8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: February 4, 2009

HORACE MANN EDUCATORS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	1-10890	37-0911756
(State of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1 Horace Mann Plaza, Springfield, Illinois 62715-0001

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: 217-789-2500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Forward-looking Information

Statements included in the accompanying press release that state Horace Mann Educators Corporation’s (the “Company”) or its management’s intentions, hopes, beliefs, expectations or predictions of future events or the Company’s future financial performance are forward-looking statements and involve known and unknown risks, uncertainties and other factors. Horace Mann is not under any obligation to (and expressly disclaims any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Please refer to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2008 and the Company’s past and future filings and reports filed with the Securities and Exchange Commission for information concerning the important factors that could cause actual results to differ materially from those in forward-looking statements.

Item 2.02: Results of Operations and Financial Condition

On February 4, 2009, Horace Mann Educators Corporation issued a press release reporting its financial results for the three and twelve month periods ended December 31, 2008. A copy of the press release is attached as Exhibit 99.2 and is incorporated by reference herein.

Item 9.01: Financial Statements and Exhibits

(d) Exhibits.

99.1 Glossary of Selected Terms

99.2 Press release dated February 4, 2009 reporting financial results for the three and twelve month periods ended December 31, 2008.

1

SIGNATURE

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

HORACE MANN EDUCATORS CORPORATION
By:	/s/ Bret A. Conklin
Name:	Bret A. Conklin
Title:	Senior Vice President & Controller
	(Principal Accounting Officer)

Date: February 4, 2009

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EX-99.1

Exhibit 99.1

Glossary of Selected Terms

The following measures are used by the Company’s management to evaluate performance against historical results and establish targets on a consolidated basis. A number of these measures are components of net income or the balance sheet but, in some cases, may be considered non-GAAP financial measures under applicable SEC rules because they are not displayed as separate line items in the Consolidated Statement of Operations or Consolidated Balance Sheets, and in some cases, require inclusion or exclusion of certain items not ordinarily included or excluded in a GAAP financial measure. In the opinion of the Company’s management, a discussion of these measures is meaningful to provide investors with an understanding of the significant factors that comprise the Company’s periodic results of operations and financial condition.

Agent - A licensed representative of an insurer in marketing insurance products.

• Career agents or Exclusive agents - Agents under contract with the Company to market only the Company’s products and limited additional third-party vendor products authorized by the Company.

• Experienced agents - Career Agents with more than two years of experience with the Company. Their compensation is comprised of commissions and incentives.

• Financed agents - Career Agents in their first two years of employment with the Company. Their compensation is comprised of a base salary (subsidy) and commissions, with the base salary (subsidy) component declining as the agent gains more experience. Financed Agents are also eligible for incentives.

• Licensed producers - Staff of Career Agents who are licensed to write insurance business.

• Independent agents - Agents who are under contract with the Company to market the Company’s annuity products but who are not restricted to writing only the Company’s products and products authorized by the Company.

Book value per share excluding the fair value adjustment for investments - The result of dividing total shareholders’ equity excluding after tax net unrealized gains and losses on fixed maturities and equity securities, including the related effect on certain deferred policy acquisition costs and value of acquired insurance in force, by ending shares outstanding. Book value per share is the most directly comparable GAAP measure.

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Catastrophe costs - The sum of catastrophe losses and property and casualty catastrophe reinsurance reinstatement premiums.

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

Net income before realized investment gains and losses - Net income adjusted to exclude after tax realized investment gains and losses. Net income is the most directly comparable GAAP measure. A projection of net income, including after tax realized investment gains and losses, is not accessible on a forward-looking basis because management believes that it is not possible to provide a reliable forecast of realized investment gains and losses, which can vary substantially from one period to another and may have a significant impact on net income.

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

Prior Years’ Reserve Development - A measure which the Company reports for its property and casualty segment which identifies the increase or decrease in net incurred claim and claim adjustment expense reserves at successive valuation dates for claims which occurred in previous calendar years. In the opinion of the Company’s management, a discussion of prior years’ loss reserve development is useful to investors as it allows them to assess the impact on current period earnings of incurred claims experience from the current calendar year and previous calendar years.

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

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

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

• Combined Ratio - The sum of the Loss Ratio and the Expense Ratio. A Combined Ratio less than 100% generally indicates profitable underwriting prior to the consideration of investment income.

• Combined Ratio Excluding Catastrophes and Prior Years’ Reserve Development - The sum of the Loss Ratio and the Expense Ratio adjusted to remove the effect of catastrophe costs and prior years’ reserve development. The Combined Ratio is the most directly comparable GAAP measure.

Return on equity - The ratio of (1) trailing 12-month net income to (2) the average of ending shareholders’ equity for the current quarter end and the preceding four quarter ends.

Sales or Annualized New Sales - Sales represent the amount of new business sold during the period and exclude renewal of policies sold in previous periods. Sales are measured by the Company as premiums and deposits to be collected over the 12 months following the sale of a new policy, and this time period may extend into the following calendar year. Sales should not be viewed as a substitute for any financial measure determined in accordance with GAAP, including “sales” as it relates to non-insurance companies, and the Company’s definition of sales might differ from that used by other companies. The Company utilizes sales information as a performance measure that indicates the productivity of Career Agents and Independent Agents. Sales are also a leading indicator of future revenue trends.

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EX-99.2

Exhibit 99.2

[Horace Mann Educators Corporation logo]

Dwayne D. Hallman

Senior Vice President - Finance

Horace Mann Educators Corporation

(217) 788-5708

www.horacemann.com

HORACE MANN REPORTS RESULTS

FOR FOURTH QUARTER AND FULL YEAR

SPRINGFIELD, Ill., February 4, 2009 — Horace Mann Educators Corporation (NYSE:HMN) today reported net income of $22.9 million (58 cents per share) and $10.9 million (27 cents per share) for the three and twelve months ended December 31, 2008, respectively, compared to net income of $18.0 million (41 cents per share) and $82.8 million ($1.86 per share) for the same periods in 2007. Included in net income were net realized losses on securities of $8.2 million (a gain of $2.7 million after tax, or 7 cents per share, reflecting the reduction of the deferred tax allowance established at September 30, 2008) and $63.9 million ($41.5 million after tax, or $1.02 per share) for the three and twelve months ended December 31, 2008, respectively. In 2007, net income reflected net realized investment losses of $5.5 million ($3.6 million after tax, or 8 cents per share) and $3.4 million ($2.2 million after tax, or 5 cents per share) for the three and twelve months, respectively. All per-share amounts are stated on a diluted basis.

“Horace Mann’s fourth quarter earnings were adversely impacted by the poor performance and continued volatility of the financial markets and by reestimates of prior period catastrophe losses. In spite of those impacts, our underlying profit fundamentals remained strong, with net income before realized investment gains and losses of 51 cents and $1.29 per share for the quarter and full year exceeding our guidance range,” said Louis G. Lower II, President and Chief Executive Officer. “For the current accident year and excluding catastrophes, our property and casualty combined ratio of approximately 90 percent for both the quarter and full year was 1 percentage point better than the respective prior year periods. In addition, excluding the impact of the valuation of deferred policy acquisition costs and change in the guaranteed minimum death benefit reserve, combined annuity and life segment pretax earnings were only modestly below our strong prior year results,” continued Lower. “Meanwhile, compared to both fourth quarter and full year 2007, average productivity of the nearly 250 agents who have completed our Agency Business School (“ABS”) training continued to be notably better than their non-ABS counterparts in our lead auto and annuity lines, in spite of the difficult competitive and economic environments.”

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“Our underlying 2008 results support a preliminary estimate of full-year 2009 net income before realized investment gains and losses of between $1.45 and $1.65 per share,” said Lower. “This projection anticipates, for property and casualty, a return to more normal catastrophe levels, a reduced level of favorable prior years’ reserve development and a modest increase in underlying combined ratios; and, for annuity, a return to historical market appreciation levels for 2009.”

Segment Earnings

The property and casualty segment recorded net income of $14.5 million for the quarter, a decrease of $1.6 million compared to the same period in 2007, including a $2.7 million increase in after tax catastrophe costs. Pretax catastrophe costs in the current quarter were $9.9 million compared to $5.9 million incurred in the fourth quarter of 2007. The fourth quarter 2008 amount included approximately $7 million pretax of adverse reserve development for catastrophe activity in the third quarter of 2008 related to Hurricanes Gustav and Ike. The fourth quarter 2008 property and casualty combined ratio was 92.9 percent, including 7.2 percentage points due to catastrophe costs, compared to 91.9 percent, including 4.3 percentage points due to catastrophe costs, in the prior year period. Favorable prior years’ reserve development totaling $6.7 million was recorded in the fourth quarter, which represented 4.8 percentage points on the combined ratio, compared to $5.2 million, or 3.8 percentage points on the combined ratio, recorded in the fourth quarter of 2007. For full year 2008, favorable prior years’ reserve development of $18.1 million was $1.9 million less than the favorable development recorded in 2007.

Annuity segment net income was $2.9 million and $17.3 million for the three and twelve months ended December 31, 2008, respectively, reflecting decreases of $1.0 million and $0.3 million compared to the same periods in 2007. In 2008, improvements in the interest margin were offset by the adverse impact of the financial markets on the level of contract charges earned. For the three and twelve months ended December 31, 2008, the valuation of annuity deferred policy acquisition costs had a $4 million net negative impact on pretax earnings, with the favorable impact related to the investment losses recognized in the periods more than offset by the adverse impact of the financial markets on variable deposit fund performance. In addition, the poor financial markets performance had an adverse impact on the company’s guaranteed minimum death benefit reserve, which increased by approximately $1 million in the three and twelve months ended December 31, 2008. Annuity segment net income for the fourth quarter and full year of 2008 also benefited from a reduction of $2.6 million in federal income tax expense as a result of the IRS completing its examination of the 2002, 2004, 2005 and 2006 tax years during the current quarter. “Fourth quarter annuity net fund flows were positive, as they have been throughout 2008, while cash value persistency of over 93 percent increased 2 percentage points during the year,” noted Lower.

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Life segment net income of $4.2 million and $16.4 million for the fourth quarter and full year decreased $0.4 million and $0.9 million compared to the respective periods in 2007, as growth in earned premium and investment income was more than offset by higher mortality costs. Life persistency remained in excess of 94 percent.

Segment Revenues

The company’s total premiums written and contract deposits were comparable to the fourth quarter of 2007 and declined a modest 1 percent compared to full year 2007, primarily reflecting the expected decreases in single premium annuity deposit receipts in 2008.

Property and casualty premiums written increased 4 percent and 2 percent compared to the prior year three and twelve month periods, respectively, reflecting lower catastrophe reinsurance premiums and an increase in average property and auto premiums per policy.

Annuity new contract deposits decreased 6 percent and 8 percent compared to the three and twelve months ended December 31, 2007, respectively. Scheduled, flexible-premium annuity deposit receipts decreased moderately compared to the prior year, while rollover deposits declined 6 percent and 14 percent compared to the fourth quarter and full year 2007, respectively. Life segment insurance premiums and contract deposits were comparable to the prior year.

Sales and Distribution

For the three and twelve months ended December 31, 2008, total new auto sales units were 9 percent and 7 percent lower in the current periods than in the prior year, respectively. “In spite of the adverse prior year comparisons, fourth quarter true new auto sales volume improved sequentially, reflecting continued productivity gains in the current period,” said Lower. Horace Mann agent flexible premium annuity sales declined 7 percent in the quarter but increased 1 percent year to date versus prior year. Reduced independent agent sales and an anticipated decline in single premium rollover deposits adversely impacted total annuity sales. “IRS transition regulations for the 403(b) annuity marketplace continued to reduce new rollover deposits industry-wide,” said Lower.

The number of Horace Mann agents declined 15 percent to 670 agents at December 31, 2008 compared to 12 months earlier. “As expected, our decline in agent count primarily reflects the loss of lower-producing agents and a reduction in new agent hires as we continue to transition our hiring standards to target only those individuals we believe will be successful in the new Agency Business Model,” Lower said. Including 394 licensed producers who work for the agents, Horace Mann’s total points of distribution increased to 1,064, a growth of 2 percent over prior year. “In spite of the decline in agent count, a difficult competitive and economic environment, and our continuing actions to reduce risk exposure in hurricane-prone areas, we recorded positive property and casualty written premium growth and only a

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slight decline in property and casualty policies in force in 2008. Growth in Agency Business School graduate productivity, policyholder retention, and educator policies in force — the primary focal points of our strategic initiatives — have contributed significantly to these results.”

Investment Gains and Losses

In 2008, pretax net realized investment losses were $8.2 million for the fourth quarter, including $5.8 million of impairment write-downs and $4.6 million of realized impairment losses on securities that were disposed of during the quarter, primarily high-yield investments, with these amounts partially offset by $2.2 million of realized gains on security sales. The $5.8 million of impairment write-downs were related primarily to high-yield and preferred stock investments that the company no longer intends to hold until the value fully recovers, with the remainder related to securities for which impairment write-downs were previously recorded. Based on an assessment that gross realized and unrealized investment gains are now sufficient, in conjunction with other tax planning strategies, to offset gross unrealized investment losses, the $11.5 million deferred tax allowance that was established at September 30, 2008 was reduced to zero at year-end. Approximately $8.2 million of the allowance release was reflected as an increase to the company’s tax benefit on realized investment losses.

“While we realized additional investment losses in the quarter, they were very manageable in terms of our ability to maintain acceptable insurance subsidiary capital and operating ratios, particularly in light of the flexibility afforded us by our existing bank credit facility,” said Lower. Consistent with the company’s previously disclosed intent, in December 2008 it repaid $37 million of the $75 million borrowed under its bank credit facility in October 2008. The remaining $38 million balance currently continues to be held at the holding company level.

Net unrealized investment losses on fixed maturity and equity securities continued to be under pressure in the fourth quarter, and Horace Mann’s December 31, 2008 balance of $327.2 million increased compared to the $271.1 million level recorded at the end of the third quarter. “With credit spreads for some asset classes widening further during the fourth quarter, on top of unprecedented September 30 levels, it remains our considered judgment that our unrealized balance predominantly reflects a remarkably disruptive credit market in a crisis mode where liquidity has been severely impaired, with spreads and prices disconnected from rational valuation across all asset classes,” said Lower. “Given our insignificant exposure to sub-prime, Alt-A and other lower-quality structured securities, coupled with the credit enhancement of the existing TARP program and the ongoing commitments of the United States and European governments to support most of our financial institution holdings, and the overall quality and performance of our CMBS holdings, we remain comfortable with the underlying credit quality of our investment portfolio.”

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Horace Mann — the largest national multiline insurance company focusing on educators’ financial needs — provides auto and homeowners insurance, retirement annuities, life insurance and other financial solutions. Founded by educators for educators in 1945, the company is headquartered in Springfield, Ill. For more information, visit www.horacemann.com.

Statements included in this news release that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties. Horace Mann is not under any obligation to (and expressly disclaims any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the company’s Quarterly Report on Form 10-Q for the period ended September 30, 2008 and the company’s past and future filings and reports filed with the Securities and Exchange Commission for information concerning the important factors that could cause actual results to differ materially from those in forward-looking statements.

#  #  #

HORACE MANN EDUCATORS CORPORATION

Digest of Earnings and Highlights (Unaudited)

(Dollars in Millions, Except Per Share Data)

	Quarter Ended December 31,						% Change		Year Ended December 31,						% Change
	Est. 2008			2007					Est. 2008			2007
DIGEST OF EARNINGS
Net income	$	22.9		$	18.0		27.2	%	$	10.9		$	82.8		-86.8	%
Net income per share:
Basic	$	0.59		$	0.42		40.5	%	$	0.27		$	1.92		-85.9	%
Diluted (A)	$	0.58		$	0.41		41.5	%	$	0.27		$	1.86		-85.5	%
Weighted average number of shares and equivalent shares (in millions) (B):
Basic		39.1			43.0		-9.1	%		39.8			43.1		-7.7	%
Diluted (A)		39.8			43.9		-9.3	%		40.6			44.6		-9.0	%
HIGHLIGHTS
Operations
Insurance premiums written and contract deposits	$	239.1		$	239.2		0.0	%	$	960.1		$	974.7		-1.5	%
Return on equity (C)										1.9	%		12.3	%	N.M.
Property & Casualty GAAP combined ratio		92.9	%		91.9	%	N.M.			100.7	%		91.9	%	N.M.
Effect of catastrophe costs on the Property & Casualty combined ratio		7.2	%		4.3	%	N.M.			13.7	%		4.4	%	N.M.
Experienced agents										524			569		-7.9	%
Financed agents										146			221		-33.9	%
Total Horace Mann agents										670			790		-15.2	%
Licensed producers										394			253		55.7	%
Total points of distribution (D)										1,064			1,043		2.0	%
Additional Per Share Information
Dividends paid	$	0.0525		$	0.105		-50.0	%	$	0.3675		$	0.42		-12.5	%
Book value (E)									$	11.47		$	16.41		-30.1	%
Financial Position
Total assets									$	5,507.2		$	6,259.3		-12.0	%
Short-term debt										38.0			—		N.M.
Long-term debt										199.5			199.5		—
Total shareholders’ equity										447.9			693.3		-35.4	%

N.M. - Not meaningful.

(A) Effective December 31, 2004, the Company adopted EITF Consensus 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share”. Diluted per share information for all periods is presented on a basis consistent with this consensus. On May 14, 2007, the Company redeemed all remaining Senior Convertible Notes. For the year ended December 31, 2007, the Senior Convertible Notes represented 0.4 million equivalent shares and had after tax interest expense of $0.3 million.

(B) In November and December 2007, the Company repurchased 1,111,600 shares of its common stock at an aggregate cost of $20.7 million, or an average cost of $18.66 per share. During the three months ended March 31, 2008, the Company repurchased 1,636,376 shares of its common stock at an aggregate cost of $29.5 million, or an average cost of $18.01 per share. During the three months ended June 30, 2008, the Company repurchased 1,561,849 shares of its common stock at an aggregate cost of $24.8 million, or an average cost of $15.93 per share.

(C) Based on trailing 12-month net income and average quarter-end shareholders’ equity.

(D) Includes licensed producers working in Horace Mann agents’ offices and excludes independent agents.

(E) Book value per share excluding the fair value adjustment for investments was $16.15 at December 31, 2008 and $16.47 at December 31, 2007. Ending shares outstanding were 39,061,788 at December 31, 2008 and 42,240,484 at December 31, 2007.

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HORACE MANN EDUCATORS CORPORATION

Statements of Operations and Supplemental GAAP Consolidated Data (Unaudited)

(Dollars in Millions)

	Quarter Ended December 31,						% Change		Year Ended December 31,						% Change
	Est. 2008			2007					Est. 2008			2007
STATEMENTS OF OPERATIONS
Insurance premiums and contract charges earned	$	168.8		$	166.3		1.5	%	$	658.5		$	654.3		0.6	%
Net investment income		58.1			57.5		1.0	%		230.3			223.8		2.9	%
Net realized investment losses		(8.2	)		(5.5	)	49.1	%		(63.9	)		(3.4	)	N.M.
Other income		2.4			3.3		-27.3	%		9.9			12.3		-19.5	%
Total revenues		221.1			221.6		-0.2	%		834.8			887.0		-5.9	%
Benefits, claims and settlement expenses		111.3			101.5		9.7	%		471.5			408.5		15.4	%
Interest credited		33.9			32.2		5.3	%		131.8			127.2		3.6	%
Policy acquisition expenses amortized		23.1			20.0		15.5	%		79.1			75.7		4.5	%
Operating expenses		33.7			37.8		-10.8	%		132.4			139.0		-4.7	%
Amortization of intangible assets		1.2			1.4		-14.3	%		5.3			5.4		-1.9	%
Interest expense		4.3			3.5		22.9	%		14.5			14.1		2.8	%
Total benefits, losses and expenses		207.5			196.4		5.7	%		834.6			769.9		8.4	%
Income before income taxes		13.6			25.2		-46.0	%		0.2			117.1		-99.8	%
Income tax expense (benefit)		(9.3	)		7.2		N.M.			(10.7	)		34.3		N.M.
Net income	$	22.9		$	18.0		27.2	%	$	10.9		$	82.8		-86.8	%
ANALYSIS OF PREMIUMS WRITTEN AND CONTRACT DEPOSITS
Property & Casualty
Automobile and property (voluntary)	$	134.8		$	129.5		4.1	%	$	542.2		$	530.6		2.2	%
Involuntary and other property & casualty		2.3			2.6		-11.5	%		3.7			4.6		-19.6	%
Total Property & Casualty		137.1			132.1		3.8	%		545.9			535.2		2.0	%
Annuity deposits		73.9			78.8		-6.2	%		311.7			337.1		-7.5	%
Life		28.1			28.3		-0.7	%		102.5			102.4		0.1	%
Total	$	239.1		$	239.2		0.0	%	$	960.1		$	974.7		-1.5	%
ANALYSIS OF SEGMENT NET INCOME (LOSS)
Property & Casualty	$	14.5		$	16.1		-9.9	%	$	28.1		$	61.2		-54.1	%
Annuity		2.9			3.9		-25.6	%		17.3			17.6		-1.7	%
Life		4.2			4.6		-8.7	%		16.4			17.3		-5.2	%
Corporate and other (A)		1.3			(6.6	)	N.M.			(50.9	)		(13.3	)	N.M.
Net income		22.9			18.0		27.2	%		10.9			82.8		-86.8	%
Catastrophe costs, after tax, included above (B)		(6.5	)		(3.8	)	71.1	%		(48.1	)		(15.3	)	214.4	%

N.M. - Not meaningful.

(A) The Corporate and Other segment includes interest expense on debt and the impact of realized investment gains and losses and other corporate level items. The Company does not allocate the impact of corporate level transactions to the insurance segments consistent with how management evaluates the results of those segments. See detail for this segment on page 4.

(B) Includes allocated loss adjustment expenses and catastrophe reinsurance reinstatement premiums. See also page 3.

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HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview (Unaudited)

(Dollars in Millions)

	Quarter Ended December 31,						% Change		Year Ended December 31,						% Change
	Est. 2008			2007					Est. 2008			2007
PROPERTY & CASUALTY
Premiums written	$	137.1		$	132.1		3.8	%	$	545.9		$	535.2		2.0	%
Premiums earned		139.1			135.9		2.4	%		541.1			535.1		1.1	%
Net investment income		8.7			10.2		-14.7	%		35.7			38.0		-6.1	%
Other income		0.4			0.9		-55.6	%		1.5			2.9		-48.3	%
Losses and loss adjustment expenses (LAE)		95.9			90.1		6.4	%		416.1			360.4		15.5	%
Operating expenses (includes policy acquisition expenses amortized)		33.2			34.8		-4.6	%		128.5			130.9		-1.8	%
Income before tax		19.1			22.1		-13.6	%		33.7			84.7		-60.2	%
Net income		14.5			16.1		-9.9	%		28.1			61.2		-54.1	%
Net investment income, after tax		7.2			8.3		-13.3	%		29.8			31.3		-4.8	%
Catastrophe costs, after tax (A)		6.5			3.8		71.1	%		48.1			15.3		214.4	%
Catastrophe losses and LAE, before tax		9.9			5.9		67.8	%		73.9			23.6		213.1	%
Reinsurance reinstatement premiums, before tax		—			—		—			—			—		—
Operating statistics:
Loss and loss adjustment expense ratio		69.0	%		66.3	%	N.M.			76.9	%		67.4	%	N.M.
Expense ratio		23.9	%		25.6	%	N.M.			23.8	%		24.5	%	N.M.
Combined ratio		92.9	%		91.9	%	N.M.			100.7	%		91.9	%	N.M.
Effect of catastrophe costs on the combined ratio		7.2	%		4.3	%	N.M.			13.7	%		4.4	%	N.M.
Automobile and property detail:
Premiums written (voluntary) (B)	$	134.8		$	129.5		4.1	%	$	542.2		$	530.6		2.2	%
Automobile		92.6			90.7		2.1	%		367.8			365.3		0.7	%
Property		42.2			38.8		8.8	%		174.4			165.3		5.5	%
Premiums earned (voluntary) (B)		136.1			132.5		2.7	%		537.8			525.1		2.4	%
Automobile		91.9			91.3		0.7	%		365.5			364.6		0.2	%
Property		44.2			41.2		7.3	%		172.3			160.5		7.4	%
Policies in force (voluntary) (in thousands)										798			801		-0.4	%
Automobile										535			535		—
Property										263			266		-1.1	%
Policy renewal rate (voluntary)
Automobile (6 months)										91.1	%		91.0	%	N.M.
Property (12 months)										88.6	%		88.3	%	N.M.
Voluntary automobile operating statistics:
Loss and loss adjustment expense ratio		67.0	%		70.2	%	N.M.			68.0	%		69.7	%	N.M.
Expense ratio		23.4	%		25.3	%	N.M.			23.5	%		24.5	%	N.M.
Combined ratio		90.4	%		95.5	%	N.M.			91.5	%		94.2	%	N.M.
Effect of catastrophe costs on the combined ratio		0.0	%		0.3	%	N.M.			1.2	%		0.5	%	N.M.
Total property operating statistics:
Loss and loss adjustment expense ratio		74.7	%		58.2	%	N.M.			97.2	%		60.4	%	N.M.
Expense ratio		24.8	%		26.7	%	N.M.			24.2	%		25.2	%	N.M.
Combined ratio		99.5	%		84.9	%	N.M.			121.4	%		85.6	%	N.M.
Effect of catastrophe costs on the combined ratio		21.6	%		12.9	%	N.M.			40.4	%		13.6	%	N.M.
Prior years’ reserves favorable (adverse) development, pretax
Voluntary automobile	$	6.3		$	5.1		23.5	%	$	16.0		$	12.3		30.1	%
Total property		(0.6	)		0.1		N.M.			(0.5	)		7.7		N.M.
Other property and casualty		1.0			—		N.M.			2.6			—		N.M.
Total		6.7			5.2		28.8	%		18.1			20.0		-9.5	%

N.M. - Not meaningful.

(A) Includes allocated loss adjustment expenses and catastrophe reinsurance reinstatement premiums.

(B) Amounts are net of additional ceded premiums to reinstate the Company’s property and casualty catastrophe reinsurance coverage, if any, as quantified above.

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HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview (Unaudited)

(Dollars in Millions)

	Quarter Ended December 31,						% Change		Year Ended December 31,						% Change
	Est. 2008			2007					Est. 2008			2007
ANNUITY
Contract deposits	$	73.9		$	78.8		-6.2	%	$	311.7		$	337.1		-7.5	%
Variable		31.8			38.7		-17.8	%		134.4			149.9		-10.3	%
Fixed		42.1			40.1		5.0	%		177.3			187.2		-5.3	%
Contract charges earned		3.9			5.4		-27.8	%		17.7			21.8		-18.8	%
Net investment income		34.7			32.8		5.8	%		136.2			128.9		5.7	%
Net interest margin (without realized investment gains and losses)		10.5			10.0		5.0	%		42.7			38.9		9.8	%
Other income		0.8			1.5		-46.7	%		4.9			5.7		-14.0	%
Mortality loss and other reserve changes		(1.3	)		0.7		N.M.			(1.7	)		(0.2	)	N.M.
Operating expenses (includes policy acquisition expenses amortized)		12.8			10.6		20.8	%		39.0			36.2		7.7	%
Amortization of intangible assets		0.9			1.1		-18.2	%		4.0			4.1		-2.4	%
Income (loss) before tax		0.2			5.9		-96.6	%		20.6			25.9		-20.5	%
Net income		2.9			3.9		-25.6	%		17.3			17.6		-1.7	%
Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs	$	(4.1	)	$	(1.4	)	192.9	%	$	(4.0	)	$	(1.2	)	233.3	%
Value of acquired insurance in force		—			(0.1	)	-100.0	%		—			(0.2	)	-100.0	%
Guaranteed minimum death benefit reserve		(1.0	)		0.8		N.M.			(1.3	)		0.7		N.M.
Annuity contracts in force (in thousands)										171			167		2.4	%
Accumulated value on deposit									$	3,262.3		$	3,714.1		-12.2	%
Variable										965.2			1,562.2		-38.2	%
Fixed										2,297.1			2,151.9		6.7	%
Annuity accumulated value retention - 12 months
Variable accumulations										93.2	%		90.9	%	N.M.
Fixed accumulations										93.5	%		91.6	%	N.M.
LIFE
Premiums and contract deposits	$	28.1		$	28.3		-0.7	%	$	102.5		$	102.4		0.1	%
Premiums and contract charges earned		25.8			25.0		3.2	%		99.7			97.4		2.4	%
Net investment income		14.8			14.6		1.4	%		59.3			57.0		4.0	%
Income before tax		6.4			7.0		-8.6	%		25.6			26.6		-3.8	%
Net income		4.2			4.6		-8.7	%		16.4			17.3		-5.2	%
Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs	$	(0.3	)	$	(0.2	)	50.0	%	$	(0.2	)	$	(0.2	)	—
Life policies in force (in thousands)										221			226		-2.2	%
Life insurance in force									$	13,672		$	13,577		0.7	%
Lapse ratio - 12 months
(Ordinary life insurance)										5.4	%		5.8	%	N.M.
CORPORATE AND OTHER (A)
Components of loss before tax:
Net realized investment losses	$	(8.2	)	$	(5.5	)	49.1	%	$	(63.9	)	$	(3.4	)	N.M.
Interest expense		(4.3	)		(3.5	)	22.9	%		(14.5	)		(14.1	)	2.8	%
Other operating expenses, net investment income and other income		0.4			(0.8	)	N.M.			(1.3	)		(2.6	)	-50.0	%
Loss before tax		(12.1	)		(9.8	)	23.5	%		(79.7	)		(20.1	)	N.M.
Net income (loss)		1.3			(6.6	)	N.M.			(50.9	)		(13.3	)	N.M.

N.M. - Not meaningful.

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

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HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview (Unaudited)

(Dollars in Millions)

	Quarter Ended December 31,						% Change		Year Ended December 31,						% Change
	Est. 2008			2007					Est. 2008			2007
INVESTMENTS
Annuity and Life
Fixed maturities, at fair value (amortized cost 2008, $3,145.4; 2007, $3,136.8)									$	2,876.7		$	3,135.1		-8.2	%
Equity securities, at fair value (cost 2008, $55.6; 2007, $55.7)										38.3			50.8		-24.6	%
Short-term investments										154.1			33.5		360.0	%
Short-term investments, securities lending collateral										—			76.7		-100.0	%
Policy loans and other										109.2			102.8		6.2	%
Total Annuity and Life investments										3,178.3			3,398.9		-6.5	%
Property & Casualty
Fixed maturities, at fair value (amortized cost 2008, $642.5; 2007, $733.5)										608.6			737.9		-17.5	%
Equity securities, at fair value (cost 2008, $30.6; 2007, $38.4)										23.3			35.7		-34.7	%
Short-term investments										66.0			7.7		N.M.
Short-term investments, securities lending collateral										—			—		—
Total Property & Casualty investments										697.9			781.3		-10.7	%
Corporate investments										25.6			0.1		N.M.
Total investments										3,901.8			4,180.3		-6.7	%
Net investment income
Before tax	$	58.1		$	57.5		1.0	%	$	230.3		$	223.8		2.9	%
After tax		39.3			39.1		0.5	%		156.3			152.1		2.8	%
Net realized investment gains (losses) by investment portfolio included in Corporate and Other segment income (loss)
Property & Casualty	$	(2.8	)	$	(0.5	)	N.M.		$	(16.4	)	$	(0.7	)	N.M.
Annuity		(5.3	)		(5.0	)	N.M.			(47.1	)		(1.5	)	N.M.
Life		(0.1	)		—		N.M.			(0.4	)		(1.2	)	N.M.
Corporate and Other		0.0			—		N.M.			0.0			—		N.M.
Total, before tax		(8.2	)		(5.5	)	N.M.			(63.9	)		(3.4	)	N.M.
Total, after tax		2.7			(3.6	)	N.M.			(41.5	)		(2.2	)	N.M.
Per share, diluted	$	0.07		$	(0.08	)	N.M.		$	(1.02	)	$	(0.05	)	N.M.

N.M. - Not meaningful.

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HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview (Unaudited)

(Dollars in Millions)

	Est. December 31, 2008					September 30, 2008			June 30, 2008			December 31, 2007
	Fair Value		Net Unrealized Gain (Loss)			Net Unrealized Gain (Loss)			Net Unrealized Gain (Loss)			Net Unrealized Gain (Loss)
FIXED MATURITY & EQUITY SECURITY INVESTMENTS
Fixed income securities
U.S. government and federally sponsored agency bonds	$	139.0	$	4.9		$	0.2		$	0.8		$	2.3
Municipal bonds		493.3		(14.1	)		(22.8	)		(5.1	)		6.0
Corporate bonds
Financial institutions		181.1		(19.9	)		(31.6	)		(13.5	)		(3.0	)
Other		1,285.3		(122.6	)		(113.5	)		(34.1	)		11.0
High yield		129.2		(38.0	)		(17.2	)		(9.5	)		(4.6	)
Foreign government bonds		14.9		0.5			0.5			0.9			1.5
Mortgage-backed securities
Prime agency		849.5		20.5			(0.6	)		(2.3	)		1.9
Prime other		15.7		(0.6	)		(0.1	)		(1.6	)		0.5
Sub-prime, Alt-A		7.1		(0.7	)		(0.7	)		(0.6	)		(0.1	)
Commercial mortgage-backed securities		221.7		(108.6	)		(47.1	)		(23.9	)		(5.4	)
Asset-backed securities
Sub-prime, Alt-A		3.9		0.1			(0.3	)		(0.1	)		—
Collateralized debt obligations, collateralized loan obligations		16.7		(0.4	)		(1.2	)		(2.5	)		(3.8	)
Other		88.5		(8.5	)		(3.8	)		(1.1	)		0.4
Preferred stocks
Financial institutions		65.7		(29.8	)		(25.1	)		(9.4	)		(7.6	)
Other		33.0		(10.0	)		(8.1	)		(4.2	)		(3.4	)
Total fixed income securities		3,544.6		(327.2	)		(271.4	)		(106.2	)		(4.3	)
Common stocks		2.3		—			0.3			0.3			(0.5	)
Derivatives		—		—			—			—			—
Total fixed maturity and equity security investments	$	3,546.9	$	(327.2	)	$	(271.1	)	$	(105.9	)	$	(4.8	)

	Est. December 31, 2008						September 30, 2008
	Investment Positions	Fair Value		Net Unrealized Gain (Loss)			Net Unrealized Gain (Loss)
COMMERCIAL MORTGAGE-BACKED SECURITIES
By Standard & Poor’s Corporation Rating:
AAA	74	$	133.4	$	(32.2	)	$	(12.1	)
AA	25		57.4		(17.4	)		(7.6	)
A	28		30.4		(58.9	)		(27.4	)
BBB or below	1		0.5		(0.1	)		—
Total	128	$	221.7	$	(108.6	)	$	(47.1	)
By Vintage Year:
2003 and prior	17	$	25.9	$	(4.2	)	$	(1.6	)
2004	14		14.5		(8.7	)		(2.4	)
2005	37		58.4		(71.3	)		(29.2	)
2006	25		32.7		(21.8	)		(10.4	)
2007 and later	35		90.2		(2.6	)		(3.5	)
Total	128	$	221.7	$	(108.6	)	$	(47.1	)

- 6 -