HORACE MANN EDUCATORS CORP /DE/HMN
HORACE MANN EDUCATORS CORP /DE/ Income Taxes Disclosure
Income Taxes
The Company is subject to U.S. federal and various state and local income taxes. The Company has no foreign operations, and therefore no foreign income tax expense. The income tax provision reflects management's best estimate of current and deferred tax expense, based on enacted tax laws and regulations, taxable income, and other factors.
The income tax assets and liabilities included in Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheets were as follows:
| ($ in millions) | December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Income tax (asset) liability | ||||||||||||||
Current | $ | (6.4) | $ | (28.1) | ||||||||||
Deferred | 65.5 | 55.8 | ||||||||||||
Deferred tax assets and liabilities are recognized for all future tax consequences attributable to "temporary differences" between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. There are no deferred tax liabilities that have not been recognized. The "temporary differences" that gave rise to the deferred tax balances were as follows:
| ($ in millions) | December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets | ||||||||||||||
| Other comprehensive income - net unrealized losses on securities | $ | 50.0 | $ | 85.2 | ||||||||||
Unearned premium reserve reduction | 15.1 | 14.4 | ||||||||||||
Compensation accruals | 12.7 | 9.3 | ||||||||||||
Impaired securities | 3.2 | 2.3 | ||||||||||||
Other comprehensive income - net funded status of benefit plans | 0.7 | 1.9 | ||||||||||||
Discounting of unpaid claims and claim expense tax reserves | 2.9 | 2.9 | ||||||||||||
Capital loss carryforward | — | 1.2 | ||||||||||||
| Net operating loss carryforward | — | 0.6 | ||||||||||||
| Postretirement benefits other than pensions | 0.2 | 0.2 | ||||||||||||
| Other comprehensive income - net reserve remeasurements | 4.7 | — | ||||||||||||
| Total gross deferred tax assets | 89.5 | 118.0 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
Deferred policy acquisition costs | 47.1 | 47.8 | ||||||||||||
| Life insurance future policy benefit reserve | 81.5 | 52.7 | ||||||||||||
Life insurance future policy benefit reserve (transitional rule) | — | 2.1 | ||||||||||||
Discounting of unpaid claims and claim expense tax reserves (transitional rule) | — | 0.2 | ||||||||||||
Investment related adjustments | 15.4 | 37.7 | ||||||||||||
Intangibles | 1.2 | 1.6 | ||||||||||||
Other comprehensive income - net reserve remeasurements | — | 23.8 | ||||||||||||
| Other, net | 9.8 | 7.9 | ||||||||||||
| Total gross deferred tax liabilities | 155.0 | 173.8 | ||||||||||||
| Net deferred tax liability | $ | 65.5 | $ | 55.8 | ||||||||||
The Company evaluated sources and character of income, including historical earnings, loss carryback potential, taxable income from future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, and taxable income from prudent and feasible tax planning strategies. Although realization of deferred tax assets is not assured, the Company believes it is more likely than not that gross deferred tax assets will be fully realized and that a valuation allowance with respect to the realization of the total gross deferred tax assets was not necessary as of December 31, 2025 and 2024.
At December 31, 2025, the Company had no available tax carryforwards or credits.
Income from continuing operations before income taxes for the years ended December 31, 2025, 2024, and 2023 was entirely domestic as follows:
| ($ in millions) | Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Domestic | $ | 201.2 | $ | 128.6 | $ | 53.3 | ||||||||||||||
Foreign | — | — | — | |||||||||||||||||
| Total income tax expense (benefit) | $ | 201.2 | $ | 128.6 | $ | 53.3 | ||||||||||||||
Income tax expense (benefit) for the following periods relates solely to U.S. federal, state, and local taxing jurisdictions.
| ($ in millions) | Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Current Tax Expense (Benefit) | ||||||||||||||||||||
Federal | $ | 55.1 | $ | 18.5 | $ | 5.6 | ||||||||||||||
State and Local | 1.3 | 1.4 | 0.9 | |||||||||||||||||
Total Current Tax Expense (Benefit) | 56.4 | 19.9 | 6.5 | |||||||||||||||||
Deferred Tax Expense (Benefit) | ||||||||||||||||||||
Federal | (17.2) | 6.1 | 2.8 | |||||||||||||||||
State and Local | (0.1) | (0.2) | (1.0) | |||||||||||||||||
Total Deferred Tax Expense (Benefit) | (17.3) | 5.9 | 1.8 | |||||||||||||||||
Total Income Tax Expense (Benefit) | ||||||||||||||||||||
Federal | 37.9 | 24.6 | 8.4 | |||||||||||||||||
State and Local | 1.2 | 1.2 | (0.1) | |||||||||||||||||
Total Income Tax Expense (Benefit) | $ | 39.1 | $ | 25.8 | $ | 8.3 | ||||||||||||||
Income tax expense for the following periods differed from the expected tax computed by applying the federal corporate tax rate of 21% for 2025, 2024 and 2023 to income before income taxes as follows:
| ($ in millions) | Years Ended December 31, | |||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
Amount | % of Pretax Income | Amount | % of Pretax Income | Amount | % of Pretax Income | |||||||||||||||||||||||||||||||||
| $ | 42.2 | 21.0 | % | $ | 27.0 | 21.0 | % | $ | 11.2 | 21.0 | % | |||||||||||||||||||||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (1) | 0.9 | 0.4 | % | 1.0 | 0.8 | % | (0.1) | (0.2) | % | |||||||||||||||||||||||||||||
Tax Credits | (1.5) | (0.7) | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
Nontaxable or Nondeductible Items | ||||||||||||||||||||||||||||||||||||||
Compensation Deduction Limitation | 2.0 | 1.0 | % | 2.7 | 2.1 | % | 0.8 | 1.5 | % | |||||||||||||||||||||||||||||
| Dividend Received Deduction | (2.3) | (1.1) | % | (2.0) | (1.6) | % | (1.3) | (2.4) | % | |||||||||||||||||||||||||||||
| Prior Year Adjustments | 0.3 | 0.1 | % | (0.4) | (0.3) | % | 0.3 | 0.6 | % | |||||||||||||||||||||||||||||
| Research and Development Reserve | — | — | % | — | — | % | (0.2) | (0.4) | % | |||||||||||||||||||||||||||||
| Share-Based Payment Awards | (0.5) | (0.2) | % | (0.2) | (0.2) | % | 0.1 | 0.2 | % | |||||||||||||||||||||||||||||
| Tax-Exempt Interest Income | (2.4) | (1.2) | % | (2.5) | (1.9) | % | (2.7) | (5.1) | % | |||||||||||||||||||||||||||||
| Other | 0.4 | 0.2 | % | 0.2 | 0.2 | % | 0.2 | 0.4 | % | |||||||||||||||||||||||||||||
Effective Tax Rate | $ | 39.1 | 19.5 | % | $ | 25.8 | 20.1 | % | $ | 8.3 | 15.6 | % | ||||||||||||||||||||||||||
(1) State and local income taxes in the above reconciliation primarily relate to operations in Illinois, Florida, and Wisconsin, which together represent over half of the Company's total state income tax expense for each year. No single state is individually significant to the Company’s tax expense.
Cash income taxes paid, net of refunds received, for the periods presented consisted entirely of U.S. federal, state, and local income taxes, and no income taxes were paid to foreign jurisdictions.
| ($ in millions) | Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Federal | $ | 33.1 | $ | 20.9 | $ | 13.0 | ||||||||||||||
State and Local | 1.6 | 1.2 | 1.0 | |||||||||||||||||
Total | $ | 34.7 | $ | 22.1 | $ | 14.0 | ||||||||||||||
The Company's federal income tax returns for years prior to 2022 are no longer subject to examination by the Internal Revenue Service (IRS).
The Company recognizes tax benefits from tax return positions only if it is more likely than not the position will be sustainable, upon examination, on its technical merits and any relevant administrative practices or precedents. As a result, the Company applies a more likely than not recognition threshold for all tax uncertainties.
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.
Unrecognized tax benefits were immaterial in each of the years ended December 31, 2025, 2024 and 2023. The Company classifies all tax related interest and penalties as income tax expense. Interest and penalties were both immaterial in each of the years ended December 31, 2025, 2024 and 2023.
During the year ended December 31, 2025, the Company entered into agreements to purchase federal transferable income tax credits. As of December 31, 2025, the Company had outstanding commitments of approximately $11.0 million related to the future purchase of such tax credits. These commitments are expected to be settled upon the completion of required transfer and certification procedures in accordance with applicable federal tax regulations. This was the first year the Company engaged in transactions involving the purchase of federal transferable tax credits.
HMEC and its subsidiaries file a consolidated federal income tax return. The federal income tax sharing agreements between HMEC and its subsidiaries, as approved by the Board, provide that tax on income is charged to each subsidiary as if it were filing a separate tax return with the limitation that each subsidiary will receive the benefit of any losses or tax credits to the extent utilized in the consolidated tax return. Intercompany balances are settled quarterly with a final settlement after filing the consolidated federal income tax return with the IRS. National Teachers Associates Life Insurance Company and NTA Life Insurance Company of New York have previously filed separate federal income tax returns and will participate in HMEC's consolidated federal income tax return for the first time in 2025.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 27, 2024 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.