HMN Horace Mann Educators Corporation

Notes to Financial Statements

December 31, 2016 and 2015

The Horace Mann Supplemental Retirement and Savings Plan (the Plan) is sponsored by Horace Mann Service Corporation (HMSC) which is a wholly owned subsidiary of Horace Mann Educators Corporation (HMEC). HMSC is also the Plan Administrator. HMSC and HMEC are collectively referred to as the Company. The following brief description of the Plan is provided for general information purposes. Participants should refer to the actual Plan document or the employee summary plan description for additional information.

The Plan is a defined-contribution 401(k) plan covering all employees of the Company. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

The Company provides an employer non-elective (safe harbor) contribution on behalf of all eligible participants. The contribution is equal to 3% of participants’ eligible compensation for the plan year. The Plan may be amended to reduce or suspend the non-elective safe harbor contribution, with at least a 30 day notice of the reduction or suspension to all eligible participants.

All new employees are subject to the Plan’s “auto-enrollment” provision which provides for an automatic employee deferral of 3% deferral of their eligible compensation. However, new hires or other participants could elect to decrease or stop their contributions at any time.

Effective January 1, 2015 the Company will match, on a dollar-for-dollar basis, the first 5% of eligible compensation that participants contribute as employee pre-tax contributions, in addition to the automatic 3% safe harbor contribution. Employees contributing zero or less than 3% to the Plan were re-enrolled with a contribution rate of 3% at January 1, 2015. Prior elections to contribute zero or less than 3% expired on December 31, 2014. Participants can opt out or decrease their contributions to less than 3% at any time by filing an election with the Plan. The 3% auto-enrollment rate increased to 4% for 2016 and will increase to 5% for 2017. Participants can voluntarily elect to defer up to 20% of their eligible earnings (subject to statutory limits).

The Company may also make employer regular profit sharing contributions to the Plan. The amount of the employer regular profit sharing contributions, if any, is determined by the Company each year and allocated to all participants who satisfy the eligibility and allocation requirements of the Plan. There were no employer regular profit sharing contributions during 2016 or 2015.

Employee contributions and employer non-elective (safe harbor) contributions are 100% vested immediately. Employer matching contributions and employer regular profit sharing contributions vest in accordance with the following schedule:

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Horace Mann Service Corporation

Horace Mann Supplemental Retirement and Savings Plan

Notes to Financial Statements

December 31, 2016 and 2015

Contributions are self-directed by the participant to any or all of the Plan’s investment options. If a participant does not designate an investment option, their contributions default to an appropriate Lifecycle Fund based on the participant’s attained age at the time of the deferral.

The total pre-tax participant contributions were limited to $18,000 in 2016 and 2015, respectively. The limit will be subject to adjustments to reflect increases in the cost of living pursuant to Section 402(g) of the Internal Revenue Code. Participating employees who reached age 50 or older during the Plan year have the opportunity to make pretax, catch-up contributions subject to federal limits, which were $6,000 in 2016 and 2015, respectively.

Each participant’s account is credited with the participant’s contribution, the Company’s contribution, an allocation of Plan investment earnings and charged with an allocation of administrative expenses. Allocations are based on account balances or specific participant transactions as defined. The benefit to which a given participant is entitled is the benefit that can be provided from that participant’s vested account.

Except for participant loans, all Plan assets are in a Master Trust held by The Northern Trust Quantitative Advisors, Inc. The Master Trust also included the specifically identified assets of the HMSC Money Purchase Pension Plan at 12/31/2015. All assets of the Master Trust were specifically identified as to Plan ownership. At December 31, 2016 and 2015, the assets of the Plan represented 100% and 95% of the total assets in the Master Trust. The increased asset allocation was a result of the termination of the Horace Mann Money Purchase Pension Plan on December 31, 2014 and subsequent distribution of all assets. The assets of the Plan are participant-directed investments and are deposited in a Horace Mann Life Insurance Company (HMLIC) Group Annuity Contract in the fixed account and in an individual separate account, (Horace Mann Life Insurance Company 401(K) Separate Account), or HMEC Common Stock.

Participants may transfer all or a portion of their account balance between the various investment funds on a daily basis. Participant withdrawals and final distributions (as allowed under the Plan) are permitted on a weekly basis. An administration fee is deducted from the participant’s withdrawal proceeds.

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Horace Mann Service Corporation

Horace Mann Supplemental Retirement and Savings Plan

Notes to Financial Statements

December 31, 2016 and 2015

Participants are eligible for a distribution of the Plan benefits upon termination of service, whether by disability, retirement, death, or leaving the Company. In the event of financial hardship, as defined in the Plan document, participants may withdraw money from their accounts while they are still employed. Participants who have attained age 59  ¹ ⁄ ₂ may request a distribution of all or a portion of the value of the account. Withdrawals by the participant before attaining age 59  ¹ ⁄ ₂ are subject to IRS penalties.

Participants’ forfeited unvested accounts are used to reduce Company contributions. At December 31, 2016 and 2015, forfeited unvested accounts available to reduce future Company contributions were $0. In 2016 and 2015, the Company applied $0 of forfeitures against Company contributions.

Participants may borrow a minimum of $1,000 up to a maximum of 50% of their vested account balance but no more than $50,000. The minimum term for a loan is 12 months and the maximum is 60 months (180 months for primary residence loans). Participants may have up to two active loans at one time. A loan administrative fee is deducted from the participant’s loan proceeds. Interest rates charged on loans ranged from 4.25% to 9.25% in both 2016 and 2015. The loans are secured by the balance in the participant’s account and are carried at amortized cost. Principal and interest is paid ratably through monthly payroll deductions. Participants may also make additional payments throughout the month directly to the record keeper. No allowance for credit losses has been recorded as of December 31, 2016 or 2015.

Although it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time, subject to the provisions of ERISA. In the event of a plan termination, participants become fully vested in their accounts.

The accompanying financial statements have been prepared using the accrual basis of accounting.

Investments held by a defined contribution plan are required to be reported at fair value except for fully benefit responsive investment contracts. Contract value is the relevant measure for the portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants normally would receive if they were to initiate permitted transactions under the terms of the plan. The fixed fund is carried in the Statement of Net Assets Available for Benefits at contract value.

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Horace Mann Service Corporation

Horace Mann Supplemental Retirement and Savings Plan

Notes to Financial Statements

December 31, 2016 and 2015

The Plan’s investment balances are carried on the Statements of Net Assets Available for Benefits as follows: Quoted market prices are used to value investments in common stock; shares of mutual funds held by the separate account are valued at the accumulated unit value based on the net asset value of the funds, which in turn value their investment securities at fair value, and investments in the fixed fund are carried at contract value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded as earned on an accrual basis. Dividend income is recognized when dividends are declared and paid.

Short-term investments are comprised of money market funds. The money market funds are valued at the daily closing price as reported by the fund. These funds are required to publish their daily net asset value (NAV) and to transact at that price.

In the Statements of Changes in Net Assets Available for Benefits, the Plan presents the net appreciation (depreciation) in the carrying amount of its investments which consists of realized gains or losses and the unrealized appreciation (depreciation) on those investments.

The Plan pays administrative expenses, consisting primarily of recordkeeping, trustee, audit, and legal fees. All investment fees have been included in the quarterly performance gains or losses reported for individual Plan funds.

Individual service fees associated with optional features or services offered under the Plan are charged separately to participant’s accounts.

Benefit payments are recorded when paid.

The preparation of the Plan’s financial statements in conformity with U.S. generally accepted accounting principles requires the Plan Administrator to make estimates and assumptions that affect (1) the reported amounts of net assets available for benefits at the date of the financial statements and (2) the reported amounts of changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates.

The Plan provides for investments in mutual funds, a fixed interest rate fund, and Horace Mann Educators Corporation common stock. Investment securities are exposed to various risks including, but not limited to, interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

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Horace Mann Service Corporation

Horace Mann Supplemental Retirement and Savings Plan

Notes to Financial Statements

December 31, 2016 and 2015

Effective January 1, 2015, the Plan adopted FASB Accounting Standards Update No. 2015-12, (Part I) Fully Benefit Responsive Investment Contracts , (Part II) Plan Investment Disclosures . Part I eliminates the requirements to measure fully benefit responsive contracts at fair value and provide certain disclosures. Contract value is the only required measure for fully benefit-responsive contracts. Part II eliminates the requirements to disclose individual investments that represent five percent or more of net assets available for benefits and the net appreciation or depreciation in fair value of investments by general type. Part II also simplifies the level of disaggregation of investments that are measured using fair value. Plans will continue to disaggregate investments that are measured using fair value by general type; however, plans are no longer required to disaggregate investments by nature, characteristics and risks. Further, the disclosure of information about fair value measurements shall be provided by general type of plan assets. The ASU is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The Plan elected to adopt the ASU early to reduce the complexity of reporting investments. The adoption was applied retrospectively and resulted in the elimination of the disclosures noted above. The adoption of this accounting guidance did not have an effect on the Plan’s net assets available for benefits or changes in net assets available for benefits.

The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2016 and 2015 to Form 5500:

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The Plan has evaluated subsequent events through June 23, 2017, the date the financial statements were available to be issued. On January1, 2017, the Plan was renamed the Horace Mann 401k Plan. The HMLIC fixed fund and 401(k) separate account mutual fund investment choices were removed on May 15, 2017 and replaced with a selection of external investment options. The Horace Mann Stock Fund remained in the Plan.

In 1989, the Plan entered into Group Annuity Contract 401K000001 with HMLIC. The Group Annuity Contract provides Fixed Account and Separate Account investment options.

Fixed Account

The Fixed Account is a traditional fully benefit-responsive guaranteed investment contract. HMLIC maintains the contributions in a general account. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The guaranteed investment contract issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the Plan. The actual credited interest rate on the group annuity contract was 4.50% for the years ended December 31, 2016 and 2015. The minimum guaranteed annual interest rate per the group annuity contract is 4.50%. The actual credited interest rate may be reset by HMLIC with 30 days advance notice.

This contract meets the fully benefit-responsive investment contract criteria and therefore is reported at contract value. Contract value is the relevant measure for fully benefit-responsive investment contracts because this is the amount received by participants if they were to initiate permitted transactions under the terms of the Plan. Contract value, as reported to the Plan by HMLIC, represents contributions made under the contract, plus earnings, less participant withdrawals, and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.

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Horace Mann Service Corporation

Horace Mann Supplemental Retirement and Savings Plan

Notes to Financial Statements

December 31, 2016 and 2015

Whenever an amount to be transferred, distributed, or disbursed from the Fixed Account together with all amounts previously or simultaneously transferred, distributed, or disbursed for any reason in the calendar year of computation from the Fixed Account assets would exceed ten percent (10%) of the total assets of that account on January 1 of the year of computation, the transfer, distribution or disbursement may be deferred up to six months. This is the only event that limits the ability of the Plan to transact the contract value with the participants.

The Plan’s ability to receive amounts due is dependent upon the issuer’s ability to meet its financial obligations. The issuer’s ability to meet its contractual obligations may be affected by future economic and regulatory developments.

401(k) Separate Account

The investments of the underlying mutual funds held by 401(k) Separate Account, which are valued at net asset value (NAV), include primarily common stocks, U.S. government and corporate bonds, and short-term commercial paper. Investments in mutual funds are valued at the daily closing price as reported by the fund. These funds are required to publish their daily NAV and to transact at that price. Redemptions initiated by Plan participants may be made on any business day and are processed on the same business day. Pursuant to ASU No. 2015-10 “Technical Corrections and Improvements” the 401(k) Separate Account has a structure similar to a mutual fund, the fair value is readily determinable, is valued using the published fair value per share amounts and should be valued as a Level 1. This resulted in the reclassification of the amount to reflect the investment in Level 1 for 2015.

The Plan’s HMEC Common Stock at December 31, 2016 and 2015 consisted of 105,833 units and 134,762 units, respectively, of HMEC common stock, which is traded on the New York Stock Exchange under the symbol HMN. The HMEC common stock is tracked on a unitized basis, whereby the value of a unit reflects the combined market value of HMEC common stock and the cash equivalents held by the stock fund.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In determining fair value, the Plan utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs that may be used to measure fair value are:

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Horace Mann Service Corporation

Horace Mann Supplemental Retirement and Savings Plan

Notes to Financial Statements

December 31, 2016 and 2015

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. As a result, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) and unobservable (Level 3). Transfers into or out of Level 3 are reported as having occurred at the end of the reporting period in which the transfers were determined. There were no transfers into or out of level 3 in either 2016 or 2015, respectively.

Common stocks are valued as Level 1 assets and are valued at the last reported sales price or closing price by the national securities exchange on which it trades.

In June 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements . This guidance included amendments to the definition of readily determinable fair value (RDFV) and clarified that investments in both mutual funds and investments in structures similar to mutual funds have a RDFV when certain criteria are met. The Plan adopted the provisions of ASU 2015-10 during the annual reporting period beginning January 1, 2016 and retrospectively applied to fiscal year 2015.

As a result of the adoption, Plan management re-evaluated the Plan’s investments as to whether they have RDFVs. Based on that reevaluation, certain accounting policy and NAV disclosures have been revised. Also, certain investments (i.e., mutual funds holding primarily common stocks, U.S. government and corporate bonds, and short-term commercial paper) previously reported NAV as a practical expedient and excluded from the fair value hierarchy have been included as Level 1 investments for purposes of the current year’s presentation.

Certain amounts have been reclassified to conform to the current year’s presentation.

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