Slide 1: Full-year 2021 Investor Presentation
Full-year 2021 Investor Presentation February 1, 2022 Information as December 31, 2021, unless otherwise noted; slide 16 contains clarification as of Feb. 2, 2022
Slide 2: Safe Harbor Statement and Non-GAAP Measures
Safe Harbor Statement and Non-GAAP Measures Certain statements made in this presentation should be considered forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements are related t
Slide 3: Our Foundation: Financially sound company with strong strategy for profitable growth
Our Foundation: Financially sound company with strong strategy for profitable growth Financial Niche Multiline Longevity strength market model • 1945: Founded by Educators for • $14.4B in assets(1) • Educators have preferred • Business mix balanced Educators to sell auto insurance • $1.3B in premium
Slide 4: Driven by a noble mission
Driven by a noble mission Mission We listen to and understand educators and those who serve our community. They are taking care of our children’s future. We believe they deserve someone to look after theirs. Vision We aspire to be the company of choice to provide financial solutions for all educator
Slide 5: Commitment to making a positive impact extends to all stakeholders
Commitment to making a positive impact extends to all stakeholders Our ESG commitment is ingrained in long-term strategy and day-to-day operations We are committed to • Recognize the importance of carbon neutrality and actively working to reduce reducing our carbon carbon footprint through installat
Slide 6: Value proposition for educator customers delivered through focus on "PDI"
Value proposition for educator customers delivered through focus on “PDI” Provided roadmap for fix-and-build and transformational stages Serving K-12 Educator Market Focused Focused on “PDI” “PDI” Products Homogenous customer set with attractive • Products designed to meet educators’ risk profiles n
Slide 7: Sizeable, growing opportunity in core K-12 education market
Sizeable, growing opportunity in core K-12 education market Additional opportunities to grow in legacy adjacent markets U.S. elementary and secondary education teachers, projected(1) • 7.5 million K-12 educators nationwide(1) - Includes teachers, administrators and support staff 3,795 3,820 3,846 3,
Slide 8: K-12 education a homogeneous market with similar customer characteristics and goals
K-12 education a homogeneous market with similar customer characteristics and goals Reachable through both retail and worksite channels Desire to Responsible, Conservative Dedicated to improve risk-adverse educator total & loyal students and loyal compensation • Strong desire for • Passion for educa
Slide 9: Relevance for educators grows with expanded worksite capabilities
Relevance for educators grows with expanded worksite capabilities Helping educators protect what they have today and prepare for a successful tomorrow Retail solutions Worksite solutions • Solutions directly selected by • Solutions offered to educators an educator, often working with via their distr
Slide 10: Strategic emphasis on solutions tailored for educators at every life stage
Strategic emphasis on solutions tailored for educators at every life stage Retirement Preparing to retire Established educator New Issues: • How to manage educator Issues: retirement income • Worried about Issues: ensuring smooth • Need to plan wealth Pre-educator • Protecting assets retirement tran
Slide 11: Expanded product set aligns with educator needs throughout life stages
Expanded product set aligns with educator needs throughout life stages Retirement Preparing to retire Established educator New educator Pre-educator Renters insurance Auto insurance Employer-paid life, disability and supplemental health insurance 403(b) retirement plan Home insurance Voluntary suppl
Slide 12: Enables customers to engage with Horace Mann the way they choose
Enables customers to engage with Horace Mann the way they choose “Horace Mann Companies” brings together three organizations with decades of commitment to educators and strong reputations in the market Purchase Purchase through from local, employer- trusted agent sponsored program Worksite Educators
Slide 13: Addition of worksite solutions caps multi-year transformation
Addition of worksite solutions caps multi-year transformation Successfully navigating pandemic environment LEVERAGE LEADERSHIP: 2022 AND BEYOND Horace Mann TRANSFORMATION: 2019-2021 enters 2022 Initiated pre-pandemic prepared for • Improved key levers of underlying profitability leadership improveme
Slide 14: Leverage leadership stage: Targeting growth across all product lines in 2022 and beyond
Leverage leadership stage: Targeting growth across all product lines in 2022 and beyond Strategies to leverage leadership focus on initiatives to maximize profitable growth and gain market share LEVERAGE LEADERSHIP: 2022 AND BEYOND Maximize worksite Cross-sell educators Leverage Auto opportunity Con
Slide 15: Earnings trajectory illustrates clear path to sustainable double-digit ROE
Earnings trajectory illustrates clear path to sustainable double-digit ROE through profitable growth Expect 2022 EPS in range of $3.45 - $3.65 2022 will include at least 15 cents from newly acquired Madison National Life’s current business activity, as well as initial contributions of the strategic
Slide 16: 2022 core EPS expected to be in range of $3.45 to $3.65
2022 core EPS expected to be in range of $3.45 to $3.65 Net investment income expected to in line with 2021, modeling limited partnership portfolio returns closer to the average historical levels Segment 2022 guidance Key drivers of range • Expect to generate about $50 million in Property & $44 to $
Slide 17: Allocation of excess capital to prioritize shareholder value creation
Allocation of excess capital to prioritize shareholder value creation As a larger and more diverse organization, Horace Mann should generate more than $50 million in excess capital each year, available to support growth and to return to shareholders $50 9% $47.24 CAGR $45 $43.74 $40.58 $40 $35.38 $3
Slide 18: Business details and results
Business details and results
Slide 19: 2021 results demonstrate value of multi-year emphasis on products, distribution and infrastructure
2021 results demonstrate value of multi-year emphasis on products, distribution and infrastructure Fourth-quarter earnings for each segment ahead of expectations due to strong net investment income, despite after-tax catastrophe losses of $9 million and higher auto loss ratio Core EPS $4.00 $3.59 •
Slide 20: P&C segment: Providing coverage to protect what educators have today
P&C segment: Providing coverage to protect what educators have today P&C Premiums Written ($608M)(1) Opportunity • Preferred risk profile • Loyal customers less likely to leave due to rate actions Products • Auto, homeowners, renters and umbrella • Majority of P&C business is bundled Auto and Home P
Slide 21: P&C segment: Core earnings of $57M and continued underlying profitability
P&C segment: Core earnings of $57M and continued underlying profitability Premiums Written 2021 results 800 682 683 634 663 636 608 • Segment profitable for both the fourth quarter 600 and full year with stronger net investment $millions income 400 • Catastrophe loss costs above historic averages •
Slide 22: Supplemental segment: Providing options for educators to address unexpected events
Supplemental segment: Providing options for educators to address unexpected events Supplemental coverage in-force(1) Opportunity • Educators facing rising out-of-pocket healthcare costs Other • No correlation between Supplemental morbidity risk, Life 4% mortality risk or P&C weather risks Products •
Slide 23: Supplemental segment: Highest sales quarter since beginning of pandemic
Supplemental segment: Highest sales quarter since beginning of pandemic Operating ratios 50% 2021 results • $2.2 million in fourth-quarter sales - 57.0% increase over 4Q 2020; reflects improving 41.5% access in some geographies 40.0% 40% 38.7% 37.6% 38.4% • Continued strong core earnings* due to: 37
Slide 24: Retirement segment: Helping educators meet their financial goals with tailored solutions
Retirement segment: Helping educators meet their financial goals with tailored solutions Assets under administration 14 Opportunity • Educators face complicated retirement system 12 2019 reinsurance offerings transaction of legacy 10 annuity block with minimum • Educators want guidance to plan for t
Slide 25: Retirement segment: Product suite meets unique needs of educator market
Retirement segment: Product suite meets unique needs of educator market Net annuity contract deposits* 2021 results 600 • 4.6% increase in net annuity contract 500 deposits for full year 502 • 90.3% rise in core earnings excluding 447 439 449 400 419 429 DAC unlocking* on strong investment spread $m
Slide 26: Life segment: Sizeable opportunity in our middle-market educator niche
Life segment: Sizeable opportunity in our middle-market educator niche Individual insurance in force(1) Opportunity • Many educators are uninsured or underinsured Products Traditional term • Basic coverages appropriate for 71% educator income levels Experience Life(2) • Full suite of Life products a
Slide 27: Life segment: Profitable in-force block
Life segment: Profitable in-force block Life sales(1) & premium written 12 140 2021 results 120 • Life annualized sales up 2.4% over prior year, with fourth-quarter sales up 9.5% 9 100 on sales of recurring premium policies 80 • Core earnings for the year rose 54.8% $millions $millions 6 due to stro
Slide 28: Investments: High-quality, well-diversified portfolio
Investments: High-quality, well-diversified portfolio Constructed to support insurance liabilities through various market cycles Portfolio composition(1) • $6.2 billion fixed-maturity portfolio $7.3 billion fair value • 64% A-rated or higher Short-term 3.4% U.S. Treasury • A+ weighted-average credit
Slide 29: $347M Commercial Mortgage Loan Fund Portfolio
$347M Commercial Mortgage Loan Fund Portfolio Diversified pool of high-quality loans Loans by Property Type 1% 4% Office • Majority of exposure is to open-ended funds comprised of senior loans 8% Multi-Family 9% 33% Retail • Fund structure and diversification of managers provide access to broader In
Slide 30: $366M Limited Partnership Fund Portfolio
$366M Limited Partnership Fund Portfolio Well diversified by strategy, vintage year, and potential volatility of returns Limited Partnership Funds by Strategy 5% 5% 9% Hedge Funds • 8.57% average annual return with IG Infrastructure Debt relatively low volatility of returns 7% Infrastructure Equity
Slide 31: Strong capital position, with more than adequate capital to grow businesses
Strong capital position, with more than adequate capital to grow businesses Capital Ratios • Capital management strategies support strong capital ratios 600% 569% 0.0 - P&C loss reserves held at top half of 536% independent actuarial range 507% 500% 504% - Conservative L&R product design 500% 0.5 -
Slide 32: Appendix
Appendix
Slide 33: Highly rated by all rating agencies
Highly rated by all rating agencies Education market focus, earnings diversification and capital strength cited Agency Rating Outlook (affirmed/reviewed) • AM Best upgraded Financial Strength Rating of subsidiary NTA Life to A AM Best A Stable (Excellent) in recent rating action Company (7/14/21) •
Slide 34: Strong corporate governance policies aligned with long-term shareholder interests
Strong corporate governance policies aligned with long-term shareholder interests Effective board Performance-based Governance best structure NEO compensation practices • Separate CEO and • Up to 78% of NEOs’ target • Clawback provision for both chairman compensation linked to cash & equity awards p
Slide 35: 2022 single-event catastrophe reinsurance provides PML coverage of approximately 400+ years
2022 single-event catastrophe reinsurance provides PML coverage of approximately 400+ years Casualty Property(1) $20M ~400+ yrs $175M THIRD LAYER 2nd LAYER CASUALTY $85M xs $90M CLASH & CONTINGENCY $10M xs $10M $90M SECOND LAYER $10M $40M xs $50M 1st LAYER CASUALTY CLASH & CONTINGENCY $50M $5M xs $5
Slide 36: Horace Mann at a glance
Horace Mann at a glance Exchange ticker symbol NYSE:HMN Share Price $38.01(1) Weighted Average Diluted Shares (for 4Q21) 42.2 million Market Capitalization $1.6 billion(1) Annualized Dividend Per Share $1.24 Dividend Yield Per Share 3.2%(1) Book Value Per Share* $36.64(2) Analyst Coverage Dowling &