.60 0.32 Second Quarter 42.62 34.22 0.32 First Quarter 42.95 36.58 0.32 2021: Fourth Quarter $ 42.10 $ 36.21 $ 0.31 Third Quarter 42.00 36.59 0.31 Second Quarter 44.13 36.96 0.31 First Quarter 44.74 37.77 0.31 The payment of dividends in the future is subject to the discretion of the Board and will depend upon general business conditions, legal restrictions and other factors the Board may deem to be relevant.
Market Price Dividends Fiscal Period High Low Paid 2023: Fourth Quarter $ 33.79 $ 28.67 $ 0.33 Third Quarter 30.12 27.94 0.33 Second Quarter 33.85 29.04 0.33 First Quarter 38.10 32.33 0.33 2022: Fourth Quarter $ 40.13 $ 35.01 $ 0.32 Third Quarter 39.51 32.60 0.32 Second Quarter 42.62 34.22 0.32 First Quarter 42.95 36.58 0.32 The payment of dividends in the future is subject to the discretion of the Board and will depend upon general business conditions, legal restrictions and other factors the Board may deem to be relevant.
Comparison of Cumulative Five Year Total Return to Shareholders Dec. 2017 Dec. 2018 Dec. 2019 Dec. 2020 Dec. 2021 Dec. 2022 HMEC $ 100 $ 87 $ 104 $ 104 $ 99 $ 99 S&P 500 Insurance Index 100 89 115 114 150 165 S&P 500 Index 100 96 126 149 191 157 Holders and Shares Issued As of February 16, 2023, the number of holders of our common stock was approximately 50,000.
Comparison of Cumulative Five-Year Total Return to Shareholders Dec. 2018 Dec. 2019 Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 HMEC $ 100 $ 120 $ 119 $ 113 $ 113 $ 103 S&P 500 Insurance Index 100 129 129 169 186 203 S&P 500 Index 100 126 156 200 164 207 Holders and Shares Issued As of February 16, 2024, the number of holders of our common stock was approximately 32,000.
Additional information is contained in Part I - Item 1, Cash Flow and in Part II - Item 8, Note 14 of the Consolidated Financial Statements in this Annual Report on Form 10-K. 36 Annual Report on Form 10-K Horace Mann Educators Corporation Shareholder Return Performance Graph The graph below sets forth the total five-year shareholder return on our common stock.
Additional information is contained in Part I - Item 1, Cash Flow and in Part II - Item 8, Note 13 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
The graph assumes a $100 investment as of December 31, 2017. The S&P 500 Index and the S&P 500 Insurance Index assume an annual reinvestment of dividends in calculating total return. We assume reinvestment of quarterly dividends when paid.
Horace Mann Educators Corporation Annual Report on Form 10-K 37 Shareholder Return Performance Graph The graph below sets forth the total five-year shareholder return on our common stock. The graph assumes a $100 investment as of December 31, 2018. The S&P 500 Index and the S&P 500 Insurance Index assume an annual reinvestment of dividends in calculating total return.
Removed
During the three months ended September 30, 2022, the 2015 Program was completed and we began repurchasing shares under the 2022 Program.
Added
We assume reinvestment of quarterly dividends when paid.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

147 edited+45 added−127 removed49 unchanged
Biggest changeIncome before income taxes 55.4 82.0 -32.4 % Income tax expense 6.6 13.6 -51.5 % Net income 48.8 68.4 -28.7 % Core earnings* 52.6 68.4 -23.1 % Life policies in force (in thousands) 162 163 -0.6 % Life insurance in force $ 20,030 $ 19,548 2.5 % Life persistency - LTM 96.0 % 96.5 % -0.5 pts Annuity contracts in force (in thousands) 228 230 -0.9 % Horace Mann Retirement Advantage ® contracts in force (in thousands) 17 15 13.3 % Cash value persistency - LTM 93.7 % 94.4 % -0.7 % (1) (Favorable) unfavorable.
Biggest change($ in millions) Year Ended December 31, 2023-2022 2023 2022 Change % Life & Retirement Net premiums written and contract deposits* $ 573.3 $ 544.8 5.2 % Net premiums and contract charges earned 151.7 144.0 5.3 % Net investment income 369.9 338.3 9.3 % Other income 17.0 17.0 — % Life mortality costs 69.4 68.6 1.2 % Interest credited 201.8 172.1 17.3 % Change in reserves 53.8 52.9 1.7 % Operating expenses 98.7 102.4 -3.6 % DAC amortization expense 28.1 23.0 22.2 % Intangible asset amortization expense 0.2 1.1 -81.8 % Income before income taxes 86.6 74.4 16.4 % Income tax expense 15.1 10.6 42.5 % Net income 71.5 63.8 12.1 % Core earnings* 71.5 67.6 5.8 % Life policies in force (in thousands) 162 162 — % Life insurance in force $ 20,476 $ 20,030 2.2 % Life persistency - LTM 95.7 % 96.0 % -0.3 pts Annuity contracts in force (in thousands) 223 228 -2.2 % Horace Mann Retirement Advantage ® contracts in force (in thousands) 19 17 11.8 % Cash value persistency - LTM 91.5 % 93.7 % -2.3 % The Life & Retirement segment net income rose 12.1% in 2023 reflecting higher net investment income.
We reinsure a $2.5 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.
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.
The risk of interest rate fluctuation is managed through asset/liability management techniques, including cash flow analysis. In addition, an annuity reinsurance agreement we entered which reinsures a $2.5 billion block of in force fixed annuities with a minimum crediting rate of 4.5%, helps mitigate the risk of not being able to generate appropriate spreads on the annuity business.
The risk of interest rate fluctuation is managed through asset/liability management techniques, including cash flow analysis. In addition, an annuity reinsurance agreement we entered which reinsures a $2.4 billion block of in force fixed annuities with a minimum crediting rate of 4.5%, helps mitigate the risk of not being able to generate appropriate spreads on the annuity business.
This portfolio was 92.0% investment grade, based on fair value, with an average credit quality rating of A+. Our investment guidelines target single corporate issuer concentrations to 0.5% of invested assets for AA or AAA rated securities, 0.35% of invested assets for A or BBB rated securities, and $5.0 million for non-investment grade securities.
This portfolio was 92.6% investment grade, based on fair value, with an average credit quality rating of A+. Our investment guidelines target single corporate issuer concentrations to 0.5% of invested assets for AA or AAA rated securities, 0.35% of invested assets for A or BBB rated securities, and $5.0 million for non-investment grade securities.
A detailed discussion of the process utilized to estimate loss reserves, risk factors considered and the impact of adjustments recorded during recent years is included in Part II - Item 8, Note 8 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
A detailed discussion of the process utilized to estimate loss reserves, risk factors considered and the impact of adjustments recorded during recent years is included in Part II - Item 8, Note 5 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
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 2022 Investor Supplement.
An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Annual Report on Form 10-K and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Fourth Quarter 2023 Investor Supplement.
In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. See Part II - Item 8, Note 19 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.
In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. See Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information.
We anticipate that our sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments, shareholder dividends and our share repurchase program. Additional information is contained in Part II - Item 8, Note 14 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
We anticipate that our sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments, shareholder dividends and our share repurchase program. Additional information is contained in Part II - Item 8, Note 13 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
In conjunction with our management of liquidity and other asset/liability 64 Annual Report on Form 10-K Horace Mann Educators Corporation management objectives, we, from time to time, will sell fixed maturity securities prior to maturity, and reinvest the proceeds into other investments with different interest rates, maturities or credit characteristics.
In conjunction with our management of liquidity and other asset/liability 60 Annual Report on Form 10-K Horace Mann Educators Corporation management objectives, we, from time to time, will sell fixed maturity securities prior to maturity, and reinvest the proceeds into other investments with different interest rates, maturities or credit characteristics.
Investments Information regarding our investment portfolio, which is comprised primarily of investment grade, fixed maturity securities, is presented in Part II - Item 7, Results of Operations by Segment, Part I - Item 1, Investments and in Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Investments Information regarding our investment portfolio, which is comprised primarily of investment grade, fixed maturity securities, is presented in Part II - Item 7, Results of Operations by Segment, Part I - Item 1, Investments and in Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
These segments are defined based on financial information management uses to evaluate performance and to determine the allocation of resources. The determination of segment data is described in more detail in Part II - Item 8, Note 19 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
These segments are defined based on financial information management uses to evaluate performance and to determine the allocation of resources. The determination of segment data is described in more detail in Part II - Item 8, Note 17 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Horace Mann Educators Corporation Annual Report on Form 10-K 61 Fixed Maturity and Equity Securities Portfolios The table below presents our fixed maturity and equity securities portfolio by major asset class, including the 10 largest sectors of our corporate bond holdings (based on fair value).
Horace Mann Educators Corporation Annual Report on Form 10-K 57 Fixed Maturity and Equity Securities Portfolios The table below presents our fixed maturity and equity securities portfolio by major asset class, including the 10 largest sectors of our corporate bond holdings (based on fair value).
We estimate the anticipated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s current effective rate and are compared to the amortized cost basis of the security.
We estimate the anticipated recovery based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s effective interest rate and are compared to the amortized cost basis of the security.
See Part II - Item 8, Note 11 of the Consolidated Financial Statements in this Annual Report on Form 10-K for further information. Outlook for 2023 The following discussion provides outlook information for our results of operations and capital position.
See Part II - Item 8, Note 11 of the Consolidated Financial Statements in this Annual Report on Form 10-K for further information. Outlook for 2024 The following discussion provides outlook information for our results of operations and capital position.
The valuation of hard-to-value fixed maturity securities (generally 75 - 125 securities) is more subjective because the markets are less liquid and there is a lack of observable market-based inputs. This may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur.
The valuation of hard-to-value fixed maturity securities (generally 75 - 125 securities) is more subjective because the markets are less liquid and there is a lack of observable market inputs. This may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur at the measurement date.
The annualized investment yield on the portfolio excluding limited partnership interests* was as follows: Year Ended December 31, 2022 2021 Investment yield, excluding limited partnership interests, pretax - annualized* 4.3% 4.3% Investment yield, excluding limited partnership interests, after tax - annualized* 3.4% 3.4% During 2022, we continued to identify and purchase investments, including alternative investments, with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines for the core portfolio.
The annualized investment yield on the portfolio excluding limited partnership interests* was as follows: Year Ended December 31, 2023 2022 Investment yield, excluding limited partnership interests, pretax - annualized* 4.7% 4.3% Investment yield, excluding limited partnership interests, after tax - annualized* 3.8% 3.4% During 2023, we continued to identify and purchase investments, including alternative investments, with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines for the core portfolio.
On May 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (i.e., the 2022 Program) to begin following the completion of the $50 million repurchase plan that was authorized on September 30, 2015 (i.e., the 2015 Program).
On May 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (2022 Program) to begin following the completion of the $50 million repurchase plan that was authorized on September 30, 2015 (2015 Program).
As a general guideline, based on our existing policies and investment portfolio, the impact from a 100 basis point decline in the average reinvestment rate would reduce Life & Retirement net investment income by approximat ely $2.5 million in year one an d $7.5 million in year two, reducing the annualized net interest spread by approximately 9 basis points and 25 basis points in the respective periods, compared to the current period annualized net interest spread.
As a general guideline, based on our existing policies and investment portfolio, the impact from a 100 basis point decline in the average reinvestment rate would reduce Life & Retirement net investment income by approximat ely $1.9 million in year one an d $5.7 million in year two, reducing the annualized net interest spread by approximately 7 basis points and 20 basis points in the respective periods, compared to the current period annualized net interest spread.
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 $2.5 billion of fixed annuity liabilities related to legacy individual annuities written in 2002 or earlier.
Investment Results Total net investment income includes net investment income from our investment portfolio as well as accreted investment income from the deposit asset on reinsurance related to our reinsured block of approximately $2.4 billion of fixed annuity liabilities related to legacy individual annuities written in 2002 or earlier.
For a discussion of the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, 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, 2021, which was filed with the Securities and Exchange Commission (SEC) on February 25, 2022.
For a discussion of the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II - Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2023.
As of December 31, 2022, our federal income tax returns for years prior to 2019 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.
As of December 31, 2023, our federal income tax returns for years prior to 2020 are no longer subject to examination by the Internal Revenue Service. We do not anticipate any assessments for tax years that remain subject to examination to have a material effect on our financial position or results of operations.
Additional information regarding net unrealized investment gains (losses) on fixed maturity securities as of December 31, 2022 is included in Part II - Item 7, Results of Operations by Segment and Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
Additional information regarding net unrealized investment gains (losses) on fixed maturity securities as of December 31, 2023 is included in Part II - Item 7, Results of Operations by Segment and Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
The goodwill and intangible asset impairment charges in the Life & Retirement segment decreased the effective income tax rate by 38.7 percentage points as of December 31, 2022. In August 2022, the Inflation Reduction Act of 2022 (IRA) was passed by the U.S. Congress and signed into law by the Executive Branch.
The goodwill and intangible asset impairment charges in the Life & Retirement segment decreased the effective income tax rate by 9.3 percentage points as of December 31, 2022. In August 2022, the Inflation Reduction Act of 2022 (IRA) was passed by the U.S. Congress and signed into law by the Executive Branch.
As of December 31, 2021, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (Senior Notes), which mature on December 1, 2025, issued at a discount resulting in an effective yield of 4.53%. Interest on the Senior Notes is payable semi-annually at a rate of 4.50%.
As of December 31, 2023, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (2015 Senior Notes), which will mature on December 1, 2025, issued at a discount resulting in an effective yield of 4.53%. Interest on the 2015 Senior Notes is payable semi-annually at a rate of 4.50%.
Our MD&A generally discusses the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Our MD&A generally discusses the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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 and variable annuities • life insurance, primarily traditional term and whole life insurance products Horace Mann Educators Corporation Annual Report on Form 10-K 39 • worksite direct insurance products, including cancer, heart, hospital, supplemental disability and accident • employer-sponsored insurance products, primarily long-term disability and short-term disability We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families, whether they engage with Horace Mann directly or through their district/employer.
Through our subsidiaries, we market and underwrite individual and group insurance and financial solutions tailored to the needs of the educational community including: • personal lines of property and casualty insurance, primarily auto and property coverages • retirement products, primarily tax-qualified fixed, variable and fixed indexed annuities • life insurance, primarily traditional term and whole life insurance products 40 Annual Report on Form 10-K Horace Mann Educators Corporation • worksite direct insurance products, including cancer, heart, hospital, supplemental disability and accident • employer-sponsored insurance products, primarily long-term disability and short-term disability We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families, whether they engage with Horace Mann directly or through their district/employer, as well as other markets of those who serve the community.
As of December 31, 2022, we held $0.9 billion of cash, U.S. government and agency fixed maturity securities and public equity securities (excluding non-redeemable preferred stocks and foreign equity securities) which, under normal market conditions, could be rapidly liquidated. Certain remote events and circumstances could constrain our liquidity.
As of December 31, 2023, we held $1.1 billion of cash, U.S. government and agency fixed maturity securities and public equity securities (excluding non-redeemable preferred stocks and foreign equity securities) which, under normal market conditions, could be rapidly liquidated. Certain remote events and circumstances could constrain our liquidity.
Financing Activities Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, issuances and repurchases of our common stock, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
Financing Activities Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, issuances and repurchases of our common stock, finance-type reinsurance agreements, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
Government and federally sponsored agency securities and $561.0 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 a NRSO.
Government and federally sponsored agency securities and $639.6 million of mortgage-backed and other asset-backed securities issued by U.S. Government and federally sponsored agencies. (3) This category primarily represents private placement and municipal securities not rated by a NRSO.
Rating of Fixed Maturity Securities and Equity Securities (1) The following table presents the composition and fair value of our fixed maturity and equity securities portfolios by rating category. As of December 31, 2022, 91.6% of these combined portfolios were investment grade, based on fair value, with an overall average credit quality rating of A+.
Rating of Fixed Maturity Securities and Equity Securities (1) The following table presents the composition and fair value of our fixed maturity and equity securities portfolios by rating category. As of December 31, 2023, 92.1% of these combined portfolios were investment grade, based on fair value, with an overall average credit quality rating of A+.
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.
Our insurance subsidiaries generate cash flow from premium and investment income, generally well in excess of their immediate needs for policy obligations, operating expenses and other cash requirements. Cash provided by operating activities primarily reflects net cash flows generated by the insurance subsidiaries. For 2023, net cash provided by operating activities increased $130.6 million.
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.
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.
Horace Mann Educators Corporation Annual Report on Form 10-K 53 Results of Operations by Segment Consolidated financial results primarily reflect the results of Property & Casualty, Life & Retirement, and Supplemental & Group Benefits reporting segments as noted in the Introduction and Outlook for 2023 sections of this MD&A, as well as the Corporate & Other reporting segment.
Horace Mann Educators Corporation Annual Report on Form 10-K 49 Results of Operations by Segment Consolidated financial results primarily reflect the results of Property & Casualty, Life & Retirement, and Supplemental & Group Benefits reporting segments as noted in the Introduction section of this MD&A, as well as the Corporate & Other reporting segment.
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 2022, other income decreased $19.5 million, primarily due to an indemnification agreement associated with the employer-sponsored business.
Generally, such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in our intent to hold a fixed maturity security. Other Income For 2023, other income increased $4.5 million primarily due to an indemnification agreement associated with the employer-sponsored business line.
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.
All four agencies currently have assigned the same insurance financial strength ratings to our Property & Casualty and Life insurance subsidiaries. Only A.M. Best currently rates our Supplemental & Group Benefits subsidiaries, with an assigned rating of A (Excellent).
Cash at beginning of year 133.7 22.3 N.M. Cash at end of year $ 42.8 $ 133.7 -68.0 % Operating Activities As a holding company, we conduct our principal operations in the personal lines portion of the property and casualty, supplemental and life insurance industries through our subsidiaries.
Cash at beginning of year 42.8 133.7 N.M. Cash at end of year $ 29.7 $ 42.8 -30.6 % Operating Activities As a holding company, we conduct our principal operations in the personal lines portion of the property and casualty, supplemental and life insurance industries through our subsidiaries.
Best HMEC (parent company) N.A. bbb (stable) 7/28/2022 HMEC's Life & Retirement subsidiaries A (stable) N.A. 7/28/2022 HMEC's Property & Casualty subsidiaries A (stable) N.A. 7/28/2022 HMEC's Supplemental & Group Benefits subsidiaries Madison National Life Insurance Company A- (stable) N.A. 7/28/2022 National Teachers Associates Life Insurance Company A (stable) N.A. 7/28/2022 Fitch A (stable) BBB (stable) 10/18/2022 Moody's HMEC (parent company) Baa2 (stable) 8/3/2022 HMEC's Life Group A2 (stable) 7/27/2022 HMEC's P&C Group A2 (stable) 8/3/2022 S&P A (stable) BBB (stable) 2/7/2023 Reinsurance Programs Information regarding the reinsurance programs for our Property & Casualty, Life & Retirement and Supplemental & Group Benefits segments is located in Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K.
Best HMEC (parent company) N.A. bbb (stable) 8/10/2023 HMEC's Life & Retirement subsidiaries A (stable) N.A. 8/10/2023 HMEC's Property & Casualty subsidiaries A (stable) N.A. 8/10/2023 HMEC's Supplemental & Group Benefits subsidiaries Madison National Life Insurance Company A (stable) N.A. 8/10/2023 National Teachers Associates Life Insurance Company A (stable) N.A. 8/10/2023 Fitch HMEC (parent company) BBB (stable) 8/17/2023 HMEC's Life Group A (stable) 8/17/2023 HMEC's P&C Group A (negative) 8/17/2023 Moody's HMEC (parent company) Baa2 (negative) 7/28/2023 HMEC's Life Group A2 (negative) 5/31/2023 HMEC's P&C Group A2 (negative) 7/28/2023 S&P A (stable) BBB (stable) 1/30/2024 Reinsurance Programs Information regarding the reinsurance programs for our Property & Casualty, Life & Retirement and Supplemental & Group Benefits segments is located in Part I - Item 1, Reporting Segments of this Annual Report on Form 10-K.
($ in millions) Year Ended December 31, 2022-2021 2022-2021 2022 2021 Change $ Change % Balance at beginning of the year $ 782.5 $ 590.5 $ 192.0 32.5 % Advances received from FHLB funding agreements 159.0 554.0 (395.0) -71.3 % Principal repayment on FHLB funding agreements (149.0) (362.0) 213.0 -58.8 % Balance at end of the year $ 792.5 $ 782.5 $ 10.0 1.3 % Horace Mann Educators Corporation Annual Report on Form 10-K 65 Liquidity Sources and Uses Our potential sources and uses of funds principally include the following activities: Property & Casualty Life & Retirement Supplemental & Group Benefits Corporate & Other Activities for potential sources of funds Receipt of insurance premiums, contractholder charges and fees ☑ ☑ ☑ Recurring service fees, commissions and overrides ☑ ☑ ☑ ☑ Contractholder fund deposits ☑ ☑ Reinsurance and indemnification program recoveries ☑ ☑ ☑ Receipts of principal, interest and dividends on investments ☑ ☑ ☑ ☑ Proceeds from sales of investments ☑ ☑ ☑ ☑ Proceeds from FHLB borrowing and funding agreements ☑ ☑ ☑ Proceeds from reverse repurchase agreements ☑ ☑ ☑ Intercompany loans ☑ ☑ ☑ ☑ Capital contributions from parent ☑ ☑ ☑ Dividends or return of capital from subsidiaries ☑ Tax refunds/settlements ☑ ☑ ☑ ☑ Proceeds from periodic issuance of additional securities ☑ Proceeds from debt issuances ☑ Proceeds from revolving credit facility ☑ Receipt of intercompany settlements related to employee benefit plans ☑ Activities for potential uses of funds Payment of claims and related expenses ☑ ☑ ☑ Payment of contract benefits, surrenders and withdrawals ☑ ☑ Reinsurance cessions and indemnification program payments ☑ ☑ ☑ Payment of operating costs and expenses ☑ ☑ ☑ ☑ Payments to purchase investments ☑ ☑ ☑ ☑ Repayment of FHLB borrowing and funding agreements ☑ ☑ ☑ Repayment of reverse repurchase agreements ☑ ☑ ☑ Payment or repayment of intercompany loans ☑ ☑ ☑ ☑ Capital contributions to subsidiaries ☑ Dividends or return of capital to shareholders/parent company ☑ ☑ ☑ ☑ Tax payments/settlements ☑ ☑ ☑ ☑ Common share repurchases ☑ Debt service expenses and repayments ☑ Repayment on revolving credit facility ☑ Payments related to employee benefit plans ☑ Payments for business acquisitions ☑ 66 Annual Report on Form 10-K Horace Mann Educators Corporation We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions.
($ in millions) Year Ended December 31, 2023-2022 2023-2022 2023 2022 Change $ Change % Balance at beginning of the year $ 792.5 $ 782.5 $ 10.0 1.3 % Advances received from FHLB funding agreements 301.5 159.0 142.5 89.6 % Principal repayment on FHLB funding agreements (189.5) (149.0) (40.5) 27.2 % Balance at end of the year $ 904.5 $ 792.5 $ 112.0 14.1 % Horace Mann Educators Corporation Annual Report on Form 10-K 61 Liquidity Sources and Uses Our potential sources and uses of funds principally include the following activities: Property & Casualty Life & Retirement Supplemental & Group Benefits Corporate & Other Activities for potential sources of funds Receipt of insurance premiums, contractholder charges and fees ☑ ☑ ☑ Recurring service fees, commissions and overrides ☑ ☑ ☑ ☑ Contractholder fund deposits ☑ ☑ Reinsurance and indemnification program recoveries ☑ ☑ ☑ Receipts of principal, interest and dividends on investments ☑ ☑ ☑ ☑ Proceeds from sales of investments ☑ ☑ ☑ ☑ Proceeds from FHLB borrowing and funding agreements ☑ ☑ ☑ Proceeds from reverse repurchase agreements ☑ ☑ ☑ Intercompany loans ☑ ☑ ☑ ☑ Capital contributions from parent ☑ ☑ ☑ Dividends or return of capital from subsidiaries ☑ Tax refunds/settlements ☑ ☑ ☑ ☑ Proceeds from periodic issuance of additional securities ☑ Proceeds from debt issuances ☑ Proceeds from revolving credit facility ☑ Receipt of intercompany settlements related to employee benefit plans ☑ Activities for potential uses of funds Payment of claims and related expenses ☑ ☑ ☑ Payment of contract benefits, surrenders and withdrawals ☑ ☑ Reinsurance cessions and indemnification program payments ☑ ☑ ☑ Payment of operating costs and expenses ☑ ☑ ☑ ☑ Payments to purchase investments ☑ ☑ ☑ ☑ Repayment of FHLB borrowing and funding agreements ☑ ☑ ☑ Repayment of reverse repurchase agreements ☑ ☑ ☑ Payment or repayment of intercompany loans ☑ ☑ ☑ ☑ Capital contributions to subsidiaries ☑ Dividends or return of capital to shareholders/parent company ☑ ☑ ☑ ☑ Tax payments/settlements ☑ ☑ ☑ ☑ Common share repurchases ☑ Debt service expenses and repayments ☑ Repayment on revolving credit facility ☑ Payments related to employee benefit plans ☑ Payments for business acquisitions ☑ 62 Annual Report on Form 10-K Horace Mann Educators Corporation We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions.
This MD&A covers the following: Page Introduction 39 Consolidated Financial Highlights 40 Consolidated Results of Operations 41 Outlook for 2023 43 Application of Critical Accounting Estimates 45 Results of Operations by Segment 54 Property & Casualty 54 Life & Retirement 57 Supplemental & Group Benefits 60 Corporate & Other 61 Investment Results 61 Liquidity and Capital Resources 64 Future Adoption of New Accounting Standards 69 Effects of Inflation and Changes in Interest Rates 70 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.
This MD&A covers the following: Page Introduction 40 Consolidated Financial Highlights 41 Consolidated Results of Operations 42 Outlook for 2024 44 Application of Critical Accounting Estimates 45 Results of Operations by Segment 50 Property & Casualty 50 Life & Retirement 53 Supplemental & Group Benefits 56 Corporate & Other 57 Investment Results 57 Liquidity and Capital Resources 60 Future Adoption of New Accounting Standards 66 Effects of Inflation and Changes in Interest Rates 66 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.
See Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information. There has been a significant increase in interest rates since December 31, 2021, driven mostly by increases in U.S. Treasury rates, though credit spreads also widened. The 10-year U.S.
See Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K for more information. There has been a significant increase in interest rates since December 31, 2021, driven mostly by a rise in U.S. Treasury rates.
In total and through December 31, 2022, 1,711,042 shares have been repurchased under the 2015 and 2022 Programs at an average price of $34.31 per share. The repurchase of shares was funded through use of cash. As of December 31, 2022, $41.3 million remained authorized for future share repurchases under the 2022 Program. The following table summarizes our debt obligations.
In total and through December 31, 2023, 1,907,976 shares have been repurchased under the 2015 and 2022 Programs at an average price of $34.49 per share. The repurchase of shares was funded through use of cash. As of December 31, 2023, $34.9 million remained authorized for future share repurchases under the 2022 Program. The following table summarizes our debt obligations.
For each fixed maturity security in an unrealized loss position, we assess whether management with the appropriate authority has made the decision to sell or whether it is more likely than not we will be required to sell the security before the anticipated recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes.
For each fixed maturity security where fair value is below amortized cost, we assess whether management with the appropriate authority has made the decision to sell or whether it is more likely than not we will be required to sell the security before the anticipated recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes.
Evaluation of Credit Loss Impairments for Fixed Maturity Securities For fixed maturity securities classified as available for sale, the difference between amortized cost, net of a credit loss allowance (i.e., amortized cost, net) and fair value, net of certain other items and deferred income taxes (as disclosed in Part II - Item 8, Note 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K) is reported as a component of accumulated other comprehensive income (loss) (i.e., AOCI) on the Consolidated Balance Sheets and is not reflected in the operating results of any period until reclassified to net income upon the consummation of a transaction with an unrelated third party or when a credit loss allowance is recorded.
Evaluation of Credit Loss Impairments for Fixed Maturity Securities For fixed maturity securities classified as available for sale, the difference between amortized cost, net of a credit loss allowance (i.e., amortized cost, net) and fair value, net of certain other items and deferred income taxes is reported as a component of accumulated other comprehensive income (loss) (i.e., AOCI) on the Consolidated Balance Sheets and is not reflected in the operating results of any period until reclassified to net income upon 46 Annual Report on Form 10-K Horace Mann Educators Corporation the consummation of a transaction with an unrelated third party or when a credit loss allowance transaction is recorded.
Our fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the fixed maturity securities portfolio to be priced through pricing services. Approximately 88.6% of the fixed maturity securities portfolio, based on fair value, was priced through pricing services or index priced using observable inputs as of December 31, 2022.
Our fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the fixed maturity securities portfolio to be priced through pricing services using observable inputs. Approximately 87.7% of the fixed maturity securities portfolio, based on fair value, was priced through valuation services or priced using observable inputs as of December 31, 2023.
Horace Mann Educators Corporation Annual Report on Form 10-K 55 Catastrophe losses incurred were as follows: (1) ($ in millions) Year Ended December 31, 2022 2021 Three months ended March 31st $ 7.3 $ 11.0 June 30th 45.7 17.5 September 30th 14.6 38.6 December 31st 12.4 11.1 Total for year $ 80.0 $ 78.2 (1) See Part I - Item 1 - Reporting Segments - Property & Casualty for further details regarding catastrophe losses for the past five years.
Horace Mann Educators Corporation Annual Report on Form 10-K 51 Catastrophe losses incurred were as follows: (1) ($ in millions) Year Ended December 31, 2023 2022 Three months ended March 31st $ 22.4 $ 7.3 June 30th 41.5 45.7 September 30th 28.7 14.6 December 31st 5.0 12.4 Total for year $ 97.6 $ 80.0 (1) See Part I - Item 1 - Reporting Segments - Property & Casualty for further details regarding catastrophe losses for the past five years.
Best, Morningstar, Egan Jones and Kroll). 62 Annual Report on Form 10-K Horace Mann Educators Corporation As of December 31, 2022, our diversified fixed maturity securities portfolio consisted of 3,724 investment positions, issued by 2,421 entities, and totaled approximately $5.2 billion in fair value.
Best, Egan Jones and Kroll). 58 Annual Report on Form 10-K Horace Mann Educators Corporation As of December 31, 2023, our diversified fixed maturity securities portfolio consisted of 3,587 investment positions, issued by 2,340 entities, and totaled approximately $5.2 billion in fair value.
At the time of issuance of this Annual Report on Form 10-K, we estimate that 2023 full year net income will be within a range of $2.00 to $2.30 per diluted share, generating a core return on equity* near 6%.
Consolidated Results At the time of issuance of this Annual Report on Form 10-K, we estimate that 2024 full year net income will be within a range of $3.00 to $3.30 per diluted share, generating a core return on equity* near 9%.
The aggregate amount of dividends that may be paid in 2023 from all of our insurance subsidiaries without prior regulatory approval is approximately $110.3 million, excluding the impact and timing of prior year dividends, of which $179.9 million was paid during the year ended December 31, 2022.
The aggregate amount of dividends that may be paid in 2024 from all of our insurance subsidiaries without prior regulatory approval is approximately $112.3 million, excluding the impact and timing of prior year dividends, of which $127.5 million was paid during the year ended December 31, 2023.
($ in millions) Interest Rates Final Maturity December 31, 2022 2021 Short-term debt Revolving 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 $0.2 and $0.3 and unamortized debt issuance costs of $0.8 and $1.1 4.50% 2025 249.0 248.6 FHLB borrowing —% 2022 — 5.0 Total $ 498.0 $ 502.6 (1) We designate our debt obligations as "long-term" based on maturity date at issuance.
($ in millions) Interest Rates Final Maturity December 31, 2023 2022 Short-term debt Revolving Credit Facility Variable 2026 $ — $ 249.0 Long-term debt (1) 7.25% 2023 Senior Notes, Aggregate principal amount of $300.0 less unaccrued discount of $0.5 and $0.0 and unamortized debt issuance costs of $2.8 and $0.0 7.25% 2028 296.7 — 4.50% 2015 Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.2 and $0.2 and unamortized debt issuance costs of $0.5 and $0.8 4.50% 2025 249.3 249.0 Total $ 546.0 $ 498.0 (1) We designate our debt obligations as "long-term" based on maturity date at issuance.
Effective January 1, 2022, we acquired all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (Madison National), for $172.3 million which added employer-sponsored products.
Effective January 1, 2022, we acquired all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (Madison National), for $172.3 million which added employer-sponsored products. As a result of the acquisition, Madison National became a wholly owned subsidiary of HMEC.
Total shareholder dividends paid were $52.6 million for the year ended December 31, 2022. In 2022, the Board declared regular quarterly dividends of $0.32 per share. Compared to the full year per share dividends paid in 2021 of $1.24, the total 2022 dividends paid per share of $1.28 represented an increase of 3.2%.
Total shareholder dividends paid were $53.9 million for the year ended December 31, 2023. In 2023, the Board declared regular quarterly dividends of $0.33 per share. Compared to the full year per share dividends paid in 2022 of $1.28, the total 2023 dividends paid per share of $1.32 represented an increase of 3.1%.
This inherent uncertainty is particularly significant for liability-related exposures due to the extended period, often many years that transpire between a loss event, receipt of related claims data from policyholders and ultimate settlement of the claim.
There is a high degree of uncertainty inherent in the estimates of ultimate losses underlying the liabilities for unpaid claims and claim expenses. This inherent uncertainty is particularly significant for liability-related exposures due to the extended period, often many years that transpire between a loss event, receipt of related claims data from policyholders and ultimate settlement of the claim.
During the third quarter of 2022, the 2015 Program was completed and we began repurchasing shares Horace Mann Educators Corporation Annual Report on Form 10-K 67 under the 2022 Program. During 2022, we repurchased 670,816 shares of our common stock at an average price per share of $35.82 under the Programs.
During Horace Mann Educators Corporation Annual Report on Form 10-K 63 the third quarter of 2022, the 2015 Program was completed and we began repurchasing shares under the 2022 Program. During 2023, we repurchased 196,934 shares of our common stock at an average price per share of $32.85 under the Programs.
We estimate that a 2.0% change in claim severity or Horace Mann Educators Corporation Annual Report on Form 10-K 49 claim frequency for the most recent 36 month period is a reasonably likely scenario based on recent experience and would result in a change in the estimated net reserves of between $5.0 million and $9.0 million for long-tail liability related exposures (auto liability coverages) and between $1.0 million and $3.0 million for short-tail liability related exposures (property and auto physical damage coverages).
We estimate that a 2.0% change in claim severity or claim frequency for unpaid losses is a reasonably likely scenario based on recent experience and would result in a change in the estimated direct reserves of approximately $6.3 million for long-tail liability related exposures 48 Annual Report on Form 10-K Horace Mann Educators Corporation (auto liability coverages) and approximately $2.0 million for short-tail liability related exposures (property and auto physical damage coverages).
For a discussion of Horace Mann Educators Corporation Annual Report on Form 10-K 69 this new accounting standard, see Part II - Item 8, Note 1 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
For a discussion of these new accounting standards, see Part II - Item 8, Note 1 of the Consolidated Financial Statements in this Annual Report on Form 10-K.
($ in millions, unless otherwise indicated) Year Ended December 31, 2022-2021 2022 2021 Change % Financial Data: Net premiums written*: Auto $ 394.0 $ 394.5 -0.1 % Property and other 223.5 213.3 4.8 % Total net premiums written 617.5 607.8 1.6 % Change in unearned net premiums (9.3) 9.6 N.M.
($ in millions, unless otherwise indicated) Year Ended December 31, 2023-2022 2023 2022 Change % Financial Data: Net premiums written*: Auto $ 439.1 $ 394.0 11.4 % Property and other 245.3 223.5 9.8 % Total net premiums written 684.4 617.5 10.8 % Change in unearned net premiums (38.8) (9.3) N.M.
The break down of net investment gains (losses) by transaction type is shown in the following table: ($ in millions) Year Ended December 31, 2022 2021 Credit loss and intent-to-sell impairments $ (10.7) $ (10.4) Sales and other, net (17.8) 4.3 Change in fair value - equity securities (33.2) (2.3) Change in fair value and losses realized on settlements - derivatives 5.2 (2.6) Net investment losses $ (56.5) $ (11.0) From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at the reporting date.
The breakdown of net investment gains (losses) by transaction type were as follows: ($ in millions) Year Ended December 31, 2023 2022 Credit loss and intent-to-sell impairments $ (7.1) $ (10.7) Sales and other, net (25.0) (17.8) Change in fair value - equity securities 7.9 (33.2) Change in fair value and losses realized on settlements - derivatives 0.2 5.2 Net investment losses $ (24.0) $ (56.5) From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at the reporting date.
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.
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.
No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K. Financial Ratings Our principal insurance subsidiaries are rated by A.M. Best Company, Inc. (A.M. Best), Fitch, Moody's, and S&P. These rating agencies have also assigned ratings to our Senior Notes.
Unless withdrawn by us, this registration statement remains effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K. Financial Ratings Our principal insurance subsidiaries are rated by A.M. Best Company, Inc. (A.M. Best), Fitch, Moody's, and S&P.
Our liabilities for unpaid claims and claim expense reserves for Property & Casualty were as follows: ($ in millions) December 31, 2022 December 31, 2021 Case Reserves IBNR Reserves Total (1) Case Reserves IBNR Reserves Total (1) Auto liability $ 105.6 $ 197.5 $ 303.1 $ 99.7 $ 183.2 $ 282.9 Auto other 17.7 (4.8) 12.9 14.4 (6.1) 8.3 Property 25.2 38.9 64.1 16.6 42.4 59.0 All other 2.8 5.8 8.6 1.6 10.6 12.2 Total $ 151.3 $ 237.4 $ 388.7 $ 132.3 $ 230.1 $ 362.4 (1) These amounts are gross, before reduction for ceded reinsurance reserves.
Our liabilities for unpaid claims and claim expense reserves for Property & Casualty were as follows: ($ in millions) December 31, 2023 December 31, 2022 Case Reserves IBNR Reserves Total (1) Case Reserves IBNR Reserves Total (1) Auto liability $ 99.5 $ 210.7 $ 310.2 $ 105.6 $ 197.5 $ 303.1 Auto other 16.8 (1.4) 15.4 17.7 (4.8) 12.9 Property 23.7 61.5 85.2 25.2 38.9 64.1 All other 1.2 4.8 6.0 2.8 5.8 8.6 Total $ 141.2 $ 275.6 $ 416.8 $ 151.3 $ 237.4 $ 388.7 (1) These amounts are gross, before reduction for ceded reinsurance reserves.
As described in Application of 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.
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.
As of December 31, 2022, the impact of a reserve re-estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.0 million in net income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by approximately $2.0 million.
As of December 31, 2023, the impact of a reserve re-estimation resulting in a 1.0% increase in net reserves would be a decrease of approximately $2.5 million in net income. A reserve re-estimation resulting in a 1.0% decrease in net reserves would increase net income by approximately $2.5 million. No prior years' reserve development was recorded in 2023.
The current environment of higher interest rates have afforded us the opportunity to invest insurance cash flows and reinvested cash flows at higher yields, which could be a benefit to net investment income, but the higher interest rates have caused an increase to both realized investment losses when securities are sold, and to net unrealized investment losses in the remaining portfolios.
The current environment of higher interest rates have afforded us the opportunity to invest new insurance cash flows and reinvested cash flows at higher yields, which should be a benefit to net investment income, but the higher interest rates have caused net unrealized investment losses in the portfolios.
If no rating is available from a NRSO, 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) As of December 31, 2022, the AA rated fair value amount included $342.6 million of U.S.
If no rating is available from a NRSRO, then a rating provided by the investment manager is used. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings. (2) As of December 31, 2023, the AA rated fair value amount included $388.8 million of U.S.
($ in millions) Year Ended December 31, 2022-2021 2022 2021 Change % Interest expense $ 19.4 $ 13.8 40.6 % Net investment losses, pretax (56.5) (11.0) N.M. Other operating expenses, net investment income and other income (7.8) (11.1) -54.8 % Net investment losses, after tax (44.5) (8.6) N.M.
($ in millions) Year Ended December 31, 2023-2022 2023 2022 Change % Interest expense $ 29.7 $ 19.4 53.1 % Net investment losses, pretax (24.0) (56.5) N.M. Other operating expenses, net investment income and other income (4.0) (7.8) -147.4 % Net investment losses, after tax (18.8) (44.5) N.M.
Detailed information regarding the redemption terms of the Senior Notes is contained in Part II - Item 8, Note 10 of the Consolidated Financial Statements in this Annual Report on Form 10-K. The Senior Notes are traded in the open market (HMN 4.50). As of December 31, 2022, we had no borrowings outstanding with FHLB.
Detailed information regarding the redemption terms of the 2015 Senior Notes is contained in the Part II - Item 8, Note 10 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. The 2015 Senior Notes are traded in the open market (HMN 4.50).
The following table summarizes our consolidated cash flows activity for the periods indicated ($ in millions) Year Ended December 31, 2022-2021 2022 2021 Change % Net cash provided by operating activities $ 171.5 $ 204.9 -16.3 % Net cash used in investing activities (214.6) (302.0) -28.9 % Net cash provided by (used in) financing activities (47.8) 208.5 -122.9 % Net increase (decrease) in cash (90.9) 111.4 N.M.
The following table summarizes our consolidated cash flows activity for the periods indicated ($ in millions) Year Ended December 31, 2023-2022 2023 2022 Change % Net cash provided by operating activities $ 302.1 $ 171.5 76.2 % Net cash used in investing activities (107.4) (214.6) -50.0 % Net cash provided by (used in) financing activities (207.8) (47.8) 334.7 % Net increase (decrease) in cash (13.1) (90.9) N.M.
Typical inputs used by these pricing sources include, but are not limited to, reported trades, bids, offers, benchmark yield curves, benchmarking of like securities, rating designations, sector groupings, issuer spreads and/or estimated cash flows, prepayment speeds and default rates as well as the Bloomberg Spread Matrix, among others.
Typical inputs used by these pricing sources include, but are not limited to, reported trades, broker quotes, yield curves, and involve the benchmarking of similar securities, rating designations, sector groupings, issuer spreads and/or estimated cash flows, prepayment speeds and default rates, among others, in determining the inputs to the prices.
For traditional and limited-payment contracts, a standard discount rate was used to remeasure the liabilities that is equivalent to market level yields for upper-medium-grade (low credit risk) fixed income instruments. The discount rate assumption will be updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income.
For traditional and limited-payment contracts, a standard discount rate is used to remeasure the liabilities that is equivalent to market level yields for upper-medium-grade (low credit risk) fixed income instruments. The discount rate assumption is updated quarterly.
The selection of the market inputs and assumptions used to estimate the fair value of hard-to-value fixed maturity securities requires judgment and includes: benchmark yield, liquidity premium, estimated cash flows, prepayment speeds and default rates, spreads, weighted average life and credit rating. The extent of the use of each market input depends on the market sector and market conditions.
The selection of the market inputs and assumptions used to estimate the fair value of hard-to-value fixed maturity securities requires judgment and may include: benchmark yield, liquidity premium, prepayment speeds and default rates, spreads, weighted average life and credit rating.
($ in millions) Year Ended December 31, 2022-2021 2022 2021 Change % Net investment income - investment portfolio $ 297.4 $ 321.4 -7.5 % Investment income - deposit asset on reinsurance 103.5 101.1 2.4 % Total net investment income 400.9 422.5 -5.1 % Pretax net investment losses (56.5) (11.0) N.M.
($ in millions) Year Ended December 31, 2023-2022 2023 2022 Change % Net investment income - investment portfolio $ 339.9 $ 297.4 14.3 % Investment income - deposit asset on reinsurance 104.9 103.5 1.4 % Total net investment income 444.8 400.9 11.0 % Pretax net investment losses (24.0) (56.5) N.M.
As of December 31, 2022, the fixed maturity securities portfolio had $606.9 million of pretax gross unrealized investment losses on $4,267.9 million of fair value related to 3,102 positions. Of the investment positions with gross unrealized investment losses, there were 547 securities trading below 80.0% of the carrying amount as of December 31, 2022.
As of December 31, 2023, the fixed maturity securities portfolio had $480.5 million of pretax gross unrealized investment losses on $3,894.7 million of fair value related to 2,500 positions. Of the investment positions with gross unrealized investment losses, there were 405 securities trading below 80.0% of the carrying amount as of December 31, 2023.
Unless withdrawn by us earlier, this registration statement will remain effective through March 10, 2024. No securities associated with the registration statement have been issued at the time of issuance of this Annual Report on Form 10-K. On March 13, 2018, we filed a "shelf" registration statement on Form S-4 with the SEC which became effective on May 2, 2018.
Unless withdrawn by us earlier, this registration statement will remain effective through March 10, 2024 and no securities associated with the registration statement have been issued. At the time of issuance of this Annual Report on Form 10-K, we expect to file another "universal shelf" registration statement on Form S-3 with the SEC in March 2024.
Based on the reserves as of the transition date, the potential effect of a decrease of 50 basis points in the discount rate would result in an increase to the liability for future policy benefits by approximately $166 million and the potential effect of an increase of 50 basis points in the discount rate would result in a decrease to the liability for future policy benefits by approximately $148 million.
The potential effect of a decrease of 50 basis points in the discount rate as of December 31, 2023 would result in an increase to the liability for future policy benefits of approximately $100 million and the potential effect of an increase of 50 basis points in the discount rate would result in a decrease to the liability for future policy benefits of approximately $90 million.
Total debt represented 31.4% of total capital including net unrealized investment losses on fixed maturity securities (25.6% of total capital excluding net unrealized investment losses on fixed maturity securities*) as of December 31, 2022, which was slightly above our long-term target of 25.0%.
Total debt represented 31.7% of total capital including net unrealized investment losses on fixed maturity securities (26.9% of total capital excluding net unrealized investment losses on fixed maturity securities and net reserve remeasurements attributed to discount rates*) as of December 31, 2023, which was slightly above our long-term target of 25.0%.
However, any AMT paid would be indefinitely available as a credit carryover that could reduce future regular tax in excess of AMT. HMEC and its controlled group of corporations have determined that it likely will not be an applicable corporation in 2023.
However, any AMT paid would be indefinitely available as a credit carryover that could reduce future regular tax in excess of AMT. HMEC and its controlled group of corporations have determined that it is not an applicable corporation in 2023. In making such determination, the group has relied upon guidance issued by the U.S Treasury Department during 2023.
Investment yields on our portfolio excluding limited partnership interests, remained near 4.25% for 2022, with new money yields continuing to exceed yields in our core fixed maturity securities portfolio. For 2022, pretax net investment losses increased $45.5 million primarily due to changes in fair values of equity securities and realized losses on disposition of fixed maturity securities.
Investment yield on the portfolio excluding limited partnership interests was 4.9%, with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio. For 2023, pretax net investment losses decreased $32.5 million primarily due to changes in fair values of equity securities.
Unfavorable prior years' auto reserve development of $28.0 million was reported for 2022, reflecting the impact on severity of overall inflation, including higher medical costs, increased usage of medical services and the current judicial environment.
Unfavorable prior years' auto reserve development of $28.0 million was reported in 2022, reflecting the impact on severity of overall inflation, including higher medical costs, increased usage of medical services and the current judicial environment. The reported property combined ratio increased 7.3 points in 2023, partially driven by catastrophe and non-catastrophe weather activity.
In 2022, auto net premiums written* decreased $0.5 million, primarily due to the continuing decline in auto risks in force partially offset by rate actions taken in the third and fourth quarters. For 2022, average net premium written and average net premium earned increased 2.7% and 0.2%, respectively.
In 2023, auto net premiums written* increased $45.1 million, primarily due to rate actions partially offset by the continuing decline in auto risks in force. For 2023, average auto net premium written and average net premium earned increased 13.1% and 8.2%, respectively.
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 $5.0 million FHLB borrowings that was outstanding as of December 31, 2021 is reported as Long-term debt in the Consolidated Balance Sheet.
As of December 31, 2023, we had no borrowings outstanding with FHLB. The Board has authorized a maximum amount equal to 15% of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing capacity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor discussions regarding our investments see Part II - Item 7, Results of Operations by Segment of this report regarding net investment gains (losses) and Part I - Item 1, Investments of this Annual Report on Form 10-K. 70 Annual Report on Form 10-K Horace Mann Educators Corporation Our Life & Retirement earnings are affected by the spreads between investment yields and rates credited or accruing on fixed annuity and life insurance liabilities with account values.
Biggest changeFor 66 Annual Report on Form 10-K Horace Mann Educators Corporation discussions regarding our investments see Part II - Item 7, Results of Operations by Segment of this report regarding net investment gains (losses) and Part I - Item 1, Investments of this Annual Report on Form 10-K.
Based on our overall exposure to interest rate risk, we believe that these changes in interest rates would not materially affect our consolidated near-term financial position, results of operations or cash flows. Horace Mann Educators Corporation Annual Report on Form 10-K 71
Horace Mann Educators Corporation Annual Report on Form 10-K 67 Based on our overall exposure to interest rate risk, we believe that these changes in interest rates would not materially affect our consolidated near-term financial position, results of operations or cash flows.
As a general guideline, we estimate that pretax net income in 2023 and 2024 would decrease by approximately $7.6 million for each 100 basis point decline in reinvestment rates, before assuming any reduction in annuity crediting rates on in force contracts.
As a general guideline, we estimate that pretax net income in 2024 and 2025 would decrease by approximately $7.1 million for each 100 basis point decline in reinvestment rates, before assuming any reduction in annuity crediting rates on in force contracts.
Overall, as of December 31, 2022, the duration of the fixed maturity securities portfolio was estimated to be approximately 6.4 years and the duration of our insurance liabilities and debt was estimated to be approximately 6.5 years.
Overall, as of December 31, 2023, the duration of the fixed maturity securities portfolio was estimated to be approximately 6.0 years and the duration of our insurance liabilities and debt was estimated to be approximately 6.5 years.
Assuming an immediate increase of 100 basis points in interest rates, the fair value of our assets and liabilities would both decrease, the net of which would result in a decrease in shareholders' equity of approximately $94.0 million after tax, or 5. 0% . In each case, these changes in interest rates assume a parallel shift in the yield curve.
Assuming an immediate increase of 100 basis points in interest rates, the fair value of our assets and liabilities would both decrease, the net of which would result in a decrease in shareholders' equity of approximately $57.7 million after tax, or 4.8%. In each case, these changes in interest rates assume a parallel shift in the yield curve.
Based on the most recent study, assuming an immediate decrease of 100 basis points in interest rates, the fair value of our assets and liabilities would both increase, the net of which would result in a increase in shareholders' equity of approximately $41.9 million after tax, or 2.2%.
Based on the most recent study, assuming an immediate decrease of 100 basis points in interest rates, the fair value of our assets and liabilities would both increase, the net of which would result in a increase in shareholders' equity of approximately $79.0 million after tax, or 6.5%.
As of the time of issuance of this Annual Report on Form 10-K, derivatives are only used to manage the interest crediting rate risk within our FIA and IUL products. As of December 31, 2022, approximately 10.6% of the fixed maturity securities portfolio supported Property & Casualty, 76.4% supported Life & Retirement, and 13.0% supported Supplemental & Group Benefits.
As of the time of issuance of this Annual Report on Form 10-K, derivatives are only used to manage the interest crediting rate risk within our FIA and IUL products. As of December 31, 2023, approximately 12.2% of the fixed maturity securities portfolio supported Property & Casualty, 75.7% supported Life & Retirement, and 12.1% supported Supplemental & Group Benefits.
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Our Life & Retirement earnings are affected by the spreads between investment yields and rates credited or accruing on fixed annuity and life insurance liabilities with account values.

Other HMN 10-K year-over-year comparisons