10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-10890

HORACE MANN EDUCATORS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	37-0911756
(State or other jurisdiction of incorporation or organization)	(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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X   No       

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   X   No      

Indicate by check mark the registrant’s filer status, as such terms are defined in Rule 12b-2 of the Act.

Large accelerated filer	Accelerated filer	X
Non-accelerated filer	Smaller reporting company

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Act. Yes        No   X  

As of October 28, 2011, 39,930,140 shares of Common Stock, par value $0.001 per share, were outstanding, net of 21,873,322 shares of treasury stock.

HORACE MANN EDUCATORS CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2011

INDEX

PART I - FINANCIAL INFORMATION			Page
	Item 1.	Financial Statements
		Report of Independent Registered Public Accounting Firm	1
		Consolidated Balance Sheets	2
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Statements of Changes in Shareholders’ Equity	5
		Consolidated Statements of Cash Flows	6
		Notes to Consolidated Financial Statements
		Note 1 - Basis of Presentation	7
		Note 2 - Investments	9
		Note 3 - Fair Value of Financial Instruments	13
		Note 4 - Debt	16
		Note 5 - Pension Plans and Other Postretirement Benefits	17
		Note 6 - Reinsurance	19
		Note 7 - Segment Information	20
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
	Item 4.	Controls and Procedures	56
PART II - OTHER INFORMATION
	Item 1A.	Risk Factors	56
	Item 5.	Other Information	56
	Item 6.	Exhibits	57
SIGNATURES			63

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Horace Mann Educators Corporation:

We have reviewed the consolidated balance sheet of Horace Mann Educators Corporation and subsidiaries (the Company) as of September 30, 2011, the related consolidated statements of operations and comprehensive income for the three-month and nine-month periods ended September 30, 2011 and 2010, and the related consolidated statements of changes in shareholders’ equity and cash flows for the nine-month periods ended September 30, 2011 and 2010. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2010, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2010, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it was derived.

Note 1 of the Company’s audited consolidated financial statements as of December 31, 2010, and for the year then ended, discloses that the Company changed its method of accounting for other-than-temporary impairments of debt securities due to the adoption of FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (included in FASB ASC Topic 320, Investments-Debt and Equity Securities), as of April 1, 2009. Our auditors’ report on those consolidated financial statements dated February 28, 2011, includes an explanatory paragraph referring to the matter in Note 1 of those consolidated financial statements.

/s/ KPMG LLP

KPMG LLP

Chicago, Illinois

November 9, 2011

1

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

	September 30, 2011				December 31, 2010
	(Unaudited)
ASSETS
Investments
Fixed maturities, available for sale, at fair value (amortized cost 2011, $4,882,036; 2010, $4,533,233)		$	5,307,034			$	4,715,537
Equity securities, available for sale, at fair value (cost 2011, $19,906; 2010, $20,765)			23,061				24,056
Short-term and other investments			249,802				334,030
Total investments			5,579,897				5,073,623
Cash			40,757				5,928
Deferred policy acquisition costs			260,589				272,825
Goodwill			47,396				47,396
Other assets			234,994				230,113
Separate Account (variable annuity) assets			1,173,065				1,375,656
Total assets		$	7,336,698			$	7,005,541
LIABILITIES AND SHAREHOLDERS’ EQUITY
Policy liabilities
Fixed annuity contract liabilities		$	2,857,966			$	2,614,380
Interest-sensitive life contract liabilities			738,206				725,286
Unpaid claims and claim expenses			310,085				315,436
Future policy benefits			207,559				202,341
Unearned premiums			212,484				211,290
Total policy liabilities			4,326,300				4,068,733
Other policyholder funds			102,354				112,739
Other liabilities			441,729				330,727
Short-term debt			38,000				38,000
Long-term debt			199,728				199,679
Separate Account (variable annuity) liabilities			1,173,065				1,375,656
Total liabilities			6,281,176				6,125,534
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued			-				-
Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2011, 61,792,029; 2010, 61,469,148			62				61
Additional paid-in capital			372,924				367,448
Retained earnings			847,197				823,579
Accumulated other comprehensive income (loss) net of taxes:
Net unrealized gains and losses on fixed maturities and equity securities			257,164				109,737
Net funded status of pension and other postretirement benefit obligations			(13,155	)			(13,155	)
Treasury stock, at cost, 2011, 21,873,322 shares; 2010, 21,813,196 shares			(408,670	)			(407,663	)
Total shareholders’ equity			1,055,522				880,007
Total liabilities and shareholders’ equity		$	7,336,698			$	7,005,541

See accompanying Notes to Consolidated Financial Statements.

See accompanying Report of Independent Registered Public Accounting Firm.

2

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in thousands, except per share data)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011		2010			2011		2010
Revenues
Insurance premiums and contract charges earned	$	167,035	$	168,062		$	500,066	$	502,845
Net investment income		71,550		68,290			213,708		203,273
Net realized investment gains		21,121		12,062			32,674		25,305
Other income		1,127		1,616			4,209		5,294
Total revenues		260,833		250,030			750,657		736,717
Benefits, losses and expenses
Benefits, claims and settlement expenses		124,412		124,864			398,822		356,162
Interest credited		39,288		37,076			114,987		108,854
Policy acquisition expenses amortized		27,922		20,189			71,712		66,080
Operating expenses		33,898		36,075			102,556		104,265
Interest expense		3,474		3,496			10,428		10,449
Total benefits, losses and expenses		228,994		221,700			698,505		645,810
Income before income taxes		31,839		28,330			52,152		90,907
Income tax expense		8,711		8,164			14,900		25,157
Net income	$	23,128	$	20,166		$	37,252	$	65,750
Net income per share
Basic	$	0.58	$	0.51		$	0.93	$	1.67
Diluted	$	0.56	$	0.49		$	0.90	$	1.61
Weighted average number of shares and equivalent shares (in thousands)
Basic		39,919		39,411			39,854		39,294
Diluted		41,451		41,115			41,455		40,947
Net realized investment gains (losses)
Total other-than-temporary impairment losses on securities	$	-	$	(4,345	)	$	-	$	(6,196	)
Portion of losses recognized in other comprehensive income		-		-			-		459
Net other-than-temporary impairment losses on securities recognized in earnings		-		(4,345	)		-		(5,737	)
Realized gains		21,121		16,407			32,674		31,042
Total	$	21,121	$	12,062		$	32,674	$	25,305

See accompanying Notes to Consolidated Financial Statements.

See accompanying Report of Independent Registered Public Accounting Firm.

3

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Comprehensive income
Net income	$	23,128	$	20,166	$	37,252	$	65,750
Other comprehensive income, net of taxes:
Change in net unrealized gains and losses on fixed maturities and equity securities		104,267		82,325		147,427		193,338
Change in net funded status of pension and other postretirement benefit obligations		-		-		-		-
Other comprehensive income		104,267		82,325		147,427		193,338
Total	$	127,395	$	102,491	$	184,679	$	259,088

See accompanying Notes to Consolidated Financial Statements.

See accompanying Report of Independent Registered Public Accounting Firm.

4

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except per share data)

	Nine Months Ended September 30,
	2011			2010
Common stock, $0.001 par value
Beginning balance	$	61		$	61
Options exercised, 2011, 136,290 shares; 2010, 51,850 shares		1			-
Conversion of common stock units, 2011, 15,715 shares; 2010, 160,876 shares		-			-
Conversion of restricted stock units, 2011, 170,876 shares; 2010, 46,584 shares		-			-
Ending balance		62			61
Additional paid-in capital
Beginning balance		367,448			358,081
Options exercised and conversion of common stock units and restricted stock units		4,247			3,889
Share-based compensation expense		1,229			1,158
Ending balance		372,924			363,128
Retained earnings
Beginning balance		823,579			758,343
Cumulative effect of adoption of accounting principle, net of taxes		-			(1,338	)
Net income		37,252			65,750
Cash dividends, 2011, $0.33 per share; 2010, $0.24 per share		(13,634	)		(9,785	)
Ending balance		847,197			812,970
Accumulated other comprehensive income (loss), net of taxes
Beginning balance		96,582			10,723
Cumulative effect of adoption of accounting principle, net of taxes		-			1,338
Change in net unrealized gains and losses on fixed maturities and equity securities		147,427			193,338
Change in net funded status of pension and other postretirement benefit obligations		-			-
Ending balance		244,009			205,399
Treasury stock, at cost
Beginning balance, 2011 and 2010, 21,813,196 shares		(407,663	)		(407,663	)
Acquisition of shares, 2011, 60,126 shares; 2010, 0 shares		(1,007	)		-
Ending balance, 2011, 21,873,322 shares; 2010, 21,813,196 shares		(408,670	)		(407,663	)
Shareholders’ equity at end of period	$	1,055,522		$	973,895

See accompanying Notes to Consolidated Financial Statements.

See accompanying Report of Independent Registered Public Accounting Firm.

5

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

	Nine Months Ended September 30,
	2011			2010
Cash flows - operating activities
Premiums collected	$	498,747		$	503,033
Policyholder benefits paid		(425,327	)		(364,579	)
Policy acquisition and other operating expenses paid		(181,593	)		(176,166	)
Federal income taxes paid		(4,130	)		(20,163	)
Investment income collected		203,352			196,582
Interest expense paid		(6,897	)		(6,914	)
Contribution to defined benefit pension plan trust		(5,774	)		(1,307	)
Other		(2,328	)		(1,622	)
Net cash provided by operating activities		76,050			128,864
Cash flows - investing activities
Fixed maturities
Purchases		(1,016,995	)		(1,151,950	)
Sales		457,411			533,894
Maturities, paydowns, calls and redemptions		285,491			278,820
Net cash provided by short-term and other investments		85,178			133,287
Net cash used in investing activities		(188,915	)		(205,949	)
Cash flows - financing activities
Dividends paid to shareholders		(13,634	)		(9,785	)
Exercise of stock options		2,127			854
Annuity contracts, variable and fixed
Deposits		318,872			288,691
Benefits, withdrawals and net transfers to Separate Account (variable annuity) assets		(161,576	)		(177,900	)
Life policy accounts
Deposits		1,553			1,404
Withdrawals and surrenders		(4,066	)		(3,844	)
Change in bank overdrafts		4,418			10,891
Net cash provided by financing activities		147,694			110,311
Net increase in cash		34,829			33,226
Cash at beginning of period		5,928			7,848
Cash at end of period	$	40,757		$	41,074

See accompanying Notes to Consolidated Financial Statements.

See accompanying Report of Independent Registered Public Accounting Firm.

6

HORACE MANN EDUCATORS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2011 and 2010

(Dollars in thousands, except per share data)

Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation (“HMEC”; and together with its subsidiaries, the “Company” or “Horace Mann”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”), specifically Regulation S-X and the instructions to Form 10-Q. Certain information and note disclosures which are normally included in annual financial statements prepared in accordance with GAAP but are not required for interim reporting purposes have been omitted. The Company believes that these consolidated financial statements contain all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the Company’s consolidated financial position as of September 30, 2011, the consolidated results of operations and comprehensive income for the three and nine months ended September 30, 2011 and 2010, and the consolidated changes in shareholders’ equity and cash flows for the nine months ended September 30, 2011 and 2010. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The subsidiaries of HMEC market and underwrite tax-qualified retirement annuities and private passenger automobile, homeowners, and life insurance products, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC’s principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds.

The Company has evaluated subsequent events through the date these consolidated financial statements were issued.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year.

The Company has reclassified the presentation of certain prior period information to conform with the 2011 presentation.

7

Note 1 - Basis of Presentation-(Continued)

Adopted Accounting Standards

Investments Held Through Separate Accounts

Effective January 1, 2011, the Company adopted accounting guidance to address how investments held through the separate accounts of an insurance entity affect the consolidation analysis. The guidance clarifies that an insurance entity should not consider any separate account interests in an investment held for the benefit of policyholders to be the insurer’s interest and those interests should not be combined with an insurer’s general account interests when making a consolidation assessment. The adoption of this accounting guidance did not have an effect on the results of operations or financial position of the Company.

Accounting Standards Not Yet Adopted, Retrospective Application

Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the Financial Accounting Standard Board (“FASB”) issued accounting guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. The guidance will allow an insurance entity to capitalize only incremental and certain direct costs related to the successful acquisition of new or renewal insurance contracts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 and provides for either prospective or retrospective application. As of the time of this Quarterly Report on Form 10-Q, management continues to assess the impact that the adoption of this accounting guidance will have on the results of operations and financial position of the Company. While management has completed a significant amount of analysis regarding deferrable costs under the new guidance, a considerable amount of work still needs to be completed, especially related to the Annuity and Life segments. As of the time of this Quarterly Report on Form 10-Q, management’s preliminary results indicate an impact on reported shareholders’ equity excluding unrealized investment gains and losses of less than 5%. However, completion of the Company’s final analysis could result in a larger impact on shareholders’ equity. Management currently anticipates electing retrospective application of the new guidance effective January 1, 2012 resulting in a downward adjustment to the deferred policy acquisition costs asset with a corresponding adjustment to beginning retained earnings. On a forward-looking basis, management currently anticipates the net impact of lower expense deferrals and lower amortization on net income to be minimal.

8

Note 2 - Investments

Maturities/Sales of Fixed Maturity Securities

The following table presents the distribution of the Company’s fixed maturity securities (“fixed maturities”) portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers’ utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.

	Percent of Total Fair Value						September 30, 2011
	September 30, 2011			December 31, 2010			Fair Value			Amortized Cost
Due in 1 year or less		3.8	%		3.3	%		$	200,883		$	184,796
Due after 1 year through 5 years		19.1			20.5				1,011,904			930,869
Due after 5 years through 10 years		32.7			29.5				1,737,247			1,598,125
Due after 10 years through 20 years		22.4			22.7				1,187,932			1,092,800
Due after 20 years		22.0			24.0				1,169,068			1,075,446
Total		100.0	%		100.0	%		$	5,307,034		$	4,882,036

The average option-adjusted duration for the Company’s fixed maturity securities was 6.5 years at September 30, 2011 and 6.9 years at December 31, 2010.

Proceeds received from sales of fixed maturities, determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Proceeds received	$	246,127		$	171,300		$	457,411		$	533,894
Gross gains realized		19,272			14,544			28,954			31,324
Gross losses realized		(9	)		(416	)		(92	)		(5,491	)

9

Note 2 - Investments-(Continued)

Unrealized Gains and Losses on Fixed Maturities and Equity Securities

The amortized cost or cost, unrealized investment gains and losses, fair values and other-than-temporary impairment (“OTTI”) included in accumulated other comprehensive income (loss) (“AOCI”) of all fixed maturities and equity securities in the portfolio as of September 30, 2011 and December 31, 2010 were as follows:

	Amortized Cost/Cost		Unrealized Gains		Unrealized Losses		Fair Value		OTTI in AOCI (2)
September 30, 2011
Fixed maturity securities
U.S. government and federally sponsored agency obligations (1)
Mortgage-backed securities	$	445,263	$	55,346	$	10	$	500,599	$	-
Other		558,144		44,003		15		602,132		-
Municipal bonds		1,155,900		106,002		1,062		1,260,840		-
Foreign government bonds		44,542		4,122		-		48,664		-
Corporate bonds		1,924,036		195,866		23,703		2,096,199		-
Other mortgage-backed securities		754,151		59,526		15,077		798,600		2,094
Totals	$	4,882,036	$	464,865	$	39,867	$	5,307,034	$	2,094
Equity securities	$	19,906	$	3,747	$	592	$	23,061	$	-
December 31, 2010
Fixed maturity securities
U.S. government and federally sponsored agency obligations (1)
Mortgage-backed securities	$	442,969	$	26,255	$	1,180	$	468,044	$	-
Other		512,692		6,227		21,465		497,454		-
Municipal bonds		1,080,324		27,782		19,399		1,088,707		-
Foreign government bonds		42,982		2,554		-		45,536		-
Corporate bonds		1,790,159		152,866		10,437		1,932,588		-
Other mortgage-backed securities		664,107		34,746		15,645		683,208		1,401
Totals	$	4,533,233	$	250,430	$	68,126	$	4,715,537	$	1,401
Equity securities	$	20,765	$	3,747	$	456	$	24,056	$	-

(1) Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $548,472 and $431,635; Federal Home Loan Mortgage Corporation (“FHLMC”) of $357,466 and $310,751; and Government National Mortgage Association (“GNMA”) of $40,108 and $45,454 as of September 30, 2011 and December 31, 2010, respectively.

(2) Represents the amount of other-than-temporary impairment losses in AOCI which, beginning April 1, 2009, was not included in earnings under current accounting guidance. Amounts also include unrealized gains and losses on impaired securities relating to changes in the fair value of such securities subsequent to the impairment measurement date.

10

Note 2 - Investments-(Continued)

Net unrealized gains and losses are computed as the difference between fair value and amortized cost for fixed maturities or cost for equity securities. The following table reconciles the net unrealized investment gains and losses, net of tax, included in accumulated other comprehensive income (loss), before the impact of deferred policy acquisition costs:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2011				2010				2011				2010
Net unrealized investment gains (losses) on fixed maturity securities, net of tax
Beginning of period		$	163,967			$	144,514			$	118,498			$	24,599
Change in unrealized investment gains and losses			125,937				94,655				178,913				221,980
Reclassification of net realized investment (gains) losses to net income			(13,655	)			(7,542	)			(21,162	)			(14,952	)
End of period		$	276,249			$	231,627			$	276,249			$	231,627
Net unrealized investment gains (losses) on equity securities, net of tax
Beginning of period		$	2,885			$	276			$	2,139			$	(1,189	)
Change in unrealized investment gains and losses			(761	)			2,421				(12	)			3,946
Reclassification of net realized investment (gains) losses to net income			(73	)			(11	)			(76	)			(71	)
End of period		$	2,051			$	2,686			$	2,051			$	2,686

Credit Losses

The following table summarizes the cumulative amounts related to the Company’s credit loss component of the other-than-temporary impairment losses on fixed maturity securities held as of September 30, 2011 and 2010 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of the other-than-temporary impairment losses were recognized in other comprehensive income:

	Nine Months Ended September 30,
	2011				2010
Cumulative credit loss (1)
Beginning of period		$	4,518			$	2,875
New credit losses			-				647
Losses related to securities sold or paid down during the period			(561	)			-
End of period		$	3,957			$	3,522

(1) The cumulative credit loss amounts exclude other-than-temporary impairment losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis. The current definition, reporting and disclosure of “credit loss” was effective as of April 1, 2009.

11

Note 2 - Investments-(Continued)

Fixed Maturities and Equity Securities

At September 30, 2011, the gross unrealized loss in the fixed maturity and equity securities portfolio was $40,459 (300 positions, the fair value of which represented 11.2% of total fixed maturity and equity securities fair value). The following table presents the fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position at September 30, 2011 and December 31, 2010. The Company views the decrease in value of all of the securities with unrealized losses at September 30, 2011 -- which was driven largely by spread widening and changes in interest rates from the date of acquisition -- as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases. In addition, management expects to recover the entire cost basis of the fixed maturity securities. For equity securities, the Company has the ability and intent to hold the securities for the recovery of cost and recovery of cost is expected within a reasonable period of time. Therefore, no impairment of these securities was recorded at September 30, 2011.

	12 Months or Less						More than 12 Months						Total
	Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses
September 30, 2011
Fixed maturity securities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities		$	60		$	-		$	1,618		$	10		$	1,678		$	10
Other			2,852			15			-			-			2,852			15
Municipal bonds			38,119			349			35,967			713			74,086			1,062
Foreign government bonds			-			-			-			-			-			-
Corporate bonds			374,350			17,983			23,719			5,720			398,069			23,703
Other mortgage-backed securities			76,118			2,261			38,545			12,816			114,663			15,077
Totals		$	491,499		$	20,608		$	99,849		$	19,259		$	591,348		$	39,867
Equity securities (1)		$	-		$	-		$	5,410		$	592		$	5,410		$	592
December 31, 2010
Fixed maturity securities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities		$	27,111		$	1,179		$	1,907		$	1		$	29,018		$	1,180
Other			312,750			21,465			-			-			312,750			21,465
Municipal bonds			416,216			14,520			34,825			4,879			451,041			19,399
Foreign government bonds			-			-			-			-			-			-
Corporate bonds			179,339			4,587			45,789			5,850			225,128			10,437
Other mortgage-backed securities			117,602			2,932			68,921			12,713			186,523			15,645
Totals		$	1,053,018		$	44,683		$	151,442		$	23,443		$	1,204,460		$	68,126
Equity securities (1)		$	938		$	49		$	5,822		$	407		$	6,760		$	456

(1) Includes primarily nonredeemable (perpetual) preferred stocks and also common stocks.

The Company’s investment portfolio includes no free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics).

12

Note 3 - Fair Value of Financial Instruments

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring and nonrecurring basis as of September 30, 2011 and December 31, 2010. At September 30, 2011, Level 3 invested assets comprised approximately 1.3% of the Company’s total investment portfolio fair value.

	Carrying		Fair		Fair Value Measurements at Reporting Date Using (1)
	Amount		Value		Level 1		Level 2		Level 3
September 30, 2011
Financial Assets
Investments
Fixed maturities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities	$	500,599	$	500,599	$	-	$	500,599	$	-
Other		602,132		602,132		73,783		528,349		-
Municipal bonds		1,260,840		1,260,840		-		1,260,840		-
Foreign government bonds		48,664		48,664		-		48,664		-
Corporate bonds		2,096,199		2,096,199		25,957		2,002,732		67,510
Other mortgage-backed securities		798,600		798,600		-		795,909		2,691
Totals		5,307,034		5,307,034		99,740		5,137,093		70,201
Equity securities		23,061		23,061		9,278		13,399		384
Short-term investments		123,167		123,167		120,627		2,540		-
Other investments (2)		126,635		130,641		-		-		-
Total investments		5,579,897		5,583,903		229,645		5,153,032		70,585
Separate Account (variable annuity) assets		1,173,065		1,173,065		-		1,173,065		-
Financial Liabilities
Fixed annuity contract liabilities		2,857,966		2,565,570
Policyholder account balances on interest-sensitive life contracts		79,432		74,750
Other policyholder funds		102,354		102,354
Short-term debt		38,000		38,000
Long-term debt		199,728		215,180
December 31, 2010
Financial Assets
Investments
Fixed maturities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities	$	468,044	$	468,044	$	-	$	468,044	$	-
Other		497,454		497,454		114,931		382,523		-
Municipal bonds		1,088,707		1,088,707		-		1,088,707		-
Foreign government bonds		45,536		45,536		-		45,536		-
Corporate bonds		1,932,588		1,932,588		32,087		1,855,257		45,244
Other mortgage-backed securities		683,208		683,208		-		682,263		945
Totals		4,715,537		4,715,537		147,018		4,522,330		46,189
Equity securities		24,056		24,056		9,866		13,794		396
Short-term investments		211,998		211,998		204,950		7,048		-
Other investments (2)		122,032		125,790		-		-		-
Total investments		5,073,623		5,077,381		361,834		4,543,172		46,585
Separate Account (variable annuity) assets		1,375,656		1,375,656		-		1,375,656		-
Financial Liabilities
Fixed annuity contract liabilities		2,614,380		2,346,971
Policyholder account balances on interest-sensitive life contracts		79,710		75,011
Other policyholder funds		112,739		112,739
Short-term debt		38,000		38,000
Long-term debt		199,679		214,971

(1) This information is not required for financial and nonfinancial assets and liabilities not recognized at fair value in the Consolidated Balance Sheets.

(2) Fair value of “Other investments” includes investments, primarily policy loans, for which inputs to fair value measurements are not required. Inputs to fair value measurements are provided only for those investments carried at fair value.

13

Note 3 - Fair Value of Financial Instruments-(Continued)

The Company did not have any transfers between Levels 1 and 2 during the nine months ended September 30, 2011. The following tables present reconciliations for the three and nine months ended September 30, 2011 and 2010 for all Level 3 assets measured at fair value on a recurring basis.

	Corporate Bonds				Other Mortgage- Backed Securities				Total Fixed Maturities				Equity Securities				Total
Financial Assets
Beginning balance, July 1, 2011		$	49,285			$	824			$	50,109			$	384			$	50,493
Transfers in (out) of Level 3 (1)			15,098				1,921				17,019				-				17,019
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-				-
Net unrealized gains (losses) included in other comprehensive income			3,388				6				3,394				-				3,394
Purchases			-				-				-				-				-
Issuances			-				-				-				-				-
Sales			-				-				-				-				-
Settlements			-				-				-				-				-
Paydowns and maturities			(261	)			(60	)			(321	)			-				(321	)
Ending balance, September 30, 2011		$	67,510			$	2,691			$	70,201			$	384			$	70,585
Beginning balance, January 1, 2011		$	45,244			$	945			$	46,189			$	396			$	46,585
Transfers in (out) of Level 3 (1)			18,762				1,921				20,683				-				20,683
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-				-
Net unrealized gains (losses) included in other comprehensive income			4,233				20				4,253				(12	)			4,241
Purchases			-				-				-				-				-
Issuances			-				-				-				-				-
Sales			-				-				-				-				-
Settlements			-				-				-				-				-
Paydowns and maturities			(729	)			(195	)			(924	)			-				(924	)
Ending balance, September 30, 2011		$	67,510			$	2,691			$	70,201			$	384			$	70,585

(1) Transfers into and out of Level 3 during the periods ended September 30, 2011 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company’s policy is to recognize transfers in and transfers out as of the ending date of the reporting period.

14

Note 3 - Fair Value of Financial Instruments-(Continued)

	Corporate Bonds				Other Mortgage- Backed Securities				Total Fixed Maturities				Equity Securities			Total
Financial Assets
Beginning balance, July 1, 2010		$	12,917			$	7,513			$	20,430			$	539		$	20,969
Transfers in (out) of Level 3 (1)			18,829				24,915				43,744				-			43,744
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-			-
Net unrealized gains (losses) included in other comprehensive income			509				223				732				-			732
Purchases			-				-				-				-			-
Issuances			-				-				-				-			-
Sales			-				-				-				-			-
Settlements			-				-				-				-			-
Paydowns and maturities			(153	)			(377	)			(530	)			-			(530	)
Ending balance, September 30, 2010		$	32,102			$	32,274			$	64,376			$	539		$	64,915
Beginning balance, January 1, 2010		$	2,439			$	7,860			$	10,299			$	539		$	10,838
Transfers in (out) of Level 3 (1)			28,982				24,525				53,507				-			53,507
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-			-
Net unrealized gains (losses) included in other comprehensive income			1,004				526				1,530				-			1,530
Purchases			-				-				-				-			-
Issuances			-				-				-				-			-
Sales			-				-				-				-			-
Settlements			-				-				-				-			-
Paydowns and maturities			(323	)			(637	)			(960	)			-			(960	)
Ending balance, September 30, 2010		$	32,102			$	32,274			$	64,376			$	539		$	64,915

(1) Transfers into and out of Level 3 during the periods ended September 30, 2010 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company’s policy is to recognize transfers in and transfers out as of the ending date of the reporting period.

At September 30, 2011 and 2010, there were no realized gains or losses, due to the change in unrealized gains or losses, included in earnings that were attributable to Level 3 assets still held.

15

Note 4 - Debt

Indebtedness outstanding was as follows:

	September 30,			December 31,
	2011			2010
Short-term debt:
Bank Credit Facility		$	38,000		$	38,000
Long-term debt:
6.05% Senior Notes, due June 15, 2015. Aggregate principal amount of $75,000 less unaccrued discount of $98 and $118 (6.1% imputed rate)			74,902			74,882
6.85% Senior Notes, due April 15, 2016. Aggregate principal amount of $125,000 less unaccrued discount of $174 and $203 (6.9% imputed rate)			124,826			124,797
Total		$	237,728		$	237,679

The Bank Credit Facility, 6.05% Senior Notes due 2015 (“Senior Notes due 2015”) and 6.85% Senior Notes due 2016 (“Senior Notes due 2016”) are described in “Notes to Consolidated Financial Statements -- Note 5 -- Debt” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Credit Agreement with Financial Institutions (“Bank Credit Facility”)

On May 31, 2005, HMEC entered into a Bank Credit Agreement by and between HMEC, certain financial institutions named therein and Bank of America, N.A., as administrative agent, that was amended and restated effective December 19, 2006 (the “Previous Bank Credit Agreement”). The Previous Bank Credit Agreement, which provided for unsecured borrowings of up to $125,000, was terminated on October 7, 2011 following HMEC’s entry into the Current Bank Credit Facility and repayment of the $38,000 balance outstanding, as described below.

On October 7, 2011, HMEC entered into a new Bank Credit Agreement (the “Current Bank Credit Facility”) that replaces the Previous Bank Credit Agreement, described above, which was scheduled to expire on December 19, 2011. The Current Bank Credit Facility is by and between HMEC, certain financial institutions named therein and JPMorgan Chase Bank, N.A., as administrative agent, provides for unsecured borrowings of up to $150,000 and expires on October 6, 2015.

On October 7, 2011, there was no change to HMEC’s short-term debt balance. HMEC borrowed $38,000 under the Current Bank Credit Facility and used the proceeds to repay the $38,000 balance outstanding under the Previous Bank Credit Agreement.

Under the Current Bank Credit Facility, interest accrues at varying spreads relative to prime or eurodollar base rates and is payable monthly or quarterly depending on the applicable base rate (eurodollar base rate plus 1.25%, or 1.63%, as of October 7, 2011). The unused portion of the Current Bank Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis at October 7, 2011.

The Current Bank Credit Facility contains financial covenants, as defined in the agreement, as follows: (1) debt to capital ratio not to exceed 35%, (2) minimum net worth and (3) insurance subsidiaries’ risk based capital percentages of not less than 300%.

16

Note 5 - Pension Plans and Other Postretirement Benefits

The Company has the following retirement plans: a defined contribution plan; a 401(k) plan; a defined benefit plan for employees hired on or before December 31, 1998; and certain employees participate in a supplemental defined contribution plan or a supplemental defined benefit plan or both.

Defined Benefit Plan and Supplemental Defined Benefit Plans

The following tables summarize the components of net periodic pension cost recognized for the defined benefit plan and the supplemental defined benefit plans for the three and nine months ended September 30, 2011 and 2010.

	Defined Benefit Plan
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Components of net periodic pension (income) expense:
Service cost:
Benefit accrual		$	-			$	-			$	-			$	-
Other expenses			63				62				188				187
Interest cost			424				470				1,268				1,408
Expected return on plan assets			(610	)			(597	)			(1,820	)			(1,791	)
Settlement (gain) loss			1,098				(155	)			1,098				619
Amortization of:
Prior service cost			-				-				-				-
Actuarial loss			478				261				1,366				784
Net periodic pension expense		$	1,453			$	41			$	2,100			$	1,207
	Supplemental Defined Benefit Plans
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Components of net periodic pension (income) expense:
Service cost:
Benefit accrual		$	-			$	-			$	-			$	-
Other expenses			-				-				-				-
Interest cost			201				85				598				631
Expected return on plan assets			-				-				-				-
Settlement loss			-				-				-				-
Amortization of:
Prior service cost			31				31				94				93
Actuarial loss			194				62				523				185
Net periodic pension expense		$	426			$	178			$	1,215			$	909

17

Note 5 - Pension Plans and Other Postretirement Benefits-(Continued)

There is a minimum funding requirement of approximately $900 for the Company’s defined benefit plan in 2011. At the time of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, the Company expected to contribute approximately $5,200 to the defined benefit plan and approximately $1,300 to the supplemental retirement plans in 2011. As of the time of this Quarterly Report on Form 10-Q, the Company expects to contribute $5,926 to the defined benefit pension plan, of which $5,774 was contributed during the nine months ended September 30, 2011. As of the time of this Quarterly Report on Form 10-Q, in 2011 the Company expects to contribute $1,355 to the supplemental retirement plans, of which $1,015 was contributed during the nine months ended September 30, 2011. For the full year, the Company expects amortization of net losses of $1,821 and $698 for the defined benefit plan and the supplemental retirement plans, respectively, and expects amortization of prior service cost of $124 for the supplemental retirement plans to be included in net periodic pension expense to 2011.

Postretirement Benefits Other Than Pensions

In addition to providing pension benefits, the Company also provides certain health care and life insurance benefits to eligible employees. Effective January 1, 2007, the Company eliminated the previous group health insurance benefits for retirees 65 years of age and over, including elimination of pharmacy benefits for Medicare eligible retirees, and established a Health Reimbursement Account (“HRA”) for each eligible participant. Funding of HRA accounts was $153 and $258 for the nine months ended September 30, 2011 and 2010, respectively.

The following table summarizes the components of the net periodic benefit for postretirement benefits other than pensions for the three and nine months ended September 30, 2011 and 2010.

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Components of net periodic benefit:
Service cost		$	-			$	-			$	-			$	-
Interest cost			32				43				91				128
Amortization of prior service cost			-				-				-				-
Amortization of prior gains			(101	)			(130	)			(376	)			(390	)
Net periodic benefit		$	(69	)		$	(87	)		$	(285	)		$	(262	)

Consistent with disclosure in “Notes to Consolidated Financial Statements -- Note 9 -- Pension Plans and Other Postretirement Benefits” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, for the full year the Company expects to contribute approximately $600 to the postretirement benefit plans other than pensions in 2011, of which $343 was contributed during the nine months ended September 30, 2011. In addition, the Company expects amortization of prior gains of $501 to be included in the net periodic benefit for the year ended December 31, 2011.

18

Note 6 - Reinsurance

The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:

				Ceded to			Assumed
	Gross			Other			from Other			Net
	Amount			Companies			Companies			Amount
Three months ended September 30, 2011
Premiums written and contract deposits		$	305,476		$	7,484		$	918		$	298,910
Premiums and contract charges earned			173,537			7,480			978			167,035
Benefits, claims and settlement expenses			127,524			4,278			1,166			124,412
Three months ended September 30, 2010
Premiums written and contract deposits		$	296,544		$	8,200		$	972		$	289,316
Premiums and contract charges earned			175,228			8,211			1,045			168,062
Benefits, claims and settlement expenses			124,524			768			1,108			124,864
Nine months ended September 30, 2011
Premiums written and contract deposits		$	823,557		$	23,698		$	2,477		$	802,336
Premiums and contract charges earned			522,207			24,702			2,561			500,066
Benefits, claims and settlement expenses			413,909			17,478			2,391			398,822
Nine months ended September 30, 2010
Premiums written and contract deposits		$	804,713		$	25,424		$	3,499		$	782,788
Premiums and contract charges earned			525,729			26,399			3,515			502,845
Benefits, claims and settlement expenses			359,405			6,319			3,076			356,162

19

Note 7 - Segment Information

The Company conducts and manages its business through four segments. The three operating segments, representing the major lines of insurance business, are: property and casualty insurance, principally personal lines automobile and homeowners products; annuity products, principally tax-qualified fixed and variable deposits; and life insurance. The Company does not allocate the impact of corporate level transactions to the insurance segments, consistent with the basis for management’s evaluation of the results of those segments, but classifies those items in the fourth segment, corporate and other. In addition to ongoing transactions such as debt service, realized investment gains and losses and certain public company expenses, within the past five years such items also have included debt retirement costs/gains. Summarized financial information for these segments is as follows:

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Insurance premiums and contract charges earned
Property and casualty		$	136,636			$	139,326			$	410,456			$	415,825
Annuity			4,936				4,160				14,443				12,986
Life			25,463				24,576				75,167				74,034
Total		$	167,035			$	168,062			$	500,066			$	502,845
Net investment income
Property and casualty		$	8,927			$	9,178			$	27,402			$	27,093
Annuity			45,582				42,150				135,029				125,197
Life			17,294				17,213				52,040				51,757
Corporate and other			(1	)			7				(2	)			5
Intersegment eliminations			(252	)			(258	)			(761	)			(779	)
Total		$	71,550			$	68,290			$	213,708			$	203,273
Net income (loss)
Property and casualty		$	1,735			$	1,430			$	(11,598	)		$	20,969
Annuity			4,355				8,547				20,517				22,690
Life			3,555				5,678				13,464				15,766
Corporate and other			13,483				4,511				14,869				6,325
Total		$	23,128			$	20,166			$	37,252			$	65,750

	September 30,				December 31,
	2011				2010
Assets
Property and casualty		$	993,212			$	954,201
Annuity			4,766,353				4,556,317
Life			1,485,860				1,393,169
Corporate and other			120,431				130,191
Intersegment eliminations			(29,158	)			(28,337	)
Total		$	7,336,698			$	7,005,541

20

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Forward-looking Information

Statements made in the following discussion that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to known and unknown risks, uncertainties and other factors. Horace Mann 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 forward-looking statements due to, among other risks and uncertainties inherent in the Company’s business, the following important factors:

• The impact that a prolonged economic recession may have on the Company’s investment portfolio; volume of new business for automobile, homeowners, annuity and life products; policy renewal rates; and additional annuity contract deposit receipts.

• Changes in the composition of the Company’s assets and liabilities which may result from occurrences such as acquisitions, divestitures, impairment in asset values or changes in estimates of insurance reserves.

• Fluctuations in the fair value of securities in the Company’s investment portfolio and the related after-tax effect on the Company’s shareholders’ equity and total capital through either realized or unrealized investment losses, as well as the potential impact on the ability of the Company’s insurance subsidiaries to distribute cash to the holding company and/or need for the holding company to make capital contributions to the insurance subsidiaries. In addition, the impact of fluctuations in the financial market on the Company’s defined benefit pension plan assets and the related after-tax effect on the Company’s operating expenses, shareholders’ equity and total capital.

• Prevailing interest rate levels, including the impact of interest rates on (1) unrealized gains and losses in the Company’s investment portfolio and the related after-tax effect on the Company’s shareholders’ equity and total capital, (2) the book yield of the Company’s investment portfolio, (3) the Company’s ability to maintain appropriate interest rate spreads over the fixed rates guaranteed in the Company’s life and annuity products and (4) amortization of deferred policy acquisition costs.

• The impact of fluctuations in the financial market on the Company’s variable annuity fee revenues, amortization of deferred policy acquisition costs, and the level of guaranteed minimum death benefit reserves.

• Defaults on interest or dividend payments in the Company’s investment portfolio due to credit issues and the resulting impact on investment income.

• The frequency and severity of catastrophes such as hurricanes, earthquakes, storms and wildfires and the ability of the Company to provide accurate estimates of ultimate catastrophe costs in its consolidated financial statements in light of such factors as: the proximity of the catastrophe occurrence date to the date of the consolidated financial statements; potential inflation of property repair costs in the affected area; the occurrence of multiple catastrophes in a geographic area over a relatively short period of time; the outcome of litigation which may be filed against the Company by policyholders, state attorneys general and other parties relative to loss coverage disputes and loss settlement payments; and the ability of state insurance facilities to assess participating insurers when financial deficits occur.

21

• The Company’s risk exposure to catastrophe-prone areas. Based on full year 2010 property and casualty direct earned premiums, the Company’s ten largest states represented 58% of the segment total. Included in this top ten group are certain states which are considered more prone to catastrophe occurrences: California, Florida, North Carolina, Texas, Louisiana, South Carolina and Georgia.

• The potential near-term, adverse impact of underwriting actions to mitigate the Company’s risk exposure to catastrophe-prone areas on premium, policy and earnings growth.

• The ability of the Company to maintain a favorable catastrophe reinsurance program considering both availability and cost; and the collectibility of reinsurance receivables.

• Adverse development of property and casualty loss and loss adjustment expense reserve experience and its impact on estimated claims and claim expenses for losses occurring in prior years.

• Climate change, to the extent it produces rising temperatures and changes in weather patterns, which could impact the frequency and/or severity of weather events and wildfires, the affordability and availability of catastrophe reinsurance coverage, and the Company’s ability to make homeowners insurance available to its customers.

• Adverse changes in market appreciation, interest spreads, business persistency and policyholder mortality and morbidity rates and the resulting impact on both estimated reserves and the amortization of deferred policy acquisition costs.

• Adverse results from the assessment of the Company’s goodwill asset requiring write off of the impaired portion.

• The Company’s ability to maintain favorable claims-paying ability ratings.

• The Company’s ability to maintain favorable financial strength and debt ratings.

• The impact of fluctuations in the capital markets on the Company’s ability to refinance outstanding indebtedness or repurchase shares of the Company’s common stock.

• The Company’s ability to (1) develop and expand its marketing operations, including agents and other points of distribution, and (2) maintain and obtain sponsorships by and/or marketing agreements with local, state and national education associations, as well as various school administrator, principal and business official associations.

• The competitive impact of Section 403(b) tax-qualified annuity regulations, including (1) their potential to lead plan sponsors to further restrict the number of providers and (2) the possible increased competition within the 403(b) market from larger companies experienced in 401(k) plans.

• The effects of economic forces and other issues affecting the educator market including, but not limited to, federal, state and local budget deficits and cut-backs and adverse changes in state and local tax revenues. The effects of these forces include, among others, teacher layoffs and early retirements, as well as individual concerns regarding employment and economic uncertainty.

• The Company’s ability to profitably expand its property and casualty business in highly competitive environments.

• Changes in insurance regulations, including (1) those affecting the ability of the Company’s insurance subsidiaries to distribute cash to the holding company and (2) those impacting the Company’s ability to profitably write property and casualty insurance policies in one or more states.

• Changes in federal and state tax laws, including changes in elements of taxation or rates of taxation which could be in response to budget pressures related to general economic conditions or other factors, and changes resulting from tax audits affecting corporate tax rates.

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• Changes in federal and state laws and regulations, which affect the relative tax and other advantages of the Company’s life and annuity products to customers, including, but not limited to, changes in IRS regulations governing Section 403(b) plans.

• Changes in federal and state laws and regulations, which affect the relative tax advantage of certain investments or which affect the ability of debt issuers to declare bankruptcy or restructure debt.

• The cyclicality of the insurance industry and the related effects of changes in price competition and industry-wide underwriting results.

• The resolution of legal proceedings and related matters including the potential adverse impact on the Company’s reputation and charges against the Company’s earnings resulting from legal defense costs, a settlement agreement and/or an adverse finding or findings against the Company from the proceedings.

• The Company’s dated and complex information systems, which are difficult to upgrade and more prone to error than advanced technology systems.

• Disruptions of the general business climate, investments, capital markets and consumer attitudes caused by pandemics or geopolitical acts such as terrorism, war or other similar events.

Executive Summary

Horace Mann Educators Corporation (“HMEC”; and together with its subsidiaries, the “Company” or “Horace Mann”) is an insurance holding company. Through its subsidiaries, HMEC markets and underwrites personal lines of property and casualty insurance, retirement annuities and life insurance in the U.S. The Company markets its products primarily to K-12 teachers, administrators and other employees of public schools and their families.

For the three months ended September 30, 2011, the Company reported net income of $23.2 million, which represented an increase of $3.1 million, or 15%, compared to the prior year. After-tax net realized investment gains increased by $6.0 million between periods. Annuity segment net income decreased $4.2 million, or 49%, compared to the third quarter of 2010, primarily due to the negative impact on the current quarter from the evaluation of deferred policy acquisition costs which was largely driven by the change in financial market performance, partially offset by improvements in the interest margin. Life segment net income decreased $2.0 million, or 36%, compared to a year earlier, primarily due to higher mortality costs. For the property and casualty segment, net income increased $0.2 million, or 13%, compared to a year earlier, due to improvements in property non-catastrophe loss experience including a reduction in sinkhole claims, which were partially offset by an increase in the automobile current accident year loss ratio and a smaller benefit in the current period from favorable prior years’ reserve development. While only somewhat greater than the third quarter 2010 level, catastrophe losses had a negative impact on the comparison to prior year.

For the nine months ended September 30, 2011, the Company’s net income of $37.3 million represented a decrease of $28.4 million, or 43%, compared to the prior year primarily due to the increase in property and casualty catastrophe losses. After-tax net realized investment gains increased by $4.8 million between periods. For the property and casualty segment, the net loss of $11.6 million reflected a decrease of $32.6 million, compared to net income for the first nine months of 2010, primarily due to the increase in catastrophe costs but also reflecting a smaller benefit in the current period from favorable prior years’ reserve development. Catastrophe costs increased $26.5 million after tax compared to the prior year. Favorable prior years’ property and casualty reserve development was $5.8 million after tax

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lower than the same period a year ago. For the nine months, current period incurred sinkhole claims in Florida were less than the prior year by approximately $6 million after tax. Excluding catastrophe losses, compared to a year earlier current accident year results for the property line improved while automobile current accident year losses increased. Including all factors, the property and casualty combined ratio was 111.4% for the first nine months of 2011 compared to 100.8% for the same period in 2010. Annuity segment net income decreased $2.2 million, or 10%, compared to the first nine months of 2010, reflecting the negative impacts from the evaluation of deferred policy acquisition costs and a non-recurring tax benefit recorded in the prior year, partially offset by improvements in the interest margin. Compared to the first nine months of 2010, life segment net income decreased $2.2 million, or 14%, including higher mortality costs in the current period.

Premiums written and contract deposits increased 3% and 2% compared to the third quarter and first nine months of 2010, respectively, driven by the increase in annuity deposit receipts. Building on increased levels of receipts in 2010, annuity deposits received increased 10% compared to the first nine months of 2010, driven by a 29% increase in single deposit and rollover receipts in the current year. Property and casualty segment premiums written decreased 2% compared to the prior year-to-date, with approximately 1 percentage point of the decrease related to the Company’s Florida homeowners non-renewal program. Total new automobile sales units and true new auto sales units for the current period were 6% and 7% less, respectively, than in the first nine months of 2010. The premium impact from increases in average premium per policy for both homeowners and automobile in the current year was more than offset by the reduced level of automobile and homeowners policies in force. Life segment insurance premiums and contract deposits decreased 1% compared to the first nine months of the prior year.

The Company’s book value per share was $26.44 at September 30, 2011, an increase of 7% compared to 12 months earlier, reflecting net income for the trailing 12 months and the improvement in unrealized investment gains and losses due to lower yields on U.S. Treasury securities somewhat offset by widening spreads, the combination of which caused an increase in values for the Company’s holdings of U.S. government and agency securities, municipal bonds and agency mortgage-backed securities. In addition, the Company has reduced the holdings in its commercial mortgage-backed securities portfolio compared to a year ago.

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Critical Accounting Policies

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the Company’s management to make estimates and assumptions based on information available at the time the consolidated financial statements are prepared. These estimates and assumptions affect the reported amounts of the Company’s consolidated assets, liabilities, shareholders’ equity and net income. Certain accounting estimates are particularly sensitive because of their significance to the Company’s 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. Management has discussed with the Audit Committee the quality, not just the acceptability, of the Company’s accounting principles as applied in its financial reporting. The discussions generally included such matters as the consistency of the Company’s accounting policies and their application, and the clarity and completeness of the Company’s consolidated financial statements, which include related disclosures. For the Company, the areas most subject to significant management judgments include: fair value measurements, other-than-temporary impairment of investments, goodwill, deferred policy acquisition costs for annuity and interest-sensitive life products, liabilities for property and casualty claims and claim expenses, liabilities for future policy benefits, deferred taxes and valuation of assets and liabilities related to the defined benefit pension plan.

Fair Value Measurements

The fair value of a financial instrument is the estimated amount at which the instrument could be exchanged in an orderly transaction between knowledgeable, unrelated and willing parties. The valuation of fixed maturity securities and equity securities is more subjective when markets are less liquid due to the lack of market based inputs, which 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.

Valuation of Fixed Maturity and Equity Securities

For fixed maturity securities, each month the Company receives prices from its investment managers and custodian bank. Fair values for the Company’s fixed maturity securities are based primarily on prices provided by its investment managers and sometimes by its custodian bank. The prices from the custodian bank are compared to prices from the investment managers. Differences in prices between the sources that the Company considers significant are researched and the Company utilizes the price that it considers most representative of an exit price. Both the investment managers and the custodian bank use a variety of independent, nationally recognized pricing sources to determine market valuations. Each designate specific pricing services or indexes for each sector of the market based upon the provider’s expertise. Typical inputs used by these pricing sources include, but are not limited to, reported trades, benchmark yield curves, benchmarking of like securities, sector groupings, matrix pricing, issuer spreads, bids, offers, and/or estimated cash flows and prepayment speeds.

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When the pricing sources cannot provide fair value determinations, the Company obtains non-binding price quotes from broker-dealers. The broker-dealers’ valuation methodology is sometimes matrix-based, using indicative evaluation measures and adjustments for specific security characteristics and market sentiment. The market inputs utilized in the evaluation measures and adjustments include: benchmark yield curves, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each market input depends on the market sector and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.

The Company analyzes price and market valuations received to verify reasonableness, to understand the key assumptions used and their sources, to conclude the prices obtained are appropriate, and to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Based on this evaluation and investment class analysis, each security is classified into Level 1, 2 or 3. The Company has in place certain control processes to determine the reasonableness of the financial asset fair values. These processes are designed to ensure the values received are accurately recorded and that the data inputs and valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. For example, on a continuing basis, the Company assesses the reasonableness of individual security values received from pricing sources that vary from certain thresholds. Historically, the control processes have not resulted in adjustments to the valuations provided by pricing sources. The Company’s fixed maturity securities portfolio is primarily publicly traded, which allows for a high percentage of the portfolio to be priced through pricing services. Approximately 91% of the portfolio, based on fair value, was priced through pricing services or index priced as of September 30, 2011. The remainder of the portfolio was priced by broker-dealers or pricing models. When non-binding broker-dealer quotes could be corroborated by comparison to other vendor quotes, pricing models or analysis, the securities were generally classified as Level 2. There were no significant changes to the valuation process during the first nine months of 2011.

Fair values of equity securities have been determined by the Company from observable market quotations, when available. When a public quotation is not available, equity securities are valued by using non-binding broker quotes or through the use of pricing models or analysis that is based on market information regarding interest rates, credit spreads and liquidity. The underlying source data for calculating the matrix of credit spreads relative to the U.S. Treasury curve are nationally recognized indices. These inputs are based on assumptions deemed appropriate given the circumstances and are believed to be consistent with what other market participants would use when pricing such securities. There were no significant changes to the valuation process in the first nine months of 2011.

At September 30, 2011, Level 3 invested assets comprised approximately 1.3% of the Company’s total investment portfolio fair value. Invested assets are classified as Level 3 when fair value is determined based on unobservable inputs that are supported by little or no market activity and those inputs are significant to the fair value. For additional detail, see “Notes to Consolidated Financial Statements -- Note 3 -- Fair Value of Financial Instruments”.

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Other-than-temporary Impairment of Investments

The Company’s methodology of assessing other-than-temporary impairments is based on security-specific facts and circumstances as of the date of the reporting period. Based on these facts, if the Company has the intent to sell the fixed maturity security, or if it is more likely than not the Company will be required to sell the fixed maturity security before the anticipated recovery of the amortized cost basis or if management does not expect to recover the entire cost basis of the fixed maturity security, an other-than-temporary impairment is considered to have occurred. For equity securities, if the Company does not have the ability and intent to hold the security for the recovery of cost or if recovery of cost is not expected within a reasonable period of time, an other-than-temporary impairment is considered to have occurred. Additionally, if events become known that call into question whether the security issuer has the ability to honor its contractual commitments, such security holding will be evaluated to determine whether or not such security has suffered an other-than-temporary decline in value.

The Company reviews the fair value of all investments in its portfolio on a monthly basis to assess whether an other-than-temporary decline in value has occurred. These reviews, in conjunction with the Company’s investment managers’ monthly credit reports and relevant factors such as (1) the financial condition and near-term prospects of the issuer, (2) the length of time and extent to which the fair value has been less than amortized cost for fixed maturity securities or cost for equity securities, (3) for fixed maturity securities, the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the anticipated recovery in the amortized cost basis; and for equity securities, the Company’s ability and intent to hold the security for the recovery of cost or if recovery of cost is not expected within a reasonable period of time, (4) the stock price trend of the issuer, (5) the market leadership position of the issuer, (6) the debt ratings of the issuer, and (7) the cash flows and liquidity of the issuer or the underlying cash flows for asset-backed securities, are all considered in the impairment assessment. A write-down of an investment is recorded when a decline in the fair value of that investment is deemed to be other-than-temporary, with a realized investment loss charged to income for the period for all equity securities and for the credit-related loss portion associated with impaired fixed maturity securities. The amount of the total other-than-temporary impairment related to non-credit factors for fixed maturity securities is recognized in other comprehensive income, net of applicable taxes, unless the Company has the intent to sell the security or if it is more likely than not the Company will be required to sell the security before the anticipated recovery of the amortized cost basis.

With respect to fixed income securities involving securitized financial assets -- primarily asset-backed and commercial mortgage-backed securities in the Company’s portfolio -- a significant portion of the fair values is determined by observable inputs. In addition, the securitized financial asset securities’ underlying collateral cash flows are stress tested to determine if there has been any adverse change in the expected cash flows.

A decline in fair value below amortized cost is not assumed to be other-than-temporary for fixed maturity investments with unrealized losses due to spread widening, market illiquidity or changes in interest rates where there exists a reasonable expectation based on the Company’s consideration of all objective information available that the Company will recover the entire cost basis of the security and the Company does not have the intent to sell the investment before maturity or a market recovery is realized and it is more likely than not the Company will not be required to sell the investment. An other-than-temporary impairment loss will be recognized based upon all relevant facts and circumstances for each investment, as appropriate.

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Goodwill

Goodwill represents the excess of the amounts paid to acquire a business over the fair value of its net assets at the date of acquisition. Goodwill is not amortized, but is tested for impairment at least annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A reporting unit is defined as an operating segment or one level below an operating segment. The Company’s reporting units, for which goodwill has been allocated, are equivalent to the Company’s operating segments.

The goodwill impairment test, as defined in the accounting guidance, follows a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second step of the impairment test is performed for purposes of confirming and measuring the impairment. In the second step, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. If the carrying amount of the reporting unit goodwill exceeds the implied goodwill value, an impairment loss would be recognized in an amount equal to that excess, and the charge could have a material adverse effect on the Company’s results of operations and financial position.

The Company completed its annual goodwill assessment for the individual reporting units as of December 31, 2010. The first step of the Company’s analysis indicated that fair value exceeded carrying value for each reporting unit. Management’s determination of the fair value of each reporting unit incorporated multiple inputs including discounted cash flow calculations, the level of the Company’s own share price and assumptions that market participants would make in valuing each reporting unit. Fair value estimates were based primarily on an in-depth analysis of historical experience, projected future cash flows and relevant discount rates, which considered market participant inputs and the relative risk associated with the projected cash flows. Other assumptions included levels of economic capital, future business growth, earnings projections and assets under management for each reporting unit. Estimates of fair value are subject to assumptions that are sensitive to change and represent the Company’s reasonable expectations regarding future developments. The Company also considered other valuation techniques such as peer company price-to-earnings and price-to-book multiples.

As part of the Company’s December 31, 2010 goodwill analysis, the Company compared the fair value of the aggregated reporting units to the market capitalization of the Company. The difference between the aggregated fair value of the reporting units and the market capitalization of the Company was attributed to transaction premium. The amount of the transaction premium was determined to be reasonable based on insurance industry and Company-specific facts and circumstances.

Subsequent goodwill assessments could result in impairment due to the impact of a volatile financial market on earnings, discount rate assumptions, liquidity and market capitalization. Management believes the Company’s continued depressed market capitalization is largely the result of current global financial market conditions and is similar to companies within the annuity and life insurance sector. There were no events or material changes in circumstances during the nine months ended September 30, 2011 that indicated that a material change in the fair value of the Company’s reporting units had occurred.

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Deferred Policy Acquisition Costs for Annuity and Interest-sensitive Life Products

Policy acquisition costs, consisting of commissions, policy issuance and other costs, which vary with and are primarily related to the production of business, are capitalized and amortized on a basis consistent with the type of insurance coverage. For all investment (annuity) contracts, acquisition costs are amortized over 20 years in proportion to estimated gross profits. Capitalized acquisition costs for interest-sensitive life contracts are also amortized over 20 years in proportion to estimated gross profits.

The most significant assumptions that are involved in the estimation of annuity gross profits include interest rate spreads, future financial market performance, business surrender/lapse rates, expenses and the impact of realized investment gains and losses. For the variable deposit portion of the annuity segment, the Company amortizes policy acquisition costs utilizing a future financial market performance assumption of a 10% reversion to the mean approach with a 200 basis point corridor around the mean during the reversion period, representing a cap and a floor on the Company’s long-term assumption. The Company’s practice with regard to returns on Separate Accounts assumes that long-term appreciation in the financial market is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are experienced. The Company monitors these fluctuations and only changes the assumption when its long-term expectation changes. The effect of an increase/(decrease) by 100 basis points in the assumed future rate of return is reasonably likely to result in a decrease/(increase) in the deferred policy acquisition costs amortization expense of approximately $1 million. At September 30, 2011, the ratio of capitalized annuity policy acquisition costs to the total annuity accumulated cash value was approximately 4%.

In the event actual experience differs significantly from assumptions or assumptions are significantly revised, the Company may be required to record a material charge or credit to amortization expense for the period in which the adjustment is made. As noted above, there are key assumptions involved in the evaluation of capitalized policy acquisition costs. In terms of the sensitivity of this amortization to two of the more significant assumptions, assuming all other assumptions are met, (1) a 10 basis point deviation in the annual targeted interest rate spread assumption would currently impact amortization between $0.15 million and $0.25 million and (2) a 1% deviation from the targeted financial market performance for the underlying mutual funds of the Company’s variable annuities would currently impact amortization between $0.20 million and $0.30 million. These results may change depending on the magnitude and direction of the deviations but represent a range of reasonably likely experience for the noted assumptions. Detailed discussion of the impact of adjustments to the amortization of capitalized acquisition costs is included in “Results of Operations -- Policy Acquisition Expenses Amortized”.

Liabilities for Property and Casualty Claims and Claim Expenses

Underwriting results of the property and casualty segment are significantly influenced by estimates of the Company’s ultimate liability for insured events. There is a high degree of uncertainty inherent in the estimates of ultimate losses underlying the liability for unpaid claims and claim settlement expenses. This inherent uncertainty is particularly significant for liability-related exposures due to the extended period, often many years, that transpires between a loss event, receipt of related claims data from policyholders and ultimate settlement of the claim. Reserves for property and casualty claims include provisions for payments to be made on reported claims (“case reserves”), claims incurred but not yet reported (“IBNR”) and associated settlement expenses (together, “loss reserves”). The process by which these

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reserves are established requires reliance upon estimates based on known facts and on interpretations of circumstances, including the Company’s experience with similar cases and historical trends involving claim payments and related patterns, pending levels of unpaid claims and product mix, as well as other factors including court decisions, economic conditions and public attitudes. The Company calculates and records a single best estimate of the reserve (which is equal to the actuarial point estimate) as of each balance sheet date.

Reserves are reestimated quarterly. Changes to reserves are recorded in the period in which development factor changes result in reserve reestimates. 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 “Notes to Consolidated Financial Statements -- Note 4 -- Property and Casualty Unpaid Claims and Claim Expenses” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Due to the nature of the Company’s personal lines business, the Company has no exposure to claims for toxic waste cleanup, other environmental remediation or asbestos-related illnesses other than claims under homeowners insurance policies for environmentally related items such as mold.

Based on the Company’s products and coverages, historical experience, and modeling of various actuarial methodologies used to develop reserve estimates, the Company estimates that the potential variability of the property and casualty loss reserves within a reasonable probability of other possible outcomes may be approximately plus or minus 6%, which equates to plus or minus approximately $11 million of net income based on net reserves as of September 30, 2011. Although this evaluation reflects the most likely outcomes, it is possible the final outcome may fall below or above these estimates.

There are a number of assumptions involved in the determination of the Company’s property and casualty loss reserves. Among the key factors affecting recorded loss reserves for both long-tail and short-tail related coverages, claim severity and claim frequency are of particular significance. Management estimates that a 2% change in claim severity or 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 loss reserves of between $6.0 million and $10.0 million for long-tail liability related exposures (automobile liability coverages) and between $3.0 million and $5.0 million for short-tail liability related exposures (homeowners and automobile physical damage coverages). Actual results may differ, depending on the magnitude and direction of the deviation.

The Company’s loss and loss adjustment expense actuarial analysis is discussed with management. As part of this discussion, the indicated point estimate of the IBNR loss reserve by line of business (coverage) is reviewed. The Company actuaries also discuss any indicated changes to the underlying assumptions used to calculate the indicated point estimate. Review of the variance between the indicated reserves from these changes in assumptions and the previously carried reserves takes place. After discussion of these analyses and all relevant risk factors, management determines whether the reserve balances require adjustment. The Company’s best estimate of loss reserves may change depending on a revision in the underlying assumptions.

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The Company’s liabilities for unpaid claims and claim expenses for the property and casualty segment were as follows:

	September 30, 2011									December 31, 2010
	Case Reserves			IBNR Reserves			Total (1)			Case Reserves			IBNR Reserves			Total (1)
Automobile liability		$	67.9		$	125.1		$	193.0		$	71.4		$	129.0		$	200.4
Automobile other			3.6			1.4			5.0			5.4			2.1			7.5
Homeowners			11.2			67.3			78.5			9.2			62.5			71.7
All other			1.6			17.2			18.8			4.0			18.0			22.0
Total		$	84.3		$	211.0		$	295.3		$	90.0		$	211.6		$	301.6

(1) These amounts are gross, before reduction for ceded reinsurance reserves.

The facts and circumstances leading to the Company’s reestimate of reserves relate to revisions of the development factors used to predict how losses are likely to develop from the end of a reporting period until all claims have been paid. Reestimates occur because actual loss amounts are different than those predicted by the estimated development factors used in prior reserve estimates. At September 30, 2011, the impact of a reserve reestimation resulting in a 1% increase in net reserves would be a decrease of approximately $2 million in net income. A reserve reestimation resulting in a 1% decrease in net reserves would increase net income by approximately $2 million.

Favorable prior years’ reserve reestimates increased net income for the nine months ended September 30, 2011 by approximately $3.7 million, primarily the result of favorable frequency and severity trends in voluntary automobile losses for accident years 2009 and prior, as well as favorable development of homeowners loss reserves for accident years 2010 and prior. The lower than expected claims emergence and resultant lower expected loss ratios caused the Company to lower its reserve estimate at September 30, 2011.

Information regarding the Company’s property and casualty claims and claims expense reserve development table as of December 31, 2010 is located in “Business -- Property and Casualty Segment -- Property and Casualty Reserves” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Information regarding property and casualty reserve reestimates for each of the years in the three year period ended December 31, 2010 is located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations for the Three Years Ended December 31, 2010 -- Benefits, Claims and Settlement Expenses” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

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Liabilities for Future Policy Benefits

Liabilities for future benefits on life and annuity policies are established in amounts adequate to meet the estimated future obligations on policies in force. Liabilities for future policy benefits on certain life insurance policies are computed using the net level premium method and are based on assumptions as to future investment yield, mortality and withdrawals. Mortality and withdrawal assumptions for all policies have been based on actuarial tables which are consistent with the Company’s own experience. In the event actual experience is worse than the assumptions, additional reserves may be required. This would result in a charge to income for the period in which the increase in reserves occurred. Liabilities for future benefits on annuity contracts and certain long-duration life insurance contracts are carried at accumulated policyholder values without reduction for potential surrender or withdrawal charges.

Deferred Taxes

Deferred tax assets and liabilities represent the tax effect of the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. The Company evaluates deferred tax assets periodically to determine if they are realizable. Factors in the determination include the performance of the business including the ability to generate capital gains from a variety of sources and tax planning strategies. If, based on available information, it is more likely than not that the deferred income tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to net income. Charges to establish a valuation allowance could have a material adverse effect on the Company’s results of operations and financial position.

Valuation of Assets and Liabilities Related to the Defined Benefit Pension Plan

Effective April 1, 2002, participants stopped accruing benefits under the defined benefit pension plan but continue to retain the benefits they had accrued to that date.

The Company’s cost estimates for its defined benefit pension plan are determined annually based on assumptions which include the discount rate, expected return on plan assets, anticipated retirement rate and estimated lump sum distributions. A discount rate of 4.58% was used by the Company for estimating accumulated benefits under the plan at December 31, 2010, which was based on the average yield for long-term, high grade securities having maturities generally consistent with the defined benefit pension payout period. To set its discount rate, the Company looks to leading indicators, including the Citigroup Pension Discount Curve. The expected annual return on plan assets assumed by the Company at December 31, 2010 was 7.5%. The assumption for the long-term rate of return on plan assets was determined by considering actual investment experience during the lifetime of the plan, balanced with reasonable expectations of future growth considering the various classes of assets and percentage allocation for each asset class. Management believes that it has adopted reasonable assumptions for investment returns, discount rates and other key factors used in the estimation of pension costs and asset values.

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To the extent that actual experience differs from the Company’s assumptions, subsequent adjustments may be required, with the effects of those adjustments charged or credited to income and/or shareholders’ equity for the period in which the adjustments are made. Generally, a change of 50 basis points in the discount rate would inversely impact pension expense and accumulated other comprehensive income (“AOCI”) by approximately $0.1 million and $1.0 million, respectively. In addition, for every $1 million increase (decrease) in the value of pension plan assets, there is a comparable pretax increase (decrease) in AOCI.

Results of Operations

Insurance Premiums and Contract Charges

Insurance Premiums Written and Contract Deposits

(Includes annuity and life contract deposits)

	Nine Months Ended September  30,						Change From Prior Year
	2011			2010			Percent			Amount
Property & casualty
Automobile and property (voluntary)		$	409.9		$	419.0		-2.2	%		$	(9.1	)
Involuntary and other property & casualty			2.3			3.1		-25.8	%			(0.8	)
Total property & casualty			412.2			422.1		-2.3	%			(9.9	)
Annuity deposits			318.9			288.7		10.5	%			30.2
Life			71.2			72.0		-1.1	%			(0.8	)
Total		$	802.3		$	782.8		2.5	%		$	19.5

Insurance Premiums and Contract Charges Earned

(Excludes annuity and life contract deposits)

	Nine Months Ended September  30,						Change From Prior Year
	2011			2010			Percent			Amount
Property & casualty
Automobile and property (voluntary)		$	409.1		$	413.7		-1.1	%		$	(4.6	)
Involuntary and other property & casualty			1.4			2.1		-33.3	%			(0.7	)
Total property & casualty			410.5			415.8		-1.3	%			(5.3	)
Annuity			14.4			13.0		10.8	%			1.4
Life			75.2			74.0		1.6	%			1.2
Total		$	500.1		$	502.8		-0.5	%		$	(2.7	)

For the three and nine months ended September 30, 2011, the Company’s premiums written and contract deposits increased $9.6 million, or 3.3%, and $19.5 million, or 2.5%, respectively, compared to the same periods in the prior year, both driven by the increase in annuity single premium and rollover deposit receipts. The Company’s premiums and contract charges earned decreased $0.9 million, or 0.5%, and $2.7 million, or 0.5%, compared to the three and nine months ended September 30, 2010, respectively, primarily reflecting growth in annuity contract charges earned and the increasing favorable impact on earned premium of the automobile and property rate actions taken in 2010 which were more than offset by a reduced level of property and casualty policies in force in the current periods. Voluntary property and casualty business represents policies sold through the Company’s marketing organization and issued under the Company’s underwriting guidelines. Involuntary property and casualty business consists of allocations of business from state mandatory insurance facilities and assigned risk business.

33

Total voluntary automobile and homeowners premium written decreased 2.2%, or $9.1 million, in the first nine months of 2011, with approximately 1 percentage point of the decrease related to the Company’s Florida homeowners non-renewal program which is described below. Automobile and homeowners average written premium per policy each increased compared to the prior year, with the impact more than offset by a reduced level of policies in force in the current period. For the Company’s automobile and homeowners business, rate changes effective during the first nine months of 2011 averaged 2% and 9%, respectively, compared to 7% and 10%, respectively, during the same period in 2010. At September 30, 2011, there were 489,000 voluntary automobile and 240,000 homeowners policies in force, for a total of 729,000 policies, compared to a total of 760,000 policies at December 31, 2010 and 772,000 policies at September 30, 2010. Management believes that the Company’s rate and risk mitigation actions have had a negative impact, in some locations, on its policy retention rates and its sales levels.

Based on policies in force, the voluntary automobile 6-month retention rate for new and renewal policies was 90.7% at September 30, 2011 compared to 91.4% at September 30, 2010. The property 12-month new and renewal policy retention rate was 85.2% at September 30, 2011 compared to 88.0% at September 30, 2010, with the change including the impact of the Company’s risk mitigation actions described below.

Voluntary automobile premium written decreased 3.1% ($8.6 million) compared to the first nine months of 2010. In the first nine months of 2011, the average written and earned premium per policy each increased 3%, more than offset by the decline in policies in force. Voluntary automobile policies in force at September 30, 2011 decreased 19,000 compared to December 31, 2010 and 27,000 compared to September 30, 2010. Both educator and non-educator policies decreased in each of these comparisons. The number of educator policies represented approximately 82% and 81% of the voluntary automobile policies in force at September 30, 2011 and 2010, respectively.

Voluntary homeowners premium written decreased 0.4% ($0.5 million) compared to the first nine months of 2010, net of catastrophe reinsurance premiums ceded that were less than the prior year. The average written and earned premium per policy increased 5% and 6%, respectively, in the first nine months of 2011 compared to a year earlier. Homeowners policies in force at September 30, 2011 decreased 12,000 compared to December 31, 2010 and 16,000 compared to September 30, 2010. The number of educator policies represented approximately 77% and 76% of the homeowners policies in force at September 30, 2011 and 2010, respectively. Growth in the number of educator policies that had been consistent sequentially for several years was offset somewhat beginning in the third quarter of 2010 by expected reductions due to the Company’s risk mitigation programs, including actions in catastrophe-prone coastal areas, involving policies of both educators and non-educators. The Company continues to evaluate and implement actions to further mitigate its risk exposure in hurricane-prone areas, as well as other areas of the country. Such actions could include, but are not limited to, non-renewal of homeowners policies, restricted agent geographic placement, limitations on agent new business sales, further tightening of underwriting standards and increased utilization of third-party vendor products.

As an example, in early 2010 the Company began a program to address homeowners profitability and hurricane exposure issues in Florida. On January 1, 2010, the Company ceased writing new homeowner (including home, condo, renters and dwelling fire) policies in that state and initiated a program to non-renew about 9,600 policies, over half of the Company’s Florida book of property business, starting with August 2010 policy effective dates.

34

By mid-August 2011, the non-renewal program had been completed, including approximately 3,600 policies terminated at the customers’ request -- a favorable result that progressed ahead of management’s expected timing. In total, the Company’s September 30, 2011 policy count for Florida homeowners business of less than 6,000 decreased by approximately 11,000 compared to December 31, 2009. Throughout the non-renewal program period, the Company’s agents worked closely with customers to find coverage with third-party companies that underwrite property risks in Florida. While this program likely will continue to impact the overall policy in force count and premiums in the short-term, it is expected to reduce risk exposure concentration, reduce overall catastrophe reinsurance costs and improve homeowners underwriting results.

For the nine months ended September 30, 2011, total annuity deposits received increased 10.5% driven by the 28.7% increase in single premium and rollover deposit receipts, which more than offset the 6.9% decrease in scheduled annuity deposit receipts. In the first nine months of 2011, new deposits to variable accounts decreased 1.0%, or $0.8 million, and new deposits to fixed accounts increased 15.0%, or $31.0 million, compared to the prior year. In addition to external contractholder deposits, annuity new deposits include contributions and transfers by the Company’s employees in the Company’s 401(k) group annuity contract.

Total annuity accumulated cash value of $4.1 billion at September 30, 2011 increased 5.2% compared to a year earlier, as the increase from new deposits received and favorable retention more than offset unfavorable financial market performance over the 12 months. Cash value retentions for variable and fixed annuity options were 92.5% and 94.7%, respectively, for the 12 month period ended September 30, 2011. At September 30, 2011, the number of annuity contracts outstanding of 182,000 increased 1.1%, or 2,000 contracts, compared to December 31, 2010 and increased 2.2%, or 4,000 contracts, compared to September 30, 2010.

Variable annuity accumulated balances at September 30, 2011 reflected a decrease of 7.5% compared to September 30, 2010, including the unfavorable impact of financial market performance over the 12 months, particularly the performance in the third quarter of 2011. Annuity segment contract charges earned increased 10.8%, or $1.4 million, compared to the first nine months of 2010, primarily reflecting the growth in average variable annuity account values.

Life segment premiums and contract deposits decreased $0.8 million, or 1.1%, compared to the first nine months of 2010. The ordinary life insurance in force lapse ratio was 4.8% for the 12 months ended September 30, 2011 compared to 5.0% for the 12 months ended September 30, 2010.

Sales

For the Company, as well as other personal lines property and casualty companies, new business levels have been adversely impacted by the economy and the overall lower level of automobile and home sales compared to a few years ago. For the first nine months of 2011, total new automobile sales units were 5.6% less than the same period in the prior year, while true new automobile sales were 6.6% less than in the prior year. In the third quarter of 2011, true new auto sales units increased 7.1% compared to a year earlier, although total new auto sales units were comparable to the prior year. New homeowners sales units decreased 10.1% compared to the first nine months of 2010. Management believes that automobile and homeowners sales levels also have been negatively impacted by the Company’s rate actions.

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In addition, the year-to-date sales decreases in both lines of business were exacerbated by the Company’s underwriting actions in Florida which were initiated in 2010.

Driven by increases in single premium and rollover deposits, total annuity sales increased 22.3% for the nine months ended September 30, 2011. Single premium and rollover deposits for Horace Mann annuity products increased 28.7% compared to the same period in 2010. In addition, the Company’s new scheduled deposit business (measured on an annualized basis at the time of sale, compared to the reporting of new contract deposits which are recorded when cash is received) increased 21.1% compared to the first nine months of 2010, including growth of 23.6% for the three months ended September 30, 2011. In the first nine months of 2011, sales of third-party vendor annuity products, a relatively minor component of total annuity sales, decreased 23.5% compared to the first nine months of 2010. Sales of Horace Mann products by the Independent Agent distribution channel, included in the information above, increased 31.7% compared to the prior year, a comparison also impacted by current period growth in single premium and rollover deposits. The Company’s annuity sales levels in recent years have been impacted both positively and negatively as K-12 educators respond to uncertainties regarding employment prospects during the economic recession. In situations where educator retirements increase, opportunities arise for single premium and rollover deposit business. For employed educators, uncertainty about their futures creates challenges for new sales of scheduled deposit business.

New sales of life insurance products have been adversely impacted by current economic conditions industry wide. The Company’s introduction of new educator-focused portfolios of term and whole life products in the third quarters of 2009, 2010 and 2011 have helped to moderate the impact on the sales of proprietary life products. The current year-to-date increase in total life sales of 6.5% included a 7.1% increase in sales of third-party vendor products and a 5.8% increase in sales of proprietary life products.

Combining all lines of business, the Company’s total new business sales increased 15.5% compared to the first nine months of 2010. Total sales for Horace Mann’s Exclusive Agencies and Employee Agents for the first nine months of 2011 increased 12.1% compared to the prior year.

Distribution System

At September 30, 2011, there was a combined total of 735 Exclusive Agencies and Employee Agents, compared to 741 at December 31, 2010 and 701 at September 30, 2010. At September 30, 2011, there were 519 Horace Mann Exclusive Agencies -- more than half of which were formed by new appointments -- increasing 132 compared to September 30, 2010. The Company’s Exclusive Agent opportunity was launched on January 1, 2009. At September 30, 2011, in addition to the Exclusive Agencies, there were 216 Employee Agents. See additional description in “Business -- Corporate Strategy and Marketing -- Dedicated Agency Force” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

As mentioned above, the Company utilizes a nationwide network of Independent Agents who comprise a supplemental distribution channel for the Company’s 403(b) tax-qualified annuity products. The Independent Agent distribution channel included 950 authorized agents at September 30, 2011. During the first nine months of 2011, this channel generated $57.2 million in annualized new annuity sales for the Company compared to $43.4 million for the first nine months of 2010, primarily reflecting increases in single and rollover deposit business.

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Net Investment Income

For the three months ended September 30, 2011, pretax investment income of $71.5 million increased 4.7%, or $3.2 million, (4.3%, or $2.0 million, after tax) compared to the prior year. Pretax investment income of $213.7 million for the nine months ended September 30, 2011 increased 5.1%, or $10.4 million, (4.8%, or $6.6 million, after tax) compared to the prior year. The increase primarily reflected growth in the size of the average investment portfolio on an amortized cost basis. Average invested assets increased 8.0% over the 12 months ended September 30, 2011. The average pretax yield on the investment portfolio was 5.68% (3.84% after tax) for the first nine months of 2011, compared to a pretax yield of 5.83% (3.95% after tax) a year earlier.

Net Realized Investment Gains and Losses

For the three months ended September 30, 2011, net realized investment gains (pretax) were $21.2 million compared to net realized investment gains of $12.1 million in the same period in the prior year. For the nine months, net realized investment gains (pretax) were $32.7 million in 2011 compared to net realized investment gains of $25.3 million in the prior year. The net gains and losses in all periods were realized from ongoing investment portfolio management activity and, when determined, the recording of impairment write-down charges.

For the nine months ended September 30, 2011, the Company’s net realized investment gains of $32.7 million included $33.3 million of gross gains realized on security sales and calls partially offset by $0.6 million of realized losses on securities that were disposed of during the nine months. There were no other-than-temporary impairment write-downs on securities in the current period. Gains realized on security disposals during the first nine months of 2011 included $0.3 million related to securities on which the Company had previously recognized other-than-temporary impairment write-downs.

For the nine months ended September 30, 2010, pretax net realized investment gains of $25.3 million included $5.7 million of credit-related impairment write-downs and $5.5 million of gross losses on securities that were disposed of during the period, which were more than offset by $36.5 million of gross realized gains on other security disposals.

The Company, from time to time, sells securities subsequent to the balance sheet date that were considered temporarily impaired at the balance sheet date. Such sales are generally due to events occurring subsequent to the balance sheet date that result in a change in the Company’s intent to sell an invested asset.

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Fixed Maturity Securities and Equity Securities Portfolios

The table below presents the Company’s fixed maturity securities and equity securities portfolios as of September 30, 2011 by major asset class, including the ten largest sectors of the Company’s corporate bond holdings (based on fair value) and the sectors of the equity securities holdings. Compared to December 31, 2010, yields on U.S. Treasury securities decreased significantly while credit spreads widened notably across virtually all asset classes, with the Company’s municipal bond portfolio showing the most significant improvement in net unrealized gains.

Fixed Maturity Securities	Number of Issuers		Fair Value			Amortized Cost or Cost			Pretax Unrealized Gain
Corporate bonds
Banking and Finance		59		$	385.9		$	374.8		$	11.1
Utilities		45			268.0			230.4			37.6
Energy		50			230.9			208.4			22.5
Insurance		25			136.4			120.1			16.3
Health Care		31			97.4			86.9			10.5
Metal and Mining		15			95.7			91.2			4.5
Broadcasting and Media		18			91.4			82.9			8.5
Transportation		20			84.3			79.7			4.6
Natural Gas		15			83.5			74.6			8.9
Telecommunications		22			77.2			70.0			7.2
All Other Corporates (1)		171			545.5			504.9			40.6
Total corporate bonds		471			2,096.2			1,923.9			172.3
Mortgage-backed securities
U.S. government and federally sponsored agencies		334			500.6			445.3			55.3
Commercial		93			332.2			306.8			25.4
Other		14			14.3			13.6			0.7
Municipal bonds		386			1,260.8			1,155.9			104.9
Government bonds
U.S.		8			602.1			558.1			44.0
Foreign		7			48.7			44.6			4.1
Collateralized debt obligations (2)		25			40.0			38.1			1.9
Asset-backed securities		99			412.1			395.7			16.4
Total fixed maturity securities		1,437		$	5,307.0		$	4,882.0		$	425.0
Equity Securities
Non-redeemable preferred stocks
Banking and Finance		5		$	8.7		$	7.3		$	1.4
Real Estate		2			5.7			4.9			0.8
Utilities		3			5.2			4.9			0.3
Insurance		3			2.8			2.7			0.1
U.S. federally sponsored agencies		2			0.2			*			0.2
Common stocks
Technology		1			0.4			-			0.4
Cable and other		4			0.1			0.1			*
Total equity securities		20		$	23.1		$	19.9		$	3.2
Total		1,457		$	5,330.1		$	4,901.9		$	428.2

* Less than $0.1 million.

(1) The All Other Corporates category contains 19 additional industry classifications. Real estate, technology, retail, consumer products, miscellaneous and automobiles represented $326.3 million of fair value at September 30, 2011, with the remaining 13 classifications each representing less than $43 million.

(2) Based on fair value, 80.2% of the collateralized debt obligation securities were rated investment grade by Standard and Poor’s Corporation (“S&P”) and/or Moody’s Investors Service, Inc. (“Moody’s”) at September 30, 2011.

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At September 30, 2011, the Company’s diversified fixed maturity securities portfolio consisted of 1,698 investment positions, issued by 1,437 entities, and totaled approximately $5.3 billion in fair value. This portfolio was 95.1% investment grade, based on fair value, with an average quality rating of A+. The Company’s investment guidelines generally limit 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 0.2% of invested assets for non-investment grade securities.

The following table presents the composition and value of the Company’s fixed maturity securities and equity securities portfolios by rating category. At September 30, 2011, 95.0% of these combined portfolios were investment grade, with an overall average quality rating of A+. The Company has classified the entire fixed maturity securities and equity securities portfolios as available for sale, which are carried at fair value.

Rating of Fixed Maturity Securities and Equity Securities(1)

(Dollars in millions)

	Percent of Portfolio Fair Value						September 30, 2011
	December 31, 2010			September 30, 2011			Fair Value			Amortized Cost or Cost
Fixed maturity securities
AAA (2)		28.2	%		5.1	%		$	271.2		$	252.0
AA (2)		17.9			39.8				2,115.5			1,917.2
A		23.2			24.5				1,298.5			1,176.3
BBB		25.4			25.7				1,362.0			1,263.3
BB		2.9			2.6				140.5			151.3
B		2.3			2.0				104.5			106.4
CCC or lower		0.1			0.3				14.7			15.4
Not rated (3)		-			-				0.1			0.1
Total fixed maturity securities		100.0	%		100.0	%		$	5,307.0		$	4,882.0
Equity securities
AAA		-			-				-			-
AA		-			-				-			-
A		17.0	%		17.3	%		$	4.0		$	4.5
BBB		55.6			50.6				11.7			10.5
BB		24.9			29.0				6.7			4.8
B		-			-				-			-
CCC or lower		0.4			0.9				0.2			*
Not rated (4)		2.1			2.2				0.5			0.1
Total equity securities		100.0	%		100.0	%		$	23.1		$	19.9
Total								$	5,330.1		$	4,901.9

* Less than $0.1 million.

(1) Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody’s. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.

(continued on next page)

39

(continued)

(2) During the three months ended September 30, 2011, S&P and Moody’s concluded on their respective evaluations of ratings for debt issued by the U.S. government. On August 2, 2011, Moody’s affirmed its Aaa rating, with an outlook of negative. On August 5, 2011, S&P reduced its AAA long-term rating one notch to AA+, with an outlook of negative. At September 30, 2011, the AA rated fair value amount included $602.1 million of U.S. government securities and $476.3 million of securities issued by U.S. government and federally sponsored agencies. At December 31, 2010, the AAA rated fair value amount included $497.5 million of U.S. government securities and $468.0 million of securities issued by U.S. government and federally sponsored agencies.

(3) Included in this category is $0.1 million fair value of private placement securities not rated by either S&P or Moody’s.

(4) This category represents common stocks that are not rated by either S&P or Moody’s.

At September 30, 2011, the Company had $332.2 million fair value in commercial mortgage-backed securities (“CMBS”), primarily in the annuity and life portfolios, with gross unrealized losses of $12.9 million and a net unrealized gain of $25.4 million. Compared to the net unrealized loss at September 30, 2010, market valuation of the CMBS portfolio improved significantly, resulting in an overall fair value to amortized cost ratio of 108.3% at September 30, 2011, compared to 96.2% at September 30, 2010. As a result of risk reduction actions during 2010, and to a lesser extent in the first nine months of 2011, the Company reduced its holdings of conduit/fusion CMBS securities by $120 million of amortized cost, or 64%, compared to December 31, 2009. The CMBS disposals over the last 21 months resulted in a net realized gain of $1.3 million for the nine months ended September 30, 2011 and a net realized loss of $18.6 million for the year ended December 31, 2010. CMBS spreads widened notably in the three month period ended September 30, 2011. The concern over current economic weakness and its impact on commercial real estate values and rising commercial mortgage loan delinquencies has resulted in downward price pressure for certain CMBS securities. At September 30, 2011, the Company’s CMBS portfolio was 93% investment grade, with an overall credit rating of A+, and well diversified by property type, geography and sponsor.

To evaluate the CMBS portfolio, the Company uses an estimate of future cash flows expected to be collected. The determination of cash flow estimates is inherently subjective and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant to the collectability of the security, including past events, current conditions, and reasonable and supportable assumptions and forecasts, are considered when developing the estimate of cash flows expected to be collected. Information includes, but is not limited to, debt-servicing, missed refinancing opportunities and geography. Loan level characteristics such as issuer, payment terms, property type, and economic outlook are also utilized in financial models, along with historical performance, to estimate or measure the loan’s propensity to default. Additionally, financial models take into account loan age, lease rollovers, rent volatilities, vacancy rates and exposure to refinancing as additional drivers of default. For transactions where loan level data is not available, financial models use a proxy based on the collateral characteristics. Loss severity is a function of multiple factors including, but not limited to, the unpaid balance, interest rate, assessed property value at origination, change in property valuation and loan-to-value ratio at origination. Cost of capital rates and debt service ratios are also considered. The cash flows generated by the collateral securing these securities are estimated using these default and loss severity assumptions. These collateral cash flows are then utilized, along with consideration for the issue’s position in the overall structure, to estimate the cash flows associated with the commercial mortgage-backed security held by the Company.

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The table below presents rating, vintage year and property type information for the Company’s CMBS portfolio.

	September 30, 2011									December 31, 2010
	Number of Positions		Fair Value			Pretax Unrealized Gain (Loss)				Number of Positions		Fair Value			Pretax Unrealized Gain (Loss)
Rating
AAA (1)		7		$	28.7		$	2.6			35		$	93.1		$	5.6
AA (1)		54			183.1			29.5			30			79.8			2.0
A		15			80.6			4.4			20			64.3			0.4
BBB		10			17.5			(2.3	)		8			19.2			(1.3	)
BB and below		7			22.3			(8.8	)		8			25.6			(7.3	)
Total		93		$	332.2		$	25.4			101		$	282.0		$	(0.6	)
Vintage
2003 and prior		5		$	10.6		$	0.7			8		$	12.8		$	0.1
2004		8			14.2			(0.1	)		10			15.3			(0.1	)
2005		15			52.2			(10.8	)		17			56.3			(9.5	)
2006		17			40.0			4.3			20			38.7			2.4
2007		16			53.1			7.9			19			51.9			3.1
2008		11			36.9			7.3			12			32.3			2.1
2009		7			47.2			10.1			7			38.6			2.3
2010		8			42.4			3.9			8			36.1			(1.0	)
2011		6			35.6			2.1			-			-			-
Total		93		$	332.2		$	25.4			101		$	282.0		$	(0.6	)
Property type
Military housing		28		$	116.6		$	15.0			26		$	86.1		$	0.2
GNMA project loans		28			96.7			18.0			26			66.2			3.0
Conduit/Fusion		26			56.0			(10.7	)		37			81.6			(5.3	)
Cell tower		3			19.3			1.4			5			20.1			0.9
Timber		5			18.3			1.0			4			8.3			0.6
Single borrower		2			12.9			0.2			2			7.7			*
Credit tenant lease		1			12.4			0.5			1			12.0			*
Total		93		$	332.2		$	25.4			101		$	282.0		$	(0.6	)

* Less than $0.1 million.

(1) During the three months ended September 30, 2011, S&P and Moody’s concluded on their respective evaluations of ratings for debt issued by the U.S. government. On August 2, 2011, Moody’s affirmed its Aaa rating, with an outlook of negative. On August 5, 2011, S&P reduced its AAA long-term rating one notch to AA+, with an outlook of negative. GNMA project loans are issued by agencies sponsored by the U.S. government and their ratings were affected by the S&P U.S. long-term debt ratings downgrade. At September 30, 2011, the AA rated fair value amount included $96.7 million of GNMA project loans. At December 31, 2010, the AAA rated fair value amount included $66.2 million of GNMA project loans.

At September 30, 2011, the Company had $394.6 million fair value in financial institution bonds and preferred stocks with a net unrealized gain of $12.5 million. The Company’s holdings in this sector are primarily large, well recognized institutions, which were broadly supported by government intervention and credit enhancement programs during the 2008 credit crisis.

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At September 30, 2011, the Company had $1,260.8 million fair value invested in municipal bonds with a net unrealized gain of $104.9 million. Of the geographically diversified municipal bond holdings, approximately 53% are tax-exempt and 76% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of these securities was AA-, with approximately 33% of the value insured at September 30, 2011. This represents approximately 7% of the Company’s total investment portfolio that is guaranteed by the mono-line credit insurers. When selecting securities, the Company focuses primarily on the quality of the underlying security and does not place significant reliance on the additional insurance benefit. Excluding the effect of insurance, the credit quality of the underlying municipal bond portfolio also was AA- at September 30, 2011.

At September 30, 2011, the fixed maturity securities and equity securities portfolios had a combined $40.5 million pretax of gross unrealized losses on $596.8 million fair value related to 300 positions. Of this amount, pretax gross unrealized losses of $20.2 million were on $477.4 million fair value for 248 positions that had been in a continuous unrealized loss position for 9 months or less.

Of the investment positions (fixed maturity securities and equity securities) with unrealized losses, 18 were trading below 80% of book value at September 30, 2011 and were not considered other-than-temporarily impaired. These positions included structured securities and corporate securities. The 18 securities with fair values below 80% of book value at September 30, 2011 had fair value of $33.2 million, representing 0.6% of the Company’s total investment portfolio at fair value, and had a gross unrealized loss of $16.3 million.

While the U.S. Treasury yield curve moved significantly lower in the first nine months of 2011, contributing to the improvement in the Company’s gross unrealized loss position compared to December 31, 2010, the persisting global uncertainty and concern over prolonged economic weakness continue to have an adverse effect on the liquidity and fair value of certain investments. With respect to fixed income securities involving securitized financial assets, the underlying collateral cash flows were stress tested to determine there was no adverse change in the expected cash flows at September 30, 2011.

The Company views the decrease in value of all of the securities with unrealized losses at September 30, 2011 as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases. In addition, management expects to recover the entire cost basis of the fixed maturity securities. For equity securities, the Company has the ability and intent to hold the securities for the recovery of cost and recovery of cost is expected within a reasonable period of time. Additionally, as of the date of this Quarterly Report on Form 10-Q, the Company is not aware of any events that call into question the ability of the issuers of the securities to honor their contractual commitments. Therefore, no impairment of these securities was recorded at September 30, 2011. Future changes in circumstances related to these and other securities could require subsequent recognition of other-than-temporary impairment losses.

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Benefits, Claims and Settlement Expenses

	Nine Months Ended September 30,						Change From Prior Year
	2011			2010			Percent			Amount
Property and casualty		$	352.6		$	313.9		12.3	%		$	38.7
Annuity			1.6			1.2		33.3	%			0.4
Life			44.6			41.1		8.5	%			3.5
Total		$	398.8		$	356.2		12.0	%		$	42.6
Property and casualty catastrophe losses, included above (1)		$	81.3		$	40.5		100.7	%		$	40.8

(1) See footnote (1) to the table below.

Property and Casualty Claims and Claim Expenses (“losses”)

	Nine Months Ended September 30,
	2011				2010
Incurred claims and claim expenses:
Claims occurring in the current year		$	358.3			$	328.5
Decrease in estimated reserves for claims occurring in prior years (2)			(5.7	)			(14.6	)
Total claims and claim expenses incurred		$	352.6			$	313.9
Property and casualty loss ratio:
Total			85.9	%			75.5	%
Effect of catastrophe costs, included above (1)			19.8	%			9.8	%
(1)    Property and casualty catastrophe losses were incurred as follows:
	2011				2010
Three months ended
March 31		$	8.0			$	6.8
June 30			55.0				16.2
September 30			18.3				17.5
Total year-to-date		$	81.3			$	40.5
(2)    Shows the amounts by which the Company decreased its reserves in each of the periods indicated for claims occurring in previous years to reflect subsequent information on such claims and changes in their projected final settlement costs.
	2011				2010
Three months ended
March 31		$	(2.7	)		$	(4.5	)
June 30			(1.0	)			(2.8	)
September 30			(2.0	)			(7.3	)
Total year-to-date		$	(5.7	)		$	(14.6	)

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For the three months ended September 30, 2011, the Company’s benefits, claims and settlement expenses decreased $0.5 million, or 0.4%, compared to the prior year, including a $0.8 million increase in property and casualty catastrophe losses in the current period. Tornado and storm activity produced 9 catastrophe events in the third quarter of 2011, with Hurricane Irene impacting several states being the costliest event for the Company. Also contributing to the third quarter change in claims and settlement expenses was an increase in current accident year automobile loss frequency, impacted by non-catastrophe weather, as well as a reduced level of favorable prior years’ property and casualty reserve development, both more than offset by favorable current accident year non-catastrophe homeowners results that largely reflected improvements in Florida sinkhole loss experience. For the third quarter of 2011, life segment benefits, claims and settlement expenses exceeded the prior year due to higher mortality costs.

For the nine months ended September 30, 2011, the Company’s benefits, claims and settlement expenses increased $42.6 million, or 12.0%, compared to the prior year, primarily reflecting a $40.8 million increase in property and casualty catastrophe losses.

For the first nine months of 2011, the favorable development of prior years’ property and casualty reserves of $5.7 million was the result of actual and remaining projected losses for prior years being below the level anticipated in the December 31, 2010 loss reserve estimate, primarily the result of favorable frequency and severity trends in voluntary automobile loss emergence for accident years 2009 and prior, as well as favorable development of homeowners loss reserves for accident years 2010 and prior.

In the first nine months of 2010, favorable development of prior years’ property and casualty reserves of $14.6 million was the result of actual and remaining projected losses for prior years being below the level anticipated in the December 31, 2009 loss reserve estimate, primarily the result of favorable frequency and severity trends in voluntary automobile loss and loss adjustment expense emergence for accident years 2009 and prior.

For the nine months ended September 30, 2011, the voluntary automobile loss ratio of 72.5% increased by 5.7 percentage points compared to the same period a year earlier, including favorable development of prior years’ reserves that had a 2.4 percentage point smaller impact in the current period, higher catastrophe losses for this line of business which represented a 1.1 percentage point increase in the loss ratio, and the impact of the third quarter increase in loss frequency. The homeowners loss ratio of 113.0% for the nine months ended September 30, 2011 increased 19.8 percentage points compared to a year earlier, including a 27.8 percentage point increase due to the higher level of catastrophe costs. Catastrophe costs represented 55.9 percentage points of the homeowners loss ratio for the current period compared to 28.1 percentage points for the prior year. The homeowners loss ratio also reflected an increase of 1.5 percentage points in the nine months ended September 30, 2011 attributable to a lower level of favorable development of prior years’ reserves in the current period. Compared to incurred amounts for each of the quarters from third quarter 2009 through first quarter 2011, the Company’s sinkhole loss costs for the current year periods reflected a favorable impact from the Company’s Florida homeowners policy non-renewal program. Excluding claim settlement expenses, Florida sinkhole losses incurred for the three and nine months ended September 30, 2011 of $(0.9) million and $5.7 million, respectively, decreased $7.8 million and $9.2 million compared to the respective prior year periods. The amount for the third quarter of 2011 included favorable development of prior years’ reserves for sinkhole losses which is included in the amount of prior years’ reserve development disclosed above.

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For the annuity segment, benefits in the first nine months of 2011 increased $0.4 million, or 33.3%, compared to the same period in the prior year. The Company’s guaranteed minimum death benefit (“GMDB”) reserve was $0.7 million at September 30, 2011, compared to $0.3 million at December 31, 2010 and $0.5 million at September 30, 2010. The changes in this reserve in both the current period and 2010 reflected the impact of financial market performance.

For the life segment, benefits in the current nine months increased $3.5 million compared to a year earlier, reflecting an increase in mortality costs in 2011.

Interest Credited to Policyholders

	Nine Months Ended September 30,						Change From Prior Year
	2011			2010			Percent			Amount
Annuity		$	84.1		$	78.7		6.9	%		$	5.4
Life			30.9			30.2		2.3	%			0.7
Total		$	115.0		$	108.9		5.6	%		$	6.1

For the three months ended September 30, 2011, interest credited of $39.3 million increased 5.9%, or $2.2 million, compared to the same period in 2010, consistent with the percentage increase reflected for the nine months.

Compared to the first nine months of 2010, the current year increase in annuity segment interest credited reflected a 10.5% increase in average accumulated fixed deposits, partially offset by a 14 basis point decline in the average annual interest rate credited to 4.03%. Life insurance interest credited increased slightly as a result of the growth in interest-sensitive life insurance reserves.

The net interest spread on fixed annuity account value on deposit measures the difference between the rate of income earned on the underlying invested assets and the rate of interest which policyholders are credited on their account values. The net interest spreads for the nine months ended September 30, 2011 and 2010 were 199 basis points and 198 basis points, respectively.

As of September 30, 2011, fixed annuity account values totaled $3.0 billion, including $2.7 billion of deferred annuities. Of the deferred annuity account values, 31% had minimum guaranteed interest rates of 3% or lower while 61% had minimum guaranteed rates of 4.5% or greater. For $2.1 billion of the deferred annuity account values, the credited interest rate was equal to the minimum guaranteed rate. Due to limitations on the Company’s ability to further lower interest crediting rates, coupled with the potential for continued low reinvestment interest rates, management recognizes there could be fixed annuity spread compression in future periods.

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Policy Acquisition Expenses Amortized

Amortized policy acquisition expenses were $27.9 million for the three months ended September 30, 2011 compared to $20.2 million for the same period in 2010. The $7.7 million increase between the quarterly periods was equal to the change in impacts of the evaluations of annuity deferred policy acquisition costs.

Amortized policy acquisition expenses were $71.7 million for the first nine months of 2011 compared to $66.1 million for the same period in 2010. At September 30, 2011, the evaluation of annuity deferred policy acquisition costs resulted in an increase in amortization of $5.6 million, which primarily reflected the impact of unfavorable financial market performance in the first nine months of the year. This compares to an increase in amortization of $0.9 million from a similar evaluation at September 30, 2010. For the life segment, the September 30, 2011 evaluation of deferred policy acquisition costs resulted in a $0.7 million year-to-date increase in amortization, compared to a $0.4 million increase recorded as a result of the September 30, 2010 evaluation.

Operating Expenses

For the three months ended September 30, 2011, operating expenses of $34.0 million decreased 5.9%, or $2.1 million, compared to a year earlier. In the third quarter of 2010, the Company recorded a charge of $2.2 million to write off software development costs related to its property insurance administrative system. This charge was borne by the property and casualty segment and represented 1.6 percentage points of that segment’s expense ratio for the third quarter of 2010.

For the first nine months of 2011, operating expenses of $102.6 million decreased 1.6%, or $1.6 million, compared to the same period in the prior year which included a charge of $2.2 million to write off software development costs described above that represented 0.5 percentage point of the property and casualty expense ratio for the first nine months of 2010. The property and casualty expense ratio of 25.5% for the nine months ended September 30, 2011 increased 0.2 percentage point compared to the prior year expense ratio of 25.3%, consistent with management’s expectations for the current period.

Income Tax Expense (Benefit)

The effective income tax rate on the Company’s pretax income, including net realized investment gains and losses, was 28.5% and 27.7% for the nine months ended September 30, 2011 and 2010, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rate 6.3 and 7.0 percentage points for the nine months ended September 30, 2011 and 2010, respectively.

The Company records liabilities for uncertain tax filing positions where it is more-likely-than-not that the position will not be sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted appropriately based upon changes in facts or law. The Company has no unrecorded liabilities from uncertain tax filing positions.

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In the second quarter of 2010, the Internal Revenue Service published guidance regarding separate account (variable annuity) dividend received deductions for life insurance companies in which they advised (1) they would concede appeals related to the issue and not raise the issue on audit unless the taxpayer changed its methodology for computing the deduction, and (2) any changes in law regarding this deduction would be effective prospectively. As a result, the Company believed this issue was no longer an uncertain tax position and recorded a reduction of $1.4 million in the uncertain tax position liability related to the separate account dividend received deduction.

At September 30, 2011, the Company had federal income tax returns for the 2006 through 2010 tax years still open and subject to adjustment upon examination by taxing authorities. The Company is currently under examination by the Internal Revenue Service for tax years 2006 through 2009. The Company has recorded $0.3 million of uncertain tax position liabilities including interest related to all open tax years as of September 30, 2011.

Net Income

For the three months ended September 30, 2011, the Company reported net income of $23.2 million, which represented an increase of $3.1 million, or 15%, compared to the prior year. After-tax net realized investment gains increased by $6.0 million between periods. Annuity segment net income decreased $4.2 million, or 49%, compared to the third quarter of 2010, primarily due to the negative impact on the current quarter from the evaluation of deferred policy acquisition costs which was largely driven by the change in financial market performance, partially offset by improvements in the interest margin. Life segment net income decreased $2.0 million, or 36%, compared to a year earlier, primarily due to higher mortality costs. For the property and casualty segment, net income increased $0.2 million, or 13%, compared to a year earlier, due to improvements in property non-catastrophe loss experience including a reduction in sinkhole claims, which were partially offset by an increase in the automobile current accident year loss ratio and a smaller benefit in the current period from favorable prior years’ reserve development. While only somewhat greater than the third quarter 2010 level, catastrophe losses had a negative impact on the comparison to prior year.

For the nine months ended September 30, 2011, the Company’s net income of $37.3 million represented a decrease of $28.4 million, or 43%, compared to the prior year primarily due to the increase in property and casualty catastrophe losses. After-tax net realized investment gains increased by $4.8 million between periods. For the property and casualty segment, the net loss of $11.6 million reflected a decrease of $32.6 million, compared to net income for the first nine months of 2010, primarily due to the increase in catastrophe costs but also reflecting a smaller benefit in the current period from favorable prior years’ reserve development. Catastrophe costs increased $26.5 million after tax compared to the prior year. Favorable prior years’ property and casualty reserve development was $5.8 million after tax lower than the same period a year ago. For the nine months, current period incurred sinkhole claims in Florida were less than the prior year by approximately $6 million after tax. Excluding catastrophe losses, compared to a year earlier current accident year results for the property line improved while automobile current accident year losses increased. Including all factors, the property and casualty combined ratio was 111.4% for the first nine months of 2011 compared to 100.8% for the same period in 2010. Annuity segment net income decreased $2.2 million, or 10%, compared to the first nine months of 2010, reflecting the negative impacts from the evaluation of deferred policy acquisition costs and a non-recurring tax benefit recorded in the prior year, partially offset by improvements in the interest margin. Compared

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to the first nine months of 2010, life segment net income decreased $2.2 million, or 14%, including higher mortality costs in the current period.

Net income (loss) by segment and net income per share were as follows:

	Nine Months Ended September 30,								Change From Prior Year
	2011				2010				Percent			Amount
Analysis of net income (loss) by segment:
Property and casualty		$	(11.6	)		$	21.0			N.M.			$	(32.6	)
Annuity			20.5				22.7			-9.7	%			(2.2	)
Life			13.5				15.7			-14.0	%			(2.2	)
Corporate and other (1)			14.9				6.3			136.5	%			8.6
Net income		$	37.3			$	65.7			-43.2	%		$	(28.4	)
Effect of catastrophe costs, after tax, included above		$	(52.8	)		$	(26.3	)		100.8	%		$	(26.5	)
Effect of realized investment gains, after tax, included above		$	21.1			$	16.3			29.4	%		$	4.8
Diluted:
Net income per share		$	0.90			$	1.61			-44.1	%		$	(0.71	)
Weighted average number of shares and equivalent shares (in millions)			41.5				40.9			1.5	%			0.6
Property and casualty combined ratio:
Total			111.4	%			100.8	%		N.M.				10.6	%
Effect of catastrophe costs, included above			19.8	%			9.8	%		N.M.				10.0	%

N.M. – Not meaningful.

(1) The corporate and other segment includes interest expense on debt, realized investment gains and losses, certain public company expenses and other corporate level items. The Company does not allocate the impact of corporate level transactions to the insurance segments, consistent with the basis for management’s evaluation of the results of those segments.

For the nine months ended September 30, 2011, the changes in net income for the property and casualty, annuity and life segments are described above.

For the corporate and other segment, net income in the current period compared to the first nine months of 2010 primarily reflected the increase in net realized investment gains in the current period.

Return on average shareholders’ equity based on net income was 6% and 11% for the trailing 12 months ended September 30, 2011 and 2010, respectively.

The accounting guidance adopted by the Company effective January 1, 2011 is described in “Notes to Consolidated Financial Statements – Note 1 – Basis of Presentation – Adopted Accounting Standards”. The adoption did not have an effect on the results of operations or financial position of the Company.

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Outlook for 2011

At the time of this Quarterly Report on Form 10-Q, management estimates that 2011 full year net income before realized investment gains and losses will be within a range of $0.90 to $1.00 per diluted share. This projection incorporates the Company’s results for the first nine months of the year, which included a significant level of property and casualty weather-related catastrophe costs and increased amortization of annuity deferred policy acquisition costs resulting from both unfavorable financial market performance and realized investment gains. For the remaining three months of 2011, this projection assumes catastrophe losses comparable to long-term historical levels, moderate financial market appreciation, minimal impact from Florida sinkhole losses and underlying results for each of the segments consistent with prior fourth quarter patterns. As described in “Critical Accounting Policies”, certain of the Company’s 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 income for the period in which the adjustments are made and may impact actual results compared to management’s current estimate. Additionally, see “Forward-looking Information” concerning other important factors that could impact actual results. Management believes that a projection of net income including realized investment gains and losses is not appropriate on a forward-looking basis because it is not possible to provide a valid 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.

Liquidity and Financial Resources

Off-Balance Sheet Arrangements

At September 30, 2011 and 2010, the Company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise if the Company had engaged in such relationships.

Investments

Information regarding the Company’s investment portfolio, which is comprised primarily of investment grade, fixed income securities, is located in “Results of Operations -- Net Realized Investment Gains and Losses” and in the “Notes to Consolidated Financial Statements -- Note 2 -- Investments”.

Cash Flow

The short-term liquidity requirements of the Company, within a 12-month operating cycle, are for the timely payment of claims and benefits to policyholders, operating expenses, interest payments and federal income taxes. Cash flow generated from operations has been, and is expected to be, adequate to meet the Company’s operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth, retire short-term debt, pay dividends to shareholders and repurchase shares of the Company’s common stock. Long-term liquidity requirements, beyond one year, are principally for the payment of future insurance policy claims and benefits and retirement of long-term debt.

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Operating Activities

As a holding company, HMEC conducts its principal operations in the personal lines segment of the property and casualty and life insurance industries through its subsidiaries. HMEC’s 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 generated by the insurance subsidiaries. For the first nine months of 2011, net cash provided by operating activities decreased compared to the same period in 2010, primarily due to higher property and casualty claims payments in the current period including the impact of catastrophe events.

Payment of principal and interest on debt, dividends to shareholders and parent company operating expenses are dependent upon the ability of the insurance subsidiaries to pay cash dividends or make other cash payments to HMEC, including tax payments pursuant to tax sharing agreements. Payments for share repurchase programs also have this dependency. The insurance subsidiaries are subject to various regulatory restrictions which limit the amount of annual dividends or other distributions, including loans or cash advances, available to HMEC without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 2011 from all of HMEC’s insurance subsidiaries without prior regulatory approval is approximately $78 million, of which $16 million was paid during the nine months ended September 30, 2011. Although regulatory restrictions exist, dividend availability from subsidiaries has been, and is expected to be, adequate for HMEC’s capital needs.

Investing Activities

HMEC’s insurance subsidiaries maintain significant investments in fixed maturity securities to meet future contractual obligations to policyholders. In conjunction with its management of liquidity and other asset/liability management objectives, the Company, from time to time, will sell fixed maturity securities prior to maturity and reinvest the proceeds in other investments with different interest rates, maturities or credit characteristics. Accordingly, the Company has classified the entire fixed maturity securities and equity securities portfolios as “available for sale”.

Financing Activities

Financing activities include primarily payment of dividends, the receipt and withdrawal of funds by annuity contractholders, repurchases of the Company’s common stock, fluctuations in bank overdraft balances, and borrowings, repayments and repurchases related to its debt facilities.

The Company’s annuity business produced net positive cash flows in the first nine months of 2011. For the nine months ended September 30, 2011, receipts from annuity contracts increased $30.2 million, or 10.5%, compared to the same period in the prior year, as described in “Results of Operations -- Insurance Premiums and Contract Charges”. In total, annuity contract benefits, withdrawals and net transfers to variable annuity accumulated cash values decreased $16.3 million, or 9.2%, compared to the prior year.

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Capital Resources

The Company has determined the amount of capital which is needed to adequately fund and support business growth, primarily based on risk-based capital formulas including those developed by the National Association of Insurance Commissioners (“NAIC”). Historically, the Company’s insurance subsidiaries have generated capital in excess of such needed capital. These excess amounts have been paid to HMEC through dividends. HMEC has then utilized these dividends and its access to the capital markets to service and retire long-term debt, pay dividends to its shareholders, fund growth initiatives, repurchase shares of its common stock and for other corporate purposes. Management anticipates that the Company’s sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments and shareholder dividends.

The total capital of the Company was $1,293.2 million at September 30, 2011, including $199.7 million of long-term debt and $38.0 million of short-term debt outstanding. Total debt represented 22.9% of total capital excluding unrealized investment gains and losses (18.4% including unrealized investment gains and losses) at September 30, 2011, which was within a range consistent with the Company’s long-term target of 25% and with the Company’s debt ratings assigned as of September 30, 2011.

Shareholders’ equity was $1,055.5 million at September 30, 2011, including a net unrealized gain in the Company’s investment portfolio of $257.2 million after taxes and the related impact of deferred policy acquisition costs associated with annuity and interest-sensitive life policies. The market value of the Company’s common stock and the market value per share were $455.5 million and $11.41, respectively, at September 30, 2011. Book value per share was $26.44 at September 30, 2011 ($20.00 excluding investment fair value adjustments).

Additional information regarding the net unrealized gain in the Company’s investment portfolio at September 30, 2011 is included in “Results of Operations -- Net Realized Investment Gains and Losses”.

Total shareholder dividends were $13.6 million for the nine months ended September 30, 2011. In March, May and September 2011, the Board of Directors announced regular quarterly dividends of $0.11 per share.

As of September 30, 2011, the Company had outstanding $75.0 million aggregate principal amount of 6.05% Senior Notes (“Senior Notes due 2015”), which will mature on June 15, 2015, issued at a discount resulting in an effective yield of 6.1%. Interest on the Senior Notes due 2015 is payable semi-annually at a rate of 6.05%. Detailed information regarding the redemption terms of the Senior Notes due 2015 is contained in the “Notes to Consolidated Financial Statements -- Note 5 -- Debt” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The Senior Notes due 2015 are traded in the open market (HMN 6.05).

As of September 30, 2011, the Company had outstanding $125.0 million aggregate principal amount of 6.85% Senior Notes (“Senior Notes due 2016”), which will mature on April 15, 2016, issued at a discount resulting in an effective yield of 6.893%. Interest on the Senior Notes due 2016 is payable semi-annually at a rate of 6.85%. Detailed information regarding the redemption terms of the Senior Notes due 2016 is contained in the “Notes to Consolidated Financial Statements -- Note 5 -- Debt” of the Company’s Annual Report on Form 10-K for the

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year ended December 31, 2010. The Senior Notes due 2016 are traded in the open market (HMN 6.85).

As of September 30, 2011, the Company had $38.0 million outstanding under its Bank Credit Facility. The Bank Credit Facility entered into on May 31, 2005 (the “Previous Bank Credit Agreement”) provided for unsecured borrowings of up to $125.0 million and was scheduled to expire on December 19, 2011. Interest accrued at varying spreads relative to corporate or Eurodollar base rates and was payable monthly or quarterly depending on the applicable base rate (London Interbank Offered Rate (“LIBOR”) plus 0.6%, which totaled 0.9%, at September 30, 2011). The unused portion under the Previous Bank Credit Agreement was subject to a variable commitment fee, which was 0.125% on an annual basis at September 30, 2011. During the nine months ended September 30, 2011, there was no change in the amount outstanding under the Company’s Previous Bank Credit Agreement.

On October 7, 2011, HMEC entered into a new Bank Credit Agreement (the “Current Bank Credit Facility”) that replaces the Previous Bank Credit Agreement. The Current Bank Credit Facility provides for unsecured borrowings of up to $150 million and expires on October 6, 2015. On October 7, 2011, there was no change to HMEC’s short-term debt balance. HMEC borrowed $38 million under the Current Bank Credit Facility and used the proceeds to repay the $38 million balance outstanding under the Previous Bank Credit Agreement. The Previous Bank Credit Facility was then terminated. Under the Current Bank Credit Facility, interest accrues at varying spreads relative to prime or eurodollar base rates and is payable monthly or quarterly depending on the applicable base rate (eurodollar base rate plus 1.25%, or 1.63%, as of October 7, 2011). The unused portion of the Current Bank Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis at October 7, 2011. The Current Bank Credit Facility contains financial covenants, as defined in the agreement, as follows: (1) debt to capital ratio not to exceed 35%, (2) minimum net worth and (3) insurance subsidiaries’ risk based capital percentages of not less than 300%.

To provide additional capital management flexibility, the Company filed a “universal shelf” registration on Form S-3 with the SEC in November 2008. The registration statement, which registers the offer and sale by the Company from time to time of up to $300 million of various securities, which may include debt securities, common stock, preferred stock, depositary shares, warrants and/or delayed delivery contracts, was declared effective on January 7, 2009. Unless fully utilized or withdrawn by the Company earlier, this registration statement will remain effective through January 7, 2012. No securities associated with the registration statement have been issued as of the date of this Quarterly Report on Form 10-Q.

Financial Ratings

HMEC’s principal insurance subsidiaries are rated by S&P, Moody’s and A.M. Best Company, Inc. (“A.M. Best”). These rating agencies have also assigned ratings to the Company’s long-term debt securities. The ratings that are assigned by these agencies, which are subject to change, can impact, among other things, the Company’s access to sources of capital, cost of capital, compliance with debt covenants and competitive position.

With the exception of the ratings by A.M. Best, assigned ratings as of October 31, 2011 were unchanged from the disclosure in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. In April 2011, A.M. Best upgraded (1) the insurance financial strength rating of the Company’s primary life insurance subsidiary to “A (Excellent)” from “A- (Excellent)” and (2) HMEC’s debt rating to “bbb” from “bbb-”.

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Assigned ratings as of October 31, 2011 were as follows (unless otherwise indicated, the insurance financial strength ratings for the Company’s property and casualty insurance subsidiaries and the Company’s principal life insurance subsidiary are the same):

	Insurance Financial Strength Ratings (Outlook)	Debt Ratings     (Outlook)
October 31, 2011
S&P (1)	A        (stable)	BBB    (stable)
Moody’s (1)	A3      (stable)	Baa3   (stable)
A.M. Best
Horace Mann Life Insurance Company	A        (stable)	N.A.
HMEC’s property and casualty subsidiaries	A-       (stable)	N.A.
HMEC	N.A.	bbb     (stable)

N.A. – Not applicable.

(1) This agency has not yet rated Horace Mann Lloyds.

Reinsurance Programs

Information regarding the reinsurance program for the Company’s property and casualty segment is located in “Business -- Property and Casualty Segment -- Property and Casualty Reinsurance” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. All components of the Company’s property and casualty reinsurance program remain consistent with the Form 10-K disclosure, with the exception of the Florida Hurricane and Catastrophe Fund (“FHCF”) coverage. Subsequent to the February 28, 2011 SEC filing of the Company’s recent Form 10-K, information received from the FHCF indicated that the Company’s maximum for the 2010-2011 contract period had been revised to $51.2 million from $49.8 million, based on the FHCF’s financial resources, with no change in the retention, for the Company’s predominant insurance subsidiary for property and casualty business written in Florida. The FHCF contract is a one-year contract. Effective June 1, 2011, the new contract with the FHCF, for the Company’s predominant insurance subsidiary for property and casualty business written in Florida, reinsures 90% of hurricane losses in Florida above an estimated retention of $7.5 million up to $26.7 million based on the FHCF’s financial resources. Compared to the 2010-2011 contract period, the reduced maximum coverage is due to the Company’s lower risk exposure in Florida as described in “Results of Operations -- Insurance Premiums and Contract Charges”.

Information regarding the reinsurance program for the Company’s life segment is located in “Business -- Life Segment” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Market Value Risk

Market value risk, the Company’s primary market risk exposure, is the risk that the Company’s invested assets will decrease in value. This decrease in value may be due to (1) a change in the yields realized on the Company’s assets and prevailing market yields for similar assets, (2) an unfavorable change in the liquidity of the investment, (3) an unfavorable change in the financial prospects of the issuer of the investment, or (4) a downgrade in the credit rating of the issuer of the investment. See also “Results of Operations -- Net Realized Investment Gains and Losses”.

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Significant changes in interest rates expose the Company to the risk of experiencing losses or earning a reduced level of income based on the difference between the interest rates earned on the Company’s investments and the credited interest rates on the Company’s insurance liabilities. See also “Results of Operations -- Interest Credited to Policyholders”.

The Company seeks to manage its market value risk by coordinating the projected cash inflows of assets with the projected cash outflows of liabilities. For all its assets and liabilities, the Company seeks to maintain reasonable durations, consistent with the maximization of income without sacrificing investment quality, while providing for liquidity and diversification. The investment risk associated with variable annuity deposits and the underlying mutual funds is assumed by those contractholders, and not by the Company. Certain fees that the Company earns from variable annuity deposits are based on the market value of the funds deposited.

More detailed descriptions of the Company’s exposure to market value risks and the management of those risks is presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Market Value Risk” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Recent Accounting Changes

Goodwill

In September 2011, the Financial Accounting Standard Board (“FASB”) issued accounting guidance to allow an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The guidance provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not necessary. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal periods beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011. Management believes the adoption of this accounting guidance will not have an effect on the results of operations or financial position of the Company.

Comprehensive Income

In June 2011, the FASB issued accounting guidance to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The guidance eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The guidance requires that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements with the Statement of Comprehensive Income following the Statement of Operations. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 and will be applied retrospectively. Management believes the adoption of this accounting guidance will not have an effect on the results of operations or financial position of the Company.

54

Fair Value Measurements

In May 2011, the FASB issued accounting guidance to revise the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements. The guidance is largely consistent with existing fair value measurement principles. For many of the requirements, the FASB does not intend for the amendments to result in a change in the application of the current requirements. Generally, the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements, such as specifying that the concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 and will be applied prospectively upon adoption. Management believes the adoption of this accounting guidance will not have an effect on the results of operations or financial position of the Company.

Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB issued accounting guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. The guidance will allow an insurance entity to capitalize only incremental and certain direct costs related to the successful acquisition of new or renewal insurance contracts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 and provides for either prospective or retrospective application. As of the time of this Quarterly Report on Form 10-Q, management continues to assess the impact that the adoption of this accounting guidance will have on the results of operations and financial position of the Company. While management has completed a significant amount of analysis regarding deferrable costs under the new guidance, a considerable amount of work still needs to be completed, especially related to the Annuity and Life segments. As of the time of this Quarterly Report on Form 10-Q, management’s preliminary results indicate an impact on reported shareholders’ equity excluding unrealized investment gains and losses of less than 5%. However, completion of the Company’s final analysis could result in a larger impact on shareholders’ equity. Management currently anticipates electing retrospective application of the new guidance effective January 1, 2012 resulting in a downward adjustment to the deferred policy acquisition costs asset with a corresponding adjustment to beginning retained earnings. On a forward-looking basis, management currently anticipates the net impact of lower expense deferrals and lower amortization on net income to be minimal.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

The information required by Item 305 of Regulation S-K is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Market Value Risk” contained in this Quarterly Report on Form 10-Q.

55

Item 4: Controls and Procedures

Management’s Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), as of September 30, 2011 pursuant to Rule 13a-15(b) of the Exchange Act. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) that is required to be included in the Company’s periodic Securities and Exchange Commission filings. No significant deficiencies or material weaknesses in the Company’s disclosure controls and procedures were identified in the evaluation and therefore, no corrective actions were taken. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1A: Risk Factors

At the time of this Quarterly Report on Form 10-Q, management believes there are no material changes from the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Item 5: Other Information

The Company is not aware of any information required to be disclosed in a report on Form 8-K during the three months ended September 30, 2011 which has not been filed with the SEC.

56

Item 6: Exhibits

The following items are filed as Exhibits. Management contracts and compensatory plans are indicated by an asterisk (*).

Exhibit  
No. Description

(3) Articles of incorporation and bylaws:

3.1 Restated Certificate of Incorporation of HMEC, filed with the Delaware Secretary of State on June 24, 2003, incorporated by reference to Exhibit 3.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2003.

3.2 Form of Certificate for shares of Common Stock, $0.001 par value per share, of HMEC, incorporated by reference to Exhibit 4.5 to HMEC’s Registration Statement on Form S-3 (Registration No. 33-53118) filed with the SEC on October 9, 1992.

3.3 Bylaws of HMEC, incorporated by reference to Exhibit 3.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the SEC on August 14, 2003.

(4) Instruments defining the rights of security holders, including indentures:

4.1 Indenture, dated as of June 9, 2005, between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee), incorporated by reference to Exhibit 4.1 to HMEC’s Current Report on Form 8-K dated June 6, 2005, filed with the SEC on June 9, 2005.

4.1(a) First Supplemental Indenture, dated as of June 9, 2005, between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee), incorporated by reference to Exhibit 4.2 to HMEC’s Current Report on Form 8-K dated June 6, 2005, filed with the SEC on June 9, 2005.

4.1(b) Form of HMEC 6.05% Senior Notes Due 2015 (included in Exhibit 4.1(a)).

4.1(c) Second Supplemental Indenture, dated as of April 21, 2006, between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee), incorporated by reference to Exhibit 4.3 to HMEC’s Current Report on Form 8-K dated April 18, 2006, filed with the SEC on April 21, 2006.

4.1(d) Form of HMEC 6.85% Senior Notes due April 15, 2016 (included in Exhibit 4.1(c)).

57

Exhibit  
No. Description

4.2 Certificate of Designations for HMEC Series A Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4.3 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

(10) Material contracts:

10.1 Credit Agreement dated as of October 7, 2011 among HMEC, certain financial institutions named therein and JPMorgan Chase Bank, N.A., as administrative agent.

10.2* Amended and Restated Horace Mann Educators Corporation Deferred Equity Compensation Plan for Directors, incorporated by reference to Exhibit 10.2 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.3* Amended and Restated Horace Mann Educators Corporation Deferred Compensation Plan for Employees, incorporated by reference to Exhibit 10.3 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.4* Amended and Restated Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.5 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 30, 2000.

10.4(a)* Amendment to Amended and Restated Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.1(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the SEC on August 11, 2000.

10.4(b)* Specimen Employee Stock Option Agreement under the Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.5(a) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 30, 2000.

10.4(c)* Specimen Director Stock Option Agreement under the Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.5(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 30, 2000.

10.5* Horace Mann Educators Corporation 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10.6 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002.

58

Exhibit  
No. Description

10.5(a)* Specimen Employee Stock Option Agreement under the Horace Mann Educators Corporation 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10.6(a) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002.

10.5(b)* Specimen Director Stock Option Agreement under the Horace Mann Educators Corporation 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10.6(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002.

10.6* Horace Mann Educators Corporation Amended and Restated 2002 Incentive Compensation Plan (“2002 Incentive Compensation Plan”), incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed with the SEC on August 9, 2005.

10.6(a)* Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.2(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002.

10.6(b)* Revised Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.6(c)* Specimen Regular Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.2(b) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002.

10.6(d)* Specimen Director Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.2(c) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002.

10.6(e)* Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(d) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

10.6(f)* Revised Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

59

Exhibit  
No. Description

10.6(g)* Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(e) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

10.6(h)* Revised Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(h) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.6(i)* Specimen Restricted Stock Unit Deferral Election Form under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

10.6(j)* Revised Specimen Restricted Stock Unit Deferral Election Forms under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(j) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.6(k)* Specimen Modification to Stock Options outstanding as of June 30, 2004, incorporated by reference to Exhibit 10.2(d) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed with the SEC on August 9, 2004.

10.7* HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 1 (beginning on page E-1) to HMEC’s Proxy Statement, filed with the SEC on April 9, 2010.

10.7(a)* Specimen Incentive Stock Option Agreement for Section 16 Officers under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

10.7(b)* Specimen Incentive Stock Option Agreement for Non-Section 16 Officers under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(b) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

10.7(c)* Specimen Employee Service-Vested Restricted Stock Units Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(c) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

60

Exhibit  
No. Description

10.7(d)* Specimen Employee Performance-Based Restricted Stock Units Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(d) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

10.7(e)* Specimen Non-Employee Director Restricted Stock Unit Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.17(a) to HMEC’s Current Report on Form 8-K dated May 27, 2010, filed with the SEC on June 2, 2010.

10.8* Horace Mann Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.

10.9* Horace Mann Executive Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.

10.10* Amended and Restated Horace Mann Nonqualified Supplemental Money Purchase Pension Plan, incorporated by reference to Exhibit 10.9 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.11* Summary of HMEC Non-Employee Director Compensation, incorporated by reference to Exhibit 10.11 to HMEC’s Current Report on Form 8-K dated May 25, 2011, filed with the SEC on May 27, 2011.

10.12* Summary of HMEC Named Executive Officer Annualized Salaries, incorporated by reference to Exhibit 10.12 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

10.13* Form of Severance Agreement between HMEC, Horace Mann Service Corporation (“HMSC”) and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.12 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.13(a)* Revised Schedule to Severance Agreements between HMEC, HMSC and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.13(a) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 28, 2011.

61

Exhibit  
No. Description

10.14* Form of Change in Control Agreement between HMEC, HMSC and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.13 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.14(a)* Revised Schedule to Change in Control Agreement between HMEC, HMSC and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.14(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

10.15* Employment Agreement between HMSC and Stephen P. Cardinal as of November 20, 2008, incorporated by reference to Exhibit 10.15 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

(11) Statement regarding computation of per share earnings.

(15) KPMG LLP letter regarding unaudited interim financial information.

(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1 Certification by Peter H. Heckman, Chief Executive Officer of HMEC.

31.2 Certification by Dwayne D. Hallman, Chief Financial Officer of HMEC.

(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1 Certification by Peter H. Heckman, Chief Executive Officer of HMEC.

32.2 Certification by Dwayne D. Hallman, Chief Financial Officer of HMEC.

(99) Additional exhibits

99.1 Glossary of Selected Terms.

(101) Interactive Data File

   101.INS     XBRL Instance Document

   101.SCH    XBRL Taxonomy Extension Schema

   101.CAL    XBRL Taxonomy Extension Calculation Linkbase

   101.DEF    XBRL Taxonomy Extension Definition Linkbase

   101.LAB     XBRL Taxonomy Extension Label Linkbase

   101.PRE    XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

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 thereunto duly authorized.

		HORACE MANN EDUCATORS CORPORATION
		(Registrant)
Date	November 9, 2011		/s/ Peter H. Heckman
			Peter H. Heckman
			President and Chief Executive Officer
Date	November 9, 2011		/s/ Dwayne D. Hallman
			Dwayne D. Hallman
			Executive Vice President
			and Chief Financial Officer
Date	November 9, 2011		/s/ Bret A. Conklin
			Bret A. Conklin
			Senior Vice President
			and Controller

63

HORACE MANN EDUCATORS CORPORATION

EXHIBITS

To

FORM 10-Q

For the Quarter Ended September 30, 2011

VOLUME 1 OF 1

The following items are filed as Exhibits to Horace Mann Educators Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011. Management contracts and compensatory plans are indicated by an asterisk (*).

EXHIBIT INDEX

Exhibit No. Description

(3)	Articles of incorporation and bylaws:
	3.1	Restated Certificate of Incorporation of HMEC, filed with the Delaware Secretary of State on June 24, 2003, incorporated by reference to Exhibit 3.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2003.
	3.2	Form of Certificate for shares of Common Stock, $0.001 par value per share, of HMEC, incorporated by reference to Exhibit 4.5 to HMEC’s Registration Statement on Form S-3 (Registration No. 33-53118) filed with the SEC on October 9, 1992.
	3.3	Bylaws of HMEC, incorporated by reference to Exhibit 3.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the SEC on August 14, 2003.
(4)	Instruments defining the rights of security holders, including indentures:
	4.1	Indenture, dated as of June 9, 2005, between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee), incorporated by reference to Exhibit 4.1 to HMEC’s Current Report on Form 8-K dated June 6, 2005, filed with the SEC on June 9, 2005.
	4.1(a)	First Supplemental Indenture, dated as of June 9, 2005, between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee), incorporated by reference to Exhibit 4.2 to HMEC’s Current Report on Form 8-K dated June 6, 2005, filed with the SEC on June 9, 2005.
	4.1(b)	Form of HMEC 6.05% Senior Notes Due 2015 (included in Exhibit 4.1(a)).
	4.1(c)	Second Supplemental Indenture, dated as of April 21, 2006, between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee), incorporated by reference to Exhibit 4.3 to HMEC’s Current Report on Form 8-K dated April 18, 2006, filed with the SEC on April 21, 2006.

1

Exhibit
No. Description

	4.1(d)	Form of HMEC 6.85% Senior Notes due April 15, 2016 (included in Exhibit 4.1(c)).
	4.2	Certificate of Designations for HMEC Series A Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4.3 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
(10)	Material contracts:
	10.1	Credit Agreement dated as of October 7, 2011 among HMEC, certain financial institutions named therein and JPMorgan Chase, N.A., as administrative agent.
	10.2*	Amended and Restated Horace Mann Educators Corporation Deferred Equity Compensation Plan for Directors, incorporated by reference to Exhibit 10.2 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
	10.3*	Amended and Restated Horace Mann Educators Corporation Deferred Compensation Plan for Employees, incorporated by reference to Exhibit 10.3 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
	10.4*	Amended and Restated Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.5 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 30, 2000.
	10.4(a)*	Amendment to Amended and Restated Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.1(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the SEC on August 11, 2000.
	10.4(b)*	Specimen Employee Stock Option Agreement under the Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.5(a) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 30, 2000.
	10.4(c)*	Specimen Director Stock Option Agreement under the Horace Mann Educators Corporation 1991 Stock Incentive Plan, incorporated by reference to Exhibit 10.5(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 30, 2000.

2

Exhibit No. Description

10.5*	Horace Mann Educators Corporation 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10.6 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002.
10.5(a)*	Specimen Employee Stock Option Agreement under the Horace Mann Educators Corporation 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10.6(a) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002.
10.5(b)*	Specimen Director Stock Option Agreement under the Horace Mann Educators Corporation 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10.6(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002.
10.6*	Horace Mann Educators Corporation Amended and Restated 2002 Incentive Compensation Plan (“2002 Incentive Compensation Plan”), incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed with the SEC on August 9, 2005.
10.6(a)*	Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.2(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002.
10.6(b)*	Revised Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
10.6(c)*	Specimen Regular Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.2(b) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002.
10.6(d)*	Specimen Director Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.2(c) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002.
10.6(e)*	Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(d) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

3

Exhibit No. Description

10.6(f)*	Revised Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
10.6(g)*	Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(e) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
10.6(h)*	Revised Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(h) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
10.6(i)*	Specimen Restricted Stock Unit Deferral Election Form under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
10.6(j)*	Revised Specimen Restricted Stock Unit Deferral Election Forms under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(j) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
10.6(k)*	Specimen Modification to Stock Options outstanding as of June 30, 2004, incorporated by reference to Exhibit 10.2(d) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed with the SEC on August 9, 2004.
10.7*	HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 1 (beginning on page E-1) to HMEC’s Proxy Statement, filed with the SEC on April 9, 2010.
10.7(a)*	Specimen Incentive Stock Option Agreement for Section 16 Officers under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

4

Exhibit No.	Description
10.7(b)*	Specimen Incentive Stock Option Agreement for Non-Section 16 Officers under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(b) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.
10.7(c)*	Specimen Employee Service-Vested Restricted Stock Units Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(c) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.
10.7(d)*	Specimen Employee Performance-Based Restricted Stock Units Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.7(d) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.
10.7(e)*	Specimen Non-Employee Director Restricted Stock Unit Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.17(a) to HMEC’s Current Report on Form 8-K dated May 27, 2010, filed with the SEC on June 2, 2010.
10.8*	Horace Mann Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.
10.9*	Horace Mann Executive Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.
10.10*	Amended and Restated Horace Mann Nonqualified Supplemental Money Purchase Pension Plan, incorporated by reference to Exhibit 10.9 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
10.11*	Summary of HMEC Non-Employee Director Compensation, incorporated by reference to Exhibit 10.11 to HMEC’s Current Report on Form 8-K dated May 25, 2011, filed with the SEC on May 27, 2011.
10.12*	Summary of HMEC Named Executive Officer Annualized Salaries, incorporated by reference to Exhibit 10.12 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.

5

Exhibit No. Description

	10.13*	Form of Severance Agreement between HMEC, Horace Mann Service Corporation (“HMSC”) and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.12 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
	10.13(a)*	Revised Schedule to Severance Agreements between HMEC, HMSC and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.13(a) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 28, 2011.
	10.14*	Form of Change in Control Agreement between HMEC, HMSC and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.13 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
	10.14(a)*	Revised Schedule to Change in Control Agreement between HMEC, HMSC and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.14(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011.
	10.15*	Employment Agreement between HMSC and Stephen P. Cardinal as of November 20, 2008, incorporated by reference to Exhibit 10.15 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
(11)	Statement regarding computation of per share earnings.
(15)	KPMG LLP letter regarding unaudited interim financial information.
(31)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.1	Certification by Peter H. Heckman, Chief Executive Officer of HMEC.
	31.2	Certification by Dwayne D. Hallman, Chief Financial Officer of HMEC.
(32)	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification by Peter H. Heckman, Chief Executive Officer of HMEC.
	32.2	Certification by Dwayne D. Hallman, Chief Financial Officer of HMEC.

6

Exhibit No. Description

(99)	Additional exhibits
	99.1	Glossary of Selected Terms.
(101)	Interactive Data File
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase
	101.DEF	XBRL Taxonomy Extension Definition Linkbase
	101.LAB	XBRL Taxonomy Extension Label Linkbase
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase

7

EX-10.1

Exhibit 10.1

CREDIT AGREEMENT

dated as of

October 7, 2011

among

HORACE MANN EDUCATORS CORPORATION

The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

J.P. MORGAN SECURITIES LLC,

as Sole Bookrunner and Joint Lead Arranger

PNC CAPITAL MARKETS LLC,

As Joint Lead Arranger

PNC BANK, NATIONAL ASSOCIATION,

As Syndication Agent

TABLE OF CONTENTS

		Page
ARTICLE I           Definitions			1
SECTION 1.01.	Defined Terms		1
SECTION 1.02.	Classification of Loans and Borrowings		15
SECTION 1.03.	Terms Generally		16
SECTION 1.04.	Accounting Terms; GAAP		16
ARTICLE II         The Credits			16
SECTION 2.01.	Commitments		16
SECTION 2.02.	Loans and Borrowings		17
SECTION 2.03.	Requests for Borrowings		17
SECTION 2.04.	Funding of Borrowings		18
SECTION 2.05.	Interest Elections		18
SECTION 2.06.	Termination and Reduction of Commitments		19
SECTION 2.07.	Repayment of Loans; Evidence of Debt		20
SECTION 2.08.	Prepayment of Loans		21
SECTION 2.09.	Fees		21
SECTION 2.10.	Interest		21
SECTION 2.11.	Alternate Rate of Interest		22
SECTION 2.12.	Increased Costs		23
SECTION 2.13.	Break Funding Payments		24
SECTION 2.14.	Taxes		24
SECTION 2.15.	Payments Generally; Pro Rata Treatment; Sharing of Set-offs		28
SECTION 2.16.	Mitigation Obligations; Replacement of Lenders		29
SECTION 2.17.	Defaulting Lenders		30
SECTION 2.18.	Increase of Commitments		30
ARTICLE III        Representations and Warranties			31
SECTION 3.01.	Due Organization, Authorization, Etc		31
SECTION 3.02.	Statutory Financial Statements		32
SECTION 3.03.	GAAP Financial Statements		32
SECTION 3.04.	Litigation and Contingent Liabilities		33

–i–

TABLE OF CONTENTS

(continued)

		Page
SECTION 3.05.	Investment Company Act		33
SECTION 3.06.	Regulations T, U and X		34
SECTION 3.07.	Proceeds		34
SECTION 3.08.	Insurance		34
SECTION 3.09.	Accuracy of Information		34
SECTION 3.10.	Subsidiaries		34
SECTION 3.11.	Insurance Licenses		34
SECTION 3.12.	Taxes		34
SECTION 3.13.	Compliance with Laws		35
SECTION 3.14.	No Default		35
SECTION 3.15.	Ownership of Property; Liens		35
ARTICLE IV        Conditions			35
SECTION 4.01.	Effective Date		35
SECTION 4.02.	Each Credit Event		36
ARTICLE V         Affirmative Covenants			37
SECTION 5.01.	Reports, Certificates and Other Information		37
SECTION 5.02.	Corporate Existence; Foreign Qualification		40
SECTION 5.03.	Books, Records and Inspections		41
SECTION 5.04.	Insurance		41
SECTION 5.05.	Taxes and Liabilities		41
SECTION 5.06.	Compliance with Laws		41
SECTION 5.07.	Conduct of Business		41
SECTION 5.08.	Maintenance of Properties		41
SECTION 5.09.	Use of Proceeds		41
SECTION 5.10.	Accuracy Of Information		41
ARTICLE VI        Negative Covenants			42
SECTION 6.01.	Consolidated Debt to Total Capitalization		42
SECTION 6.02.	Net Worth		42
SECTION 6.03.	Minimum Risk Based Capital		42
SECTION 6.04.	Mergers, Consolidations and Sales		42

-ii-

TABLE OF CONTENTS

(continued)

		Page
SECTION 6.05.	Regulations T, U and X		42
SECTION 6.06.	Restrictive Agreements		42
SECTION 6.07.	Transactions with Affiliates		43
SECTION 6.08.	Liens		43
SECTION 6.09.	Subsidiary Debt		44
ARTICLE VII      Events of Default			44
ARTICLE VIII    The Administrative Agent			47
ARTICLE IX       Miscellaneous			49
SECTION 9.01.	Notices		49
SECTION 9.02.	Waivers; Amendments		49
SECTION 9.03.	Expenses; Indemnity; Damage Waiver		50
SECTION 9.04.	Successors and Assigns		51
SECTION 9.05.	Survival		55
SECTION 9.06.	Counterparts; Integration; Effectiveness		55
SECTION 9.07.	Severability		55
SECTION 9.08.	Right of Setoff		56
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process		56
SECTION 9.10.	WAIVER OF JURY TRIAL		56
SECTION 9.11.	Headings		57
SECTION 9.12.	Confidentiality		57
SECTION 9.13.	Interest Rate Limitation		58
SECTION 9.14.	USA PATRIOT Act		58
SECTION 9.15.	No Advisory or Fiduciary Responsibility		58

-iii-

SCHEDULES:
Schedule 2.01	Commitments
Schedule 3.01	Jurisdictions
Schedule 3.02(a)	SAP Exceptions
Schedule 3.04	Litigation
Schedule 3.10	Subsidiaries
Schedule 3.11	Insurance Licenses
Schedule 6.06	Restrictive Agreements
EXHIBITS:
Exhibit A	Form of Assignment and Assumption
Exhibit B	Compliance Certificate
Exhibit C-1	U.S. Tax Certificate (For Non-U.S. Lenders that are not Partnerships for U.S. Federal Income Tax Purposes)
Exhibit C-2	U.S. Tax Certificate (For Non-U.S. Lenders that are Partnerships for U.S. Federal Income Tax Purposes)
Exhibit C-3	U.S. Tax Certificate (For Non-U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes)
Exhibit C-4	U.S. Tax Certificate (For Non-U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes)

CREDIT AGREEMENT

CREDIT AGREEMENT dated as of October 7, 2011, among HORACE MANN EDUCATORS CORPORATION, the LENDERS party hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01.          Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMorgan Chase Bank, N.A. in its capacity as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agreement” means this Credit Agreement as from time to time amended, modified, supplemented, restated, refunded or renewed and in effect.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus  ¹/2 of 1% and (c) the Adjusted LIBO Rate for a one-month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing on the Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of such page) at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

“Annual Statement” means the annual statutory financial statement of any Insurance Subsidiary required to be filed with the insurance commissioner (or similar authority) of its jurisdiction of incorporation, which statement shall be in the form required by such Insurance Subsidiary’s jurisdiction of incorporation or, if no specific form is so required, in the form of financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing annual statutory financial statements and shall contain the type of information permitted by such insurance commissioner (or such similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith.

“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

“Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread”, “Eurodollar Spread” or “Commitment Fee Rate”, as the case may be, based upon the ratings by S&P and Moody’s, respectively, applicable on such date to the Index Debt:

Index Debt Ratings (S&P/Moody’s): ABR Spread: Eurodollar Spread: Commitment Fee Rate:

Category 1 A-/A3 or better	0%	1.00%	0.10%
Category 2 BBB+/Baa1	0.125%	1.125%	0.125%
Category 3 BBB/Baa2	0.250%	1.250%	0.15%
Category 4 BBB-/Baa3	0.375%	1.375%	0.175%
Category 5 less than BBB-/Baa3	0.50%	1.50%	0.25%

For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 5; (ii) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall differ by one rating, the Applicable Rate shall be based on the higher of the two credit ratings; (iii) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall differ by two or more ratings, the Applicable Rate shall be one rating level below the higher of such credit ratings; and (iv) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall be changed

2

(other than as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency, irrespective of when notice of such change shall have been furnished by the Borrower to the Agent and the Lenders pursuant to Section 5.01 or otherwise. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect from such rating agency prior to such change or cessation.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Arrangers” means J.P. Morgan Securities, LLC and PNC Capital Markets LLC in their capacities as joint lead arrangers.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

“Attributable Debt” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

“Augmenting Lender” has the meaning assigned to such term in Section 2.18.

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof,

3

provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Beneficial Owner” means, with respect to any U.S. Federal withholding Tax, the beneficial owner, for U.S. Federal income tax purposes, to whom such Tax relates.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” means Horace Mann Educators Corporation, a Delaware corporation.

“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois or New York, New York are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Capitalized Lease” shall mean, as to any Person, any lease which is or should be capitalized on the balance sheet in accordance with GAAP, together with any other lease which is in substance a financing lease, including, without limitation, any lease under which (a) such Person has or will have an option to purchase the property subject thereto at a nominal amount or an amount less than a reasonable estimate of the fair market value of such property as of the date the lease is entered into or (b) the term of the lease approximates or exceeds the expected useful life of the property leased thereunder.

“Change in Control” shall be deemed to have occurred if (a) there shall be consummated (i) any consolidation or merger of the Borrower in which the Borrower is not the continuing or surviving corporation, or pursuant to which shares of the Borrower’s common stock would be converted into cash, securities or other property, other than a merger of the Borrower in which no Borrower shareholder’s ownership percentage in the surviving corporation immediately after the merger is less than such shareholder’s ownership percentage in the Borrower immediately prior to such merger by ten percent (10%) or more, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Borrower; (b) the shareholders of the Borrower approve any plan or proposal for the liquidation or dissolution of the Borrower; (c) any “person” or “group” as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is or becomes, directly or indirectly, the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of securities of the Borrower that represent 51%

4

or more of the combined voting power of the Borrower’s then outstanding securities; or (d) a majority of the members of the Borrower’s Board of Directors are persons who are then serving on the Board of Directors without having been elected by the Board of Directors or having been nominated by the Borrower for election by its shareholders.

“Change in Law” means (a) the adoption of any law, rule, regulation or treaty (including any rules or regulations issued under or implementing any existing law) after the date of this Agreement, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06, (b) increased from time to time pursuant to Section 2.18 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments is $150,000,000.

“Compliance Certificate” means a certificate substantially in the form of Exhibit B, but with such changes as the Administrative Agent may from time to time request for purposes of monitoring the Borrower’s compliance herewith

“Consolidated Debt” means the consolidated Debt of the Borrower and its consolidated Subsidiaries, including without limitation the principal amount of the Loans.

“Contingent Liability” means any agreement, undertaking or arrangement by which any Person (outside the ordinary course of business) guarantees, endorses, acts as surety for or otherwise becomes or is contingently liable for (by direct or indirect agreement, contingent or otherwise, to provide funds for payment by, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the debt, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or for the payment of dividends or other distributions upon the shares of any other Person or undertakes or agrees (contingently or otherwise) to purchase, repurchase, or otherwise acquire or become

5

responsible for any Debt, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition of any other Person, or to make payment or transfer property to any other Person other than for fair value received; provided, however, that obligations of each of the Insurance Subsidiaries under insurance policies, annuities, or surety contracts issued by it or to which it is a party, reinsurance treaties, certificates or other agreements of each of the Insurance Subsidiaries which are entered into in the ordinary course of business (including security posted by each of the Insurance Subsidiaries in the ordinary course of its business to secure obligations thereunder) shall not be deemed to be Contingent Liabilities of such Insurance Subsidiary or the Borrower for the purposes of this Agreement. The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the debt, obligation or other liability guaranteed or supported thereby.

“Contractual Obligation” means, relative to any Person, any obligation, commitment or undertaking under any agreement or other instrument to which such Person is a party or by which it or any of its property is bound or subject.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Controlled Group” means the Borrower and any corporation, trade or business that is, along with the Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses as described in sections 414(b) and 414(c), respectively, of the Code or in section 4001 of ERISA.

“Debt” means, with respect to any Person, at any date, without duplication, (a) all obligations of such Person for borrowed money or in respect of loans or advances; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations in respect of letters of credit which have been drawn but not reimbursed by the Person for whose account such letter of credit was issued, and bankers’ acceptances issued for the account of such Person; (d) all obligations in respect of Capitalized Leases and Synthetic Lease Obligations of such Person; (e) all Hedging Obligations of such Person; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services; (g) Debt of such Person secured by a Lien on property owned or being purchased by such Person (including Debt arising under conditional sales or other title retention agreements) whether or not such Debt is limited in recourse; (h) any Debt of another Person secured by a Lien on any assets of such first Person, whether or not such Debt is assumed by such first Person; (i) any Debt of a partnership in which such Person is a general partner; and (j) all Contingent Liabilities of such Person whether or not in connection with the foregoing. The amount of any net obligation under any Hedging Obligation on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Debt in respect thereof as of such date.

6

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Defaulting Lender” means any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans or (ii) pay over to the Administrative Agent or any Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower, the Administrative Agent or any Lender in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after request by the Administrative Agent or any Lender, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s or such Lender’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, as applicable, or (d) has become the subject of a Bankruptcy Event.

“Department” has the meaning assigned to such term in Section 3.02.

“dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Taxes” means, with respect to the Borrower under any Loan Document, any of the following Taxes imposed on or with respect to a Recipient: (a) income or

7

franchise Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such Recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Taxes imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Non-U.S. Lender (other than an assignee pursuant to a request by the Borrower under Section 2.16(b)), any U.S. Federal withholding Taxes resulting from any law in effect (including FATCA) on such date such Non-U.S. Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Non-U.S. Lender’s failure to comply with Section 2.14(f), except to the extent that such Non-U.S. Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Taxes pursuant to Section 2.14(a).

“Executive Officer” means, as to any Person, the president, the chief financial officer, the chief executive officer, the senior vice president-finance, the general counsel, the treasurer or the secretary.

“Existing Credit Agreement” means the Amended and Restated Credit Agreement, dated as of December 19, 2006, by and among the Borrower, the various financial institutions which are parties thereto and Bank of America, N.A., as administrative agent, as amended through the Effective Date.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement and any regulations or official interpretations thereof.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“Fee Letters” means, collectively, the JPMCB Fee Letter and the PNC Fee Letter.

“Fiscal Quarter” means any quarter of a Fiscal Year.

“Fiscal Year” means any period of twelve consecutive calendar months ending on the last day of December.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising

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executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Hedging Obligations” means, with respect to any Person, the net liability of such Person under Swap Contracts.

“Indemnified Taxes” means (a) Taxes other than Excluded Taxes, imposed on or with respect to any payment made by the Borrower under any Loan Document and (b) Other Taxes.

“Indemnitee” has the meaning assigned to it in Section 9.03(b).

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.

“Ineligible Institution” has the meaning assigned to it in Section 9.04(b).

“Information” has the meaning assigned to it in Section 9.12.

“Information Memorandum” means the Confidential Information Memorandum dated September 12, 2011 relating to the Borrower and the Transactions.

“Insurance Code” means, with respect to any Insurance Subsidiary, the Insurance Code of such Insurance Subsidiary’s state of domicile and any successor statute of similar import, together with the regulations thereunder, as amended or otherwise modified and in effect from time to time. References to sections of the Insurance Code shall be construed to also refer to successor sections.

“Insurance Policies” means policies purchased from insurance companies by any of the Borrower or its Subsidiaries, for its own account to insure against its own liability and property loss (including, without limitation, casualty, liability and workers’ compensation insurance), other than Reinsurance Agreements and Surplus Relief Reinsurance Agreements.

“Insurance Subsidiary” means any Life Subsidiary or any P/C Subsidiary.

“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05.

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

“Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in

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the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“IRS” means the United States Internal Revenue Service.

“JPMCB Fee Letter” means the letter agreement, dated as of August 15, 2011, among the Borrower, the Administrative Agent and J.P. Morgan Securities LLC.

“Lease Obligations” means, at any date, the rental commitments of any person under leases for real and/or personal property (including taxes, insurance, maintenance and similar expenses which any Person is obligated to pay under the terms of said leases) on such date, whether or not such obligations are reflected as liabilities or commitments on a balance sheet of such Person or in the notes thereto, excluding, however, obligations under Capitalized Leases.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of such page) providing rate quotations comparable to those currently provided on such page of such page, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

“Licenses” has the meaning assigned to it in Section 3.11.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title

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retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Life Subsidiary” means any Subsidiary of the Borrower that is engaged in the business of providing life insurance and/or annuities, and related services.

“Loan Document” means, collectively, this Agreement, any Note and the Fee Letters.

“Loans” means the loans made by the Lenders to the Borrower pursuant to Section 2.03.

“Material Adverse Effect” means, relative to any occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), a materially adverse effect on:

(a)        the assets, business, financial condition, operations or prospects of the Borrower or any Subsidiary; or

(b)        the ability of the Borrower or any Subsidiary to perform any of its payment or other material obligations under any of the Loan Documents.

“Material Insurance Subsidiary” means, at any time, an Insurance Subsidiary having (on a consolidated basis with its Subsidiaries) at such time either (a) gross revenues for the most recent four Fiscal Quarter period in excess of 5% of the gross revenues of the Borrower and its Subsidiaries for such Four Fiscal Quarter period or (b) total assets, as of the last day of the preceding Fiscal Quarter, having a net book value in excess of 5% of the total assets of the Borrower and its Subsidiaries as of such day, in each case, based upon the Borrower’s most recent annual or quarterly financial statements delivered to the Administrative Agent under Section 5.01. Notwithstanding the foregoing, it is agreed that Educators Life Insurance Company of America shall not be deemed a Material Insurance Subsidiary but its Subsidiary, Horace Mann Life Insurance Company, shall be a Material Insurance Subsidiary. The Material Insurance Subsidiaries are set forth on Schedule 3.10, as such schedule may be updated from time to time.

“Maturity Date” means October 6, 2015.

“Minimum Net Worth” has the meaning assigned to such term in Section 6.02.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“NAIC” means the National Association of Insurance Commissioners, or any successor thereto.

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“Net Worth” means the consolidated net worth, calculated in accordance with GAAP, of the Borrower and its consolidated Subsidiaries, excluding unrealized gains and losses as calculated in accordance with FASB 115.

“Non-U.S. Lender” means a Lender that is not a U.S. Person.

“Note” has the meaning assigned to such term in Section 2.07(e).

“Ordinary Course Litigation” has the meaning assigned to such term in Section 3.04.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than a connection arising from such Recipient having executed, delivered, enforced, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, or engaged in any other transaction pursuant to, or enforced, any Loan Document, or sold or assigned an interest in any Loan Document).

“Other Taxes” means any present or future stamp, court, documentary intangible, recording, filing or similar other excise or property Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment under Section 2.16(b)).

“P/C Subsidiary” means any Subsidiary of the Borrower that is engaged in the business of providing property and casualty insurance and related services.

“Participant” has the meaning assigned to such term in Section 9.04.

“Participant Register” has the meaning assigned to such term in Section 9.04(c).

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“PNC Fee Letter” means the letter agreement, dated as of August 15, 2011, among the Borrower, PNC Bank, National Association and PNC Capital Markets LLC.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect at its office located at 270 Park

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Avenue, New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Quarterly Statement” means the quarterly financial statement of any Insurance Subsidiary as required to be filed with the insurance commissioner (or similar authority) of such Insurance Subsidiary’s state of domicile, together with all exhibits or schedules filed therewith, prepared in conformity with SAP.

“Recipient” means, as applicable, (a) the Administrative Agent and (b) any Lender.

“Register” has the meaning assigned to such term in Section 9.04.

“Reinsurance Agreements” means any agreement, contract, treaty, certificate or other arrangement (other than a Surplus Relief Reinsurance Agreement) whereby any Insurance Subsidiary agrees to transfer or cede to another insurer all or part of the liability assumed by such Insurance Subsidiary under a policy or policies of insurance reinsured by such Insurance Subsidiary.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that for the purpose of determining the Required Lenders needed for any waiver, amendment, modification or consent, any Lender that is the Borrower or any Affiliate of the Borrower or, subject to Section 2.17(b), a Defaulting Lender shall be disregarded.

“Requirement of Law” for any Person means the corporate charter and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule, ordinance or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans at such time.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc. and any successor thereto.

“SAP” means, as to each Insurance Subsidiary, the statutory accounting practices prescribed or permitted by the insurance commissioner (or other similar authority) in such Insurance Subsidiary’s state of domicile for the preparation of Annual Statements and other financial reports by insurance corporations of the same type as such Insurance Subsidiary.

“Statutory Financial Statements” has the meaning specified in Section 3.02(a).

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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentage shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Subsidiary” means, with respect to the Borrower at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the Borrower in the Borrower’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the Borrower or one or more subsidiaries of the Borrower or by the Borrower and one or more Subsidiaries of the Borrower.

“Surplus Relief Reinsurance Agreements” means any agreement whereby any Insurance Subsidiary assumes or cedes business under a reinsurance agreement that would be considered a “financing-type” reinsurance agreement and (a) with respect to any P/C Subsidiary, which is entered into solely for the purpose of affecting the income statement of such P/C Subsidiary as the same may be amended from time to time, and (b) with respect to any Life Subsidiary, as determined in the Fourth Edition of the AICPA Audit Guide for Stock Life Insurance Companies on pp. 91-92 thereof as the same may be amended from time to time.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

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“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Transactions” means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans and the use of the proceeds thereof.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

“U.S. Tax Certificate” has the meaning assigned to such term in Section 2.14(f)(ii)(D)(2).

“Withholding Agent” means the Borrower and the Administrative Agent.

“2009 Annual Statement” has the meaning assigned to such term in Section 3.02(b).

“2010 Annual Statement” has the meaning assigned to such term in Section 3.02(b).

“2011 Quarterly Statement” has the meaning assigned to such term in Section 3.02(b).

SECTION 1.02.          Classification of Loans and Borrowings.    For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a “Eurodollar Loan”). Borrowings also may be classified and referred to by Type (e.g., a “Eurodollar Borrowing”).

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SECTION 1.03.          Terms Generally.    The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04.          Accounting Terms; GAAP.    Unless otherwise defined or the context otherwise requires, all financial and accounting terms used herein or in any of the Loan Documents or any certificate or other document made or delivered pursuant hereto shall be defined in accordance with GAAP or SAP, as the context may require. When used in this Agreement, the term “financial statements” shall include the notes and schedules thereto. In addition, when used herein, the terms “best knowledge of” or “to the best knowledge of” any Person shall mean matters within the actual knowledge of such Person (or an Executive Officer or general partner of such Person) or which should have been known by such Person after reasonable inquiry. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

THE CREDITS

SECTION 2.01.          Commitments.    Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment. Within the foregoing limits

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and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.

SECTION 2.02.          Loans and Borrowings.  (a)  Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b)        Subject to Section 2.14, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c)        At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 5 Eurodollar Borrowings outstanding.

(d)        Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

SECTION 2.03.          Requests for Borrowings.  To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile (or e-mail with a PDF copy attached) to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i)         the aggregate amount of the requested Borrowing;

(ii)        the date of such Borrowing, which shall be a Business Day;

(iii)       whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

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(iv)       in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(v)        the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04.

If no election as to the Type of Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04.          Funding of Borrowings.  (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in Illinois and designated by the Borrower in the applicable Borrowing Request.

(b)        Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

SECTION 2.05.          Interest Elections.    (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

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(b)        To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery, telecopy or facsimile (or e-mail with a PDF copy attached) to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.

(c)        Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i)         the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii)        the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii)       whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv)       if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d)        Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e)        If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.06.          Termination and Reduction of Commitments.      (a)  Unless previously terminated, the Commitments shall terminate on the Maturity Date.

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(b)        The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.08, the Revolving Credit Exposures would exceed the total Commitments.

(c)        The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

SECTION 2.07.          Repayment of Loans; Evidence of Debt.  (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date.

(b)        Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c)        The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d)        The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(e)        Any Lender may request that Loans made by it be evidenced by a promissory note (each, a “Note”). In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns). Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be

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represented by one or more Notes payable to the order of the payee named therein (or, if such Notes is a registered note, to such payee and its registered assigns).

SECTION 2.08.          Prepayment of Loans.  (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section.

(b)        The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy or facsimile (or e-mail with a PDF copy attached)) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.06, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10.

SECTION 2.09.          Fees.  (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the daily unused amount of the Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any commitment fees accruing after the date on which the Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b)        The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

(c)        All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of commitment fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

SECTION 2.10.          Interest.    (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate.

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(b)        The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c)        Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, upon the request of the Required Lenders such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. If any other Event of Default hereunder shall arise, then upon the request of the Required Lenders, all principal of and interest on any Loan, and any other fee or other amount payable by the Borrower hereunder shall bear interest at 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section, until such Event of Default is cured or is waived.

(d)        Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e)        All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.11.          Alternate Rate of Interest.  If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(a)        the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

(b)        the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election

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Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.

SECTION 2.12.          Increased Costs.  (a) If any Change in Law shall:

(i)         impose, modify or deem applicable any reserve, special deposit or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or

(ii)        impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Loans made by such Lenders;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

(b)        If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c)        A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)        Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further

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that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.13.          Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.08(b) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.16, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.14.          Taxes.

(a)        Withholding Taxes; Gross-Up.  Each payment by the Borrower under any Loan Document shall be made without withholding for any Taxes, unless such withholding is required by law. If any Withholding Agent determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such Withholding Agent may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law. If such Taxes are Indemnified Taxes, then the amount payable by the Borrower shall be increased as necessary so that net of such withholding (including withholding applicable to additional amounts payable under this Section) the applicable Recipient receives the amount it would have received had no such withholding been made. The applicable Withholding Agent shall file such tax returns and information with respect to any withholding for any Taxes pursuant to this Section 2.14 as is required by applicable law.

(b)        Payment of Other Taxes by the Borrower.  The Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c)        Evidence of Payment.    As soon as practicable after any payment of Indemnified Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to

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the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(d)        Indemnification by the Borrower.  The Borrower shall indemnify each Recipient for any Indemnified Taxes that are paid or payable by such Recipient in connection with any Loan Document (including amounts paid or payable under this Section 2.14(d)) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 2.14(d) shall be paid within 10 days after the Recipient delivers to the Borrower a certificate stating the amount of any Indemnified Taxes so paid or payable by such Recipient or Beneficial Owner and describing the basis for the indemnification claim. Such certificate shall be conclusive of the amount so paid or payable absent manifest error. Such Recipient shall deliver a copy of such certificate to the Administrative Agent.

(e)        Indemnification by the Lenders.  Each Lender shall severally indemnify the Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes, only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so) attributable to such Lender that are paid or payable by the Administrative Agent in connection with any Loan Document and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 2.14(e) shall be paid within 10 days after the Administrative Agent or the Borrower (as applicable) delivers to the applicable Lender a certificate stating the amount of Taxes so paid or payable by the Administrative Agent or the Borrower (as applicable). Such certificate shall be conclusive of the amount so paid or payable absent manifest error.

(f)        Status of Lenders.

(i)        Any Lender that is entitled to an exemption from, or reduction of, any applicable withholding Tax with respect to any payments under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without, or at a reduced rate of, withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to any withholding (including backup withholding) or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.14(f)(ii)(A) through (E) below) shall not be required if in the Lender’s judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially

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prejudice the legal or commercial position of such Lender. Upon the reasonable request of such Borrower or the Administrative Agent, any Lender shall update any form or certification previously delivered pursuant to this Section 2.14(f). If any form or certification previously delivered pursuant to this Section expires or becomes obsolete or inaccurate in any respect with respect to a Lender, such Lender shall promptly (and in any event within 10 days after such expiration, obsolescence or inaccuracy) notify such Borrower and the Administrative Agent in writing of such expiration, obsolescence or inaccuracy and update the form or certification if it is legally eligible to do so.

(ii)        Without limiting the generality of the foregoing, if the Borrower is a U.S. Person, any Lender with respect to such Borrower shall, if it is legally eligible to do so, deliver to such Borrower and the Administrative Agent (in such number of copies reasonably requested by such Borrower and the Administrative Agent) on or prior to the date on which such Lender becomes a party hereto, duly completed and executed copies of whichever of the following is applicable:

(A)        in the case of a Lender that is a U.S. Person, IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax;

(B)        in the case of a Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a party (1) with respect to payments of interest under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (2) with respect to any other applicable payments under this Agreement, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(C)        in the case of a Non-U.S. Lender for whom payments under this Agreement constitute income that is effectively connected with such Lender’s conduct of a trade or business in the United States, IRS Form W-8ECI;

(D)        in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code both (1) IRS Form W-8BEN and (2) a certificate substantially in the form of Exhibit C (a “U.S. Tax Certificate”) to the effect that such Lender is not (a) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (b) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code (c) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (d) conducting a trade or business in the United States with which the relevant interest payments are effectively connected;

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(E)        in the case of a Non-U.S. Lender that is not the beneficial owner of payments made under this Agreement (including a partnership or a participating Lender) (1) an IRS Form W-8IMY on behalf of itself and (2) the relevant forms prescribed in clauses (A), (B), (C), (D) and (F) of this paragraph (f)(ii) that would be required of each such beneficial owner or partner of such partnership if such beneficial owner or partner were a Lender; provided, however, that if the Lender is a partnership and one or more of its partners are claiming the exemption for portfolio interest under Section 881(c) of the Code, such Lender may provide a U.S. Tax Certificate on behalf of such partners; or

(F)        any other form prescribed by law as a basis for claiming exemption from, or a reduction of, U.S. Federal withholding Tax together with such supplementary documentation necessary to enable the Borrower or the Administrative Agent to determine the amount of Tax (if any) required by law to be withheld.

(iii)       If a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Withholding Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Withholding Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Withholding Agent as may be necessary for the Withholding Agent to comply with its obligations under FATCA, to determine that such Lender has or has not complied with such Lender’s obligations under FATCA and, as necessary, to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.17(f)(iii), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(g)        Treatment of Certain Refunds.  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.14 (including additional amounts paid pursuant to this Section 2.14), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid such indemnified party pursuant to the previous sentence (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything herein to the contrary in this Section 2.14(g), in no event will any indemnified party be required to pay any amount to any indemnifying party pursuant to this Section 2.14(g) if such payment would place such

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indemnified party in a less favorable position (on a net after-Tax basis) than such indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This Section 2.14(g).shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the indemnifying party or any other Person.

SECTION 2.15.          Payments Generally; Pro Rata Treatment; Sharing of Set-offs.  (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or of amounts payable under Section 2.12, 2.13 or 2.14, or otherwise) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, except that payments pursuant to Sections 2.12, 2.13, 2.14 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

(b)        If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

(c)        If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements

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may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d)        Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e)        If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b), 2.15(d) or 9.03(c), then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid, and/or hold such amounts in a segregated account over which the Administrative Agent shall have exclusive control as cash collateral for, and application to, any future funding obligations of such Lender under any such Section, in each case, in any order as determined by the Administrative Agent in its discretion.

SECTION 2.16.          Mitigation Obligations; Replacement of Lenders.  (a) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)        If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender becomes a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which

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consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

SECTION 2.17.          Defaulting Lenders.

Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(a)        fees shall cease to accrue on the Commitment of such Defaulting Lender pursuant to Section 2.12(a); and

(b)        the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided, that this clause (b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender affected thereby.

SECTION 2.18.          Increase of Commitments.

(a)        The Borrower may, from time to time, by notice to the Administrative Agent, request that the aggregate Commitments be increased by an amount that will not result in the aggregate Commitments exceeding $200,000,000; provided that each increase in aggregate Commitments under this Section shall be in a minimum amount of $25,000,000. Each such notice shall set forth the requested amount of the increase in the Commitments and the date on which such increase is to become effective. The Borrower shall have the right, but not the obligation, to arrange for one or more commercial banks or other financial institutions (any such bank or other financial institution being called an “Augmenting Lender”), which may include any Lender, to extend Commitments or increase their existing Commitments in an aggregate amount up to, but not greater than, the requested increase, provided that each Augmenting Lender, if not already a Lender hereunder (i) shall extend a new Commitment of not less than $5,000,000, (ii) shall execute all such documentation as the Administrative Agent shall reasonably specify to evidence its status as a Lender hereunder and (iii) shall be consented to by the Administrative Agent (which consent shall not be unreasonably withheld or delayed). Such increases and such new Commitments shall become effective on the date agreed to by the Borrower, the Augmenting Lenders and the Administrative Agent. Notwithstanding the foregoing, no increase in the aggregate Commitments (or in the Commitment of any Lender) shall become effective under this paragraph unless, on the date of such increase, the conditions

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set forth in Section 4.02 shall be satisfied (with all references in such paragraphs to a Loan being deemed to be references to such increase) and the Administrative Agent shall have received a certificate to that effect dated such date and executed by an Executive Officer of the Borrower. Notwithstanding anything else in the foregoing, no Lender shall become an Augmenting Lender without such Lender’s consent.

(b)        Upon the effectiveness of any increase pursuant to this Section 2.18 of the aggregate Commitments and any resulting adjustment in the Applicable Percentages, the Lenders and the Augmenting Lenders will purchase from each other and sell to each other outstanding Loans sufficient to cause the outstanding Loans of each Lender and Augmenting Lender to equal its Applicable Percentage (as so adjusted) of the aggregate outstanding Revolving Loans. Such purchase and sale shall be made pursuant to Section 9.04 except that no minimum amount shall be required, no processing fee shall be charged and, if any Lender shall suffer a loss or incur an expense as a result of the effectiveness of such purchase or sale being during an Interest Period, the Borrower shall reimburse such Lender the amount of such loss or expense. Each such Lender shall furnish the Borrower with a certificate setting forth, in reasonable detail, the basis for determining the amount to be paid to it hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

SECTION 3.01.          Due Organization, Authorization, Etc.  Each of the Borrower and each Subsidiary (a) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, (b) is duly qualified to do business and in good standing in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, which jurisdictions are set forth with respect to the Borrower and each Subsidiary on Schedule 3.01, (c) has the requisite corporate power and authority and the right to own and operate its properties, to lease the property it operates under lease, and to conduct its business as now and proposed to be conducted, and (d) has obtained all material licenses, permits, consents or approvals from or by, and has made all filings with, and given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct (including, without limitation, the consummation of the transactions contemplated by this Agreement) as to each of the foregoing except where the failure to do so would not have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole. The execution, delivery and performance by the Borrower of this Agreement and the consummation of the transactions contemplated hereby and thereby are within its corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval, if required) and do not contravene or conflict with the Borrower’s articles of incorporation or bylaws. Each of the Borrower and its Subsidiaries has received all material governmental and other consents and approvals (if any shall be required) necessary for such execution, delivery and performance, and such execution, delivery and performance do not and will not contravene or conflict with, or create a Lien or right of termination or acceleration under, any Requirement of Law or Contractual Obligation binding upon the Borrower or such Subsidiaries. This Agreement and each of the Loan Documents is (or

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when executed and delivered will be) the legal, valid, and binding obligation of the Borrower enforceable against the Borrower in accordance with its respective terms; provided that the Borrower assumes for purposes of this Section 3.01 that this Agreement and the other Loan Documents have been validly executed and delivered by each of the parties thereto other than the Borrower.

SECTION 3.02.          Statutory Financial Statements.  (a) The Annual Statement of each of the Insurance Subsidiaries as filed with the appropriate Governmental Authority of its state of domicile (the “Department”) and delivered to each Lender prior to the execution and delivery of this Agreement, as of and for the 2009 and 2010 Fiscal Years and as of and for the Fiscal Quarter ended June 30, 2011 (collectively, the “Statutory Financial Statements”), have been prepared in accordance with SAP applied on a consistent basis (except as noted therein). Each such Statutory Financial Statement was in material compliance with applicable law when filed. The Statutory Financial Statements fairly present the financial position, the results of operations, changes in equity and changes in financial position of each such Insurance Subsidiary as of and for the respective dates and periods indicated therein in accordance with SAP applied on a consistent basis, except as set forth in the notes thereto or on Schedule 3.02(a). All books of account of each of the Insurance Subsidiaries fully and fairly disclose all of the transactions, properties, assets, investments, liabilities and obligations of such Insurance Subsidiary and all of such books of account are in the possession of each such Insurance Subsidiary and are true, correct and complete in all material respects.

(b)        The investments of Insurance Subsidiaries reflected in the Annual Statements filed with the respective Departments with respect to the 2009 Fiscal Year (the “2009 Annual Statement”), the 2010 Fiscal Year (the “2010 Annual Statement”) and the June 30, 2011 Quarterly Statement (the “2011 Quarterly Statement”) comply in all material respects with all applicable requirements of the Department with respect to each such Insurance Subsidiary as well as those of any other applicable jurisdiction relating to investments in respect of which it may invest its funds.

(c)        Marketable securities and short term investments reflected in the 2009 Annual Statement, the 2010 Annual Statement and in the 2011 Quarterly Statement of each Insurance Subsidiary are valued at cost, amortized cost or market value, as required by applicable law.

(d)        There has been no event or occurrence which has had or could reasonably be expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole, since December 31, 2010.

SECTION 3.03.          GAAP Financial Statements.  (a) The Borrower has furnished to the Administrative Agent and each of the Lenders (i) a copy of the unaudited consolidated balance sheets of the Borrower and its Subsidiaries, and the balance sheet of the Borrower on an unconsolidated basis as of June 30, 2011 and the related consolidated statements of income and cash flows for that portion of the Fiscal Year ending as of the close of June 30, 2011 and (ii) a copy of the unaudited consolidated statement of income of the Borrower and its Subsidiaries, and the statement of income of the Borrower on an unconsolidated basis, for June 30, 2011, all prepared in accordance with GAAP (subject to normal year-end adjustments and except that

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footnote and schedule disclosures are abbreviated) which financial statements are complete and correct and present fairly in accordance with GAAP (subject to normal year-end adjustments) consolidated or unconsolidated, as the case may be results of operations and cash flows of the Borrower as of June 30, 2011 and the period then ended.

(b)        The Borrower has provided to the Administrative Agent and each Lender a copy of the annual audited consolidated financial statements of the Borrower and its Subsidiaries, consisting of consolidated balance sheets and consolidated statements of income and retained earnings and cash flows, setting forth in comparative form in each case the consolidated figures for the year ended December 31, 2010, which financial statements have been prepared in accordance with GAAP and certified without material qualification by KPMG LLP. Such financial statements are complete and correct and present fairly in accordance with GAAP the consolidated financial position and the consolidated results of operations and cash flows of the Borrower and its Subsidiaries as at the end of such year and for the period then ended.

(c)        With respect to any representation and warranty which is deemed to be made after the date hereof by the Borrower, the balance sheet and statements of operations, of shareholders’ equity and of cash flow, which as of such date shall most recently have been furnished by or on behalf of the Borrower to each Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby, shall have been prepared in accordance with GAAP consistently applied (except as disclosed therein), and shall present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof for the periods then ended, subject, in the case of quarterly financial statements, to normal year-end audit adjustments.

SECTION 3.04.          Litigation and Contingent Liabilities.      Except as set forth (including estimates of the dollar amounts involved) in Schedule 3.04 hereto and except for claims which are covered by Insurance Policies, coverage for which has not been denied in writing, or which relate to insurance policies or surety contracts issued by the Borrower or to which it is a party, reinsurance treaties, reinsurance certificates, or any other such agreements entered into by the Borrower in the ordinary course of business (referred to herein as “Ordinary Course Litigation”), no claim, litigation (including, without limitation, derivative actions), arbitration, governmental investigation or proceeding or inquiry is pending or threatened against the Borrower or any of its Subsidiaries (i) which would, if adversely determined, have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole or (ii) which relates to any of the transactions contemplated hereby, and there is no basis known to the Borrower for any of the foregoing. Other than any liability incident to such claims, litigation or proceedings, the Borrower has no material Contingent Liabilities not provided for or referred to in the financial statements delivered pursuant to Section 3.03.

SECTION 3.05.          Investment Company Act.    Other than Horace Mann Investors, Inc., neither the Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended.

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SECTION 3.06.          Regulations T, U and X.    Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock. None of the Borrower, any of its Subsidiaries or any Person acting on their behalf has taken or will take action to cause the execution, delivery or performance of this Agreement or the Note, the making or existence of the Loans or the use of proceeds of the Loans to violate Regulations T, U or X of the Board.

SECTION 3.07.          Proceeds.    The proceeds of the Loans will be used for general corporate purposes. None of such proceeds will be used in violation of applicable law, and none of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any margin stock as defined in Regulation U of the Board.

SECTION 3.08.          Insurance.    The Borrower and its Subsidiaries maintain Insurance Policies to such extent and against such hazards and liabilities as is required by law or customarily maintained by prudent companies similarly situated.

SECTION 3.09.          Accuracy of Information.      All factual written information furnished heretofore or contemporaneously herewith by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or the Lenders for purposes of or in connection with this Agreement or any of the transactions contemplated hereby, as supplemented to the date hereof, is and all other such factual written information hereafter furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or the Lenders will be, true and accurate in every material respect on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information not misleading.

SECTION 3.10.          Subsidiaries.  As of the Effective Date, Schedule 3.10 contains a complete list of the Borrower’s Subsidiaries and indicates which Subsidiaries are Material Insurance Subsidiaries.

SECTION 3.11.         Insurance Licenses.  Except as set forth on Schedule 3.11, to the best of the Borrower’s knowledge, no license (including, without limitation, licenses or certificates of authority from applicable insurance departments), permits or authorizations to transact insurance and reinsurance business (collectively, the “Licenses”) is the subject of a proceeding for suspension or revocation or any similar proceedings, there is no sustainable basis for such a suspension or revocation, and no such suspension or revocation is threatened by any state insurance department.

SECTION 3.12.          Taxes.    The Borrower and each of its Subsidiaries has filed all material tax returns that are required to be filed by it, and has paid or provided adequate reserves for the payment of all material Taxes payable by it that have become due, other than those that are not yet delinquent and are being contested in good faith by appropriate proceedings and with respect to which reserves have been established, and are being maintained, in accordance with GAAP.

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SECTION 3.13.          Compliance with Laws.    Neither the Borrower nor any of its Subsidiaries is in violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any Governmental Authority (including, without limitation, ERISA or environmental laws), if the effect of such violation could reasonably be expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole and, to the best of the Borrower’s knowledge, no such violation has been alleged and each of the Borrower and its Subsidiaries (a) has filed in a timely manner all reports, documents and other materials required to be filed by it with any Governmental Authority, if such failure to so file could reasonably be expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole; and the information contained in each of such filings is true, correct and complete in all material respects and (b) has retained all records and documents required to be retained by it pursuant to any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any Governmental Authority, if the failure to so retain such records and documents could reasonably be expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole.

SECTION 3.14.          No Default.  Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

SECTION 3.15.          Ownership of Property; Liens.    Each of the Borrower and each Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 6.08.

ARTICLE IV

CONDITIONS

SECTION 4.01.          Effective Date.    The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a)        The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

(b)        The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of counsel for the Borrower, covering such other matters relating to the Borrower, this Agreement or the

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Transactions as the Administrative Agent shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion.

(c)        The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

(d)        The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or an Executive Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02.

(e)        The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

(f)        All amounts due and owing under the Existing Credit Agreement shall have been paid in full (which amounts owing under the Existing Credit Agreement may be repaid with the proceeds of the initial Revolving Loans made hereunder) and the Existing Credit Agreement shall have been terminated.

(g)        The Borrower shall have delivered the financial statements referred to in Section 3.02.

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

SECTION 4.02.          Each Credit Event.  The obligation of each Lender to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:

(a)        The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of the date of such earlier date.

(b)        At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing.

Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

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ARTICLE V

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that it will:

SECTION 5.01.          Reports, Certificates and Other Information.    Furnish or cause to be furnished to the Administrative Agent and the Lenders:

(a)        GAAP Financial Statements:

(i)        Within 50 days after the close of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of its Form 10-Q filed with the Securities and Exchange Commission and accompanied by the certification of the chief executive officer, chief financial officer or treasurer of the Borrower that the financial statements set forth therein are complete and correct and present fairly in accordance with GAAP (subject to normal year-end adjustments) the consolidated, or unconsolidated, as the case may be, results of operations and cash flows of the Borrower as at the end of such Fiscal Quarter and for the period then ended.

(ii)       Within 95 days after the close of each Fiscal Year, a copy of the annual audited consolidated financial statements of the Borrower and its Subsidiaries, consisting of consolidated balance sheets and consolidated statements of income and retained earnings and cash flows, setting forth in comparative form in each case the consolidated figures for the previous Fiscal Year, which financial statements shall be prepared in accordance with GAAP, certified without material qualification by the independent certified public accountants regularly retained by the Borrower, or any other firm of independent certified public accountants of recognized national standing selected by the Borrower and reasonably acceptable to the Required Lenders that all such financial statements are complete and correct and present fairly in accordance with GAAP the consolidated financial position and the consolidated results of operations and cash flows of the Borrower and its Subsidiaries as at the end of such year and for the period then ended.

(b)        Tax Returns.    If requested by the Administrative Agent, copies of all federal, state, local and foreign Tax returns and reports in respect of income, franchise or other Taxes on or measured by income (excluding sales, use or like Taxes) filed by the Borrower or any of its Subsidiaries.

(c)        SAP Financial Statements:

(i)        Within 5 days after the applicable regulatory filing date for each of its Fiscal Quarters, but in any event within 50 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of each Insurance Subsidiary a copy

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of the Quarterly Statement of such Insurance Subsidiary for such Fiscal Quarter, all prepared in accordance with SAP and accompanied by the certification of the chief financial officer or chief executive officer of each Insurance Subsidiary that all such financial statements are complete and correct and present fairly in accordance with SAP the financial position of such Insurance Subsidiary for the periods then ended.

(ii)        Within 5 days after the applicable regulatory filing date for each of its Fiscal Years, but in any event within 60 days after the end of each Fiscal Year of each Insurance Subsidiary a copy of the Annual Statement of each Insurance Subsidiary for such Fiscal Year prepared in accordance with SAP and accompanied by the certification of the chief financial officer or chief executive officer of each Insurance Subsidiary that such financial statement is complete and correct and presents fairly in accordance with SAP the financial position of such Insurance Subsidiary for the period then ended.

(iii)       Within 5 days after the applicable regulatory filing date for each of its Fiscal Years, but in any event within 95 days after the close of each Fiscal Year of each Insurance Subsidiary a copy of each Insurance Subsidiary’s “Statement of Actuarial Opinion” which is provided to the applicable Department (or equivalent information should the Department no longer require such a statement) as to the adequacy of loss reserves of such Insurance Subsidiary. Such opinion shall be in the format prescribed by the applicable Insurance Code.

(d)        Notice of Default, etc.    Immediately after an Executive Officer of the Borrower knows or has reason to know of the existence of any Default, or any development or other information which would have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole, telephonic notice specifying the nature of such Default or development or information, including the anticipated effect thereof, which notice shall be promptly confirmed in writing within two (2) Business Days.

(e)        Other Information.    The following certificates and other information related to the Borrower:

(i)         Promptly after completion of each such item but in no event later than the first day of April of each Fiscal Year of the Borrower, a copy of the Borrower’s (A) operating budget and (B) new business plans, if any, which are in the form approved by the Board of Directors of the Borrower.

(ii)        Within five (5) Business Days of receipt, a copy of any financial examination reports by a Governmental Authority with respect to the Insurance Subsidiaries relating to the insurance business of the Insurance Subsidiaries (when, and if, prepared); provided, the Borrower shall only be required to deliver any interim report hereunder at such time as Borrower has knowledge that a final report will not be issued and delivered to the Administrative Agent within 90 days of any such interim report.

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(iii)        Copies of all Insurance Holding Company System Regulatory Act filings with Governmental Authorities in the applicable state of domicile, with respect to any occurrence which might reasonably be expected to have a Material Adverse Effect, by the Borrower or any Subsidiary not later than five (5) Business Days after such filings are made, including, without limitation, filings which seek approval of Governmental Authorities with respect to transactions between the Borrower or such Subsidiary and its Affiliates.

(iv)        Within five (5) Business Days of such notice, notice of actual suspension, termination or revocation of any material License of the Insurance Subsidiaries by any Governmental Authority or of receipt of notice from any Governmental Authority notifying the Borrower of a hearing (which is not withdrawn within ten (10) days) relating to such a suspension, termination or revocation, including any request by a Governmental Authority which commits the Borrower to take, or refrain from taking, any action or which otherwise materially and adversely affects the authority of the Borrower to conduct its business.

(v)         Within five (5) Business Days of such notice, notice of any pending or threatened investigation or regulatory proceeding (other than routine periodic investigations or reviews) by any Governmental Authority concerning the business, practices or operations of the Borrower, including any agent or managing general agent thereof.

(vi)        Promptly upon any change in the rating for Index Debt of the Borrower, notice of such change.

(vii)       Promptly, such additional financial and other information as the Administrative Agent or any Lender may from time to time reasonably request.

(viii)      Promptly, notice of any actual or, to the best of the Borrower’s knowledge, proposed material changes in the Insurance Code governing the investment or dividend practices of any Insurance Subsidiary.

(ix)        Promptly upon effectiveness, notice of any change of accounting or financial reporting practices.

(f)        Compliance Certificates.  Concurrently with the later to occur of delivery to the Administrative Agent of the GAAP financial statements and delivery to the Administrative Agent of the SAP financial statements under Sections 5.01(a) and 5.01(c), for each Fiscal Quarter and Fiscal Year of the Borrower, and at any other time no later than thirty (30) Business Days following a written request of the Administrative Agent, a duly completed Compliance Certificate, signed by an Executive Officer of the Borrower, containing, among other things, a computation of, and showing compliance with, each of the applicable financial ratios and restrictions contained in Sections 6.01 through 6.03, and to the effect that, to the best of such officer’s knowledge, as of such date no Default has occurred and is continuing.

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(g)        Reports to SEC and to Shareholders.  Promptly upon the filing or making thereof (i) copies of each filing and report made by the Borrower or any of its Subsidiaries with or to any securities exchange or the Securities and Exchange Commission and (ii) of each communication from the Borrower to shareholders generally; provided that only those items described in clauses (i) and (ii) of this Section 5.01(g) which are material to the interest of the Lenders hereunder shall be provided to the Administrative Agent and the Lenders hereunder.

(h)        Notice of Litigation, License and ERISA Matters.  Upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by the Borrower with respect thereto: (i) the institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental proceeding (including any Internal Revenue Service or Department of Labor proceeding with respect to any Plan or Welfare Plan) which could, if adversely determined, be reasonably expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole and which is not Ordinary Course Litigation, (ii) the failure of any Person in the Controlled Group to make a required contribution to any Plan if such failure is sufficient to give rise to a Lien under section 302(f)(1) of ERISA, (iii) the institution of any steps by any entity in the Controlled Group to withdraw from, or the institution of any steps by the Borrower or any other Person to terminate under a distress termination, any Plan or the taking of any action with respect to a Plan which could result in the requirement that the Borrower or any of its Subsidiaries furnish a bond or other security to such Plan, or the occurrence of any event with respect to any Plan which could result in the incurrence by the Borrower or any of its Subsidiaries of any material liability (other than a liability for contributions or premiums), fine or penalty, (iv) the commencement of any dispute which might lead to the modification, transfer, revocation, suspension or termination of this Agreement or any Loan Document or (v) any event which could be reasonably expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole.

(i)         Other Information.  From time to time such other information concerning the Borrower or any Subsidiary as the Administrative Agent or any Lender may reasonably request.

SECTION 5.02.          Corporate Existence; Foreign Qualification.    Do and cause to be done at all times all things necessary to (a) maintain and preserve the corporate existence of the Borrower, (b) be, and ensure that each Subsidiary of the Borrower is, duly qualified to do business and be in good standing as a foreign corporation in each jurisdiction where the nature of its business makes such qualification necessary, and (c) do or cause to be done all things necessary to preserve and keep in full force and effect the Borrower’s corporate existence.

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SECTION 5.03.         Books, Records and Inspections.  (a) Maintain, and cause each of its Subsidiaries to maintain, materially complete and accurate books and records, (b) permit, and cause each of its Subsidiaries to permit, access at reasonable times by the Administrative Agent and the Lenders to its books and records, (c) permit, and cause each of its Subsidiaries to permit, the Administrative Agent, the Lenders or their respective designated representatives to inspect at reasonable times its properties and operations, and (d) permit, and cause each of its Subsidiaries to permit, the Administrative Agent and the Lenders to discuss its business, operations and financial condition with its officers.

SECTION 5.04.         Insurance.    Maintain, and cause each of its Subsidiaries to maintain, Insurance Policies to such extent and against such hazards and liabilities as is required by law or customarily maintained by prudent companies similarly situated.

SECTION 5.05.         Taxes and Liabilities.  Pay, and cause each of its Subsidiaries to pay, when due all material taxes, assessments and other material liabilities except as contested in good faith and by appropriate proceedings with respect to which reserves have been established, and are being maintained, in accordance with GAAP if and so long as such contest could not reasonably be expected to have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole.

SECTION 5.06.         Compliance with Laws.        Comply, and cause each of its Subsidiaries to comply, (a) with all federal, state and local laws, rules and regulations related to its businesses (including, without limitation, the establishment of all insurance reserves required to be established under SAP and applicable laws restricting the investments of the Borrower), and (b) with all Contractual Obligations binding upon such entity, except where failure so to comply would not in the aggregate have a Material Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole.

SECTION 5.07.        Conduct of Business.    Engage on a consolidated basis with its Subsidiaries primarily in the same business in which the Borrower and its Subsidiaries are engaged on the date hereof.

SECTION 5.08.         Maintenance of Properties.    Maintain, preserve and protect and cause each of its Subsidiaries to maintain, preserve and protect, all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted.

SECTION 5.09.         Use of Proceeds.    Use proceeds of the Loans only for general corporate purposes. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

SECTION 5.10.       Accuracy Of Information.  Ensure that any information, including financial statements or other documents, furnished to the Administrative Agent or the Lenders in connection with this Agreement or any amendment or modification hereof or waiver hereunder contains no material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not

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misleading, and the furnishing of such information shall be deemed to be representation and warranty by the Borrower on the date thereof as to the matters specified in this Section 5.11.

ARTICLE VI

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will:

SECTION 6.01.          Consolidated Debt to Total Capitalization.  Not permit the ratio of (a) the principal amount of Consolidated Debt to (b) the sum of (i) Net Worth plus (ii) Consolidated Debt to exceed 0.35 to 1.0 at any time.

SECTION 6.02.          Net Worth.  Not permit its Net Worth at any time to be less than the Minimum Net Worth. “Minimum Net Worth” means $623,488,000 plus 50% of equity contributions after June 30, 2011; provided that on each June 30, commencing June 30, 2012, if 80% of the consolidated net worth of the Borrower and its Subsidiaries, calculated in accordance with GAAP, is greater than the Minimum Net Worth, the Minimum Net Worth shall be increased to such greater amount.

SECTION 6.03.          Minimum Risk Based Capital.    The Borrower shall not permit Horace Mann Life Insurance Company or the P/C Subsidiaries (taken as a whole) to maintain, as of the end of any Fiscal Year, a ratio (expressed as a percentage) of (a) Total Adjusted Capital (as defined in the Risk-Based Capital (RBC) for Insurers Act in the applicable state of domicile or in the rules and procedures prescribed from time to time by the NAIC with respect thereto) to (b) the Company Action Level RBC (as defined in the Risk-Based Capital Act or in the rules and procedures prescribed from time to time by the NAIC with respect thereto) of less than 300%.

SECTION 6.04.          Mergers, Consolidations and Sales.  Not, and not permit any of its Subsidiaries to, (a) merge or consolidate, or purchase or otherwise acquire all or substantially all of the assets or stock of any class of, or any partnership or joint venture interest in, any other Person, other than mergers or acquisitions where the corporate existence of the Borrower is not affected by such merger or acquisition and, subsequent to such merger or acquisition, the Borrower is in compliance with all the provisions of this Agreement and no Default shall exist, or (b) sell, transfer, convey or lease all or any substantial part of its assets or sell or assign with or without recourse any receivables, other than any sale, transfer, conveyance or lease in the ordinary course of business.

SECTION 6.05.          Regulations T, U and X.    Not, and not permit any of its Subsidiaries to, use or permit any proceeds of the Loans to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying margin stock, as defined in Regulation U of the Board.

SECTION 6.06.          Restrictive Agreements.    Not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other

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arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.06 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

SECTION 6.07.          Transactions with Affiliates.  Not, and not permit any Subsidiary to, enter into, or cause, suffer or permit to exist, directly or indirectly, any arrangement, transaction or contract with any of its Affiliates unless such arrangement, transaction or contract is in the ordinary course of business, reasonably intended to satisfy the reasonable business requirements of the Borrower or such Subsidiary, and on terms and conditions at least as favorable to the Borrower or such Subsidiary as the terms and conditions which would apply in a similar arrangement, transaction or contract with a Person or entity not an Affiliate; provided that transactions between the Borrower and any wholly-owned Subsidiary of the Borrower or between any wholly-owned Subsidiaries of the Borrower shall be excluded from the restrictions set forth in this Section 6.07.

SECTION 6.08.          Liens.  Not, and not permit any of its Subsidiaries to, create or permit to exist any Lien with respect to any assets now or hereafter existing or acquired, except the following: (a) Liens for current taxes not delinquent or for taxes being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, (b) Liens arising in the ordinary course of business or by operation of law for sums being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, or for sums not due, and in either case not involving any deposits or advances for borrowed money or the deferred purchase price of property or services, (c) Liens in connection with the acquisition of fixed assets after the date hereof and attaching only to the property being acquired, (d) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits, (e) mechanics’, workers’, materialmen’s and other like Liens arising in the ordinary course of business in respect of obligations which are not delinquent or which are being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, and (f) other Liens securing Debt which Debt does not in the aggregate exceed $5,000,000; provided, however, that, no Lien shall be permitted to exist on the shares of stock of any of its Subsidiaries.

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SECTION 6.09.      Subsidiary Debt.  Not permit the aggregate amount of Debt of its Subsidiaries at any time outstanding to exceed $20,000,000.

ARTICLE VII

EVENTS OF DEFAULT

If any of the following events (“Events of Default”) shall occur:

(a)        Non-Payment of Loan.  Default in the payment when due of any principal on the Loans;

(b)        Non-Payment of Interest, Fees, Etc.  Default, and continuance thereof for 3 Business Days, in the payment when due of interest on the Loans or of any other amount payable hereunder or under the Loan Documents;

(c)        Non-Payment of Other Debt. (i) Default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other Debt of, or guaranteed by, the Borrower or any of its Subsidiaries if the aggregate amount of Debt of the Borrower and/or any of its Subsidiaries which is accelerated or due and payable, or which may be accelerated or otherwise become due and payable, by reason of such default or defaults is $20,000,000 or more, or (ii) default in the performance or observance of any obligation or condition with respect to any such other Debt of, or guaranteed by, the Borrower and/or any of its Subsidiaries if the effect of such default or defaults is to accelerate the maturity of any such Debt of $20,000,000 or more in the aggregate or to permit the holder or holders of such Debt of $20,000,000 or more in the aggregate, or any trustee or agent for such holders, to cause such Debt to become due and payable prior to its expressed maturity;

(d)        Other Material Obligations.  Except for obligations covered under other provisions of this Article VII, default in the payment when due, or in the performance or observance of, any material obligation of, or material condition agreed to by, the Borrower or any of its Subsidiaries with respect to any material purchase or Lease Obligation (except only to the extent that the existence of any such default is being contested by the Borrower in good faith and by appropriate proceedings and the Borrower has established, and is maintaining, adequate reserves therefor in accordance with GAAP) which default continues for a period of 30 days;

(e)        Bankruptcy, Insolvency, Etc.  (i) (A) The Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they become due; or (B) the Borrower applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian or similar Person for the Borrower or any property of any thereof, or makes a general assignment for the benefit of creditors; or (C) in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian or similar Person is appointed for the Borrower or for a substantial part of the property of any thereof, unless (1) the Borrower institutes appropriate proceedings to contest or discharge such appointment within 30 days and thereafter continuously and diligently prosecutes such proceedings and (2) such appointment is in fact discharged within 60 days of such appointment; or (D) any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any

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dissolution or liquidation proceeding is commenced in respect of the Borrower, unless (1) such case or proceeding is not commenced by the Borrower, (2) such case or proceeding is not consented to or acquiesced in by the Borrower, (3) the Borrower institutes appropriate proceedings to dismiss such case or proceeding within 30 days and thereafter continuously and diligently prosecutes such proceedings, and (4) such case or proceeding is in fact dismissed within 60 days after the commencement thereof; or (5) the Borrower takes any action to authorize, or in furtherance of, any of the foregoing; or (ii) (A) there shall be commenced against any Insurance Subsidiary any case, proceeding or other action (1) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, supervision, conservatorship, liquidation, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, rehabilitation, conservation, supervision, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, obligations or liabilities, or (2) seeking appointment of a receiver, trustee, custodian, rehabilitator, conservator, supervisor, liquidator or other similar official for it or for all or any substantial part of its assets, in each case which (x) results in the entry of an order for relief or any such adjudication or appointment or (y) remains undismissed, undischarged or unbonded for a period of 60 days; or (B) there shall be commenced against any of such Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (C) any of such Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause(ii)(A) or (B) above; or (D) any Governmental Authority shall issue any order of conservation, supervision or any other order of like effect relating to any of such Subsidiaries;

(f)        Non-compliance with Certain Provisions.    Failure of the Borrower to comply with the provisions of each of Sections 5.01(d), 5.01(h), 5.02(a), 6.01 through 6.03, 6.04, 6.07, 6.08 or 6.09;

(g)       Non-compliance With Other Provisions.    Failure by the Borrower to comply with or to perform any provision of this Agreement or the other Loan Documents (and not constituting an Event of Default under any of the other provisions of this Article VII) and continuance of such failure for 30 days after notice thereof from the Administrative Agent to the Borrower;

(h)       Warranties and Representations.  Any warranty or representation made by or on behalf of the Borrower or any Subsidiary herein is inaccurate or incorrect or is breached or false or misleading in any material respect as of the date such warranty or representation is made; or any schedule, certificate, financial statement, report, notice, or other instrument furnished by or on behalf of Borrower or any Subsidiary to the Administrative Agent or the Lenders is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified;

(i)        Employee Benefit Plans.  A contribution failure occurs with respect to any Plan sufficient to give rise to a Lien against the Borrower or any of its Subsidiaries under section 302(f)(1) of ERISA; or withdrawal by one or more companies in the Controlled Group from one

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or more Multiemployer Plans to which it or they have an obligation to contribute and the withdrawal liability (without unaccrued interest) to multiemployer plans as a result of such withdrawal or withdrawals (including any outstanding withdrawal liability that the Controlled Group has incurred on the date of such withdrawal) is in excess of $20,000,000;

(j)         Change in Control.  A Change in Control occurs;

(k)        Litigation.  (i) There shall be entered against the Borrower or any of its Subsidiaries one or more judgments, awards or decrees, or orders of attachment, garnishment or any other writ, which exceed $50,000,000, individually or in the aggregate, excluding judgments, awards, decrees, orders or writs (A) for which there is insurance, but only to the extent there is actual insurance coverage, (B) for which there is indemnification (upon terms and from creditworthy indemnitors which are satisfactory to Administrative Agent), but only to the extent there is actual indemnification, (C) which have been in force for less than the applicable period for filing an appeal so long as execution is not levied thereunder (or in respect of which the Borrower or its appropriate Subsidiary shall at the time in good faith be prosecuting an appeal or proceeding for review and in respect of which a stay of execution or appropriate appeal bond shall have been obtained pending such appeal or review), (D) which constitute Ordinary Course Litigation, or (E) which are reserved for, to the actual extent of reserves or (ii) there has been a final judgment or final judgments for the payment of money exceeding, in the aggregate, $50,000,000 rendered against the Borrower or any of its Subsidiaries by a court of competent jurisdiction and such judgment(s) remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days after such judgment(s) become final and nonappealable;

(l)         Change in Law.  Any change is made in the Insurance Code which affects the dividend practices of any Insurance Subsidiary and which is reasonably likely to have a Material Adverse Effect on the ability of the Borrower to perform its obligations under the Agreement and such circumstances shall continue for 120 days; or

(m)       Invalidity of Loan Documents.  Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all principal of and interest on each Loan and all fees payable hereunder, ceases to be in full force and effect; or the Borrower or any other Person contests in any manner the validity or enforceability of any Loan Document; or the Borrower denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document;

then, and in every such event (other than an event with respect to the Borrower described in clause (e) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the

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Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (e) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VIII

THE ADMINISTRATIVE AGENT

Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or

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elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time upon 10 business days’ notice to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in

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taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01.        Notices.      (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy or facsimile (or email with a PDF copy attached), as follows:

(i)       if to the Borrower, to it at One Horace Mann Plaza, Springfield, Illinois 62715-001, Attention of Angela Christian (Telephone No. 217.788.5350) (Telecopy No. 217.788.5796) (Email: angela.christian@horacemann.com) (Website www.horacemann.com);

(ii)      if to the Administrative Agent for purposes of loan administration information, to JPMorgan Chase Bank, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2300, Attention of Nanette Wilson (Telephone No. 312.385.7084) (Telecopy No. 888.292.9533) (Email: nanette.wilson@jpmchase.com);

(iii)     if to the Administrative Agent for purposes of covenant compliance/financial information, to JPMorgan Chase Bank, 10 South Dearborn, Floor 9, Chicago, Illinois 60603-2300, Attention of Danielle Babine (Telephone No. 312.325.3261) (Telecopy No. 312.386.7632) (Email: danielle.d.babine@jpmorgan.com); and

(iv)     if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b)        Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications (including internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c)        Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02.        Waivers; Amendments.      (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a

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waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

(b)        Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent.

SECTION 9.03.          Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arrangers and any of their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

(b)        The Borrower shall indemnify the Administrative Agent, the Arrangers and each Lender, and each Related Party of any of the foregoing Persons (each such Person

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being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. This Section 9.3(b) shall not apply with respect to Taxes other than any Taxes that represent losses or damages arising from any non-Tax claim.

(c)        To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such.

(d)        To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof.

(e)        All amounts due under this Section shall be payable not later than 10 Business Days after written demand therefor.

SECTION 9.04.          Successors and Assigns. (a)    The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)        (i)         Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Persons (other than an Ineligible Institution) all or a portion of

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its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A)        the Borrower, provided that, the Borrower shall be deemed to have consented to an assignment unless it shall have objected thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof; provided further that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; and

(B)        the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of any Commitment to an assignee that is a Lender with a Commitment immediately prior to giving effect to such assignment.

As used herein, “Ineligible Institution” means a (a) natural person or (b) holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof; provided that, such holding company, investment vehicle or trust shall not constitute an Ineligible Institution if it (x) has not been established for the primary purpose of acquiring any Loans or Commitments, (y) is managed by a professional advisor, who is not such natural person or a relative thereof, having significant experience in the business of making or purchasing commercial loans, and (z) has assets greater than $25,000,000 and a significant part of its activities consist of making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business; provided that upon the occurrence of an Event of Default, any Person (other than a Lender) shall be an Ineligible Institutions if after giving effect any proposed assignment to such Person, such Person would hold more than 25% of the then outstanding Revolving Credit Exposure or Commitments, as the case may be.

(ii)        Assignments shall be subject to the following additional conditions:

(A)        except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;

(B)        each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

52

 (C)        the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

 (D)        the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more Credit Contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower and its related parties or its securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state securities laws.

(iii)        Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

(iv)        The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v)         Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and

53

Assumption and record the information contained therein in the Register; provided that if either the assigning Lender or the assignee shall have failed to make any payment required to be made by it pursuant to Section 2.04(b), 2.15(d) or 9.03(c), the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c)        Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”), other than an Ineligible Institution, in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 (subject to the requirements and limitations therein, including the requirements under Section 2.14(f) (it being understood that the documentation required under Section 2.14(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 2.15 and 2.16 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 2.12 or 2.14, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is

54

recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(d)        Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05.           Survival.      All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12, 2.13, 2.14 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06.          Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07.          Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

55

SECTION 9.08.          Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09.          Governing Law; Jurisdiction; Consent to Service of Process.  (a) This Agreement shall be construed in accordance with and governed by the law of the State of Illinois.

(b)        The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Circuit Court of the State of Illinois sitting in Cook County, Illinois and of the United States District Court for the Northern District of Illinois, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Illinois State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction.

(c)        The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)        Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10.          WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS

56

REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11.          Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12.          Confidentiality.  (a) Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

(b)        EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN SECTION 9.12(a) FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

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(c)        ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER AND ITS RELATED PARTIES OR ITS SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.

SECTION 9.13.          Interest Rate Limitation.  Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.14.          USA PATRIOT Act.    Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies the Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

SECTION 9.15.          No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower, on the one hand, and the Administrative Agent and the Arrangers, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, the Administrative Agent and the Arrangers each is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Administrative Agent nor any Arranger has assumed or will assume

58

an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Administrative Agent or any Arranger has advised or is currently advising the Borrower or its Affiliates on other matters) and neither the Administrative Agent nor any Arranger has any obligation to the Borrower or its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Administrative Agent and each Arranger and its respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent nor any Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) neither the Administrative Agent nor any Arranger has provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Administrative Agent and the Arrangers with respect to any breach or alleged breach of agency or fiduciary duty.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

HORACE MANN EDUCATORS CORPORATION
By	/s/	Dwayne D. Hallman
Name:		Dwayne D. Hallman
Title:  Executive Vice President and CFO
By	/s/	Angela S. Christian
Name:		Angela S. Christian
Title:  Vice President and Treasurer
JPMORGAN CHASE BANK, individually and as Administrative Agent,
By	/s/	Thomas A. Kiepura II
Name:		Thomas A. Kiepura
Title:  Vice President
PNC BANK, NATIONAL ASSOCIATION
By	/s/	William R. McDonnell
Name:		William R. McDonnell
Title:  Senior Vice President
ASSOCIATED BANK, NATIONAL ASSOCIATION
By	/s/	Liliana Huerta
Name:		Liliana Huerta
Title:  Vice President
THE NORTHERN TRUST COMPANY
By	/s/	Chris McKean
Name:		Chris McKean
Title:  Senior Vice President

S-1

COMERICA BANK
By	/s/	Mark J. Leveille
Name:		Mark J. Leveille
Title:  Vice President
STATE STREET BANK AND TRUST COMPANY
By	/s/	Kimberly R. Costa
Name:		Kimberly R. Costa
Title:  Vice President
ILLINOIS NATIONAL BANK
By	/s/	John W. Wilson
Name:		John W. Wilson
Title:  Executive Vice President

S-2

Schedule 2.01

Commitments

Lender	Commitment
JPMorgan Chase Bank, N.A.	$36,000,000
PNC Bank, National Association	$36,000,000
Associated Bank	$20,000,000
The Northern Trust Company	$20,000,000
Comerica Bank	$15,000,000
State Street Bank and Trust Company	$15,000,000
Illinois National Bank	$8,000,000
TOTAL:	$150,000,000

Schedule 3.01

Jurisdictions

[see attached]

Schedule 3.01

Jurisdictions

CERTIFICATES OF AUTHORITY BY STATE AND DATE ISSUED

STATE	HMIC	TIC	HMP&CIC	HMLIC	ELICA	HMSC
Alabama	12-19-66	04-18-73	08-20-03	12-15-58		X
Alaska	01-31-64	03-26-73	12-22-87	02-02-62		X
Arizona	05-27-59	11-12-74	06-09-80	07-15-59	08-21-57	X
Arkansas	01-31-64	10-06-77	11-19-75	05-06-50		X
California	01-31-64		03-25-65	08-18-67		X
Colorado	06-05-64	09-05-73	11-13-81	11-02-56	12-31-84	X
Connecticut	06-28-74	11-18-99	11-18-99	11-20-78		X
Delaware	06-02-59	03-02-71	09-25-98	12-08-55		X
Dist. of Col.	08-20-59	01-30-73	05-01-97	12-03-65		X
Florida	09-23-63	08-19-76	04-02-10	07-16-62	08-15-66	X
Georgia	01-31-64	02-09-78	07-02-07	04-05-61		X
Hawaii				08-25-87	02-01-85
Idaho	12-16-68	04-16-73	05-26-88	05-09-60		X
Illinois	01-31-64*	03-09-77*	04-25-75*	08-09-49*	12-31-84*	08-13-73*
Indiana	05-01-68	12-01-77	01-15-98	05-01-57		X
Iowa	12-29-64	05-04-73	11-26-74	08-01-52		X
Kansas	01-31-64	09-13-96	12/21/99	11-12-61		X
Kentucky	01-31-64	08-02-64	11-01-99	02-21-69		X
Louisiana	12-23-58	11-14-73	09-30-99	05-16-61		X
Maine	06-01-70	05-04-88	12-30-98	09-02-60		X
Maryland	01-10-68	10-29-91	03-31-98	06-26-56		X
Massachusetts	10-25-68	02-12-81		09-09-68		X
Michigan	03-19-59	12-14-77	02-23-99	10-27-59		X
Minnesota	02-11-64	06-01-74	08-19-98	10-08-56		X
Mississippi	06-01-58	07-19-74	06-01-97	10- -61		X
Missouri	03-01-64	07-19-88	11-25-74	06-27-60		X
Montana	01-31-64	06-01-73	02-26-88	01-02-54		X
Nebraska	08-30-60	12-15-76	06-24-97	10-29-59	09-28-61	X
Nevada	02-12-68	06-14-99	06-17-99	05-10-60	02-04-83	X
New Hampshire	04-09-69	11-15-76	03-19-01	07-13-61		X

Revised as of 07/26/11 Page 1

STATE	HMIC	TIC	HMP&CIC	HMLIC	ELICA	HMSC
New Jersey	Cancelled  05-30-96					X
New Mexico	03-01-64	08-15-73	01-03-03	05-21-56		X
New York	01-31-64	06-17-02	03-27-00			X
North Carolina	10-18-68	07-01-74	03-05-98	07-10-59		X
North Dakota	05-08-62	03-22-73	06-21-88	05-29-62		X
Ohio	02-07-64	12-03-84	12-31-96	12-02-59	10-09-84	X
Oklahoma	03-01-68	11-25-74	11-07-74	12-07-60	08-02-66	X
Oregon	07-15-70	09-01-73	11-15-74	11-01-53	06-05-57	X
Pennsylvania	12-29-63	04-16-81	12-20-99	09-01-49		X
Rhode Island	01-23-70	12-13-73	01-12-98	09-05-61		09-10-73
South Carolina	10-02-58	02-08-74	05-04-82	08-14-61		X
South Dakota	05-01-62	01-22-74	09-14-88	08-03-53		X
Tennessee	01-31-64	09-07-77	11-19-97	03-28-56		X
Texas	01-31-64	12-29-78	05-29-75	07-14-60	06-26-68	09-10-73
Utah	03-01-64	06-14-73	04-05-88	11-22-55		X
Vermont	10-01-68	08-25-99	08-25-97	04-18-56		X
Virginia	02-03-64	03-19-91	03-30-99	04-18-56		X
Washington	02-10-64	12-28-73	12-31-98	11-13-58	09-20-57	X
West Virginia	01-23-64	10-23-89	03-29-99	12-28-60		X
Wisconsin	01-31-64	09-14-73	06-27-74	11-22-68		X
Wyoming	12-24-58	07-23-87	01-18-88	03-24-53		X
Puerto Rico	08-15-00

HMIC:	Horace Mann Insurance Company
TIC:	Teachers Insurance Company
HMP&CIC:	Horace Mann Property & Casualty Insurance Company
HMLIC:	Horace Mann Life Insurance Company
HMSC:	Horace Mann Service Corporation
ELICA:	Educators Life Insurance Company of America

Revised as of 07/26/11 Page 2

Schedule 3.02(a)

SAP Exceptions

None.

Schedule 3.04

Litigation

None.

Schedule 3.10

Subsidiaries

[see attached]

Schedule 3.10 Subsidiaries

Horace Mann Educators Corporation is a publicly held company.

* Material Insurance Subsidiary

Schedule 3.11

Insurance Licenses

None.

Schedule 6.06

Restrictive Agreements

1.        Restrictions pursuant to First Supplemental Indenture, dated as of June 9, 2005, by and between Borrower and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee)

The Borrower can not, and it can not permit any Subsidiary, create, assume, incur or permit to exist any indebtedness secured by a pledge, lien or other encumbrance on the voting securities of any “Significant Subsidiary” (as defined in paragraph (w) of Rule 1-02 of Regulation S-X (17 CFR § 210.1-01, et seq.), or the voting securities of a Subsidiary that owns, directly or indirectly, the voting securities of any “Significant Subsidiary” without making effective provision whereby the outstanding 6.05% Senior Notes due June 15, 2015 shall be equally and ratably secured with such secured indebtedness so long as such other indebtedness shall be secured.

2.        Restrictions pursuant to Second Supplemental Indenture, dated as of April 21, 2006, by and between Borrower and The Bank of New York Mellon Trust Company, N.A., as trustee (formerly JPMorgan Chase Bank, N.A. was trustee)

The Borrower can not, and it can not permit any Subsidiary, create, assume, incur or permit to exist any indebtedness secured by a pledge, lien or other encumbrance on the voting securities of any “Significant Subsidiary” (as defined in paragraph (w) of Rule 1-02 of Regulation S-X (17 CFR § 210.1-01, et seq.), or the voting securities of a Subsidiary that owns, directly or indirectly, the voting securities of any “Significant Subsidiary” without making effective provision whereby the outstanding 6.85% Senior Notes due April 15, 2016 shall be equally and ratably secured with such secured indebtedness so long as such other indebtedness shall be secured.

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.       Assignor:
2.       Assignee:
	[and is an Affiliate/Approved Fund of [identify Lender]]
3.       Borrower(s):	HORACE MANN EDUCATORS CORPORATION
4.       Administrative Agent:	JPMORGAN CHASE BANK, N.A., as the administrative agent under the Credit Agreement
5.       Credit Agreement:	The Credit Agreement dated as of October 7, 2011 among Horace Mann Educators Corporation, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties thereto

A-1

6. Assigned Interest:

Aggregate Amount of Commitment/Loans for all Lenders	Amount of Commitment/Loans Assigned	Percentage Assigned of Commitment/Loans1
$	$	%
$	$	%
$	$	%

Effective Date:                      , 20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more Credit Contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower and its Related Parties or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

[NAME OF ASSIGNOR]

By:                                                                         

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:                                                                         

Title:

¹  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

A-2

[Consented to and]² Accepted:

JPMORGAN CHASE BANK, N.A.,, as

Administrative Agent

By                                                                         

Title:

[Consented to:]³

HORACE MANN EDUCATORS CORPORATION

By                                                                         

Title:

²  To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

³  To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.

A-3

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.  Representations and Warranties.

1.1  Assignor.  The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2.  Assignee.  The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Non-U.S. Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.  Payments.  From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest,

A-4

fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3.  General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of Illinois.

A-5

EXHIBIT B

[FORM OF]

COMPLIANCE CERTIFICATE

To: The Lenders parties to the

Credit Agreement Described Below

For the period ended                          , 20    , this Compliance Certificate is furnished pursuant to that certain Credit Agreement, dated as of October 7, 2011 (as amended, modified, renewed or extended from time to time, the “Agreement”), among Horace Mann Educators Corporation (the “Borrower”), the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1.        I am a duly elected Executive Officer of the Borrower;

2.        I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;

3.        The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or Event of Default during or at the time of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; and

4.        To the extent that there are any changes from the most recently delivered Schedule 3.10, Schedule I attached hereto sets forth a current Schedule 3.10, setting forth each of the Borrower’s Subsidiaries and indicating which Subsidiaries are Material Insurance Subsidiaries, accurate as of the date hereof.

5.        Schedule II attached hereto sets forth financial data and computations evidencing the Borrower’s compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct.

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

B-1

B-2

The foregoing certifications, together with the computations set forth in Schedule II hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this      day of             ,     .

Name:

Title:

B-3

SCHEDULE I TO COMPLIANCE CERTIFICATE

Updated Schedule 3.10 as of             ,     

B-4

SCHEDULE II TO COMPLIANCE CERTIFICATE

Compliance as of             ,          with

Provisions of Sections 6.01, 6.02 and 6.03 of

the Agreement

Section 6.01 – Consolidated Debt to Total Capitalization
	Required		0.35:1.0
	Actual
	(a)	Consolidated Debt of the Borrower and its Consolidated Subsidiaries on date  of determination:	$
	(b)	Consolidated Net Worth on date of determination:	$
	(c)	(a) plus (b):	$
	(d)	Ratio of (a) to (c):	:1.0
Section 6.02 – Net Worth
	Required Minimum Net Worth:		$
	Actual Net Worth:
	Net Worth (excluding the effect of unrealized gain or loss under FASB 115):		$
Section 6.03 – Minimum Risk-Based Capital (as of the end of any Fiscal Year)
	Required:		300%
	Actual:
	(a) Horace Mann Life Insurance Company
	(1)	Total Adjusted Capital on date of determination:	$
	(2)	Company Action Level RBC on date of determination:	$

B-5

(3)	Ratio of (1) to (2) (expressed as a percentage):	%
(b) The P/C Subsidiaries (taken as a whole)
(1)	Total Adjusted Capital on date of determination:	$
(2)	Company Action Level RBC on date of determination:	$
(3)	Ratio of (1) to (2) (expressed as a percentage):	%

B-6

EXHIBIT C-1

[FORM OF]

U.S. TAX CERTIFICATE

       (For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of October 7, 2011 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Horace Mann Educators Corporation, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.14 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a U.S. trade or business.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]

By:                                                                      

       Name:

       Title:

Date:                  , 20[  ]

C-1-1

EXHIBIT C-2

[FORM OF]

U.S. TAX CERTIFICATE

       (For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of October 7, 2011 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Horace Mann Educators Corporation, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.14 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement, neither the undersigned nor any of its partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigned’s or its partners/members’ conduct of a U.S. trade or business.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]

By:                                                                      

       Name:

       Title:

Date:                  , 20[  ]

C-2-1

EXHIBIT C-3

[FORM OF]

U.S. TAX CERTIFICATE

       (For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of October 7, 2011 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Horace Mann Educators Corporation, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.14 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a U.S. trade or business.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]

By:                                                                      

       Name:

       Title:

Date:                  , 20[  ]

C-3-1

EXHIBIT C-4

[FORM OF]

U.S. TAX CERTIFICATE

       (For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of October 7, 2011 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Horace Mann Educators Corporation, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigned’s or its partners/members’ conduct of a U.S. trade or business.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]

By:                                                                      

       Name:

       Title:

Date:                  , 20[  ]

C-4-1

EX-11

Exhibit 11

Horace Mann Educators Corporation

Computation of Net Income per Share (Unaudited)

For the Three and Nine Months Ended September 30, 2011 and 2010

(Amounts in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Basic – assumes no dilution:
Net income		$	23,128		$	20,166		$	37,252		$	65,750
Weighted average number of common shares outstanding during the period			39,919			39,411			39,854			39,294
Net income per share – basic		$	0.58		$	0.51		$	0.93		$	1.67
Diluted – assumes full dilution:
Net income		$	23,128		$	20,166		$	37,252		$	65,750
Weighted average number of common shares outstanding during the period			39,919			39,411			39,854			39,294
Weighted average number of common equivalent shares to reflect the dilutive effect of common stock equivalent securities:
Stock options			162			304			231			253
Common stock units related to deferred compensation for Directors			112			106			112			106
Common stock units related to deferred compensation for Employees			114			194			114			194
Restricted common stock units related to incentive compensation			1,144			1,100			1,144			1,100
Total common and common equivalent shares adjusted to calculate diluted earnings per share			41,451			41,115			41,455			40,947
Net income per share – diluted		$	0.56		$	0.49		$	0.90		$	1.61

EX-15

Exhibit 15

Horace Mann Educators Corporation

Springfield, Illinois

Re:         Registration Statements on Form S-3 (No. 333-155753) and Form S-8 (No. 33-47066, No. 33-45152, No. 333-16473, No. 333-74686, No. 333-98917 and No. 333-171384)

With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated November 9, 2011, related to our review of interim financial information for the period ended September 30, 2011.

Pursuant to Rule 436 under the Securities Act of 1933 (the “Act”), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP

KPMG LLP

Chicago, Illinois

November 9, 2011

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Peter H. Heckman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2011 of Horace Mann Educators Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Peter H. Heckman
Peter H. Heckman, Chief Executive Officer
Horace Mann Educators Corporation
Date:	November 9, 2011

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dwayne D. Hallman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2011 of Horace Mann Educators Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

    /s/ Dwayne D. Hallman

Dwayne D. Hallman, Chief Financial Officer

Horace Mann Educators Corporation

Date:     November 9, 2011

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Horace Mann Educators Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter H. Heckman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

      /s/ Peter H. Heckman

Peter H. Heckman

Chief Executive Officer

Date:     November 9, 2011

A signed original of this written statement required by Section 906 has been provided to Horace

Mann Educators Corporation and will be retained by Horace Mann Educators Corporation

and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Horace Mann Educators Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dwayne D. Hallman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

    /s/ Dwayne D. Hallman

Dwayne D. Hallman

Chief Financial Officer

Date:     November 9, 2011

A signed original of this written statement required by Section 906 has been provided to Horace

Mann Educators Corporation and will be retained by Horace Mann Educators Corporation

and furnished to the Securities and Exchange Commission or its staff upon request.

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, there is 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.

• Exclusive Agency - A local Horace Mann agency created and owned by an independent contractor who has signed an Exclusive Agent agreement with the Company (an “Exclusive Agent”). That agreement states that only the Company’s products and limited additional third-party vendor products authorized by the Company will be marketed by the agency. An independent contractor may sign multiple Exclusive Agent agreements with the Company and manage more than one Exclusive Agency.

• Employee Agents - Agents who have employee status with the Company and by contract market only the Company’s products and limited additional third-party vendor products authorized by the Company.

• Independent Agents - Non-exclusive independent contractors 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.

1

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 of loss 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.

Insurance premiums written and contract deposits - Premiums written represent (1) the amount charged for policies issued during a fiscal period for property and casualty business, such amounts may be earned and included in financial results over future fiscal periods, and (2) the amount charged for policies in force during a fiscal period for traditional life and group life business. Amounts are reported net of reinsurance, unless otherwise specified. Contract deposits include amounts received from customers on deposit-type contracts, such as annuities and interest-sensitive life policy accounts, including deposit amounts and any related contract or policy fees. Management utilizes this non-GAAP measure, which is based on statutory accounting principles, in analyzing and evaluating the business growth of its operating segments. Insurance premiums and contract charges earned is the most directly comparable GAAP measure.

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. Management believes that a projection of net income including after tax realized investment gains and losses is not appropriate on a forward-looking basis because it is not possible to provide a valid 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.

2

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. In addition to the Company’s products, sales data includes authorized products sold by Employee Agents, Exclusive Agents, and their licensed staff which are underwritten by third-party vendors. 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 its agency force. Sales are also a leading indicator of future revenue trends.

3

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Sep. 30, 2011	Dec. 31, 2010
Consolidated Balance Sheets [Abstract]
Fixed maturities, available for sale, amortized cost	$ 4,882,036	$ 4,533,233
Equity securities, available for sale, cost	$ 19,906	$ 20,765
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	61,792,029	61,469,148
Treasury stock, shares	21,873,322	21,813,196

XML

Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Revenues
Insurance premiums and contract charges earned	$ 167,035	$ 168,062	$ 500,066	$ 502,845
Net investment income	71,550	68,290	213,708	203,273
Net realized investment gains	21,121	12,062	32,674	25,305
Other income	1,127	1,616	4,209	5,294
Total revenues	260,833	250,030	750,657	736,717
Benefits, losses and expenses
Benefits, claims and settlement expenses	124,412	124,864	398,822	356,162
Interest credited	39,288	37,076	114,987	108,854
Policy acquisition expenses amortized	27,922	20,189	71,712	66,080
Operating expenses	33,898	36,075	102,556	104,265
Interest expense	3,474	3,496	10,428	10,449
Total benefits, losses and expenses	228,994	221,700	698,505	645,810
Income before income taxes	31,839	28,330	52,152	90,907
Income tax expense	8,711	8,164	14,900	25,157
Net income	23,128	20,166	37,252	65,750
Net income per share
Basic	$ 0.58	$ 0.51	$ 0.93	$ 1.67
Diluted	$ 0.56	$ 0.49	$ 0.90	$ 1.61
Weighted average number of shares and equivalent shares (in thousands)
Basic	39,919	39,411	39,854	39,294
Diluted	41,451	41,115	41,455	40,947
Net realized investment gains (losses)
Total other-than-temporary impairment losses on securities		(4,345)		(6,196)
Portion of losses recognized in other comprehensive income				459
Net other-than-temporary impairment losses on securities recognized in earnings		(4,345)		(5,737)
Realized gains	21,121	16,407	32,674	31,042
Total	$ 21,121	$ 12,062	$ 32,674	$ 25,305

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2011	Oct. 28, 2011
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	HORACE MANN EDUCATORS CORP /DE/
Entity Central Index Key	0000850141
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		39,930,140

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Debt

9 Months Ended

Sep. 30, 2011

Debt [Abstract]

Debt

Note 4 - Debt

Indebtedness outstanding was as follows:

	September 30,			December 31,
	2011			2010
Short-term debt:
Bank Credit Facility		$	38,000		$	38,000
Long-term debt:
6.05% Senior Notes, due June 15, 2015. Aggregate principal amount of $75,000 less unaccrued discount of $98 and $118 (6.1% imputed rate)			74,902			74,882
6.85% Senior Notes, due April 15, 2016. Aggregate principal amount of $125,000 less unaccrued discount of $174 and $203 (6.9% imputed rate)			124,826			124,797
Total		$	237,728		$	237,679

The Bank Credit Facility, 6.05% Senior Notes due 2015 ("Senior Notes due 2015") and 6.85% Senior Notes due 2016 ("Senior Notes due 2016") are described in "Notes to Consolidated Financial Statements -- Note 5 -- Debt" of the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

Credit Agreement with Financial Institutions ("Bank Credit Facility")

On May 31, 2005, HMEC entered into a Bank Credit Agreement by and between HMEC, certain financial institutions named therein and Bank of America, N.A., as administrative agent, that was amended and restated effective December 19, 2006 (the "Previous Bank Credit Agreement"). The Previous Bank Credit Agreement, which provided for unsecured borrowings of up to $125,000, was terminated on October 7, 2011 following HMEC's entry into the Current Bank Credit Facility and repayment of the $38,000 balance outstanding, as described below.

On October 7, 2011, HMEC entered into a new Bank Credit Agreement (the "Current Bank Credit Facility") that replaces the Previous Bank Credit Agreement, described above, which was scheduled to expire on December 19, 2011. The Current Bank Credit Facility is by and between HMEC, certain financial institutions named therein and JPMorgan Chase Bank, N.A., as administrative agent, provides for unsecured borrowings of up to $150,000 and expires on October 6, 2015.

On October 7, 2011, there was no change to HMEC's short-term debt balance. HMEC borrowed $38,000 under the Current Bank Credit Facility and used the proceeds to repay the $38,000 balance outstanding under the Previous Bank Credit Agreement.

Under the Current Bank Credit Facility, interest accrues at varying spreads relative to prime or eurodollar base rates and is payable monthly or quarterly depending on the applicable base rate (eurodollar base rate plus 1.25%, or 1.63%, as of October 7, 2011). The unused portion of the Current Bank Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis at October 7, 2011.

The Current Bank Credit Facility contains financial covenants, as defined in the agreement, as follows: (1) debt to capital ratio not to exceed 35%, (2) minimum net worth and (3) insurance subsidiaries' risk based capital percentages of not less than 300%.

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Consolidated Statements Of Cash Flows (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows-operating activities
Premiums collected	$ 498,747	$ 503,033
Policyholder benefits paid	(425,327)	(364,579)
Policy acquisition and other operating expenses paid	(181,593)	(176,166)
Federal income taxes paid	(4,130)	(20,163)
Investment income collected	203,352	196,582
Interest expense paid	(6,897)	(6,914)
Contribution to defined benefit pension plan trust	(5,774)	(1,307)
Other	(2,328)	(1,622)
Net cash provided by operating activities	76,050	128,864
Cash flows-investing activities
Purchases	(1,016,995)	(1,151,950)
Sales	457,411	533,894
Maturities, paydowns, calls and redemptions	285,491	278,820
Net cash provided by short-term and other investments	85,178	133,287
Net cash used in investing activities	(188,915)	(205,949)
Cash flows-financing activities
Dividends paid to shareholders	(13,634)	(9,785)
Exercise of stock options	2,127	854
Annuity contracts, variable and fixed
Deposits	318,872	288,691
Benefits, withdrawals and net transfers to Separate Account (variable annuity) assets	(161,576)	(177,900)
Life policy accounts
Deposits	1,553	1,404
Withdrawals and surrenders	(4,066)	(3,844)
Change in bank overdrafts	4,418	10,891
Net cash provided by financing activities	147,694	110,311
Net increase in cash	34,829	33,226
Cash at beginning of period	5,928	7,848
Cash at end of period	$ 40,757	$ 41,074

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Reinsurance

9 Months Ended

Sep. 30, 2011

Reinsurance [Abstract]

Reinsurance

Note 6 - Reinsurance

The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:

				Ceded to			Assumed
	Gross			Other			from Other			Net
	Amount			Companies			Companies			Amount
Three months ended September 30, 2011
Premiums written and contract deposits		$	305,476		$	7,484		$	918		$	298,910
Premiums and contract charges earned			173,537			7,480			978			167,035
Benefits, claims and settlement expenses			127,524			4,278			1,166			124,412
Three months ended September 30, 2010
Premiums written and contract deposits		$	296,544		$	8,200		$	972		$	289,316
Premiums and contract charges earned			175,228			8,211			1,045			168,062
Benefits, claims and settlement expenses			124,524			768			1,108			124,864
Nine months ended September 30, 2011
Premiums written and contract deposits		$	823,557		$	23,698		$	2,477		$	802,336
Premiums and contract charges earned			522,207			24,702			2,561			500,066
Benefits, claims and settlement expenses			413,909			17,478			2,391			398,822
Nine months ended September 30, 2010
Premiums written and contract deposits		$	804,713		$	25,424		$	3,499		$	782,788
Premiums and contract charges earned			525,729			26,399			3,515			502,845
Benefits, claims and settlement expenses			359,405			6,319			3,076			356,162

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Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

Note 7 - Segment Information

The Company conducts and manages its business through four segments. The three operating segments, representing the major lines of insurance business, are: property and casualty insurance, principally personal lines automobile and homeowners products; annuity products, principally tax-qualified fixed and variable deposits; and life insurance. The Company does not allocate the impact of corporate level transactions to the insurance segments, consistent with the basis for management's evaluation of the results of those segments, but classifies those items in the fourth segment, corporate and other. In addition to ongoing transactions such as debt service, realized investment gains and losses and certain public company expenses, within the past five years such items also have included debt retirement costs/gains. Summarized financial information for these segments is as follows:

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Insurance premiums and contract charges earned
Property and casualty		$	136,636			$	139,326			$	410,456			$	415,825
Annuity			4,936				4,160				14,443				12,986
Life			25,463				24,576				75,167				74,034
Total		$	167,035			$	168,062			$	500,066			$	502,845
Net investment income
Property and casualty		$	8,927			$	9,178			$	27,402			$	27,093
Annuity			45,582				42,150				135,029				125,197
Life			17,294				17,213				52,040				51,757
Corporate and other			(1	)			7				(2	)			5
Intersegment eliminations			(252	)			(258	)			(761	)			(779	)
Total		$	71,550			$	68,290			$	213,708			$	203,273
Net income (loss)
Property and casualty		$	1,735			$	1,430			$	(11,598	)		$	20,969
Annuity			4,355				8,547				20,517				22,690
Life			3,555				5,678				13,464				15,766
Corporate and other			13,483				4,511				14,869				6,325
Total		$	23,128			$	20,166			$	37,252			$	65,750

	September 30,				December 31,
	2011				2010
Assets
Property and casualty		$	993,212			$	954,201
Annuity			4,766,353				4,556,317
Life			1,485,860				1,393,169
Corporate and other			120,431				130,191
Intersegment eliminations			(29,158	)			(28,337	)
Total		$	7,336,698			$	7,005,541

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Pension Plans And Other Postretirement Benefits

9 Months Ended

Sep. 30, 2011

Pension Plans And Other Postretirement Benefits [Abstract]

Pension Plans And Other Postretirement Benefits

Note 5 - Pension Plans and Other Postretirement Benefits

The Company has the following retirement plans: a defined contribution plan; a 401(k) plan; a defined benefit plan for employees hired on or before December 31, 1998; and certain employees participate in a supplemental defined contribution plan or a supplemental defined benefit plan or both.

Defined Benefit Plan and Supplemental Defined Benefit Plans

The following tables summarize the components of net periodic pension cost recognized for the defined benefit plan and the supplemental defined benefit plans for the three and nine months ended September 30, 2011 and 2010.

	Defined Benefit Plan
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Components of net periodic pension (income) expense:
Service cost:
Benefit accrual		$	-			$	-			$	-			$	-
Other expenses			63				62				188				187
Interest cost			424				470				1,268				1,408
Expected return on plan assets			(610	)			(597	)			(1,820	)			(1,791	)
Settlement (gain) loss			1,098				(155	)			1,098				619
Amortization of:
Prior service cost			-				-				-				-
Actuarial loss			478				261				1,366				784
Net periodic pension expense		$	1,453			$	41			$	2,100			$	1,207
	Supplemental Defined Benefit Plans
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Components of net periodic pension (income) expense:
Service cost:
Benefit accrual		$	-			$	-			$	-			$	-
Other expenses			-				-				-				-
Interest cost			201				85				598				631
Expected return on plan assets			-				-				-				-
Settlement loss			-				-				-				-
Amortization of:
Prior service cost			31				31				94				93
Actuarial loss			194				62				523				185
Net periodic pension expense		$	426			$	178			$	1,215			$	909

There is a minimum funding requirement of approximately $900 for the Company's defined benefit plan in 2011. At the time of the Company's Annual Report on Form 10-K for the year ended December 31, 2010, the Company expected to contribute approximately $5,200 to the defined benefit plan and approximately $1,300 to the supplemental retirement plans in 2011. As of the time of this Quarterly Report on Form 10-Q, the Company expects to contribute $5,926 to the defined benefit pension plan, of which $5,774 was contributed during the nine months ended September 30, 2011. As of the time of this Quarterly Report on Form 10-Q, in 2011 the Company expects to contribute $1,355 to the supplemental retirement plans, of which $1,015 was contributed during the nine months ended September 30, 2011. For the full year, the Company expects amortization of net losses of $1,821 and $698 for the defined benefit plan and the supplemental retirement plans, respectively, and expects amortization of prior service cost of $124 for the supplemental retirement plans to be included in net periodic pension expense to 2011.

Postretirement Benefits Other Than Pensions

In addition to providing pension benefits, the Company also provides certain health care and life insurance benefits to eligible employees. Effective January 1, 2007, the Company eliminated the previous group health insurance benefits for retirees 65 years of age and over, including elimination of pharmacy benefits for Medicare eligible retirees, and established a Health Reimbursement Account ("HRA") for each eligible participant. Funding of HRA accounts was $153 and $258 for the nine months ended September 30, 2011 and 2010, respectively.

The following table summarizes the components of the net periodic benefit for postretirement benefits other than pensions for the three and nine months ended September 30, 2011 and 2010.

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2011				2010				2011				2010
Components of net periodic benefit:
Service cost		$	-			$	-			$	-			$	-
Interest cost			32				43				91				128
Amortization of prior service cost			-				-				-				-
Amortization of prior gains			(101	)			(130	)			(376	)			(390	)
Net periodic benefit		$	(69	)		$	(87	)		$	(285	)		$	(262	)

Consistent with disclosure in "Notes to Consolidated Financial Statements -- Note 9 -- Pension Plans and Other Postretirement Benefits" of the Company's Annual Report on Form 10-K for the year ended December 31, 2010, for the full year the Company expects to contribute approximately $600 to the postretirement benefit plans other than pensions in 2011, of which $343 was contributed during the nine months ended September 30, 2011. In addition, the Company expects amortization of prior gains of $501 to be included in the net periodic benefit for the year ended December 31, 2011.

XML

Consolidated Statements Of Changes In Shareholders' Equity (USD $) In Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss), Net Of Taxes [Member]	Treasury Stock, At Cost [Member]	Total
Beginning balance at Dec. 31, 2009	$ 61	$ 358,081	$ 758,343	$ 10,723	$ (407,663)
Conversion of common stock units, 2011, 15,715 shares; 2010, 160,876 shares
Conversion of restricted stock units, 2011, 170,876 shares; 2010, 46,584 shares
Options exercised and conversion of common stock units and restricted stock units		3,889
Share-based compensation expense		1,158
Cumulative effect of adoption of accounting principle, net of taxes			(1,338)	1,338
Net income			65,750			65,750
Cash dividends, 2011, $0.33 per share; 2010, $0.24 per share			(9,785)
Change in net unrealized gains and losses on fixed maturities and equity securities				193,338		193,338
Change in net funded status of pension and other postretirement benefit obligations
Ending balance at Sep. 30, 2010	61	363,128	812,970	205,399	(407,663)	973,895
Beginning balance at Dec. 31, 2010	61	367,448	823,579	96,582	(407,663)	880,007
Options exercised, 2011, 136,290 shares; 2010, 51,850 shares	1
Conversion of common stock units, 2011, 15,715 shares; 2010, 160,876 shares
Conversion of restricted stock units, 2011, 170,876 shares; 2010, 46,584 shares
Options exercised and conversion of common stock units and restricted stock units		4,247
Share-based compensation expense		1,229
Net income			37,252			37,252
Cash dividends, 2011, $0.33 per share; 2010, $0.24 per share			(13,634)
Change in net unrealized gains and losses on fixed maturities and equity securities				147,427		147,427
Change in net funded status of pension and other postretirement benefit obligations
Acquisition of shares, 2011, 60,126 shares; 2010, 0 shares					(1,007)
Ending balance at Sep. 30, 2011	$ 62	$ 372,924	$ 847,197	$ 244,009	$ (408,670)	$ 1,055,522

XML

Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation ("HMEC"; and together with its subsidiaries, the "Company" or "Horace Mann") have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") and with the rules and regulations of the Securities and Exchange Commission ("SEC"), specifically Regulation S-X and the instructions to Form 10-Q. Certain information and note disclosures which are normally included in annual financial statements prepared in accordance with GAAP but are not required for interim reporting purposes have been omitted. The Company believes that these consolidated financial statements contain all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the Company's consolidated financial position as of September 30, 2011, the consolidated results of operations and comprehensive income for the three and nine months ended September 30, 2011 and 2010, and the consolidated changes in shareholders' equity and cash flows for the nine months ended September 30, 2011 and 2010. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The subsidiaries of HMEC market and underwrite tax-qualified retirement annuities and private passenger automobile, homeowners, and life insurance products, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC's principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds.

The Company has evaluated subsequent events through the date these consolidated financial statements were issued.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year.

The Company has reclassified the presentation of certain prior period information to conform with the 2011 presentation.

Adopted Accounting Standards

Investments Held Through Separate Accounts

Effective January 1, 2011, the Company adopted accounting guidance to address how investments held through the separate accounts of an insurance entity affect the consolidation analysis. The guidance clarifies that an insurance entity should not consider any separate account interests in an investment held for the benefit of policyholders to be the insurer's interest and those interests should not be combined with an insurer's general account interests when making a consolidation assessment. The adoption of this accounting guidance did not have an effect on the results of operations or financial position of the Company.

Accounting Standards Not Yet Adopted, Retrospective Application

Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the Financial Accounting Standard Board ("FASB") issued accounting guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. The guidance will allow an insurance entity to capitalize only incremental and certain direct costs related to the successful acquisition of new or renewal insurance contracts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 and provides for either prospective or retrospective application. As of the time of this Quarterly Report on Form 10-Q, management continues to assess the impact that the adoption of this accounting guidance will have on the results of operations and financial position of the Company. While management has completed a significant amount of analysis regarding deferrable costs under the new guidance, a considerable amount of work still needs to be completed, especially related to the Annuity and Life segments. As of the time of this Quarterly Report on Form 10-Q, management's preliminary results indicate an impact on reported shareholders' equity excluding unrealized investment gains and losses of less than 5%. However, completion of the Company's final analysis could result in a larger impact on shareholders' equity. Management currently anticipates electing retrospective application of the new guidance effective January 1, 2012 resulting in a downward adjustment to the deferred policy acquisition costs asset with a corresponding adjustment to beginning retained earnings. On a forward-looking basis, management currently anticipates the net impact of lower expense deferrals and lower amortization on net income to be minimal.

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Investments

9 Months Ended

Sep. 30, 2011

Investments [Abstract]

Investments

Note 2 - Investments

Maturities/Sales of Fixed Maturity Securities

The following table presents the distribution of the Company's fixed maturity securities ("fixed maturities") portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.

	Percent of Total Fair Value						September 30, 2011
	September 30, 2011			December 31, 2010			Fair Value			Amortized Cost
Due in 1 year or less		3.8	%		3.3	%		$	200,883		$	184,796
Due after 1 year through 5 years		19.1			20.5				1,011,904			930,869
Due after 5 years through 10 years		32.7			29.5				1,737,247			1,598,125
Due after 10 years through 20 years		22.4			22.7				1,187,932			1,092,800
Due after 20 years		22.0			24.0				1,169,068			1,075,446
Total		100.0	%		100.0	%		$	5,307,034		$	4,882,036

The average option-adjusted duration for the Company's fixed maturity securities was 6.5 years at September 30, 2011 and 6.9 years at December 31, 2010.

Proceeds received from sales of fixed maturities, determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Proceeds received	$	246,127		$	171,300		$	457,411		$	533,894
Gross gains realized		19,272			14,544			28,954			31,324
Gross losses realized		(9	)		(416	)		(92	)		(5,491	)

Unrealized Gains and Losses on Fixed Maturities and Equity Securities

The amortized cost or cost, unrealized investment gains and losses, fair values and other-than-temporary impairment ("OTTI") included in accumulated other comprehensive income (loss) ("AOCI") of all fixed maturities and equity securities in the portfolio as of September 30, 2011 and December 31, 2010 were as follows:

	Amortized Cost/Cost		Unrealized Gains		Unrealized Losses		Fair Value		OTTI in AOCI (2)
September 30, 2011
Fixed maturity securities
U.S. government and federally sponsored agency obligations (1)
Mortgage-backed securities	$	445,263	$	55,346	$	10	$	500,599	$	-
Other		558,144		44,003		15		602,132		-
Municipal bonds		1,155,900		106,002		1,062		1,260,840		-
Foreign government bonds		44,542		4,122		-		48,664		-
Corporate bonds		1,924,036		195,866		23,703		2,096,199		-
Other mortgage-backed securities		754,151		59,526		15,077		798,600		2,094
Totals	$	4,882,036	$	464,865	$	39,867	$	5,307,034	$	2,094
Equity securities	$	19,906	$	3,747	$	592	$	23,061	$	-
December 31, 2010
Fixed maturity securities
U.S. government and federally sponsored agency obligations (1)
Mortgage-backed securities	$	442,969	$	26,255	$	1,180	$	468,044	$	-
Other		512,692		6,227		21,465		497,454		-
Municipal bonds		1,080,324		27,782		19,399		1,088,707		-
Foreign government bonds		42,982		2,554		-		45,536		-
Corporate bonds		1,790,159		152,866		10,437		1,932,588		-
Other mortgage-backed securities		664,107		34,746		15,645		683,208		1,401
Totals	$	4,533,233	$	250,430	$	68,126	$	4,715,537	$	1,401
Equity securities	$	20,765	$	3,747	$	456	$	24,056	$	-

(1) Fair value includes securities issued by Federal National Mortgage Association ("FNMA") of $548,472 and $431,635; Federal Home Loan Mortgage Corporation ("FHLMC") of $357,466 and $310,751; and Government National Mortgage Association ("GNMA") of $40,108 and $45,454 as of September 30, 2011 and December 31, 2010, respectively.

(2) Represents the amount of other-than-temporary impairment losses in AOCI which, beginning April 1, 2009, was not included in earnings under current accounting guidance. Amounts also include unrealized gains and losses on impaired securities relating to changes in the fair value of such securities subsequent to the impairment measurement date.

Net unrealized gains and losses are computed as the difference between fair value and amortized cost for fixed maturities or cost for equity securities. The following table reconciles the net unrealized investment gains and losses, net of tax, included in accumulated other comprehensive income (loss), before the impact of deferred policy acquisition costs:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2011				2010				2011				2010
Net unrealized investment gains (losses) on fixed maturity securities, net of tax
Beginning of period		$	163,967			$	144,514			$	118,498			$	24,599
Change in unrealized investment gains and losses			125,937				94,655				178,913				221,980
Reclassification of net realized investment (gains) losses to net income			(13,655	)			(7,542	)			(21,162	)			(14,952	)
End of period		$	276,249			$	231,627			$	276,249			$	231,627
Net unrealized investment gains (losses) on equity securities, net of tax
Beginning of period		$	2,885			$	276			$	2,139			$	(1,189	)
Change in unrealized investment gains and losses			(761	)			2,421				(12	)			3,946
Reclassification of net realized investment (gains) losses to net income			(73	)			(11	)			(76	)			(71	)
End of period		$	2,051			$	2,686			$	2,051			$	2,686

Credit Losses

The following table summarizes the cumulative amounts related to the Company's credit loss component of the other-than-temporary impairment losses on fixed maturity securities held as of September 30, 2011 and 2010 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of the other-than-temporary impairment losses were recognized in other comprehensive income:

	Nine Months Ended September 30,
	2011				2010
Cumulative credit loss (1)
Beginning of period		$	4,518			$	2,875
New credit losses			-				647
Losses related to securities sold or paid down during the period			(561	)			-
End of period		$	3,957			$	3,522

(1) The cumulative credit loss amounts exclude other-than-temporary impairment losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis. The current definition, reporting and disclosure of "credit loss" was effective as of April 1, 2009.

Fixed Maturities and Equity Securities

At September 30, 2011, the gross unrealized loss in the fixed maturity and equity securities portfolio was $40,459 (300 positions, the fair value of which represented 11.2% of total fixed maturity and equity securities fair value). The following table presents the fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position at September 30, 2011 and December 31, 2010. The Company views the decrease in value of all of the securities with unrealized losses at September 30, 2011 -- which was driven largely by spread widening and changes in interest rates from the date of acquisition -- as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases. In addition, management expects to recover the entire cost basis of the fixed maturity securities. For equity securities, the Company has the ability and intent to hold the securities for the recovery of cost and recovery of cost is expected within a reasonable period of time. Therefore, no impairment of these securities was recorded at September 30, 2011.

	12 Months or Less						More than 12 Months						Total
	Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses
September 30, 2011
Fixed maturity securities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities		$	60		$	-		$	1,618		$	10		$	1,678		$	10
Other			2,852			15			-			-			2,852			15
Municipal bonds			38,119			349			35,967			713			74,086			1,062
Foreign government bonds			-			-			-			-			-			-
Corporate bonds			374,350			17,983			23,719			5,720			398,069			23,703
Other mortgage-backed securities			76,118			2,261			38,545			12,816			114,663			15,077
Totals		$	491,499		$	20,608		$	99,849		$	19,259		$	591,348		$	39,867
Equity securities (1)		$	-		$	-		$	5,410		$	592		$	5,410		$	592
December 31, 2010
Fixed maturity securities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities		$	27,111		$	1,179		$	1,907		$	1		$	29,018		$	1,180
Other			312,750			21,465			-			-			312,750			21,465
Municipal bonds			416,216			14,520			34,825			4,879			451,041			19,399
Foreign government bonds			-			-			-			-			-			-
Corporate bonds			179,339			4,587			45,789			5,850			225,128			10,437
Other mortgage-backed securities			117,602			2,932			68,921			12,713			186,523			15,645
Totals		$	1,053,018		$	44,683		$	151,442		$	23,443		$	1,204,460		$	68,126
Equity securities (1)		$	938		$	49		$	5,822		$	407		$	6,760		$	456

(1) Includes primarily nonredeemable (perpetual) preferred stocks and also common stocks.

The Company's investment portfolio includes no free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics).

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Fair Value Of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

Note 3 - Fair Value of Financial Instruments

The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring and nonrecurring basis as of September 30, 2011 and December 31, 2010. At September 30, 2011, Level 3 invested assets comprised approximately 1.3% of the Company's total investment portfolio fair value.

	Carrying		Fair		Fair Value Measurements at Reporting Date Using (1)
	Amount		Value		Level 1		Level 2		Level 3
September 30, 2011
Financial Assets
Investments
Fixed maturities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities	$	500,599	$	500,599	$	-	$	500,599	$	-
Other		602,132		602,132		73,783		528,349		-
Municipal bonds		1,260,840		1,260,840		-		1,260,840		-
Foreign government bonds		48,664		48,664		-		48,664		-
Corporate bonds		2,096,199		2,096,199		25,957		2,002,732		67,510
Other mortgage-backed securities		798,600		798,600		-		795,909		2,691
Totals		5,307,034		5,307,034		99,740		5,137,093		70,201
Equity securities		23,061		23,061		9,278		13,399		384
Short-term investments		123,167		123,167		120,627		2,540		-
Other investments (2)		126,635		130,641		-		-		-
Total investments		5,579,897		5,583,903		229,645		5,153,032		70,585
Separate Account (variable annuity) assets		1,173,065		1,173,065		-		1,173,065		-
Financial Liabilities
Fixed annuity contract liabilities		2,857,966		2,565,570
Policyholder account balances on interest-sensitive life contracts		79,432		74,750
Other policyholder funds		102,354		102,354
Short-term debt		38,000		38,000
Long-term debt		199,728		215,180
December 31, 2010
Financial Assets
Investments
Fixed maturities
U.S. government and federally sponsored agency obligations
Mortgage-backed securities	$	468,044	$	468,044	$	-	$	468,044	$	-
Other		497,454		497,454		114,931		382,523		-
Municipal bonds		1,088,707		1,088,707		-		1,088,707		-
Foreign government bonds		45,536		45,536		-		45,536		-
Corporate bonds		1,932,588		1,932,588		32,087		1,855,257		45,244
Other mortgage-backed securities		683,208		683,208		-		682,263		945
Totals		4,715,537		4,715,537		147,018		4,522,330		46,189
Equity securities		24,056		24,056		9,866		13,794		396
Short-term investments		211,998		211,998		204,950		7,048		-
Other investments (2)		122,032		125,790		-		-		-
Total investments		5,073,623		5,077,381		361,834		4,543,172		46,585
Separate Account (variable annuity) assets		1,375,656		1,375,656		-		1,375,656		-
Financial Liabilities
Fixed annuity contract liabilities		2,614,380		2,346,971
Policyholder account balances on interest-sensitive life contracts		79,710		75,011
Other policyholder funds		112,739		112,739
Short-term debt		38,000		38,000
Long-term debt		199,679		214,971

(1) This information is not required for financial and nonfinancial assets and liabilities not recognized at fair value in the Consolidated Balance Sheets.

(2) Fair value of "Other investments" includes investments, primarily policy loans, for which inputs to fair value measurements are not required. Inputs to fair value measurements are provided only for those investments carried at fair value.

The Company did not have any transfers between Levels 1 and 2 during the nine months ended September 30, 2011. The following tables present reconciliations for the three and nine months ended September 30, 2011 and 2010 for all Level 3 assets measured at fair value on a recurring basis.

	Corporate Bonds				Other Mortgage- Backed Securities				Total Fixed Maturities				Equity Securities				Total
Financial Assets
Beginning balance, July 1, 2011		$	49,285			$	824			$	50,109			$	384			$	50,493
Transfers in (out) of Level 3 (1)			15,098				1,921				17,019				-				17,019
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-				-
Net unrealized gains (losses) included in other comprehensive income			3,388				6				3,394				-				3,394
Purchases			-				-				-				-				-
Issuances			-				-				-				-				-
Sales			-				-				-				-				-
Settlements			-				-				-				-				-
Paydowns and maturities			(261	)			(60	)			(321	)			-				(321	)
Ending balance, September 30, 2011		$	67,510			$	2,691			$	70,201			$	384			$	70,585
Beginning balance, January 1, 2011		$	45,244			$	945			$	46,189			$	396			$	46,585
Transfers in (out) of Level 3 (1)			18,762				1,921				20,683				-				20,683
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-				-
Net unrealized gains (losses) included in other comprehensive income			4,233				20				4,253				(12	)			4,241
Purchases			-				-				-				-				-
Issuances			-				-				-				-				-
Sales			-				-				-				-				-
Settlements			-				-				-				-				-
Paydowns and maturities			(729	)			(195	)			(924	)			-				(924	)
Ending balance, September 30, 2011		$	67,510			$	2,691			$	70,201			$	384			$	70,585

(1) Transfers into and out of Level 3 during the periods ended September 30, 2011 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers in and transfers out as of the ending date of the reporting period.  

	Corporate Bonds				Other Mortgage- Backed Securities				Total Fixed Maturities				Equity Securities			Total
Financial Assets
Beginning balance, July 1, 2010		$	12,917			$	7,513			$	20,430			$	539		$	20,969
Transfers in (out) of Level 3 (1)			18,829				24,915				43,744				-			43,744
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-			-
Net unrealized gains (losses) included in other comprehensive income			509				223				732				-			732
Purchases			-				-				-				-			-
Issuances			-				-				-				-			-
Sales			-				-				-				-			-
Settlements			-				-				-				-			-
Paydowns and maturities			(153	)			(377	)			(530	)			-			(530	)
Ending balance, September 30, 2010		$	32,102			$	32,274			$	64,376			$	539		$	64,915
Beginning balance, January 1, 2010		$	2,439			$	7,860			$	10,299			$	539		$	10,838
Transfers in (out) of Level 3 (1)			28,982				24,525				53,507				-			53,507
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-			-
Net unrealized gains (losses) included in other comprehensive income			1,004				526				1,530				-			1,530
Purchases			-				-				-				-			-
Issuances			-				-				-				-			-
Sales			-				-				-				-			-
Settlements			-				-				-				-			-
Paydowns and maturities			(323	)			(637	)			(960	)			-			(960	)
Ending balance, September 30, 2010		$	32,102			$	32,274			$	64,376			$	539		$	64,915

(1) Transfers into and out of Level 3 during the periods ended September 30, 2010 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers in and transfers out as of the ending date of the reporting period.

At September 30, 2011 and 2010, there were no realized gains or losses, due to the change in unrealized gains or losses, included in earnings that were attributable to Level 3 assets still held.

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Consolidated Statements Of Comprehensive Income (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Comprehensive income
Net income	$ 23,128	$ 20,166	$ 37,252	$ 65,750
Other comprehensive income, net of taxes:
Change in net unrealized gains and losses on fixed maturities and equity securities	104,267	82,325	147,427	193,338
Change in net funded status of pension and other postretirement benefit obligations
Other comprehensive income	104,267	82,325	147,427	193,338
Total	$ 127,395	$ 102,491	$ 184,679	$ 259,088

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Options exercised, shares	136,290	51,850
Conversion of common stock units, shares	15,715	160,876
Conversion of restricted stock units, shares	170,876	46,584
Cash dividends, per share	$ 0.33	$ 0.24
Treasury stock, beginning balance, shares	21,813,196	21,813,196
Treasury stock, acquisition of shares	60,126	0
Treasury stock, ending balance, shares	21,873,322	21,813,196

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Consolidated Balance Sheets (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Fixed maturities, available for sale, at fair value (amortized cost 2011, $4,882,036; 2010, $4,533,233)	$ 5,307,034	$ 4,715,537
Equity securities, available for sale, at fair value (cost 2011, $19,906; 2010, $20,765)	23,061	24,056
Short-term and other investments	249,802	334,030
Total investments	5,579,897	5,073,623
Cash	40,757	5,928
Deferred policy acquisition costs	260,589	272,825
Goodwill	47,396	47,396
Other assets	234,994	230,113
Separate Account (variable annuity) assets	1,173,065	1,375,656
Total assets	7,336,698	7,005,541
LIABILITIES AND SHAREHOLDERS' EQUITY
Fixed annuity contract liabilities	2,857,966	2,614,380
Interest-sensitive life contract liabilities	738,206	725,286
Unpaid claims and claim expenses	310,085	315,436
Future policy benefits	207,559	202,341
Unearned premiums	212,484	211,290
Total policy liabilities	4,326,300	4,068,733
Other policyholder funds	102,354	112,739
Other liabilities	441,729	330,727
Short-term debt	38,000	38,000
Long-term debt	199,728	199,679
Separate Account (variable annuity) liabilities	1,173,065	1,375,656
Total liabilities	6,281,176	6,125,534
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued
Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2011, 61,792,029; 2010, 61,469,148	62	61
Additional paid-in capital	372,924	367,448
Retained earnings	847,197	823,579
Accumulated other comprehensive income (loss) net of taxes:
Net unrealized gains and losses on fixed maturities and equity securities	257,164	109,737
Net funded status of pension and other postretirement benefit obligations	(13,155)	(13,155)
Treasury stock, at cost, 2011, 21,873,322 shares; 2010, 21,813,196 shares	(408,670)	(407,663)
Total shareholders' equity	1,055,522	880,007
Total liabilities and shareholders' equity	$ 7,336,698	$ 7,005,541