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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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) (Zip Code)
Registrant’s telephone number, including area code: 217-789-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange
on which registered
Common Stock, $0.001 par value HMN New York Stock Exchange


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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer
☐
Non-accelerated filer ☐ Smaller reporting company
☐
Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

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

As of October 31, 2021, the registrant had 41,487,550 common shares, $0.001 par value, outstanding.


HORACE MANN EDUCATORS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS

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PART I: FINANCIAL INFORMATION
ITEM 1. I Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Horace Mann Educators Corporation:

Results of Review of Interim Financial Information
We have reviewed the consolidated balance sheet of Horace Mann Educators Corporation and subsidiaries (the Company) as of September 30, 2021, the related consolidated statements of operations, comprehensive income (loss) and changes in shareholders' equity for the three-month and nine-month periods ended September 30, 2021 and 2020, and cash flows for the nine-month period ended September 30, 2021 and 2020, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it 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) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, 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 26, 2021, 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, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated 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 PCAOB, 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.
 
/s/ KPMG LLP
KPMG LLP
 
 
Chicago, Illinois
 
November 5, 2021
 
Horace Mann Educators Corporation
1
Quarterly Report on Form 10-Q


HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in millions, except share data)
September 30, 2021 December 31, 2020
(Unaudited)
Assets
Investments
Fixed maturity securities, available for sale, at fair value
(amortized cost, net 2021, $6,045.6; 2020, $5,788.6)
$ 6,512.0  $ 6,345.3 
Equity securities at fair value
152.3  121.6 
Limited partnership interests 615.4  449.0 
Short-term and other investments 251.6  346.3 
Total investments
7,531.3  7,262.2 
Cash 40.2  22.3 
Deferred policy acquisition costs 244.7  229.8 
Deposit asset on reinsurance 2,477.9  2,420.9 
Intangible assets 148.7  158.5 
Goodwill 43.5  43.5 
Other assets 451.9  443.2 
Separate Account (variable annuity) assets 3,326.8  2,891.4 
Total assets $ 14,265.0  $ 13,471.8 
Liabilities and Shareholders' Equity
Policy liabilities
Investment contract and policy reserves $ 6,569.0  $ 6,445.3 
Unpaid claims and claim expenses 440.1  438.8 
Unearned premiums 261.4  264.5 
Total policy liabilities
7,270.5  7,148.6 
Other policyholder funds 994.3  751.3 
Other liabilities 488.4  453.1 
Short-term debt 135.0  135.0 
Long-term debt 253.6  302.3 
Separate Account (variable annuity) liabilities 3,326.8  2,891.4 
Total liabilities 12,468.6  11,681.7 
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, 2021, 66,434,551; 2020, 66,316,797
0.1  0.1 
Additional paid-in capital 492.9  488.4 
Retained earnings 1,497.5  1,434.6 
Accumulated other comprehensive income (loss), net of tax:  
Net unrealized investment gains on fixed maturity securities 306.9  366.3 
Net funded status of benefit plans
(11.2) (11.2)
Treasury stock, at cost, 2021, 24,947,264 shares;
2020, 24,902,579 shares
(489.8) (488.1)
Total shareholders’ equity 1,796.4  1,790.1 
Total liabilities and shareholders’ equity $ 14,265.0  $ 13,471.8 







See Notes to Consolidated Financial Statements.
Horace Mann Educators Corporation
2
Quarterly Report on Form 10-Q


HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
($ in millions, except per share data)
Three Months Ended
September 30, 		Nine Months Ended
September 30,
  2021 2020 2021 2020
Statements of Operations
Revenues    
Premiums and contract charges earned $ 225.4  $ 235.3  $ 678.8  $ 697.0 
Net investment income 103.7  93.7  308.4  256.4 
Net investment (losses) gains (6.5) 2.5  (10.6) (12.8)
Other income 7.0  5.6  22.1  17.5 
Total revenues
329.6  337.1  998.7  958.1 
Benefits, losses and expenses
Benefits, claims and settlement expenses 164.8  151.4  446.2  433.1 
Interest credited 51.9  51.1  153.7  153.3 
Operating expenses 64.3  57.9  182.8  173.1 
DAC unlocking and amortization expense 22.9  24.6  70.5  75.0 
Intangible asset amortization expense 3.3  3.5  9.8  10.9 
Interest expense 3.4  3.5  10.4  11.7 
Total benefits, losses and expenses
310.6  292.0  873.4  857.1 
Income before income taxes 19.0  45.1  125.3  101.0 
Income tax expense 2.7  8.6  23.0  15.5 
Net income $ 16.3  $ 36.5  $ 102.3  $ 85.5 
Net income per share
Basic $ 0.39  $ 0.87  $ 2.44  $ 2.04 
Diluted $ 0.39  $ 0.87  $ 2.43  $ 2.03 
Weighted average number of shares and equivalent shares
Basic 42.0  41.9  42.0  41.9 
Diluted 42.2  42.1  42.2  42.0 
Statements of Comprehensive (Loss) Income
Net income $ 16.3  $ 36.5  $ 102.3  $ 85.5 
Other comprehensive (loss) income, net of tax:
Change in net unrealized investment gains
(losses) on fixed maturity securities
(25.3) 49.1  (59.4) 97.8 
Change in net funded status of benefit plans —  —  —  — 
Other comprehensive (loss) income (25.3) 49.1  (59.4) 97.8 
Comprehensive (loss) income $ (9.0) $ 85.6  $ 42.9  $ 183.3 








See Notes to Consolidated Financial Statements.
Horace Mann Educators Corporation
3
Quarterly Report on Form 10-Q


HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
($ in millions, except per share data)
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Common stock, $0.001 par value
Beginning balance $ 0.1  $ 0.1  $ 0.1  $ 0.1 
Options exercised —  —  —  — 
Conversion of common stock units —  —  —  — 
Conversion of restricted stock units —  —  —  — 
Ending balance 0.1  0.1  0.1  0.1 
Additional paid-in capital
Beginning balance 490.7  483.8  488.4  481.0 
Options exercised and conversion of common stock
units and restricted stock units
0.2  1.3  (1.0) 1.6 
Share-based compensation expense 2.0  1.7  5.5  4.2 
Ending balance 492.9  486.8  492.9  486.8 
Retained earnings
Beginning balance 1,494.4  1,375.7  1,434.6  1,352.5 
Net income 16.3  36.5  102.3  85.5 
Dividends, 2021, $0.31, $0.93 per share;
2020, $0.30, $0.90 per share
(13.2) (12.7) (39.4) (38.0)
Cumulative effect of change in accounting principle —  —  —  (0.5)
Ending balance 1,497.5  1,399.5  1,497.5  1,399.5 
Accumulated other comprehensive income (loss), net of tax:
Beginning balance 321.0  268.4  355.1  219.7 
Change in net unrealized investment gains (losses)
on fixed maturity securities
(25.3) 49.1  (59.4) 97.8 
Change in net funded status of benefit plans —  —  —  — 
Ending balance 295.7  317.5  295.7  317.5 
Treasury stock, at cost
Beginning balance (489.6) (488.1) (488.1) (485.9)
Acquisition of shares (0.2) —  (1.7) (2.2)
Ending balance (489.8) (488.1) (489.8) (488.1)
Shareholders' equity at end of period $ 1,796.4  $ 1,715.8  $ 1,796.4  $ 1,715.8 















See Notes to Consolidated Financial Statements.
Horace Mann Educators Corporation
4
Quarterly Report on Form 10-Q


HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ in millions)
Nine Months Ended
September 30,
2021 2020
Cash flows - operating activities
Net income $ 102.3  $ 85.5 
Adjustments to reconcile net income to net cash provided by operating activities:
     Net investment losses 10.6  12.8 
     Amortization of premiums and accretion of discounts on
        fixed maturity securities, net 		3.3  4.9 
     Depreciation and intangible asset amortization 16.7  17.5 
     Share-based compensation expense 6.0  4.6 
     Changes in:
      Accrued investment income (8.1) (5.5)
      Insurance liabilities 75.1  97.9 
      Premium receivables (3.4) 4.1 
      Deferred policy acquisition costs (0.1) (2.5)
      Reinsurance recoverables (1.6) 3.3 
      Income tax liabilities 2.3  (3.4)
      Other operating assets and liabilities 2.5  44.3 
      Other (27.5) 4.3 
Net cash provided by operating activities 178.1  267.8 
Cash flows - investing activities    
Fixed maturity securities    
Purchases (1,228.1) (1,093.9)
Sales 319.2  352.8 
Maturities, paydowns, calls and redemptions 631.5  525.3 
Equity securities
Purchases (45.0) (23.2)
Sales and repayments 1.0  12.4 
Limited partnership interests
Purchases (202.1) (59.9)
Sales 69.4  14.6 
Change in short-term and other investments, net 103.1  (96.9)
Net cash used in investing activities (351.0) (368.8)
Cash flows - financing activities    
Dividends paid to shareholders (38.6) (37.2)
FHLB borrowings 1.0  4.0 
Principal repayment on FHLB borrowings (50.0) — 
Acquisition of treasury stock (1.7) (2.2)
Proceeds from exercise of stock options 0.3  2.4 
Withholding tax payments on RSUs tendered (2.0) (2.0)
Annuity contracts: variable, fixed and FHLB funding agreements:    
Deposits 833.2  462.2 
Benefits, withdrawals and net transfers to
   Separate Account (variable annuity) assets 		(342.1) (284.4)
  Principal repayment on FHLB funding agreements (204.0) — 
Life policy accounts:  
Deposits 6.7  6.8 
Withdrawals and surrenders (3.0) (2.9)
Change in deposit asset on reinsurance (17.2) (14.8)
Change in book overdrafts 8.2  9.1 
Net cash provided by financing activities 190.8  141.0 
Net increase in cash 17.9  40.0 
Cash at beginning of period 22.3  25.5 
Cash at end of period $ 40.2  $ 65.5 
See Notes to Consolidated Financial Statements.
Horace Mann Educators Corporation
5
Quarterly Report on Form 10-Q


HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - Basis of Presentation and Significant Accounting Policies
Business
Horace Mann Educators Corporation is a holding company for insurance subsidiaries that market and underwrite personal lines of property and casualty insurance products (primarily personal lines of automobile and property insurance), supplemental insurance products (primarily cancer, heart, hospital, supplemental disability and accident coverages), retirement products (primarily tax-qualified fixed and variable annuities) and life insurance products, primarily to K-12 teachers, administrators and other employees of public schools and their families (collectively, HMEC, the Company or Horace Mann).
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in conformity with GAAP, but are not required for interim reporting purposes, have been omitted. These Consolidated Financial Statements and Notes thereto should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Part II - Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year.
The accompanying Consolidated Financial Statements and Notes thereto are unaudited. These financial statements reflect all adjustments (generally consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Part II - Item 8, Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Consolidation
All intercompany transactions and balances between HMEC and its subsidiaries and affiliates have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the reporting date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The most significant critical accounting estimates include valuation of hard-to-value fixed maturity securities (including evaluation of impairments), evaluation of goodwill and intangible assets for impairment, valuation of annuity and life deferred policy acquisition costs, valuation of liabilities for property and casualty unpaid claims and claim expenses and valuation of certain investment contracts and policy reserves.
Future Adoption of New Accounting Standards
Accounting for Long-Duration Insurance Contracts
In August 2018, the FASB issued accounting and disclosure guidance that contains targeted improvements to the accounting for long-duration insurance contracts. Under the new guidance, the cash flow assumptions used to measure the liability for future policy benefits for traditional insurance contracts will be required to be updated at least annually with changes recognized as a benefit expense (i.e., assumptions will no longer be locked-in).
Horace Mann Educators Corporation
6
Quarterly Report on Form 10-Q


NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)
Insurance entities will be required to use a standard discount rate to measure the liabilities that will be equivalent to the yield from a high-quality bond. The new guidance also changes the amortization of deferred policy acquisition costs (DAC) to be on a constant-level basis over the expected term of the related contracts with no interest accruing on the DAC balance. The new guidance also introduces a new category of contract features associated with deposit type contracts referred to as market risk benefits (MRBs). Contract features meeting the definition of a MRB will be measured at fair value. New disclosures will be required for long-duration insurance contracts in order to provide better transparency into the exposure of insurance entities and the drivers of their results. For public business entities, the guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those years. With regards to the liability for future policy benefits and DAC, the guidance applies to contracts in force as of the beginning of the earliest period presented and may be applied retrospectively. With regards to MRBs, the guidance is to be applied retrospectively at the beginning of the earliest period presented. Early adoption is permitted. Management is currently evaluating the impact this guidance will have on the results of operations and financial position of the Company.
NOTE 2 - Acquisitions
On July 14, 2021, the Company announced that it entered into a Stock Purchase Agreement (Agreement), by and among the Company and Independence Capital Corp. and Independence Holding Company (Seller) to acquire all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (Madison National). The Agreement provides, among other things, that, upon the terms and subject to the conditions set forth in the Agreement, the Company will acquire all the equity interests in Madison National (Acquisition) for $172.5 million. The Seller will have a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. The Agreement and the consummation of the transactions contemplated by the Agreement have been approved by the Company’s Board of Directors. The Company has cleared the anti-trust review and the closing of the Acquisition is expected to occur early during the first quarter of 2022, subject to the satisfaction or waiver of applicable closing conditions as well as approval by certain regulators.
NOTE 3 - Investments
Net Investment Income
The components of net investment income for the following periods were as follows:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Fixed maturity securities $ 59.8  $ 56.4  $ 177.2  $ 174.7 
Equity securities 1.4  1.1  3.8  3.5 
Limited partnership interests 16.8  11.1  51.1  4.9 
Short-term and other investments 2.8  2.7  8.5  8.4 
Investment expenses (2.7) (2.1) (7.3) (7.2)
Net investment income - investment portfolio
78.1  69.2  233.3  184.3 
Investment income - deposit asset on reinsurance 25.6  24.5  75.1  72.1 
Total net investment income
$ 103.7  $ 93.7  $ 308.4  $ 256.4 

Horace Mann Educators Corporation
7
Quarterly Report on Form 10-Q


NOTE 3 - Investments (continued)
Net Investment (Losses) Gains
Net investment (losses) gains for the following periods were as follows:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Fixed maturity securities $ (4.0) $ 2.7  $ (7.9) $ 3.1 
Equity securities (1.0) 4.0  0.7  (3.6)
Short-term investments and other (1.5) (4.2) (3.4) (12.3)
Net investment (losses) gains $ (6.5) $ 2.5  $ (10.6) $ (12.8)

The Company, from time to time, sells fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in the Company's intent to sell a fixed maturity security. The types of events that may result in a sale include significant changes in the economic facts and circumstances related to the invested asset, significant unforeseen changes in liquidity needs, or changes in the Company's investment strategy.
Net Investment (Losses) Gains by Transaction Type
The following table reconciles net investment (losses) gains by transaction type:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Credit loss impairments(1)
$ (6.6) $ —  $ (7.7) $ — 
Intent-to-sell impairments —  (1.1) (2.1) (5.3)
Total impairments on investments recognized in net income (6.6) (1.1) (9.8) (5.3)
Sales and other, net 2.7  3.7  2.2  8.6 
Change in fair value - equity securities (1.1) 2.3  0.4  (5.6)
Change in fair value and losses realized
on settlements - derivatives
(1.5) (2.4) (3.4) (10.5)
Net investment (losses) gains $ (6.5) $ 2.5  $ (10.6) $ (12.8)
(1)    For the nine months ended September 30, 2021, the Company recognized a valuation allowance of $7.7 million for credit loss impairments with respect to fixed maturity securities available for sale.

Horace Mann Educators Corporation
8
Quarterly Report on Form 10-Q


NOTE 3 - Investments (continued)
Allowance for Credit Loss Impairments on Fixed Maturity Securities
The following table presents changes in the allowance for credit loss impairments on fixed maturity securities classified as available for sale for the category of other asset-backed securities (no other categories of fixed maturity securities have an allowance for credit loss impairments):
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Beginning balance $ 1.1  $ —  $ —  $ — 
Credit losses on fixed maturity securities for which credit losses were not previously reported 6.6  —  7.7  — 
Net (increases) decreases related to credit losses previously reported —  —  —  — 
Reduction of credit allowances related to sales —  —  —  — 
Write-offs —  —  —  — 
Ending balance $ 7.7  $ —  $ 7.7  $ — 
Fixed Maturity Securities
The Company's investment portfolio is comprised primarily of fixed maturity securities. Amortized cost, net, gross unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in millions) Amortized
Cost, net 		Gross Unrealized
Gains 		Gross Unrealized
Losses 		Fair
Value
September 30, 2021
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:(1)
Mortgage-backed securities
$ 636.2  $ 58.3  $ 1.0  $ 693.5 
Other, including U.S. Treasury securities
385.7  28.8  5.6  408.9 
Municipal bonds 1,592.5  184.1  1.1  1,775.5 
Foreign government bonds 40.2  3.8  —  44.0 
Corporate bonds 2,268.8  189.4  6.6  2,451.6 
Other asset-backed securities 1,122.2  21.1  4.8  1,138.5 
Totals $ 6,045.6  $ 485.5  $ 19.1  $ 6,512.0 
December 31, 2020
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:(1)
Mortgage-backed securities $ 605.5  $ 79.6  $ 0.3  $ 684.8 
Other, including U.S. Treasury securities 395.0  39.2  1.0  433.2 
Municipal bonds 1,612.3  215.7  0.5  1,827.5 
Foreign government bonds 40.2  4.9  —  45.1 
Corporate bonds 1,905.2  221.6  3.9  2,122.9 
Other asset-backed securities 1,230.4  24.1  22.7  1,231.8 
Totals $ 5,788.6  $ 585.1  $ 28.4  $ 6,345.3 
(1)    Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $394.9 million and $387.1 million; Federal Home Loan Mortgage Corporation (FHLMC) of $337.8 million and $344.3 million; and Government National Mortgage Association (GNMA) of $118.2 million and $132.3 million as of September 30, 2021 and December 31, 2020, respectively.
Horace Mann Educators Corporation
9
Quarterly Report on Form 10-Q


NOTE 3 - Investments (continued)
The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position at September 30, 2021 and December 31, 2020, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses at September 30, 2021 — which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition — as temporary. As of September 30, 2021, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before an anticipated recovery in value. Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any impairments as of September 30, 2021.
($ in millions) 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, 2021
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities $ 69.5  $ 0.9  $ 2.1  $ 0.1  $ 71.6  $ 1.0 
Other
106.1  4.4  15.0  1.2  121.1  5.6 
Municipal bonds 52.2  1.0  1.4  0.1  53.6  1.1 
Foreign government bonds
—  —  —  —  —  — 
Corporate bonds
214.1  5.3  36.1  1.3  250.2  6.6 
Other asset-backed securities
187.6  1.1  205.4  3.7  393.0  4.8 
Total
$ 629.5  $ 12.7  $ 260.0  $ 6.4  $ 889.5  $ 19.1 
Number of positions with a
   gross unrealized loss
401  129  530 
Fair value as a percentage of total fixed
   maturity securities at fair value
9.7  % 4.0  % 13.7  %
December 31, 2020
Fixed maturity securities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities $ 4.9  $ 0.1  $ 2.6  $ 0.2  $ 7.5  $ 0.3 
Other 95.9  1.0  —  —  95.9  1.0 
Municipal bonds 18.1  0.5  —  —  18.1  0.5 
Foreign government bonds —  —  —  —  —  — 
Corporate bonds 126.6  3.7  10.9  0.2  137.5  3.9 
Other asset-backed securities 316.9  17.2  409.3  5.5  726.2  22.7 
Total
$ 562.4  $ 22.5  $ 422.8  $ 5.9  $ 985.2  $ 28.4 
Number of positions with a
   gross unrealized loss
308  123  431 
Fair value as a percentage of total fixed
   maturity securities at fair value
8.9  % 6.7  % 15.6  %

Fixed maturity securities with an investment grade rating represented 86.7% of the gross unrealized losses as of September 30, 2021. With respect to fixed maturity securities involving securitized financial assets, the underlying collateral cash flows were stress tested to determine there was no adverse change in the present value of cash flows below the amortized cost basis.
Horace Mann Educators Corporation
10
Quarterly Report on Form 10-Q


NOTE 3 - Investments (continued)
Maturities of Fixed Maturity Securities
The following table presents the distribution of the Company’s fixed maturity securities 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, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in millions) Percent of Total Fair Value September 30, 2021
September 30, 2021 December 31, 2020 Fair
Value 		Amortized
Cost, net
Estimated expected maturity:
Due in 1 year or less 4.0  % 4.0  % $ 260.5  $ 253.7 
Due after 1 year through 5 years 26.2  % 28.3  % 1,703.6  1,620.1 
Due after 5 years through 10 years 28.1  % 28.0  % 1,830.4  1,685.7 
Due after 10 years through 20 years 23.9  % 24.6  % 1,559.5  1,411.2 
Due after 20 years 17.8  % 15.1  % 1,158.0  1,074.9 
Total 100.0  % 100.0  % $ 6,512.0  $ 6,045.6 
Average option-adjusted duration, in years 6.8 6.4

Sales of Fixed Maturity and Equity Securities
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were as follows:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Fixed maturity securities
Proceeds received
$ 155.4  $ 58.6  $ 319.2  $ 352.8 
Gross gains realized
3.2  3.7  6.2  14.0 
Gross losses realized
(0.7) —  (4.3) (5.9)
Equity securities
Proceeds received
$ 0.3  $ 0.3  $ 1.0  $ 12.4 
Gross gains realized
0.1  0.1  0.3  2.1 
Gross losses realized
—  —  —  (1.8)

Net Unrealized Investment Gains (Losses) on Fixed Maturity Securities
The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in accumulated other comprehensive income (AOCI), before the impact of DAC:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Net unrealized investment gains (losses)
   on fixed maturity securities, net of tax
Beginning of period $ 399.4  $ 329.9  $ 439.8  $ 264.4 
Change in net unrealized investment gains
   (losses) on fixed maturity securities 		(34.9) 56.9  (77.0) 128.1 
Reclassification of net investment (gains) losses
   on fixed maturity securities to net income 		3.9  5.2  5.6  (0.5)
End of period $ 368.4  $ 392.0  $ 368.4  $ 392.0 
Horace Mann Educators Corporation
11
Quarterly Report on Form 10-Q


NOTE 3 - Investments (continued)
Limited Partnership Interests
Investments in limited partnership interests are accounted for using the equity method of accounting and include interests in senior commercial mortgage loan funds, infrastructure debt funds, infrastructure equity funds, hedge funds and other funds. Principal factors influencing carrying amount appreciation or decline include operating performance, comparable public company earnings multiples, capitalization rates and the economic environment. The Company recognizes an impairment loss for equity method limited partnership interests when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. The carrying amounts of equity method limited partnership interests were as follows:
($ in millions)
September 30, 2021 December 31, 2020
Senior commercial mortgage loan funds $ 265.8  $ 149.6 
Infrastructure debt funds 62.7  58.3 
Infrastructure equity funds 59.1  52.1 
Hedge funds 51.1  63.2 
Other funds(1)
176.7  125.8 
Total $ 615.4  $ 449.0 
(1)Other funds consist primarily of limited partnership interests in private equity, real estate equity and corporate mezzanine funds.
Offsetting of Assets and Liabilities
The Company's derivatives are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event minimum thresholds have been reached. Information regarding the Company's derivatives is contained in Part II - Item 8, Note 4 in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The following table presents instruments that were subject to a master netting arrangement for the Company.
($ in millions) Gross
Amounts
Offset in the
Consolidated
Balance
Sheets 		Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance
Sheets 		Gross Amounts Not Offset
in the Consolidated
Balance Sheets
Gross
Amounts 		Financial
Instruments 		Cash
Collateral
Received 		Net
Amount
September 30, 2021
Asset derivatives:
Free-standing derivatives $ 10.6  $ —  $ 10.6  $ 9.8  $ 3.5  $ (2.7)
December 31, 2020
Asset derivatives:
Free-standing derivatives $ 16.8  $ —  $ 16.8  $ 13.7  $ 2.6  $ 0.5 
Deposits
At September 30, 2021 and December 31, 2020, fixed maturity securities with a fair value of $26.4 million and $26.9 million, respectively, were on deposit with governmental agencies as required by law in various states for which the insurance subsidiaries of HMEC conduct business. In addition, at September 30, 2021 and December 31, 2020, fixed maturity securities with a fair value of $923.6 million and $707.3 million, respectively, were on deposit with the Federal Home Loan Bank of Chicago (FHLB) as collateral for amounts subject to funding agreements, advances and borrowings which were equal to $837.5 million at September 30, 2021 and $644.5 million at December 31, 2020. The deposited securities are reported as Fixed maturity securities on the Company’s Consolidated Balance Sheets.



Horace Mann Educators Corporation
12
Quarterly Report on Form 10-Q


NOTE 4 - Fair Value of Financial Instruments

The Company is required to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values of the Company’s insurance contracts other than annuity contracts (which are investment contracts) and equity method limited partnership interests are not required to be disclosed. However, the estimated fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk through the matching of investment maturities with amounts due under insurance contracts.
Information regarding the three-level hierarchy presented below and the valuation methodologies utilized by the Company to estimate fair values at each reporting date is included in Part II - Item 8, Note 3 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Horace Mann Educators Corporation
13
Quarterly Report on Form 10-Q


NOTE 4 - Fair Value of Financial Instruments (continued)
Financial Instruments Measured and Carried at Fair Value on a Recurring Basis
The following table presents the Company's fair value hierarchy for financial assets and financial liabilities measured and carried at fair value on a recurring basis. During the nine months ended September 30, 2021 and 2020, there were no transfers between Level 1 and Level 2. At September 30, 2021, Level 3 invested assets comprised 5.4% of the Company’s total investment portfolio at fair value.
($ in millions) Carrying
Amount 		Fair
Value 		Fair Value Measurements at
Reporting Date Using
  Level 1 Level 2 Level 3
September 30, 2021
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
   sponsored agency obligations:
Mortgage-backed securities $ 693.5  $ 693.5  $ —  $ 693.5  $ — 
Other, including U.S. Treasury securities 408.9  408.9  17.9  391.0  — 
Municipal bonds 1,775.5  1,775.5  —  1,717.3  58.2 
Foreign government bonds 44.0  44.0  —  44.0  — 
Corporate bonds 2,451.6  2,451.6  14.5  2,232.1  205.0 
Other asset-backed securities 1,138.5  1,138.5  —  1,040.0  98.5 
Total fixed maturity securities 6,512.0  6,512.0  32.4  6,117.9  361.7 
Equity securities 152.3  152.3  39.3  112.6  0.4 
Short-term investments 52.3  52.3  36.1  16.2  — 
Other investments 43.2  43.2  —  43.2  — 
Totals $ 6,759.8  $ 6,759.8  $ 107.8  $ 6,289.9  $ 362.1 
Separate Account (variable annuity) assets(1)
$ 3,326.8  $ 3,326.8  $ 3,326.8  $ —  $ — 
Financial Liabilities
Investment contract and policy reserves,
 embedded derivatives
$ 2.3  $ 2.3  $ —  $ 2.3  $ — 
Other policyholder funds, embedded derivatives $ 106.7  $ 106.7  $ —  $ —  $ 106.7 
December 31, 2020
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally
   sponsored agency obligations:
Mortgage-backed securities $ 684.8  $ 684.8  $ —  $ 673.7  $ 11.1 
Other, including U.S. Treasury securities 433.2  433.2  18.4  414.8  — 
Municipal bonds
1,827.5  1,827.5  —  1,767.9  59.6 
Foreign government bonds
45.1  45.1  —  45.1  — 
Corporate bonds
2,122.9  2,122.9  14.9  1,952.2  155.8 
Other asset-backed securities
1,231.8  1,231.8  —  1,103.5  128.3 
Total fixed maturity securities 6,345.3  6,345.3  33.3  5,957.2  354.8 
Equity securities 121.6  121.6  39.2  82.1  0.3 
Short-term investments 141.8  141.8  137.7  4.1  — 
Other investments 36.3  36.3  —  36.3  — 
Totals $ 6,645.0  $ 6,645.0  $ 210.2  $ 6,079.7  $ 355.1 
Separate Account (variable annuity) assets(1)
$ 2,891.4  $ 2,891.4  $ 2,891.4  $ —  $ — 
Financial Liabilities          
Investment contract and policy reserves,
 embedded derivatives
$ 2.5  $ 2.5  $ —  $ 2.5  $ — 
Other policyholder funds, embedded derivatives $ 104.5  $ 104.5  $ —  $ —  $ 104.5 
(1)    Separate Account (variable annuity) liabilities are equal to the estimated fair value of the Separate Account (variable annuity) assets.
Horace Mann Educators Corporation
14
Quarterly Report on Form 10-Q


NOTE 4 - Fair Value of Financial Instruments (continued)
Changes in Level 3 Fair Value Measurements
The reconciliation for all financial assets and financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows:
($ in millions) Financial Assets
Financial
Liabilities(1)
Municipal
Bonds 		Corporate
Bonds

Mortgage-Backed
and Other
Asset-
Backed
Securities(2)
Total
Fixed
Maturity
Securities 		Equity
Securities 		Total
Beginning balance, July 1, 2021 $ 58.6  $ 150.5  $ 115.5  $ 324.6  $ 0.3  $ 324.9  $ 108.9 
Transfers into Level 3(3)
—  55.7  4.0  59.7  —  59.7  — 
Transfers out of Level 3(3)
—  —  —  —  —  —  — 
Total gains or losses
Net investment gains (losses)
 included in net income related
 to financial assets
—  —  (6.6) (6.6) 0.1  (6.5) — 
Net investment (gains) losses
 included in net income related
 to financial liabilities
—  —  —  —  —  —  0.7 
Net unrealized investment gains
 (losses) included in OCI
(0.3) (0.1) 6.6  6.2  —  6.2  — 
Purchases —  —  —  —  —  —  — 
Issuances —  —  —  —  —  —  1.4 
Sales —  —  —  —  —  —  — 
Settlements —  —  —  —  —  —  — 
Paydowns, maturities and distributions (0.1) (1.1) (21.0) (22.2) —  (22.2) (4.3)
Ending balance, September 30, 2021 $ 58.2  $ 205.0  $ 98.5  $ 361.7  $ 0.4  $ 362.1  $ 106.7 
Beginning balance, January 1, 2021 $ 59.6  $ 155.8  $ 139.4  $ 354.8  $ 0.3  $ 355.1  $ 104.5 
Transfers into Level 3(3)
—  108.3  10.2  118.5  —  118.5  — 
Transfers out of Level 3(3)
—  (56.7) (19.2) (75.9) —  (75.9) — 
Total gains or losses
Net investment gains (losses)
 included in net income related
 to financial assets
—  —  (7.7) (7.7) 0.1  (7.6) — 
Net investment (gains) losses
 included in net income related
 to financial liabilities
—  —  —  —  —  —  8.2 
Net unrealized investment gains
 (losses) included in OCI
(0.9) 1.0  8.7  8.8  —  8.8  — 
Purchases —  —  —  —  —  —  — 
Issuances —  —  —  —  —  —  3.3 
Sales —  —  —  —  —  —  — 
Settlements —  —  —  —  —  —  — 
Paydowns, maturities and distributions (0.5) (3.4) (32.9) (36.8) —  (36.8) (9.3)
Ending balance, September 30, 2021 $ 58.2  $ 205.0  $ 98.5  $ 361.7  $ 0.4  $ 362.1  $ 106.7 
(1)Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.
(2)Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.
(3)Transfers into and out of Level 3 during the three and nine months ended September 30, 2021 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

Horace Mann Educators Corporation
15
Quarterly Report on Form 10-Q


NOTE 4 - Fair Value of Financial Instruments (continued)
($ in millions) Financial Assets
Financial
Liabilities(1)
Municipal
Bonds 		Corporate
Bonds

Mortgage-Backed
and Other
Asset-
Backed
Securities(2)
Total
Fixed
Maturity
Securities 		Equity
Securities 		Total
Beginning balance, July 1, 2020 $ 73.2  $ 126.3  $ 200.1  $ 399.6  $ 0.1  $ 399.7  $ 93.6 
Transfers into Level 3(3)
6.2  6.8  8.7  21.7  —  21.7  — 
Transfers out of Level 3(3)
(16.7) (12.5) (71.0) (100.2) —  (100.2) — 
Total gains or losses
Net investment gains (losses)
 included in net income related
 to financial assets
—  —  (0.3) (0.3) —  (0.3) — 
Net investment (gains) losses
 included in net income related
 to financial liabilities
—  —  —  —  —  —  4.4 
Net unrealized investment gains
 (losses) included in OCI
3.2  0.5  6.3  10.0  —  10.0  — 
Purchases —  —  —  —  —  —  — 
Issuances —  —  —  —  —  —  2.0 
Sales —  —  —  —  —  —  — 
Settlements —  —  —  —  —  —  — 
Paydowns, maturities and distributions (0.2) 0.1  (3.1) (3.2) —  (3.2) (1.9)
Ending balance, September 30, 2020 $ 65.7  $ 121.2  $ 140.7  $ 327.6  $ 0.1  $ 327.7  $ 98.1 
Beginning balance, January 1, 2020 $ 44.3  $ 104.0  $ 146.8  $ 295.1  $ 0.1  $ 295.2  $ 93.7 
Transfers into Level 3(3)
80.7  39.6  95.4  215.7  —  215.7  — 
Transfers out of Level 3(3)
(62.6) (26.7) (77.4) (166.7) —  (166.7) — 
Total gains or losses
Net investment gains (losses)
 included in net income related
 to financial assets
—  —  (0.3) (0.3) —  (0.3) — 
Net investment (gains) losses
 included in net income related
 to financial liabilities
—  —  —  —  —  —  5.3 
Net unrealized investment gains
 (losses) included in OCI
4.0  0.3  (14.8) (10.5) —  (10.5) — 
Purchases —  6.9  1.9  8.8  —  8.8  — 
Issuances —  —  —  —  —  —  5.9 
Sales —  —  —  —  —  —  — 
Settlements —  —  —  —  —  —  — 
Paydowns, maturities and distributions (0.7) (2.9) (10.9) (14.5) —  (14.5) (6.8)
Ending balance, September 30, 2020 $ 65.7  $ 121.2  $ 140.7  $ 327.6  $ 0.1  $ 327.7  $ 98.1 
(1)    Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.
(2)    Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.
(3)    Transfers into and out of Level 3 during the three and nine months ended September 30, 2020 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

For the three and nine months ended September 30, 2021, the Company had net investment losses of $6.5 million and $7.6 million, respectively, that were included in net income and were primarily attributable to credit loss impairments for Level 3 financial assets; for both the three and nine months ended September 30, 2020, the Company had $0.3 million of net investment losses on Level 3 financial assets, respectively, that were included in net income. For the three and nine months ended September 30, 2021, the Company had net investment losses of $0.7 million and $8.2 million, respectively, that were included in net income and were attributable to changes in the fair value of Level 3 financial liabilities; for the three and nine months ended September 30, 2020, the respective net investment losses were $4.4 million and $5.3 million.
Horace Mann Educators Corporation
16
Quarterly Report on Form 10-Q


NOTE 4 - Fair Value of Financial Instruments (continued)
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized within Level 3.
($ in millions)
Financial
Assets
Fair Value at
September 30, 2021
Valuation Technique(s) Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate(1)
Municipal bonds $ 58.2  discounted cash flow
I spread(2)
307 - 391 bps
Corporate bonds 205.0  discounted cash flow
N spread(3)
272 - 553 bps
market comparable option adjusted spread 12.54%
Other asset-backed securities 98.5  vendor price haircut
3.00% - 5.00%
discounted cash flow constant prepayment rate 20.00%
discounted cash flow
T spread(4)
235 - 800 bps
discounted cash flow
PDI interest margin(5)
7.13%
discounted cash flow
SBL interest margin(6)
4.50%
Equity securities 0.4  Black Scholes equity value
low - 28.00%; high - 35.00%
($ in millions)
Financial
Liabilities
Fair Value at
September 30, 2021
Valuation Technique(s) Unobservable Inputs
Range
(Weighted Average)
and Single Point Best Estimate(1)
Derivatives
embedded in
fixed indexed annuity products 		$ 106.7  discounted cash flow lapse rate 5.30%
mortality multiplier(7)
63.00%
            option budget  
0.90% - 2.50%
non-performance adjustment(8)
5.00%
(1)    When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
(2)    "I spread" is the interpolated weighted average life point on the "on the run" (OTR) point of the curve.
(3)    "N spread" is the interpolated weighted average life point on the swap curve.
(4)    "T spread" is a specific point on the OTR curve.
(5)    "PDI" stands for private debt investment.
(6)    "SBL" stands for broadly syndicated loans.
(7)    Mortality multiplier is applied to the Annuity 2000 table.
(8)    Determined as a percentage of a risk-free rate.

The valuation techniques and significant unobservable inputs used in the fair value measurement for financial assets and financial liabilities classified as Level 3 are subject to the control processes as described in Part II - Item 8, Note 3 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Generally, valuation techniques for fixed maturity securities include spread pricing, matrix pricing and discounted cash flow methodologies; include inputs such as quoted prices for identical or similar securities that are less liquid; and are based on lower levels of trading activity than securities classified as Level 2. The valuation techniques and significant unobservable inputs used in the fair value measurement for equity securities classified as Level 3 use similar valuation techniques and significant unobservable inputs as those used for fixed maturity securities.
Horace Mann Educators Corporation
17
Quarterly Report on Form 10-Q


NOTE 4 - Fair Value of Financial Instruments (continued)
The sensitivity of the estimated fair values to changes in the significant unobservable inputs for fixed maturity and equity securities included in Level 3 include: benchmark yield, liquidity premium, estimated cash flows, prepayment and default speeds, spreads, weighted average life and credit rating. Significant spread widening in isolation will adversely impact the overall valuation, while significant tightening will lead to substantial valuation increases. Significant increases (decreases) in illiquidity premiums in isolation will result in substantially lower (higher) valuations. Significant increases (decreases) in expected default rates in isolation will result in substantially lower (higher) valuations.
Financial Instruments Not Carried at Fair Value
The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. These financial assets and financial liabilities are further described in Part II - Item 8, Note 3 in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The following table presents the carrying amount, fair value and fair value hierarchy of these financial assets and financial liabilities.
($ in millions) Carrying
Amount 		Fair
Value 		Fair Value Measurements at
Reporting Date Using
Level 1 Level 2 Level 3
September 30, 2021
Financial Assets
Other investments $ 156.2  $ 159.8  $ —  $ —  $ 159.8 
Deposit asset on reinsurance 2,477.9  2,945.0  —  —  2,945.0 
Financial Liabilities
Investment contract and policy reserves,
fixed annuity contracts
4,942.5  5,063.0  —  —  5,063.0 
Investment contract and policy reserves,
account values on life contracts
103.2  112.6  —  —  112.6 
Other policyholder funds 887.6  887.6  —  832.7  54.9 
Short-term debt 135.0  135.0  —  —  135.0 
Long-term debt 253.6  282.1  —  282.1  — 
December 31, 2020
Financial Assets
Other investments $ 168.3  $ 172.1  $ —  $ —  $ 172.1 
Deposit asset on reinsurance 2,420.9  3,030.6  —  —  3,030.6 
Financial Liabilities          
Investment contract and policy reserves,
fixed annuity contracts
4,847.6  4,963.3  —  —  4,963.3 
Investment contract and policy reserves,
account values on life contracts
98.7  108.4  —  —  108.4 
Other policyholder funds 646.8  646.8  —  590.7  56.1 
Short-term debt 135.0  135.0  —  —  135.0 
Long-term debt 302.3  331.1  —  331.1  — 













Horace Mann Educators Corporation
18
Quarterly Report on Form 10-Q


NOTE 5 - Deposit Asset on Reinsurance
The Company reinsures a $3.2 billion block of in force fixed and variable annuity business with a minimum crediting rate of 4.5%. The reinsured fixed business represents approximately 50% of the Company’s in force fixed annuity account balances. The arrangement contains investment guidelines and a trust to help meet the Company’s risk management objectives.
Under the annuity reinsurance agreement, approximately $2.4 billion of fixed annuity reserves are reinsured on a coinsurance basis. The separate account assets and liabilities of approximately $0.8 billion are reinsured on a modified coinsurance basis and thus, remain on the Company's consolidated financial statements, but the related results of operations are fully reinsured.
The annuity reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk. Therefore, the Company recognizes the reinsurance agreement using the deposit method of accounting. The assets transferred to the reinsurer as consideration paid is reported as a Deposit asset on reinsurance on the Company's Consolidated Balance Sheets. As amounts are received or paid, consistent with the underlying reinsured contracts, the Deposit asset on reinsurance is adjusted. The Deposit asset on reinsurance is accreted to the estimated ultimate cash flows using the interest method and the adjustment is reported as Net investment income. Interest accreted on the Deposit asset on reinsurance was $25.6 million and $75.1 million for the three and nine months ended September 30, 2021, respectively. Interest accreted on the Deposit asset on reinsurance was $24.5 million and $72.1 million for the three and nine months ended September 30, 2020, respectively.
NOTE 6 - Goodwill and Intangible Assets
The Company conducts impairment testing for goodwill and intangible assets at least annually, or more often if events, changes or circumstances indicate that the carrying amount may not be recoverable. See Part II - Item 8, Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for further description of impairment testing.
There were no changes in the carrying amount of goodwill by reporting unit for the three months ended September 30, 2021. The carrying amount of goodwill by reporting unit as of September 30, 2021 was as follows:
($ in millions) September 30, 2021
Property and Casualty $ 9.5 
Supplemental 19.6 
Retirement 4.5 
Life 9.9 
Total
$ 43.5 

As of September 30, 2021, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of Benefit Consultants Group, Inc. (BCG) and NTA Life Enterprises, LLC (NTA) during 2019. The acquisition of BCG resulted in initial recognition of definite-lived intangible assets subject to amortization in the amount of $14.1 million and the acquisition of NTA resulted in initial recognition of definite-lived intangible assets subject to amortization in the amount of $160.4 million. As of September 30, 2021 the outstanding amounts of definite-lived intangible assets subject to amortization were as follows:
Horace Mann Educators Corporation
19
Quarterly Report on Form 10-Q


NOTE 6 - Goodwill and Intangible Assets (continued)
($ in millions) Weighted Average
Useful Life (in Years)
At inception:
Value of business acquired
30 $ 94.4 
Value of distribution acquired
17 54.0 
Value of agency relationships
14 17.0 
Value of customer relationships
10 9.1 
Total
23 174.5 
Accumulated amortization and impairments:
Value of business acquired
(15.9)
Value of distribution acquired
(10.9)
Value of agency relationships
(5.7)
Value of customer relationships
(4.1)
Total
(36.6)
Net intangible assets subject to amortization: $ 137.9 
With regards to the definite-lived intangible assets in the table above, the value of business acquired intangible asset represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of distribution acquired intangible asset represents the present value of future business to be written by the existing agency force. The value of agency relationships intangible asset represents the present value of the commission overrides retained by NTA. The value of customer relationships intangible asset represents the present value of the expected profits from existing BCG customers in force at the date of acquisition. All of the aforementioned definite-lived intangible assets were valued using the income approach.
Estimated future amortization of the Company's definite-lived intangible assets were as follows:
($ in millions)
Year Ending December 31,
2021 (excluding the nine months ended September 30, 2021) $ 3.2 
2022 12.1 
2023 11.2 
2024 10.5 
2025 9.8 
Thereafter
91.1 
Total
$ 137.9 
The value of business acquired intangible asset is being amortized by product based on the present value of future premiums to be received. The value of distribution acquired intangible asset is being amortized on a straight-line basis. The value of agency relationships intangible asset is being amortized based on the present value of future premiums to be received. The value of customer relationships intangible asset is being amortized based on the present value of future profits to be received.
Indefinite-lived intangible assets (not subject to amortization) as of September 30, 2021 were as follows:
($ in millions)
Trade names $ 7.9 
State licenses 2.9 
Total $ 10.8 
The trade names intangible asset represents the present value of future savings accruing to NTA and BCG by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. The state licenses intangible asset represents the regulatory licenses held by NTA that were valued using the cost approach.
Horace Mann Educators Corporation
20
Quarterly Report on Form 10-Q


NOTE 7 - Unpaid Claims and Claim Expenses
The following table is a summary reconciliation of the beginning and ending Property and Casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after reinsurance) basis. The total net Property and Casualty insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations. The end of the period gross reserve (before reinsurance) balances and the reinsurance recoverable balances are reflected on a gross basis in the Consolidated Balance Sheets.
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Property and Casualty    
Beginning gross reserves(1)
$ 368.4  $ 388.5  $ 372.2  $ 387.0 
Less: reinsurance recoverables 108.9  116.1  112.9  120.5 
Net reserves, beginning of period(2)
259.5  272.4  259.3  266.5 
Incurred claims and claim expenses:    
Claims occurring in the current period 132.5  125.6  345.4  340.2 
Decrease in estimated reserves for claims occurring
in prior periods(3)
(3.0) (7.2) (7.2) (9.2)
Total claims and claim expenses incurred(4)
129.5  118.4  338.2  331.0 
Claims and claim expense payments
for claims occurring during:
   
Current period
96.8  91.0  210.3  195.9 
Prior periods
26.4  19.3  121.4  121.1 
Total claims and claim expense payments 123.2  110.3  331.7  317.0 
Net reserves, end of period(2)
265.8  280.5  265.8  280.5 
Plus: reinsurance recoverables 109.6  114.8  109.6  114.8 
Ending gross reserves(1)
$ 375.4  $ 395.3  $ 375.4  $ 395.3 
(1)Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Supplemental, Retirement and Life of $64.7 million and $59.2 million as of September 30, 2021 and 2020, respectively, in addition to Property and Casualty reserves.
(2)Reserves net of anticipated reinsurance recoverables.
(3)Shows the amounts by which the Company decreased its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs.
(4)Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for Supplemental, Retirement and Life of $35.3 million and $108.0 million for the three and nine months ended September 30, 2021, respectively, in addition to Property and Casualty amounts. Benefits, claims and settlement expenses as reported in the Consolidate Statements of Operations also include amounts for Supplemental, Retirement and Life of $33.0 million and $102.1 million for the three and nine months ended September 30, 2020, respectively, in addition to Property and Casualty amounts.

Net favorable development of total reserves for Property and Casualty claims occurring in prior years was $7.2 million and $9.2 million for the nine months ended September 30, 2021 and 2020, respectively. The favorable development for the nine months ended September 30, 2021 was the result of favorable loss trends in automobile and homeowners loss emergence for accident years 2020 and prior. The favorable development for the nine months ended September 30, 2020 was the result of favorable loss trends in automobile and homeowners loss emergence for accident years 2019 and prior; including $5.2 million of subrogation received largely related to the 2018 Camp Fire in California.
Horace Mann Educators Corporation
21
Quarterly Report on Form 10-Q


NOTE 8 - 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:
($ in millions) Gross
Amount
Ceded to
Other
Companies(1)
Assumed
from Other
Companies 		Net
Amount
Three months ended September 30, 2021        
Premiums written and contract deposits(2)
$ 366.0  $ 5.5  $ 2.6  $ 363.1 
Premiums and contract charges earned 230.9  8.1  2.6  225.4 
Benefits, claims and settlement expenses 164.5  1.5  1.8  164.8 
Three months ended September 30, 2020        
Premiums written and contract deposits(2)
$ 368.6  $ 2.1  $ 2.4  $ 368.9 
Premiums and contract charges earned 237.1  4.2  2.4  235.3 
Benefits, claims and settlement expenses 59.4  (90.1) 1.9  151.4 
Nine months ended September 30, 2021
Premiums written and contract deposits(2)
$ 1,037.8  $ 17.0  $ 6.6  $ 1,027.4 
Premiums and contract charges earned 696.6  24.6  6.8  678.8 
Benefits, claims and settlement expenses 444.7  3.0  4.5  446.2 
Nine months ended September 30, 2020
Premiums written and contract deposits(2)
$ 1,034.7  $ 14.8  $ 6.9  $ 1,026.8 
Premiums and contract charges earned 710.9  20.9  7.0  697.0 
Benefits, claims and settlement expenses 342.2  (85.8) 5.1  433.1 
(1)    Excludes the annuity reinsurance transaction accounted for using the deposit method that is discussed in Note 5.
(2)    This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as Exhibit 99.1 in the Company's reports filed with the SEC.
NOTE 9 - Commitments
Investment Commitments
The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $911.4 million and $571.9 million as of September 30, 2021 and December 31, 2020, respectively.
Horace Mann Educators Corporation
22
Quarterly Report on Form 10-Q


NOTE 10 - Segment Information
The Company conducts and manages its business through five segments. The four operating segments, representing the major lines of business, are: Property and Casualty (primarily personal lines of automobile and property insurance products), Supplemental (primarily cancer, heart, hospital, supplemental disability and accident coverages), Retirement (primarily tax-qualified fixed and variable annuities) and Life (life insurance products). The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management's evaluation of the results of those segments, but classifies those items in the fifth segment, Corporate and Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. Summarized financial information for these segments is as follows:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Premiums and contract charges earned
Property and Casualty $ 153.3  $ 166.0  $ 464.1  $ 488.7 
Supplemental 31.0  32.5  94.3  98.8 
Retirement 9.9  7.4  27.7  21.5 
Life 31.2  29.4  92.7  88.0 
Total $ 225.4  $ 235.3  $ 678.8  $ 697.0 
Net investment income
Property and Casualty $ 11.3  $ 13.7  $ 43.8  $ 30.3 
Supplemental 7.1  4.3  18.7  11.8 
Retirement 64.8  58.1  187.2  166.7 
Life 21.1  18.2  60.5  49.4 
Corporate and Other —  —  (0.1) (0.1)
Intersegment eliminations (0.6) (0.6) (1.7) (1.7)
Total $ 103.7  $ 93.7  $ 308.4  $ 256.4 
Net income (loss)
Property and Casualty $ (4.7) $ 15.8  $ 42.5  $ 53.7 
Supplemental 11.4  10.6  34.8  30.6 
Retirement 14.1  7.8  36.2  16.6 
Life 5.1  4.3  10.8  6.8 
Corporate and Other (9.6) (2.0) (22.0) (22.2)
Total $ 16.3  $ 36.5  $ 102.3  $ 85.5 
($ in millions) September 30, 2021 December 31, 2020
Assets
Property and Casualty $ 1,269.0  $ 1,324.9 
Supplemental 863.8  811.5 
Retirement 9,893.4  9,198.7 
Life 2,142.6  2,044.5 
Corporate and Other 165.4  182.3 
Intersegment eliminations (69.2) (90.1)
Total $ 14,265.0  $ 13,471.8 

Horace Mann Educators Corporation
23
Quarterly Report on Form 10-Q


NOTE 11 - Accumulated Other Comprehensive Income (Loss)
AOCI represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, AOCI includes the after tax change in net unrealized investment gains (losses) on fixed maturity securities and the after tax change in net funded status of benefit plans for the periods as shown in the Consolidated Statements of Changes in Shareholders’ Equity. The following table reconciles these components.
($ in millions)
Net Unrealized Investment
 Gains (Losses)
 on Securities(1)
Net Funded Status of
Benefit Plans(1)
Total(1)
Beginning balance, July 1, 2021 $ 332.2  $ (11.2) $ 321.0 
Other comprehensive income (loss) before reclassifications (29.3) —  (29.3)
Amounts reclassified from AOCI(2)
4.0  —  4.0 
Net current period other comprehensive income (loss)
(25.3) —  (25.3)
Ending balance, September 30, 2021 $ 306.9  $ (11.2) $ 295.7 
Beginning balance, July 1, 2020 $ 279.1  $ (10.7) $ 268.4 
Other comprehensive income (loss) before reclassifications 54.3  —  54.3 
Amounts reclassified from AOCI(3)
(5.2) —  (5.2)
Net current period other comprehensive income (loss) 49.1  —  49.1 
Ending balance, September 30, 2020 $ 328.2  $ (10.7) $ 317.5 
Beginning balance, January 1, 2021 $ 366.3  $ (11.2) $ 355.1 
Other comprehensive income (loss) before reclassifications (65.0) —  (65.0)
Amounts reclassified from AOCI(2)
5.6  —  5.6 
Net current period other comprehensive income (loss)
(59.4) —  (59.4)
Ending balance, September 30, 2021 $ 306.9  $ (11.2) $ 295.7 
Beginning balance, January 1, 2020 $ 230.4  $ (10.7) $ 219.7 
Other comprehensive income (loss) before reclassifications 97.3  —  97.3 
Amounts reclassified from AOCI(3)
0.5  —  0.5 
Net current period other comprehensive income (loss) 97.8  —  97.8 
Ending balance, September 30, 2020 $ 328.2  $ (10.7) $ 317.5 
(1)All amounts are net of tax.
(2)The pretax amounts reclassified from AOCI, $(5.0) million and $(7.1) million, are included in Net investment gains (losses) and the related income tax expenses, $(1.0) million and $(1.5) million, are included in income tax expense in the Consolidated Statements of Operations for the three and nine months ended September 30, 2021, respectively.
(3)    The pretax amounts reclassified from AOCI, $6.6 million and $(0.6) million, are included in Net investment gains (losses) and the related income tax expenses, $1.4 million and $(0.1) million, are included in Income tax expense in the Consolidated Statements of Operations for the three and nine months ended September 30, 2020, respectively.

Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is disclosed in Note 3.















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Quarterly Report on Form 10-Q


NOTE 12 - Supplemental Consolidated Cash and Cash Flow Information
($ in millions)
September 30, 2021 December 31, 2020
Cash $ 38.9  $ 21.8 
Restricted cash 1.3  0.5 
Total cash and restricted cash reported in the Consolidated Balance Sheets $ 40.2  $ 22.3 
($ in millions) Nine Months Ended
September 30,
2021 2020
Cash paid for:
Interest
$ 7.3  $ 9.3 
Income taxes
20.2  18.5 
Non-cash investing activities with respect to modifications or exchanges of fixed maturity securities as well as paid-in-kind activity for policy loans were insignificant for the three and nine months ended September 30, 2021 and 2020, respectively.
ITEM 2. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
($ in millions, except per share data)

Measures within this MD&A that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within this Part I - Item 2. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's Third Quarter 2021 Investor Supplement.
Increases or decreases in this MD&A that are not meaningful are marked "N.M.".
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 Educators Corporation (referred to in Part I - Items 2 - 4 and Part II of this report as "we", "our", "us", the "Company", "Horace Mann" or "HMEC") is an insurance holding company. We are not under any obligation to (and expressly disclaim 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 our actual results could differ materially from those projected in forward-looking statements due to a number of risks and uncertainties inherent in our business. See Part I - Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding risks and uncertainties.
Introduction
The purpose of this MD&A is to provide an understanding of our consolidated results of operations and financial condition. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part I - Item 1 of this report.
HMEC is an insurance holding company, and through its subsidiaries, we market and underwrite personal lines of property and casualty insurance products, supplemental insurance products, retirement products and life insurance products in the United States of America (U.S.). We market our products primarily to K-12 teachers, administrators and other employees of public schools and their families.
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Quarterly Report on Form 10-Q


This MD&A covers our consolidated financial highlights followed by consolidated results of operations, an outlook for future performance, details about critical accounting estimates, results of operations by segment, investment results and liquidity and capital resources.
On July 14, 2021, we entered into a definitive agreement to acquire all the equity interests in Madison National Life Insurance Company, Inc. (Madison National) for $172.5 million. Madison National is a leading writer of employer-paid and sponsored benefits provided to educators by K-12 school districts. The transaction is expected to close early in the first quarter of 2022, subject to regulatory approval and other customary closing conditions. The transaction is expected to be funded with cash on hand and additional borrowings on our Bank Credit Facility which was extended to 2026 and expanded by $100.0 million to $325.0 million to provide ample liquidity. At closing, our leverage ratio is expected to be approximately 25% which is our long-term target and aligns with levels appropriate for our current financial strength ratings.
Madison National offers short- and long-term group disability, group life and other products, with K-12 school districts representing 80% of 2020 premiums. The acquisition of Madison National is expected to be immediately accretive to our EPS and ROE and is expected to accelerate our progress on all fronts of our multi-year strategic plan: strengthening our product offerings, enhancing our distribution, and adding capabilities to our infrastructure. With the addition of Madison National, we will be able to serve K-12 educators through a new distribution channel that is entirely complementary to our strengths in individual products sold through local, trusted advisors.
Coronavirus Disease (COVID-19) Considerations
Beginning in March 2020, the global pandemic associated with the novel coronavirus COVID-19 and related economic conditions introduced unprecedented challenges for our country. Those challenges are ongoing. We relied on our previously developed Corporate Pandemic Plan to address preparation, prevention and response measures specific to COVID-19 while allowing flexibility to quickly react to evolving circumstances and implement varying actions accordingly.
As discussed in our Annual Report on Form 10-K for the year ended December 31, 2020, we successfully met the challenges of the pandemic environment and are now operating in a hybrid model. Our return to office plans are being guided by data from the Center for Disease Control.
In the hybrid working environment, we continue to monitor cybersecurity including increasing security and network monitoring to proactively identify and prevent potential security threats and vulnerabilities. We also are identifying and assessing critical third-party vendors and ensuring their ability to continue to perform as anticipated.
Although educators have largely remained employed through the pandemic, the impact of the pandemic resulted in slower growth in new sales, particularly sales generated from in-person events at schools. We continue to work with our network of exclusive agents to make sure they are using virtual and other tools so they can reach current and potential educator customers regardless of the level of access they have to a specific school.
For further discussion regarding the current period and potential future impacts of COVID-19 and related economic conditions on HMEC, see Outlook for 2021 and other content within this MD&A as well as Part I - Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020.
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Quarterly Report on Form 10-Q


Consolidated Financial Highlights
(All comparisons vs. same periods in 2020, unless noted otherwise)
($ in millions) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change % 2021 2020 Change %
Total revenues $ 329.6  $ 337.1  -2.2  % $ 998.7  $ 958.1  4.2  %
Net income 16.3  36.5  -55.3  % 102.3  85.5  19.6  %
Per diluted share:
Net income 0.39  0.87  -55.2  % 2.43  2.03  19.7  %
Net investment (losses) gains after tax (0.11) 0.05  N.M. (0.19) (0.24) N.M.
Book value per share $ 43.30  $ 41.45  4.5  %
Net income return on equity - last twelve
months
8.5  % 7.4  %
Net income return on equity - annualized 7.6  % 6.9  %

For the three months ended September 30, 2021, net income decreased $20.2 million primarily due to net investment (losses) gains and automobile loss costs that continue to move closer to pre-pandemic levels. For the nine months ended September 30, 2021, net income increased $16.8 million primarily due to net investment income which more than offset the higher automobile loss costs.
Consolidated Results of Operations
(All comparisons vs. same periods in 2020, unless noted otherwise)
($ in millions) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change % 2021 2020 Change %
Premiums and contract charges earned $ 225.4  $ 235.3  -4.2  % $ 678.8  $ 697.0  -2.6  %
Net investment income 103.7  93.7  10.7  % 308.4  256.4  20.3  %
Net investment (losses) gains (6.5) 2.5  N.M. (10.6) (12.8) N.M.
Other income 7.0  5.6  25.0  % 22.1  17.5  26.3  %
Total revenues
329.6  337.1  -2.2  % 998.7  958.1  4.2  %
Benefits, claims and settlement expenses 164.8  151.4  8.9  % 446.2  433.1  3.0  %
Interest credited 51.9  51.1  1.6  % 153.7  153.3  0.3  %
Operating expenses 64.3  57.9  11.1  % 182.8  173.1  5.6  %
DAC unlocking and amortization expense 22.9  24.6  -6.9  % 70.5  75.0  -6.0  %
Intangible asset amortization expense 3.3  3.5  -5.7  % 9.8  10.9  -10.1  %
Interest expense 3.4  3.5  -2.9  % 10.4  11.7  -11.1  %
Total benefits, losses and expenses
310.6  292.0  6.4  % 873.4  857.1  1.9  %
Income before income taxes 19.0  45.1  -57.9  % 125.3  101.0  24.1  %
Income tax expense 2.7  8.6  -68.6  % 23.0  15.5  48.4  %
Net income $ 16.3  $ 36.5  -55.3  % $ 102.3  $ 85.5  19.6  %

Premiums and Contract Charges Earned
For the three and nine months ended September 30, 2021, premiums and contract charges earned decreased $9.9 million and $18.2 million, respectively, due primarily to lower premiums earned by Property and Casualty.
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Quarterly Report on Form 10-Q


Net Investment Income
Excluding accreted investment income on the deposit asset on reinsurance, for the three and nine months ended September 30, 2021, net investment income increased $8.9 million and $49.0 million, respectively, primarily due to more favorable returns on limited partnership interests. Current year private equity and venture capital returns have been strong, reflecting the strength of the equity markets and the active IPO window. Investment yields continue to be impacted by the low interest rate environment of recent years. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Investment yield, excluding limited partnership interests,
pretax - annualized*
4.4% 4.2% 4.3% 4.4%
Investment yield, excluding limited partnership interests,
after tax - annualized*
3.5% 3.3% 3.4% 3.5%

During the three and nine months ended September 30, 2021, we continued to identify and purchase investments with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines for the core portfolio. We also funded commercial mortgage loan funds and limited partnership interests in line with our intent to increase our allocation to this portion of our portfolio to increase yields while balancing principal protection and risk.
Net Investment (Losses) Gains
For the three and nine months ended September 30, 2021, net investment losses increased $9.0 million and net investment losses decreased $2.2 million, respectively. The increase in net investment losses for the current quarter is primarily attributable to recognition of $6.6 million in credit loss impairments. The breakdown of net investment (losses) gains by transaction type were as follows:
($ in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020
Impairments on investments recognized in net income $ (6.6) $ (1.1) $ (9.8) $ (5.3)
Sales and other, net 2.7  3.7  2.2  8.6 
Change in fair value - equity securities (1.1) 2.3  0.4  (5.6)
Change in fair value and losses realized
on settlements - derivatives
(1.5) (2.4) (3.4) (10.5)
Net investment (losses) gains $ (6.5) $ 2.5  $ (10.6) $ (12.8)

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer specific events occurring subsequent to the reporting date that result in a change in our intent to sell a fixed maturity security.
Other Income
For the three and nine months ended September 30, 2021, other income increased $1.4 million and $4.6 million, respectively, due to the impact of the strong financial markets on asset based fees.
Benefits, Claims and Settlement Expenses
For the three and nine months ended September 30, 2021, benefits, claims and settlement expenses increased $13.4 million and $13.1 million, respectively. The increase for the current quarter is due to an increase in underlying automobile loss experience, higher catastrophe losses and an increase in Life benefits.
Interest Credited
For the three and nine months ended September 30, 2021, interest credited was relatively flat. Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be reported. The average deferred annuity credited rate, excluding the reinsured annuity block, was 2.4% and 2.5% at September 30, 2021 and September 30, 2020, respectively.
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Quarterly Report on Form 10-Q


Operating Expenses
For the three and nine months ended September 30, 2021, operating expenses increased $6.4 million and $9.7 million, respectively. Targeted spend on product, distribution and infrastructure has increased, including costs incurred in performing due diligence on the planned acquisition of Madison National. Increased operating expenses also reflect a lower level of expenses realized in 2020 due to the pandemic.
Deferred Policy Acquisition Costs (DAC) Unlocking and Amortization Expense
For the three and nine months ended September 30, 2021, DAC unlocking and amortization expense decreased $1.7 million and $4.5 million, respectively, as revenue growth has slowed in the Property and Casualty segment.
Intangible Asset Amortization Expense
For the three and nine months ended September 30, 2021, intangible asset amortization expense decreased $0.2 million and $1.1 million, respectively.
Interest Expense
For the three and nine months ended September 30, 2021, interest expense decreased $0.1 million and $1.3 million, respectively, due to lower interest rates on our senior revolving credit facility.
Income Tax Expense
The effective income tax rate, including net investment (losses) gains, was 18.4% and 15.3% for the nine months ended September 30, 2021 and 2020, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 3.3 and 4.0 percentage points for the nine months ended September 30, 2021 and 2020, respectively.
The tax effects of legislation enacted in 2020 due to the Coronavirus pandemic were reflected in our income tax expense calculations as of September 30, 2020. Total income tax expense for the nine months ended September 30, 2020, included a benefit of $2.8 million (that reduced the effective income tax rate by 2.8 percentage points) to reflect a net operating loss carryback to taxable years for which the corporate rate was 35% as compared to the current corporate rate of 21%.
We record 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 on changes in facts or law. We have no unrecorded liabilities from uncertain tax filing positions.
At September 30, 2021, our federal income tax returns for years prior to 2014 are no longer subject to examination by the Internal Revenue Service. We do not anticipate any assessments for tax years that remain subject to examination to have a material effect on our financial position or results of operations.
Outlook for 2021
The following discussion provides outlook information for our results of operations and capital position.
The impacts of the COVID-19 pandemic and related economic conditions on the Company’s results continue to be highly uncertain and outside the Company’s control. The scope, duration and magnitude of the direct and indirect effects of the pandemic continue to evolve in ways that are difficult or impossible to anticipate. For additional information on the risks posed by the pandemic, see “A large-scale pandemic, the occurrence of terrorism or military actions may have an adverse effect on our business” included in Part I—Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.
At the time of issuance of this Quarterly Report on Form 10-Q, we estimate that 2021 fourth quarter core earnings will be in the range of $.65 to $.80 per diluted share resulting in full-year net income within a range of $3.27 to $3.42 per diluted share, generating a core return on equity* of close to 10%. The outlook assumes a federal statutory corporate tax rate of 21%. The decrease in the range from the Outlook included in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 is due to the higher catastrophe losses experienced in the third quarter and a higher underlying automobile loss ratio partially offset by higher net investment income. The segment guidance discussed below also anticipates modest variations in results for those businesses from our original expectations.
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Quarterly Report on Form 10-Q


Investments
We anticipate fourth-quarter total net investment income will be in the range of $95 million to $100 million resulting in a full year range of $405 million to $410 million, including approximately $100 million of accreted investment income on the deposit asset on reinsurance in the Retirement segment. Segment ranges noted below include that anticipated level of net investment income.
Property and Casualty Segment
Primarily because of the impact of underlying automobile loss costs, Property and Casualty’s fourth quarter 2021 net income is now anticipated to be in the range of $10 million to $13 million. Fourth-quarter 2021 catastrophe losses are modeled between $7 and $9 million, in line with the 10-year average for the quarter.
The pandemic’s favorable impact on automobile loss costs lessened throughout the first nine months of 2021. We anticipate frequency will be at or close to pre-pandemic levels due to changing driving patterns as well as higher severity. As a result, the underlying automobile loss ratio should rise again in the fourth quarter, as it has every quarter in 2021. We are initiating appropriate rate filings in the majority of our states to address the higher severity.
For the fourth quarter, we anticipate the underlying property loss ratio will be similar to the third quarter as we reflect inflation in our coverages and initiate appropriate rate filings to address.
Supplemental Segment
Our outlook for Supplemental's fourth quarter 2021 net income reflects a strong contribution from net investment income and continued favorable business trends with some continued benefit from changes in policyholder behavior due to the pandemic. Fourth-quarter net income for Supplemental is anticipated to be in the range of $10 million to $11 million.
Retirement Segment
We anticipate Retirement will generate net income in the range of $10 to $11 million in fourth quarter, consistent with prior guidance.
Life Segment
We expect Life to generate net income between $3 million and $4 million in fourth quarter, consistent with prior guidance.
As described in Critical Accounting Estimates, certain of our 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 net income for the period in which the adjustments are made and may impact actual results compared to our estimates above. Additionally, see Forward-looking Information in this Quarterly Report on Form 10-Q as well as Part I – Items 1 and 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 concerning other important factors that could impact actual results. We believe that a projection of net income is not appropriate on a forward-looking basis because it is not possible to provide a valid forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.
Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us 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 our consolidated assets, liabilities, shareholders' equity and net income. Certain accounting estimates are particularly sensitive because of their significance to our 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. We have discussed with the Audit Committee the quality, not just the acceptability, of our accounting principles as applied in our financial reporting. The discussions generally included such matters as the consistency of our accounting policies and their application, and the clarity and completeness of our consolidated financial statements, which include related disclosures. Information regarding our accounting
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Quarterly Report on Form 10-Q


policies pertaining to these topics is located in the Notes to the Consolidated Financial Statements contained in Part II - Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.
We have identified the following accounting estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:
•Valuation of hard-to-value fixed maturity securities, including evaluation of impairments
•Evaluation of goodwill and intangible assets for impairment
•Valuation of annuity and life deferred policy acquisition costs
•Valuation of liabilities for property and casualty unpaid claims and claim expenses
•Valuation of certain investment contract and policy reserves
Compared to December 31, 2020, at September 30, 2021, there were no material changes to accounting policies for areas most subject to significant management judgments identified above. In addition to disclosures in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020, discussion of accounting policies, including certain sensitivity information, was presented in Management's Discussion and Analysis of Financial Condition and Results of Operations -- Critical Accounting Estimates in that Form 10-K.
Results of Operations by Segment
Consolidated financial results primarily reflect the operating results of our four operating segments as well as the corporate and other segment. These reporting segments are defined based on financial information we use to evaluate performance and to determine the allocation of resources.
•Property and Casualty
•Supplemental
•Retirement
•Life
•Corporate and Other
The determination of segment data is described in more detail in Part I - Item 1, Note 10 of the Consolidated Financial Statements in this report. The following sections provide analysis and discussion of the results of operations for each of the reporting segments as well as investment results.
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Quarterly Report on Form 10-Q


Property and Casualty
(All comparisons vs. same periods in 2020, unless noted otherwise)
For the three and nine months ended September 30, 2021, net income (loss) reflected the following factors:
•An increase in net investment income due to favorable returns on limited partnership interests for the nine months ended September 30, 2021
•Automobile loss costs continuing to move closer to pre-pandemic levels
•Lower levels of favorable prior years' reserve development (PYD) recognized in 2021 ($5.2 million of favorable PYD recognized in the prior year quarter due to subrogation received largely related to the 2018 Camp Fire in California)
•Higher levels of catastrophe losses experienced in 2021 which added 25.1 points to the property and casualty combined ratio in the current quarter compared to 20.9 points in the prior year



















HMN-20210930_G1.JPG
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Quarterly Report on Form 10-Q


The following table provides certain financial information for Property and Casualty for the periods indicated.
($ in millions, unless otherwise indicated) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change 2021 2020 Change
Financial Data:
Premiums written*:
Automobile $ 103.1  $ 109.5  -5.8  % $ 300.1  $ 315.6  -4.9  %
Property and other 60.7  63.3  -4.1  % 161.1  166.9  -3.5  %
Total premiums written 163.8  172.8  -5.2  % 461.2  482.5  -4.4  %
Change in unearned premiums (10.5) (6.8) -54.4  % 2.9  6.2  -53.2  %
Total premiums earned 153.3  166.0  -7.7  % 464.1  488.7  -5.0  %
Incurred claims and claims expenses:
Claims occurring in the current year 132.5  125.6  5.5  % 345.4  340.2  1.5  %
Prior years' reserve development(1)
(3.0) (7.2) -58.3  % (7.2) (9.2) -21.7  %
Total claims and claim expenses
incurred
129.5  118.4  9.4  % 338.2  331.0  2.2  %
Operating expenses, including DAC
amortization
42.1  41.9  0.5  % 121.5  126.0  -3.6  %
Underwriting gain (loss) (18.3) 5.7  N.M. 4.4  31.7  -86.1  %
Net investment income
11.3  13.7  -17.5  % 43.8  30.3  44.6  %
Income (loss) before income taxes (6.3) 19.8  -131.8  % 52.1  63.7  -18.2  %
Net income (loss) / core earnings (loss)* (4.7) 15.8  -129.7  % 42.5  53.7  -20.9  %
Operating Statistics:
Automobile
Loss and loss adjustment expense ratio 71.5  % 57.6  % 13.9  pts 66.0  % 59.1  % 6.9  pts
Expense ratio 27.7  % 25.7  % 2.0  pts 26.1  % 26.2  % -0.1  pts
Combined ratio: 99.2  % 83.3  % 15.9  pts 92.1  % 85.3  % 6.8  pts
Prior years' reserve development(1)
-2.0  % -0.9  % -1.1  pts -1.6  % -0.6  % -1.0  pts
Catastrophe losses 2.9  % 1.7  % 1.2  pts 1.9  % 1.6  % 0.3  pts
Underlying combined ratio*
98.3  % 82.5  % 15.8  pts 91.8  % 84.3  % 7.5  pts
Property
Loss and loss adjustment expense ratio 108.9  % 97.3  % 11.6  pts 86.0  % 84.5  % 1.5  pts
Expense ratio 27.2  % 24.4  % 2.8  pts 26.4  % 25.1  % 1.3  pts
Combined ratio: 136.1  % 121.7  % 14.4  pts 112.4  % 109.6  % 2.8  pts
Prior years' reserve development(1)
-1.9  % -10.8  % 8.9  pts -1.4  % -4.3  % 2.9  pts
Catastrophe losses 67.3  % 57.3  % 10.0  pts 38.4  % 43.9  % -5.5  pts
Underlying combined ratio*
70.7  % 75.2  % -4.5  pts 75.4  % 70.0  % 5.4  pts
Risks in force (in thousands)
Automobile(2)
381  406  -6.2  %
Property
178  187  -4.8  %
Total
559  593  -5.7  %
(1)    (Favorable) unfavorable.
(2)    Includes assumed risks in force of 4.
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Quarterly Report on Form 10-Q


On a reported basis, the 6.8 point increase in the automobile combined ratio for the nine months ended September 30, 2021 was mainly attributable to a 7.6 point increase in the automobile underlying loss ratio*. The increase in the automobile underlying loss ratio reflects a return to more normal driving patterns as well as an increase in severity trends. The reported property combined ratio increased 2.8 points and the property underlying loss ratio* increased 4.1 points for the nine months ended September 30, 2021 reflecting higher non-catastrophe fire losses and non-weather water losses as well as overall inflation due to the cost of labor and materials. The third quarter 2021 property underlying loss ratio compared to the first half of 2021 and the third quarter of 2020 improved due to lower non-catastrophe fire losses and non-weather water losses.
For the three and nine months ended September 30, 2021, total premiums written* decreased $9.0 million and $21.3 million, respectively. For the remainder of 2021, we anticipate average rate increases in the low-single digits (including states with no rate actions) for both automobile and property for the full year. Average approved rate changes for the nine months ended September 30, 2021 were insignificant. Sales* have slowed due to COVID-19.
For the three and nine months ended September 30, 2021, automobile premiums written* decreased $6.4 million and $15.5 million, respectively, as the number of automobile risks in force has declined. Average premium written and average premium earned decreased slightly. Educator risks as a percentage of overall automobile risks remained stable at 83.5% as of September 30, 2021.
For the three and nine months ended September 30, 2021, property and other premiums written* decreased $2.6 million and $5.8 million, respectively, as the number of property risks in force has declined. In addition, the 2018 California Camp Fire subrogation recovery provided for the return of $3.5 million of reinsurance reinstatement premium in the third quarter of 2020. Average premium written and average premium earned increased slightly in the first nine months of 2021, but with inflationary pressure continuing, adjustments to coverage values and rates are expected to play a greater role in the coming quarters. Educator risks as a percentage of overall property risks remained stable at 81.2% as of September 30, 2021.
We continue to evaluate and implement actions to further mitigate our exposure in catastrophe-prone areas of the country. Such actions could include, but are not limited to, non-renewal of property policies, restricted agent geographic placement, limitations on agent new business sales, further tightening of underwriting standards and increased utilization of third-party vendor products.
Horace Mann Educators Corporation
34
Quarterly Report on Form 10-Q


Supplemental
(All comparisons vs. same periods in 2020, unless noted otherwise)
For the three and nine months ended September 30, 2021, net income reflected the following factors:
•Favorable business trends including some continued benefit from changes in policyholder behavior due to the pandemic
•Improved net investment income driven by more favorable returns on limited partnership interests







HMN-20210930_G2.JPG
The following table provides certain information for Supplemental for the periods indicated.
($ in millions, unless otherwise indicated) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change 2021 2020 Change
Financial Data:
Premiums written and contract deposits* $ 30.9  $ 32.0  -3.4  % $ 94.2  $ 98.3  -4.2  %
Premiums and contract charges earned 31.0  32.5  -4.6  % 94.3  98.8  -4.6  %
Net investment income
7.1  4.3  65.1  % 18.7  11.8  58.5  %
Benefits and settlement expenses
10.4  10.5  -1.0  % 30.0  33.5  -10.4  %
Operating expenses (includes DAC
unlocking and amortization expense)
10.7  10.1  5.9  % 31.3  30.3  3.3  %
Intangible asset amortization expense
2.9  3.1  -6.5  % 8.8  9.5  -7.4  %
Income before income taxes
14.5  13.6  6.6  % 44.5  39.1  13.8  %
Net income / core earnings*
11.4  10.6  7.5  % 34.8  30.6  13.7  %
Operating Statistics:
Supplemental insurance in force
(thousands)
280  292  -4.1  %
Benefits ratio(1)
33.5  % 32.3  % 1.2  pts 31.8  % 33.9  % -2.1  pts
Operating expense ratio(2)
27.7  % 26.9  % 0.8  pts 27.3  % 26.9  % 0.4  pts
Pretax profit margin(2)
37.6  % 36.3  % 1.3  pts 38.8  % 34.7  % 4.1  pts
Persistency
92.2  % 90.1  % 2.1  pts
(1)    Benefits ratio measured to earned premium.
(2)    Operating expense ratio and pretax profit margin measured to total revenues.

For the three and nine months ended September 30, 2021, Supplemental sales* were $2.0 million and $4.2 million, respectively, which continues to reflect limited school access because of the pandemic. Sales growth is expected to continue its upward trajectory for the remainder of 2021 and into 2022. Tactics are being implemented to address return-to-school in person selling. Persistency was up 2.1 points at 92.2%.
Net income reflected higher net investment income as well as favorable business trends including some continued benefit from changes in policyholder behavior due to the pandemic. Segment expenses include the non-cash impact of amortization of intangible assets under purchase accounting that reduced net income by $2.9 million pretax for the three months ended September 30, 2021. The pretax profit margin remains above management’s longer-term expectations because of the pandemic-related changes in policyholder behavior.
Horace Mann Educators Corporation
35
Quarterly Report on Form 10-Q


Retirement
(All comparisons vs. same periods in 2020, unless noted otherwise)
For the three and nine months ended September 30, 2021, net income reflected the following factors:
•Strong annualized net interest spread on fixed annuities of 272 bps for the nine months ended September 30, 2021
•Continued growth in net annuity contract deposits* that increased $18.5 million for the nine months ended September 30, 2021
























HMN-20210930_G3.JPG
Horace Mann Educators Corporation
36
Quarterly Report on Form 10-Q


The following table provides certain information for Retirement for the periods indicated.
($ in millions, unless otherwise indicated) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change 2021 2020 Change
Financial Data:
Contract charges earned
$ 9.9  $ 7.4  33.8  % $ 27.7  $ 21.5  28.8  %
Net investment income
64.8  58.1  11.5  % 187.2  166.7  12.3  %
Interest credited
40.7  39.7  2.5  % 120.0  119.4  0.5  %
Net interest margin without net
investment (losses) gains
25.0  19.4  28.9  % 70.0  50.2  39.4  %
Net interest margin - reinsured block
(0.9) (1.0) 10.0  % (2.8) (2.9) 3.4  %
Mortality loss and other reserve charges
0.9  1.3  -30.8  % 3.6  4.1  -12.2  %
Operating expenses
16.9  15.1  11.9  % 48.6  44.0  10.5  %
DAC and intangible asset amortization
expense, excluding DAC unlocking
5.3  5.1  3.9  % 15.8  15.1  4.6  %
DAC unlocking
(0.8) (0.7) -14.3  % (1.8) (1.3) -38.5  %
Income before income taxes 16.8  8.9  88.8  % 43.4  19.0  128.4  %
Net income 14.1  7.8  80.8  % 36.2  16.6  118.1  %
Core earnings* 14.1  7.8  80.8  % 36.2  16.6  118.1  %
Operating Statistics:
Net annuity contract deposits*
Variable
$ 71.0  $ 58.5  21.4  % $ 200.2  $ 168.6  18.7  %
Fixed
50.4  60.2  -16.3  % 144.4  157.5  -8.3  %
Total
121.4  118.7  2.3  % 344.6  326.1  5.7  %
Single
75.8  68.3  11.0  % 196.6  170.4  15.4  %
Recurring
45.6  50.4  -9.5  % 148.0  155.7  -4.9  %
Total
121.4  118.7  2.3  % 344.6  326.1  5.7  %
Assets under administration (AUA)
Annuity assets under management(1)
5,246.9  4,508.7  16.4  %
Broker and advisory assets under
administration
2,499.5  2,124.3  17.7  %
Recordkeeping assets under
administration
1,606.3  1,399.6  14.8  %
Total
9,352.7  8,032.6  16.4  %
Persistency
Variable annuities
94.7  % 94.8  % -0.1  pts
Fixed annuities
94.7  % 94.5  % 0.2  pts
Total
94.7  % 94.6  % 0.1  pts
Annuity contracts in force (thousands)
229  230  -0.4  %
Retirement Advantage® contracts in force (thousands)
14  12  16.7  %
Net interest spread on fixed annuities - YTD annualized (basis points) 272  188  84  bps
(1)    Amounts reported as of September 30, 2021 and September 30, 2020 exclude $820.2 million and $660.1 million, respectively, of assets under management held under modified coinsurance reinsurance.

For the nine months ended September 30, 2021, net annuity contract deposits for variable and fixed annuities increased $18.5 million. Our relationship with educators often begins with our 403(b) retirement savings products, including our attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency remained strong at 94.7% for both variable annuities and fixed annuities.
At September 30, 2021, annuity assets under management were up $738.2 million, or 16.4%, compared to a year ago primarily due to market appreciation. Assets under administration, which includes Retirement Advantage® and other advisory and recordkeeping assets were up $1.3 billion, or 16.4%, from a year ago, as assets under management also rose primarily due to strong market appreciation over the past 12 months. The year-to-date annualized net interest spread on fixed annuities, excluding reinsurance, increased 84 basis points, primarily reflecting higher net investment income due to returns on limited partnership interests.
Horace Mann Educators Corporation
37
Quarterly Report on Form 10-Q


We actively manage our interest rate risk exposure, considering a variety of factors, including earned interest rates, credited interest rates and the relationship between the expected durations of assets and liabilities. We estimate that over the next 12 months approximately $529.1 million of the Retirement and Life combined investment portfolio and related investable cash flows will be reinvested at current market rates. As interest rates remain at low levels, borrowers may prepay or redeem the securities with greater frequency in order to borrow at lower market rates, which could increase investable cash flows and exacerbate the reinvestment risk.
As a general guideline, for a 100 basis point decline in the average reinvestment rate and based on our existing policies and investment portfolio, the impact from investing in that lower interest rate environment could further reduce Retirement net investment income by approximately $2.0 million in year one and $6.0 million in year two, further reducing the annualized net interest spread on fixed annuities by approximately 7 basis points and 20 basis points in the respective periods, compared to the current period annualized net interest spread on fixed annuities. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to minimum guaranteed crediting rates.
The expectation for future annualized net interest spreads on fixed annuities is also an important component in the amortization of DAC. In terms of the sensitivity of this amortization to the annualized net interest spread on fixed annuities, based on DAC as of September 30, 2021 and assuming all other assumptions are met, a 10 basis point deviation in the current year targeted annualized net interest rate spread on the fixed annuities assumption would impact amortization between $0.3 million and $0.4 million. This result may change depending on the magnitude and direction of any actual deviations but represents a range of reasonably likely experience for the noted assumption.
We reinsure a $2.4 billion block of in force fixed annuities with a minimum crediting rate of 4.5% which helps mitigate the risk of not being able to generate appropriate spreads on the annuity business. Information regarding the interest crediting rates and balances equal to the minimum guaranteed rate for deferred annuity account values excluding the reinsured block is shown below.
($ in millions) September 30, 2021
Total Deferred Annuities Deferred Annuities at
Minimum Guaranteed Rate
Percent
of Total 		Accumulated
Value (AV) 		Percent of
Total Deferred
Annuities AV 		Percent
of Total 		Accumulated
Value
Minimum guaranteed interest rates:
Less than 2% 55.2  % $ 1,393.1  62.7  % 44.6  % $ 873.0 
Equal to 2% but less than 3% 11.3  % 285.5  83.5  % 12.2  % 238.3 
Equal to 3% but less than 4% 24.8  % 627.1  99.9  % 32.0  % 626.8 
Equal to 4% but less than 5% 6.7  % 169.4  100.0  % 8.6  % 169.4 
5% or higher 2.0  % 50.0  100.0  % 2.6  % 50.0 
Total
100.0  % $ 2,525.1  77.5  % 100.0  % $ 1,957.5 

We will continue to be disciplined in executing strategies to mitigate the negative impact on profitability of a sustained low interest rate environment. However, the success of these strategies may be affected by the factors discussed in Part I - Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020 and other factors in this report.

Horace Mann Educators Corporation
38
Quarterly Report on Form 10-Q


Life
(All comparisons vs. same periods in 2020, unless noted otherwise)
For the three and nine months ended September 30, 2021, net income reflected the following factors:
•Higher net investment income driven by favorable returns on limited partnership interests
•Higher premiums and contract charges earned
•Higher mortality costs
The following table provides certain information for Life for the periods indicated.





HMN-20210930_G4.JPG
($ in millions, unless otherwise indicated) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change 2021 2020 Change
Financial Data:
Premiums written and contract deposits* $ 30.1  $ 26.9  11.9  % $ 84.8  $ 79.3  6.9  %
Premiums and contract charges earned 31.2  29.4  6.1  % 92.7  88.0  5.3  %
Net investment income
21.1  18.2  15.9  % 60.5  49.4  22.5  %
Benefits and settlement expenses
24.0  21.2  13.2  % 74.4  64.5  15.3  %
Interest credited
11.1  11.2  -0.9  % 33.5  33.7  -0.6  %
Operating expenses
9.3  8.4  10.7  % 26.8  25.8  3.9  %
DAC amortization expense,
excluding unlocking
1.9  1.9  —  % 5.7  5.8  -1.7  %
DAC unlocking
—  (0.2) 100.0  % —  (0.5) 100.0  %
Income before income taxes
6.1  5.2  17.3  % 13.1  8.2  59.8  %
Net income / core earnings*
5.1  4.3  18.6  % 10.8  6.8  58.8  %
Operating Statistics:
Life insurance in force
$ 20,271  $ 19,681  3.0  %
Number of policies in force (thousands)
199  201  -1.0  %
Average face amount in force (in dollars)
$ 101,734  $ 97,712  4.1  %
Lapse ratio (ordinary life insurance in force)
3.8  % 4.3  % -0.5  pts
Mortality costs
$ 33.4  $ 28.3  18.0  %

For the three and nine months ended September 30, 2021, annualized sales* were unchanged on steady new sales of recurring policies and an increase in sales of single premium policies. Full-year persistency for life products of 96.2% remains in line with prior year periods. Mortality costs were elevated.
Horace Mann Educators Corporation
39
Quarterly Report on Form 10-Q


Corporate and Other
(All comparisons vs. same periods in 2020, unless noted otherwise)
The following table provides certain financial information for Corporate and Other for the periods indicated.
($ in millions) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change % 2021 2020 Change %
Interest expense $ 3.4  $ 3.4  —  % $ 10.3  $ 11.3  -8.8  %
Net investment (losses) gains pretax (6.5) 2.5  N.M. (10.6) (12.8) N.M.
Tax on net investment (losses) gains (1.4) 0.6  N.M. (2.3) (2.7) N.M.
Net investment (losses) gains after tax (5.1) 1.9  N.M. (8.3) (10.1) N.M.
Net loss (9.6) (2.0) N.M. (22.0) (22.2) 0.9  %
Core earnings (loss)* (4.5) (3.9) -15.4  % (13.7) (12.1) -13.2  %

For the three months ended September 30, 2021, the net loss increased primarily due to changes in net investment (losses) gains.
Investment Results
(All comparisons vs. same periods in 2020, unless noted otherwise)
Our investment strategy is primarily focused on generating income to support product liabilities, and balances principal protection and risk. Total net investment income includes net investment income from our investment portfolio as well as accreted investment income from the deposit asset on reinsurance related to our reinsured block of approximately $2.4 billion of fixed annuity liabilities related to legacy individual policies written in 2002 or earlier.
($ in millions) Three Months Ended
September 30, 		2021-2020 Nine Months Ended
September 30, 		2021-2020
2021 2020 Change % 2021 2020 Change %
Net investment income - investment portfolio $ 78.1  $ 69.2  12.9  % $ 233.3  $ 184.3  26.6  %
Investment income - deposit asset on reinsurance 25.6  24.5  4.5  % 75.1  72.1  4.2  %
Total net investment income
103.7  93.7  10.7  % 308.4  256.4  20.3  %
Pretax net investment (losses) gains (6.5) 2.5  N.M. (10.6) (12.8) N.M.
Pretax net unrealized investment gains on fixed maturity securities
466.4  496.2  -6.0  %

Excluding accreted investment income on the deposit asset on reinsurance, net investment income increased $8.9 million and $49.0 million for the three and nine months ended September 30, 2021, primarily due to more favorable returns on limited partnership interests.
For the three and nine months ended September 30, 2021, pretax net investment losses increased $9.0 million and pretax net investment losses decreased $2.2 million, respectively. The increase in net investment losses for the current quarter is primarily attributable to recognition of $6.6 million in credit loss impairments. Pretax net unrealized investment gains on fixed maturity securities were down $90.3 million compared to December 31, 2020, reflecting a 58 basis point increase in the 10-year U.S. Treasury yield that more than offset tighter credit spreads across most asset classes.
Horace Mann Educators Corporation
40
Quarterly Report on Form 10-Q


Fixed Maturity and Equity Securities Portfolios
The table below presents our fixed maturity and equity securities portfolios by major asset class, including the 10 largest sectors of our corporate bond holdings (based on fair value).
($ in millions) September 30, 2021
Number of
Issuers 		Fair
Value 		Amortized
Cost, net 		Pretax Net
Unrealized
Gain (Loss)
Fixed maturity securities
Corporate bonds
Banking & Finance 148  $ 510.5  $ 470.9  $ 39.6 
Energy(1)
90  198.5  182.1  16.4 
Insurance 54  197.1  173.3  23.8 
Healthcare, Pharmacy 94  182.6  168.6  14.0 
Real Estate 45  139.6  132.9  6.7 
Utilities 73  139.6  128.6  11.0 
Miscellaneous 39  133.8  132.7  1.1 
Transportation 50  130.0  121.5  8.5 
Food and Beverage 38  99.1  87.4  11.7 
Technology 45  97.0  91.9  5.1 
All other corporates(2)
370  623.8  578.9  44.9 
Total corporate bonds 1,046  2,451.6  2,268.8  182.8 
Mortgage-backed securities
U.S. Government and federally sponsored agencies 264  487.2  452.6  34.6 
Commercial(3)
134  318.5  292.4  26.1 
Other 38  35.8  35.5  0.3 
Municipal bonds(4)
608  1,775.5  1,592.5  183.0 
Government bonds
U.S. 40  408.9  385.7  23.2 
Foreign 7  44.0  40.2  3.8 
Collateralized loan obligations(5)
183  687.8  683.6  4.2 
Asset-backed securities 102  302.7  294.3  8.4 
Total fixed maturity securities 2,422  $ 6,512.0  $ 6,045.6  $ 466.4 
Equity securities
Non-redeemable preferred stocks 28  $ 121.3 
Common stocks 93  8.9 
Closed-end fund 1  22.1 
Total equity securities 122  $ 152.3 
Total 2,544  $ 6,664.3 
(1)At September 30, 2021, the fair value amount included $381.9 million which were non-investment grade.
(2)The All other corporates category contains 18 additional industry sectors. Broadcasting and media, telecommunications, consumer products, industry manufacturing and metal and mining represented $325.8 million of fair value at September 30, 2021, with the remaining 13 sectors each representing less than $298.1 million.
(3)At September 30, 2021, 98.7% were investment grade, with an overall credit rating of AA+, and the positions were well diversified by property type, geography and sponsor.
(4)Holdings are geographically diversified, 49.6% are tax-exempt and 76.8% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- at September 30, 2021.
(5)Based on fair value, 91.9% of the collateralized loan obligation securities were rated investment grade by Standard and Poor's Global Inc. (S&P), Moody's Investors Service, Inc. (Moody's) and/or Fitch Ratings, Inc. (Fitch) at September 30, 2021.
Horace Mann Educators Corporation
41
Quarterly Report on Form 10-Q


At September 30, 2021, our diversified fixed maturity securities portfolio consisted of 3,819 investment positions, issued by 2,422 entities, and totaled approximately $6.5 billion in fair value. This portfolio was 86.4% investment grade, based on fair value, with an average quality rating of A+. Our investment guidelines target single corporate issuer concentrations to 0.5% of invested assets for AAA or AA rated securities, 0.35% of invested assets for A or BBB rated securities, and $5.0 million for non-investment grade securities.
Rating of Fixed Maturity Securities and Equity Securities(1)
The following table presents the composition and fair value of our fixed maturity and equity securities portfolios by rating category. At September 30, 2021, 85.9% of these combined portfolios were investment grade, based on fair value, with an overall average quality rating of A+. We have classified the entire fixed maturity securities portfolio as available for sale, which is carried at fair value.
($ in millions) Percent of Portfolio
Fair Value 		September 30, 2021
December 31, 2020 September 30, 2021 Fair
Value 		Amortized
Cost, net
Fixed maturity securities
AAA
11.6  % 9.8  % $ 636.5  $ 614.4 
AA(2)
40.0  % 37.6  % 2,450.3  2,256.5 
A
18.7  % 17.0  % 1,104.1  1,004.7 
BBB
21.2  % 22.0  % 1,433.5  1,316.7 
BB
2.4  % 2.9  % 185.6  176.3 
B
1.1  % 1.3  % 86.5  85.2 
CCC or lower
0.1  % —  % 2.7  2.6 
Not rated(3)
4.9  % 9.4  % 612.8  589.2 
Total fixed maturity securities
100.0  % 100.0  % $ 6,512.0  $ 6,045.6 
Equity securities
AAA
—  % —  % $ — 
AA
—  % —  % — 
A
0.7  % 0.5  % 0.8 
BBB
62.2  % 66.0  % 100.5 
BB
10.9  % 12.5  % 19.0 
B
—  % —  % — 
CCC or lower
—  % —  % — 
Not rated
26.2  % 21.0  % 32.0 
Total equity securities
100.0  % 100.0  % $ 152.3 
Total
$ 6,664.3 
(1)Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody's or Fitch. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.
(2)At September 30, 2021, the AA rated fair value amount included $402.1 million of U.S. Government and federally sponsored agency securities and $685.6 million of mortgage-backed and other asset-backed securities issued by U.S. Government and federally sponsored agencies.
(3)This category primarily represents private placement and municipal securities not rated by either S&P, Moody's or Fitch.

At September 30, 2021, the fixed maturity securities portfolio had $19.1 million of pretax gross unrealized investment losses on $889.5 million of fair value related to 530 positions. Of the investment positions with gross unrealized losses, there were 14 trading below 80.0% of the carrying value at September 30, 2021.
We view the pretax gross unrealized investment losses of all our fixed maturity securities at September 30, 2021 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of impairment.
Horace Mann Educators Corporation
42
Quarterly Report on Form 10-Q


Liquidity and Capital Resources
Off-Balance Sheet Arrangements
At September 30, 2021 and 2020, we 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, we are not exposed to any financing, liquidity, market or credit risk that could arise if we engaged in such relationships.
Investments
Information regarding our investment portfolio, which is comprised primarily of investment grade fixed maturity securities, is presented in Part I - Item 1, Note 3 of the Consolidated Financial Statements as well as Part I - Item 2 - Investments Results in this report.
Cash Flow
Our short-term liquidity requirements, 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 our operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth, pay dividends to shareholders and repurchase shares of our common stock. Long-term liquidity requirements, beyond one year, are principally for the payment of future insurance and annuity policy claims and benefits, as well as retirement of debt. The following table summarizes our consolidated cash flows activity for the periods indicated.
($ in millions) Nine Months Ended
September 30, 		2021-2020
2021 2020 Change %
Net cash provided by operating activities $ 178.1  $ 267.8  -33.5  %
Net cash used in investing activities (351.0) (368.8) 4.8  %
Net cash provided by financing activities 190.8  141.0  35.3  %
Net increase in cash 17.9  40.0  -55.3  %
Cash at beginning of period 22.3  25.5  -12.5  %
Cash at end of period $ 40.2  $ 65.5  -38.6  %

Operating Activities
As a holding company, we conduct our principal operations in the personal lines segment of the property and casualty, supplemental and life insurance industries through our subsidiaries. Our 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 flows generated by the insurance subsidiaries.
For the nine months ended September 30, 2021, net cash provided by operating activities decreased $89.7 million, primarily due to higher claims paid on insurance policies partially offset by higher investment income collected.
Investing Activities
Our insurance subsidiaries maintain significant investments in fixed maturity securities to meet future contractual obligations to policyholders. In conjunction with our management of liquidity and other asset/liability management objectives, we, from time to time, will sell fixed maturity securities prior to maturity, and reinvest the proceeds into other investments with different interest rates, maturities or credit characteristics. Accordingly, we have classified the entire fixed maturity securities portfolio as available for sale.
Horace Mann Educators Corporation
43
Quarterly Report on Form 10-Q


Financing Activities
Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, changes in the deposit asset on reinsurance, issuances and repurchases of our common stock, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.
For the nine months ended September 30, 2021, net cash provided by financing activities increased $49.8 million compared to the prior year period, primarily due to a $242.0 million net increase in cash inflows from advances received under Federal Home Loan Bank of Chicago (FHLB) funding agreements partially offset by a $50.0 million principal repayment on FHLB borrowings.
The following table shows activity from FHLB funding agreements for the periods indicated.
($ in millions) Nine Months Ended
September 30, 		2021-2020 2021-2020
2021 2020 Change $ Change %
Balance at beginning of the period $ 590.5  $ 495.0  $ 95.5  19.3  %
Advances received from FHLB funding agreements
446.0  95.5  350.5  N.M.
Principal repayments on FHLB funding agreements (204.0) —  (204.0) N.M.
Balance at end of the period $ 832.5  $ 590.5  $ 242.0  41.0  %

Horace Mann Educators Corporation
44
Quarterly Report on Form 10-Q


Liquidity Sources and Uses
Our potential sources and uses of funds principally include the following activities:
Property and Casualty Supplemental Retirement Life Corporate and Other
Activities for potential sources of funds
Receipt of insurance premiums,
contractholder charges and fees
☑ ☑ ☑ ☑
Recurring service fees, commissions
and overrides
☑ ☑ ☑ ☑ ☑
Contractholder fund deposits ☑ ☑ ☑
Reinsurance and indemnification
program recoveries
☑ ☑ ☑ ☑
Receipts of principal, interest and
dividends on investments
☑ ☑ ☑ ☑ ☑
Sales of investments ☑ ☑ ☑ ☑ ☑
Funds from FHLB and line of credit
agreements
☑ ☑ ☑ ☑ ☑
Intercompany loans ☑ ☑ ☑ ☑ ☑
Capital contributions from parent ☑ ☑ ☑ ☑
Dividends or return of capital from
subsidiaries
☑
Tax refunds/settlements ☑ ☑ ☑ ☑ ☑
Funds from periodic issuance of
additional securities
☑
Proceeds from debt issuances ☑
Receipt of intercompany settlements
related to employee benefit plans
☑
Activities for potential uses of funds
Payment of claims and related
expenses
☑ ☑ ☑ ☑
Payment of contract benefits,
surrenders and withdrawals
☑ ☑ ☑
Reinsurance cessions and
indemnification program payments
☑ ☑ ☑ ☑
Operating costs and expenses ☑ ☑ ☑ ☑ ☑
Purchase of investments ☑ ☑ ☑ ☑ ☑
Repayment of FHLB and line of credit
agreements
☑ ☑ ☑ ☑ ☑
Payment or repayment of
intercompany loans
☑ ☑ ☑ ☑ ☑
Capital contributions to subsidiaries ☑
Dividends or return of capital to
shareholders/parent company
☑ ☑ ☑ ☑ ☑
Tax payments/settlements ☑ ☑ ☑ ☑ ☑
Common share repurchases ☑
Debt service expenses and
repayment
☑
Payments related to employee benefit
plans
☑
Payments for acquisitions ☑
We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across HMEC and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across HMEC to enhance flexibility.
Horace Mann Educators Corporation
45
Quarterly Report on Form 10-Q


As of September 30, 2021, we held $1.1 billion of cash, U.S. government and agency fixed maturity securities and public equity securities (excluding non-redeemable preferred stocks and foreign equity securities) which, under normal market conditions, could be rapidly liquidated.
Certain remote events and circumstances could constrain our liquidity. Those events and circumstances include, for example, a catastrophe resulting in extraordinary losses, a downgrade of our Senior Notes rating to non-investment grade status or a downgrade in our insurance subsidiaries' financial strength ratings. The rating agencies also consider the interdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the ratings of other related entities.
Capital Resources
We have determined the amount of capital that 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. Historically, our insurance subsidiaries have generated capital in excess of such needed levels. These excess amounts have been paid to us through dividends. We have then utilized these dividends and our access to the capital markets to fund growth initiatives, service and retire debt, pay dividends to our shareholders, repurchase shares of our common stock and for other corporate purposes. If necessary, we also have other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, including a revolving line of credit, as well as issuances of various securities.
The insurance subsidiaries are subject to various regulatory restrictions that limit the amount of annual dividends or other distributions, including loans or cash advances, available to us without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 2021 from all of our insurance subsidiaries without prior regulatory approval is $161.9 million, excluding the impact and timing of prior dividends, of which $35.0 million was paid during the nine months ended September 30, 2021. We anticipate that our sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments, shareholder dividends and our share repurchase program. Additional information is contained in Part II - Item 8, Note 13 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
Total capital was $2,185.0 million at September 30, 2021, including $388.6 million of short-term and long-term debt. Total debt represented 17.8% of total capital including net unrealized investment gains on fixed maturity securities (20.7% excluding net unrealized investment gains on fixed maturity securities*) at September 30, 2021, which was below our long-term target of 25%.
Shareholders' equity was $1,796.4 million at September 30, 2021, including net unrealized investment gains on fixed maturity securities of $306.9 million after taxes and the related impact of DAC associated with annuity contracts and life insurance products with account values. The market value of our common stock and the market value per share were $1,650.8 million and $39.79, respectively, at September 30, 2021. Book value per share was $43.30 at September 30, 2021 ($35.90 excluding net unrealized investment gains on fixed maturity securities*).
Additional information regarding net unrealized investment gains on fixed maturity securities at September 30, 2021 is included in Part I - Item 1, Note 3 of the Consolidated Financial Statements as well as in Part I - Item 2 - Investment Results in this report.
Total shareholder dividends paid was $38.6 million for the nine months ended September 30, 2021. In March, May, and September 2021, the Board of Directors (Board) approved regular quarterly dividends of $0.31 per share.
For the nine months ended September 30, 2021, we repurchased 44,685 shares of our common stock at an average price per share of $38.26 under our share repurchase program, which is further described in Part II - Item 8, Note 12 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020. As of September 30, 2021, $18.9 million remained authorized for future share repurchases under the share repurchase program.
Horace Mann Educators Corporation
46
Quarterly Report on Form 10-Q


The following table summarizes our debt obligations.
($ in millions) Interest
Rates 		Final
Maturity 		September 30, 2021 December 31, 2020
Short-term debt
Bank Credit Facility Variable 2026 $ 135.0  $ 135.0 
Long-term debt(1)
4.50% Senior Notes, Aggregate principal
amount of $250.0 less unaccrued
discount of $0.3 and $0.4 and unamortized
debt issuance costs of $1.1 and $1.3
4.50% 2025 248.6  248.3 
FHLB borrowings 0.00% 2022 5.0  54.0 
Total
$ 388.6  $ 437.3 
(1)    We designate debt obligations as "long-term" based on maturity date at issuance.

As of September 30, 2021, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (Senior Notes), which will mature on December 1, 2025, issued at a discount resulting in an effective yield of 4.53%. Interest on the Senior Notes is payable semi-annually at a rate of 4.50%. Detailed information regarding the redemption terms of the Senior Notes is contained in the Part II - Item 8, Note 9 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020. The Senior Notes are traded in the open market (HMN 4.50).
As of September 30, 2021, we had $5.0 million of borrowings outstanding with FHLB. The Board has authorized a maximum amount equal to 25% of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing capacity. The total $5.0 million received matures on May 16, 2022 and is reported as Long-term debt in the Consolidated Balance Sheets.
Effective July 12, 2021, we, as borrower, amended our Credit Agreement (Bank Credit Facility). The amended Bank Credit Facility increased the amount available on the senior revolving credit facility from $225.0 million to $325.0 million. PNC Bank, National Association and JPMorgan Chase Bank, N.A. serve as joint lead arrangers under the amended Bank Credit Facility, with The Northern Trust Company, KeyBank National Association, U.S. Bank National Association, Illinois National Bank, and Comerica Bank as lenders participating in the syndicate. Terms and conditions of the amended Bank Credit Facility are substantially consistent with the prior agreement, with an interest rate based on LIBOR plus 115 basis points.
We expect to utilize the senior revolving credit facility to fund a portion of the acquisition of Madison National, as well as to be available for ongoing working capital, capital expenditures and general corporate expenditures.
As of September 30, 2021, the amount outstanding on the senior revolving credit facility was $135.0 million. The $190.0 million unused portion of the Bank Credit Facility is available for use and subject to a variable commitment fee, which was 0.15% on an annual basis at September 30, 2021.
To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on March 10, 2021. The registration statement, which registered the offer and sale from time to time of an indeterminate amount of various securities, which may include debt securities, common stock, preferred stock, depositary shares, warrants, delayed delivery contracts and/or units that include any of these securities, was automatically effective on March 10, 2021. Unless withdrawn by us earlier, this registration statement will remain effective through March 10, 2024. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.
On March 13, 2018, we filed a "shelf" registration statement on Form S-4 with the SEC which became effective on May 2, 2018. Under this registration statement, we may from time to time offer and issue up to 5,000,000 shares of our common stock in connection with future acquisitions of other businesses, assets or securities. Unless withdrawn by us, this registration statement will remain effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.
Horace Mann Educators Corporation
47
Quarterly Report on Form 10-Q


Financial Ratings
Our principal insurance subsidiaries are rated by AM Best Company, Inc. (AM Best), Fitch, Moody's and S&P. These rating agencies have also assigned ratings to our Senior Notes. The ratings that are assigned by these agencies, which are subject to change, can impact, among other things, our access to sources of capital, cost of capital, and competitive position. These ratings are not a recommendation to buy or hold any of our securities.
Following our July 14 announcement of the planned acquisition of Madison National, AM Best, Fitch and Moody's affirmed our ratings. Among other observations, the agencies noted that, following the close of the transaction, capitalization and leverage metrics are expected to remain in line with rating expectations and the addition of Madison National is expected to improve Horace Mann's value proposition for the education market and further diversify the business.
All four agencies currently have assigned equivalent insurance financial strength ratings to our Property and Casualty and Life insurance subsidiaries. Only AM Best currently rates our Supplemental segment's subsidiaries, and the firm upgraded those ratings on July 14 to align with those of our other subsidiaries. AM Best noted that the upgrade reflects NTA Life's balance sheet strength as well as the support it receives from the parent company and the full integration of their operations within Horace Mann. Assigned ratings and respective affirmation/review dates as of October 31, 2021 were as follows:
Insurance Financial Affirmed/
Strength Ratings (Outlook) Debt Ratings (Outlook) Reviewed
AM Best 7/14/2021
HMEC (parent company)
N.A. bbb (stable)
HMEC's Life subsidiary A (stable) N.A.
HMEC's Property and Casualty subsidiaries
A (stable) N.A.
HMEC's Supplemental subsidiaries
A (stable) N.A.
Fitch A (stable) BBB (stable) 9/14/2021
Moody's A2 (stable) Baa2 (stable) 10/28/2021
S&P A (stable) BBB (stable) 2/18/2021
Reinsurance Programs
Information regarding the reinsurance programs for our Property and Casualty, Supplemental, Retirement and Life segments is located in Part II - Item 8, Note 5 and Note 8 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 3. I Quantitative and Qualitative Disclosures about Market Risk
Market value risk, our primary market risk exposure, is the risk that our invested assets will decrease in value. This decrease in value may be due to (1) a change in the yields realized on our assets and prevailing market yields for similar assets, (2) an unfavorable change in the liquidity of an investment, (3) an unfavorable change in the financial prospects of the issuer of an investment, or (4) a downgrade in the credit rating of the issuer of an investment. Also see Consolidated Results of Operations in Part I - Item 2 of this report regarding net investment gains (losses).
Horace Mann Educators Corporation
48
Quarterly Report on Form 10-Q


Significant changes in interest rates expose us to the risk of experiencing losses or earning a reduced level of income based on the difference between the interest rates earned on our investments and the credited interest rates on our insurance and investment contract liabilities. Also see Consolidated Results of Operations in Part I - Item 2 of this report regarding interest credited to policyholders.
We seek to manage our market value risk by coordinating the projected cash inflows of assets with the projected cash outflows of liabilities. For all of our assets and liabilities, we seek 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 us. Certain fees that we earn from variable annuity deposits are based on the market value of the funds deposited.
More detailed descriptions of our exposure to market value risks and the management of those risks is contained in Part II - Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 4. I Controls and Procedures
Management's Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as amended (Exchange Act), as of September 30, 2021. Based on this evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) that is required to be included in our periodic SEC filings. No material weaknesses in our disclosure controls and procedures were identified in the evaluation and therefore, no corrective actions were taken. There were no significant changes in our 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 our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Horace Mann Educators Corporation
49
Quarterly Report on Form 10-Q


PART II: OTHER INFORMATION
ITEM 1A. I Risk Factors
At the time of issuance of this Quarterly Report on Form 10-Q, we believe there are no material changes from the risk factors as previously disclosed in Part I - Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2. I Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On September 30, 2015, the Board authorized a share repurchase program allowing repurchases of up to $50.0 million of our common stock, par value $0.001 (Program). The Program authorizes the repurchase of our common stock in open market or privately negotiated transactions, from time to time, depending on market conditions. The Program does not have an expiration date and may be limited or terminated at any time without notice. During the three months ended September 30, 2021, we repurchased shares of our common stock under the Program as follows:
Period

Total Number
of Shares
Purchased


Average Price
Paid per Share 		Total Number of Shares Purchased
under the Program 		Approximate Dollar Value
 of Shares that may yet be
Purchased under the
Program
July 1 - 31 5,000  $ 36.88  5,000  $ 18.9  million
August 1 - 31 —  —  —  $ 18.9  million
September 1 - 30 —  —  —  $ 18.9  million
Total 5,000  $ 36.88  5,000  $ 18.9  million
ITEM 5. I Other Information
Not applicable.
ITEM 6. I 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
3.2
Horace Mann Educators Corporation
50
Quarterly Report on Form 10-Q


(4) Instruments defining the rights of security holders, including indentures:
4.1
4.1(a)
4.2
4.3
(10) Material contracts:
10.1
10.1(a)
10.1(b)
10.2*
10.2(a)*
10.2(b)*
10.2(c)*
10.2(d)*
Horace Mann Educators Corporation
51
Quarterly Report on Form 10-Q


10.2(e)*
10.3*
10.3(a)*
10.3(b)*
10.3(c)*
10.3(d)*
10.3(e)*
10.3(f)*
10.3(g)*
10.4*
10.5*
10.6*
Horace Mann Educators Corporation
52
Quarterly Report on Form 10-Q


10.7*
10.8*
10.9*
10.10*
10.10(a)*
10.11*
10.11(a)*
10.11(b)*
10.12
10.13
10.14
(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:
31.1
31.2
(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
Horace Mann Educators Corporation
53
Quarterly Report on Form 10-Q


32.1
32.2
(99) Additional exhibits:
99.1
(101) Interactive Data File:
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
Horace Mann Educators Corporation
54
Quarterly Report on Form 10-Q


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 5, 2021 /s/ Marita Zuraitis
Marita Zuraitis
President and Chief Executive Officer
Date
November 5, 2021 /s/ Bret A. Conklin
Bret A. Conklin
Executive Vice President and
Chief Financial Officer
Date
November 5, 2021 /s/ Kimberly A. Johnson
Kimberly A. Johnson
Senior Vice President, Controller and
Principal Accounting Officer

Horace Mann Educators Corporation
55
Quarterly Report on Form 10-Q

Execution Version STOCK PURCHASE AGREEMENT BY AND AMONG INDEPENDENCE CAPITAL CORP., INDEPENDENCE HOLDING COMPANY AND HORACE MANN EDUCATORS CORPORATION DATED AS OF JULY 14, 2021

 
- i - TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS ......................................................................................................................... 1 1.1 Certain Definitions ..................................................................................................................... 1 1.2 Table of Defined Terms ........................................................................................................... 15 ARTICLE II. PURCHASE AND SALE ..................................................................................................... 17 2.1 Purchase and Sale of the Shares ............................................................................................... 17 2.2 Closing ..................................................................................................................................... 17 2.3 Closing Deliveries .................................................................................................................... 18 2.4 Payment at Closing. ................................................................................................................. 19 2.5 Post-Closing Payment .............................................................................................................. 20 2.6 Earn-Out Payment. ................................................................................................................... 23 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER ................... 24 3.1 Organization and Qualification ................................................................................................ 24 3.2 Organizational Documents ....................................................................................................... 25 3.3 Capitalization. .......................................................................................................................... 25 3.4 Subsidiaries .............................................................................................................................. 26 3.5 Authority; Enforceability. ........................................................................................................ 27 3.6 No Conflict; Required Filings and Consents. .......................................................................... 27 3.7 Material Contracts. ................................................................................................................... 28 3.8 Compliance with Law; Permits. ............................................................................................... 30 3.9 Financial Statements. ............................................................................................................... 32 3.10 Insurance Business. .................................................................................................................. 34 3.11 Producers; Sale Practices; Third Party Administrators. ........................................................... 35 3.12 Existing Reinsurance Contracts. .............................................................................................. 36 3.13 No Undisclosed Liabilities ....................................................................................................... 37 3.14 Absence of Certain Changes or Events .................................................................................... 38 3.15 Absence of Litigation, Claims and Orders ............................................................................... 38 3.16 Employee Benefit Plans. .......................................................................................................... 38 3.17 Labor Matters. .......................................................................................................................... 40 3.18 Real Property. ........................................................................................................................... 41 3.19 Taxes. ....................................................................................................................................... 41 3.20 Intellectual Property and Technology. ..................................................................................... 44 3.21 Insurance .................................................................................................................................. 46 3.22 Environmental Matters. ............................................................................................................ 46 3.23 Affiliated Transactions ............................................................................................................. 47 3.24 Assets ....................................................................................................................................... 48 3.25 Investment Assets..................................................................................................................... 48 3.26 Actuarial Data .......................................................................................................................... 49 3.27 Bank Accounts; Power of Attorney ......................................................................................... 49 3.28 Privacy and Data Security ........................................................................................................ 49 3.29 Brokers ..................................................................................................................................... 50 3.30 CARES Act .............................................................................................................................. 50 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER ............................................... 50 4.1 Organization ............................................................................................................................. 50 4.2 Authority; Enforceability ......................................................................................................... 50

 
TABLE OF CONTENTS (continued) Page - ii - 4.3 No Conflict; Required Filings and Consents ........................................................................... 51 4.4 Absence of Litigation, Claims and Orders ............................................................................... 51 4.5 Sufficient Funds ....................................................................................................................... 51 4.6 Brokers ..................................................................................................................................... 51 4.7 Investment Purpose .................................................................................................................. 51 4.8 Tax Election ............................................................................................................................. 52 ARTICLE V. COVENANTS ...................................................................................................................... 52 5.1 Conduct of Business Pending the Closing ............................................................................... 52 5.2 Access to Information; Confidentiality. ................................................................................... 55 5.3 Governmental Approvals and Filings; Third Party Consents; Third Party Audit. ................... 56 5.4 Notification of Certain Matters ................................................................................................ 59 5.5 Interim Financial Statements.................................................................................................... 59 5.6 Public Announcements............................................................................................................. 60 5.7 Further Assurances ................................................................................................................... 60 5.8 Delivery of Books and Records ............................................................................................... 60 5.9 Access to Books and Records .................................................................................................. 60 5.10 Non-Competition; Non-Solicitation ......................................................................................... 61 5.11 D&O Liabilities ........................................................................................................................ 62 5.12 Employee Matters .................................................................................................................... 62 5.13 Release ..................................................................................................................................... 64 5.14 No Shop .................................................................................................................................... 64 5.15 Intercompany Agreements ....................................................................................................... 65 5.16 Bank Accounts ......................................................................................................................... 66 5.17 Investment Assets..................................................................................................................... 66 5.18 Transaction Expenses. .............................................................................................................. 66 5.19 PolicyPro Software................................................................................................................... 66 5.20 Reinsurance Agreements. ......................................................................................................... 66 5.21 Voting Agreement. ................................................................................................................... 67 5.22 Escrow Agreement. .................................................................................................................. 67 5.23 Transition Services Agreement. ............................................................................................... 67 ARTICLE VI. CONDITIONS PRECEDENT ............................................................................................. 68 6.1 Conditions to Each Party’s Obligations ................................................................................... 68 6.2 Conditions to Obligations of Buyer ......................................................................................... 68 6.3 Conditions to Obligations of Parent and Seller ........................................................................ 69 ARTICLE VII. TERMINATION PRIOR TO CLOSING ........................................................................... 70 7.1 Termination .............................................................................................................................. 70 7.2 Effect of Termination ............................................................................................................... 71 ARTICLE VIII. TAX MATTERS ............................................................................................................... 71 8.1 Responsibility for Filing Tax Returns. ..................................................................................... 71 8.2 Straddle Periods ....................................................................................................................... 72 8.3 Tax Covenants. ......................................................................................................................... 72 8.4 Contests Related to Taxes ........................................................................................................ 73 8.5 Cooperation on Tax Matters..................................................................................................... 73 8.6 Transfer Taxes .......................................................................................................................... 74

 
TABLE OF CONTENTS (continued) Page - iii - 8.7 Section 338(h)(10) Election ..................................................................................................... 74 ARTICLE IX. SURVIVAL AND INDEMNIFICATION .......................................................................... 75 9.1 Survival of Representations and Warranties ............................................................................ 75 9.2 Indemnification. ....................................................................................................................... 75 9.3 Certain Limitations................................................................................................................... 76 9.4 Definitions. As used in this Agreement: ................................................................................. 77 9.5 Procedures for Third Party Claims ........................................................................................... 77 9.6 Direct Claims ........................................................................................................................... 79 9.7 Adjustment to Purchase Price .................................................................................................. 79 9.8 Exclusive Remedy .................................................................................................................... 79 ARTICLE X. MISCELLANEOUS ............................................................................................................. 79 10.1 Amendment .............................................................................................................................. 79 10.2 Waiver ...................................................................................................................................... 79 10.3 Expenses ................................................................................................................................... 79 10.4 Notices...................................................................................................................................... 80 10.5 Specific Performance ............................................................................................................... 81 10.6 Interpretation ............................................................................................................................ 81 10.7 Severability .............................................................................................................................. 82 10.8 Entire Agreement; Third Party Beneficiaries ........................................................................... 82 10.9 Assignment ............................................................................................................................... 82 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative ...................................................... 82 10.11 Governing Law......................................................................................................................... 82 10.12 Jurisdiction; Enforcement. ....................................................................................................... 83 10.13 Certain Limitations................................................................................................................... 83 10.14 Counterparts ............................................................................................................................. 84

 
- iv - Error! Unknown document property name. EXHIBITS Exhibit A — Voting Agreement ANNEXES Annex A — Key Employees Annex B — LA County Policies Annex C — Specified Accounting Principles Annex D — Pro Forma Closing Statement Annex E — Third Party Consents Annex F — Reinsured Business Statutory Earnings Annex G — Company Statutory Earnings Parent Disclosure Schedule Buyer Disclosure Schedule

 
Error! Unknown document property name. STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT, dated as of July 14, 2021 (this “Agreement”), is by and among HORACE MANN EDUCATORS CORPORATION, a Delaware corporation (“Buyer”), INDEPENDENCE HOLDING COMPANY, a Delaware corporation (“Parent”) and INDEPENDENCE CAPITAL CORP., a Delaware corporation (“Seller”). RECITALS WHEREAS, Parent directly owns one hundred percent (100%) of the issued and outstanding capital stock of Seller, which directly owns one hundred percent (100%) of the issued and outstanding shares of common stock, par value $60,000 per share (the “Shares”) of Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (the “Company”); WHEREAS, the Company owns one hundred percent (100%) of the outstanding equity interests of The Abacus Group, LLC, a Georgia limited liability company (“Abacus” and such equity interests, the “Abacus Membership Interests”); WHEREAS, each of (a) the board of directors of Buyer, (b) the board of directors of Seller, (c) the board of directors of Parent, and (d) the board of directors of the Company has approved this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Buyer desires to purchase from Seller, and Seller desires to, and Parent desires to cause Seller to, sell to Buyer, all of the Shares; WHEREAS, as a material inducement to the willingness of Buyer to enter into this Agreement, each of the employees set forth on Annex A (the “Key Employees”) has entered into an employment arrangement with the Company, which employment arrangements are conditional upon and effective upon the Closing (the “New Employment Arrangements”); and (ii) the Seller has delivered to Purchaser a voting and support agreement, executed by certain beneficial owners and/or holders of record of shares of common stock of Parent (the “Stockholders”), in the form attached hereto as Exhibit A (the “Voting Agreement”), pursuant to which each such Stockholder has agreed to vote in favor of the Parent Voting Matters; NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE I. DEFINITIONS 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

 
- 2 - “ACA Taxes” means any “health insurer provider” fee or other similar fee imposed by any Governmental Authority in connection with the Patient Protection and Affordable Care Act, including under Section 9010 thereof and including any assessments or fees imposed by any Governmental Authority of any state or other jurisdictions in connection with the existence or operation of, or participation in, any health insurance exchange or marketplace of such state or jurisdictions. “Adjusted Statutory Book Value” means, as of any date of determination, an amount equal to the sum of (a) the capital and surplus of the Company as of such date, as would be required to be reflected in line 38, column 1, plus (b) the asset valuation reserve of the Company as of such date as would be required to be reflected in line 24.01, column 1 (in each case of (a) and (b), in the “Liabilities, Surplus and Other Funds” section of the National Association of Insurance Commissioners statement blank used to prepare the Company’s balance sheet in the most recent statutory financial statement filed by the Company with the Wisconsin Office of the Commissioner of Insurance) minus (c) the Deferred Tax Asset as of such date (which, for the avoidance doubt, shall not be offset by the Deferred Tax Loss as of such date), in each case, to the extent applicable, as adjusted to give effect to (i) the transactions contemplated by the SSL Reinsurance Agreement and the IAIC Reinsurance Agreement, and (ii) the transactions contemplated herein to occur on or prior to the Closing. “Adjusted Statutory Book Value Deficit” means the amount, if any, by which (i) for purposes of the Closing Payment, the Adjusted Statutory Book Value Target for purposes of the Closing Payment exceeds the Adjusted Statutory Book Value estimated as of the Effective Time pursuant to Section 2.4, and (ii) for purposes of the Final Closing Payment, the Adjusted Statutory Book Value Target exceeds the Adjusted Statutory Book Value, each determined as of the Effective Time pursuant to Section 2.5. “Adjusted Statutory Book Value Surplus” means the amount, if any, by which (i) for purposes of the Closing Payment, the Adjusted Statutory Book Value estimated as of the Effective Time pursuant to Section 2.4 exceeds the Adjusted Statutory Book Value Target for purposes of the Closing Payment, and (ii) for purposes of the Final Closing Payment, the Adjusted Statutory Book Value exceeds the Adjusted Statutory Book Value Target, each determined as of the Effective Time pursuant to Section 2.5. “Adjusted Statutory Book Value Target” means, $88,000,000 for purposes of determining the Closing Payment as of the Closing Date, provided that for purposes of determining the Final Closing Payment, the Adjusted Statutory Book Value Target shall be calculated using an amount that is the greater of $88,000,000 and the amount of surplus that would at least result in the Company having an RBC Ratio of 807% after taking into account the transactions contemplated to occur on or prior to the Closing. “Affiliate” means, with respect to a specified Person at the time of determination, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For purposes of this definition, the term “control” (including its correlative meanings “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or

 
- 3 - otherwise). For the avoidance of doubt, unless otherwise specified herein, the Company and Abacus shall each be deemed an “Affiliate” of Parent and Seller (and not Buyer) prior to the Closing, and shall each be deemed an “Affiliate” of Buyer (and not Parent or Seller) from and after the Closing. “Applicable Rate” means an interest rate equal to 1.5% per annum. “Authorized Control Level RBC” means with respect to the Company as of any date of determination, its authorized control level risk based capital, as defined in Wis. Admin. Code § Ins 51.01(3) as in effect on the date of determination and calculated in accordance with the Specified Accounting Principles. “Base Price” means $172,500,000. “Book Value” means, as of any date, (i) with respect to any Investment Asset held by the Company, the carrying value thereof as would be set forth, as of such date, in the statement of annual condition in the statutory financial statements of the Company (assuming such date was the end of an annual period) determined in accordance with SAP applicable to the Company, consistently applied and (ii) with respect to any Investment Asset held by Abacus, the carrying value thereof as would be set forth, as of such date, in the balance sheet of Abacus, determined in accordance with GAAP, consistently applied. “Books and Records” means all written or electronic accounts, ledgers and records (including computer generated, recorded or stored records) of (i) the Company and Abacus, or (ii) Parent or any of Parent’s Affiliates to the extent relating to the Company or Abacus, in each case, whether or not in the custody of the Company, Abacus, Parent or any of Parent’s Affiliates, including customer lists, contract forms, applications, enrollment forms, policy information, policyholder information, claim records, sales records, underwriting records, administrative, pricing, underwriting, claims handling and reserving manuals, corporate (including Employee records) and accounting, reinsurance and other records (including the books of account and other records), agreements of the Company or Abacus (including agreements with Independent Producers), Tax records (including Tax Returns of the Company and Abacus), disclosure and other documents and filings required under applicable Law, financial records, and compliance records relating to the Company and Abacus, including any database, magnetic or optical media and any other form of recorded, computer generated or stored information or process relating to the operations of the Company and Abacus. “Burdensome Condition” means any arrangement, condition or restriction imposed by any Governmental Authority on Buyer, the Company or Abacus as a condition of such Governmental Authority’s approval of the transactions contemplated by this Agreement (i) to offer, sell or hold separate or agree to offer, sell, divest or discontinue, before or after the Closing Date, any properties, assets, business or licenses of Buyer, its Affiliates or the Company or Abacus, (ii) to fund or commit to fund any capital contribution to or for the benefit of the Company, (iii) to limit the declaration and payment of ordinary dividends, (iv) that requires Buyer or any of its Affiliates to commence, threaten or otherwise seek to commence any Proceeding against a Governmental Authority, (v) that, individually or in the aggregate, are materially adverse to the combined businesses of Buyer, the Company and their respective Subsidiaries, taken as a whole, following

 
- 4 - the Closing, or (vi) that is reasonably likely to have a material negative effect on or impairment of the economic benefits that, as of the date hereof, Buyer reasonably expects to derive from the consummation of the transactions contemplated hereby, had such Persons not been obligated to take or refrain from taking the relevant action or to become subject to the relevant condition, limitation, restriction or requirement being imposed by a Governmental Authority. “Business” means the business conducted by the Company and Abacus prior to the Closing, including the underwriting, issuance, sale, renewal, administration and servicing of the insurance policies of the Company and its related business. “Business Day” means any day other than a Saturday, Sunday or day on which banks are permitted or required by Law to close in Chicago, Illinois or Stamford, Connecticut. “Buyer Disclosure Schedule” means the Buyer Disclosure Schedule delivered by Buyer to Seller concurrently with the execution of this Agreement. “Buyer Expenses” means all fees and expenses incurred or payable by or on behalf of Buyer or its Affiliates in connection with this Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting, finders and all other fees and expenses. “Buyer Material Adverse Effect” means any fact, circumstance, condition, event, development, occurrence, change or effect that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement. “CARES Act” means the Coronavirus Aid, Relief and Economic Security Act, as signed into law by the President of the United States on March 27, 2020, and the Continuing Appropriations Act, 2021 and Other Extensions Act, as signed into law by the President of the United States on December 27, 2020. “Closing Indebtedness” means the Indebtedness of the Company and Abacus as of the Closing, which amount, for the avoidance of doubt, is to be expressed as a positive number. “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. “Company Material Adverse Effect” means any fact, circumstance, condition, event, development, occurrence, change or effect that has had, or would reasonably be expected to have, individually or in the aggregate, (a) a material adverse effect on the business, capitalization, operations, results of operations, properties, assets, liabilities or condition (financial or other) of the Company or Abacus, taken as a whole, but excluding any such effect to the extent resulting from or arising out of: (i) changes in general political, economic or securities or financial market conditions (including general changes in interest rates or equity prices); (ii) any matter affecting the life and health insurance industries in which the Company or Abacus participates generally; (iii) any change or proposed change in GAAP, SAP or applicable Law; (iv) natural catastrophe events, hostilities, acts of war or terrorism, or any escalation or worsening thereof; or (v) the public

 
- 5 - announcement of the transactions contemplated hereby; except in the case of clauses (i) through (iv), to the extent such changes or effects affect the Company in a materially disproportionate manner relative to such other participants in the businesses and industries in which the Company operates, or (b) a material adverse effect on the ability of Parent or Seller to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement. “Company Statutory Earnings” means an amount equal to the net income of the Company as set forth on Line 35, Column 1, Page 4 (“Summary of Operations”) of the audited annual statutory financial statement of the Company for the calendar year ended on December 31, 2023 as filed with the Insurance Regulator in the Company’s domiciliary jurisdiction, minus the Net Investment Income Adjustment. The line, column, and page references are based on the Company’s 2020 annual statement and shall be such corresponding line, column, and page number of the Company’s 2023 annual statement. An example calculation of Company Statutory Earnings using 2020 data is included on Annex G. “Computer Programs” means currently existing and available prior versions retired since January 1, 2018 of (i) computer programs or other Software owned or used by or licensed to the Company or Abacus, including all object code and all source code other than open source code, all executables and run books (and related Contracts with escrow agents), (ii) Software databases, including structures, format, procedures and associated documentation for the organization, storage and sorting of information, to the extent developed by or licensed to or used by the Company or Abacus, (iii) parameter settings and configuration settings with respect to the items described in each of (i)-(ii), (iv) available descriptions, specifications, flow-charts, templates, maps and any other work product used to design, plan, organize and develop each of (i)–(ii), to the extent developed by or licensed to or used by the Company or Abacus, and (v) documentation, including design and development artifacts, test data and scripts, user manuals, system documentation, operations manuals/instructions and training materials, relating to each of (i)–(iv). “Confidentiality Agreement” means the Mutual Non-Disclosure Agreement among Buyer, the Company and SSL, dated August 13, 2020, as amended on March 23, 2021. “Court” means any court or arbitration tribunal of the United States, any domestic state, any foreign country and any political subdivision or agency thereof. “Data Input Inaccuracies” means inaccuracies or omissions in (i) the inputting of factual data, including data (and omission of data) relating to the inventory of insurance policies in force, the terms of such policies or contracts, the relevant information related to the owners or insureds of such insurance policies, the Reserves, the Investment Assets held by the Company or Abacus or insurance policies and transactions related thereto, or (ii) the coding, compilation or aggregation of such factual data, in either case other than omissions in the factual data inputs resulting from reasonable judgments made by an actuary or other financial professional as to the scope of factual data inputs (or omissions of factual data inputs). “Deferred Tax Asset” means, as of any date of determination, the gross deferred tax assets, reduced by any statutory valuation allowances and any nonadmitted deferred tax assets, of the Company as of such date as would be reported in footnote 9.A.1. in the Notes to Financial Statements in the National Association of Insurance Commissioners statement blank used to

 
- 6 - prepare the Company’s balance sheet in the most recent statutory financial statement filed by the Company with the Wisconsin Office of the Commissioner of Insurance. “Deferred Tax Loss” means, as of any date of determination, the deferred tax liabilities of the Company as of such date as would be reported in footnote 9.A.1. in the Notes to Financial Statements in the National Association of Insurance Commissioners statement blank used to prepare the Company’s balance sheet in the most recent statutory financial statement filed by the Company with the Wisconsin Office of the Commissioner of Insurance. “Developer” means Realized Solutions Inc., a Connecticut corporation. “Earn-Out End Date” means December 31, 2023. “Employee” means any employee of the Company or Abacus. “Employee Plan” means a written or unwritten plan, policy, program, agreement or arrangement, whether covering a single individual or a group of individuals, sponsored, maintained or contributed to by the Company or any ERISA Affiliate, which provides benefits or compensation to or on behalf of Employees, or any of their beneficiaries, dependents, spouses or other family members, that is (i) an “employee benefit plan” within the meaning of Section 3(3) of ERISA, (ii) a stock bonus, stock purchase, stock option, restricted stock, stock appreciation right or similar equity-based plan or arrangement, or (iii) any other employment, severance, deferred- compensation, retirement, welfare-benefit, bonus, retention, termination, change in control, incentive or fringe benefit plan, policy, program, agreement or arrangement. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. “ERISA Affiliate” means an entity (whether or not incorporated) required to be treated as a single employer with the Company or Abacus under Section 414 of the Code. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended. “Excluded Employees” means . “Excluded Employee Liabilities” means all Liabilities (including for Taxes) in respect of Excluded Employees arising out of or in connection with (i) any payments, compensation, benefits or entitlements that Parent or any of its Affiliates owes or is obligated to provide, whether currently, prospectively or on a contingent basis, with respect to any current or former Employee that is an Excluded Employee, including wages, other remuneration, holiday or vacation pay, bonus, severance pay (statutory or otherwise), commissions, post-employment medical or life obligations, pension contributions, insurance premiums, and Taxes, (ii) under, or with respect to, ERISA, the U.S. Worker Adjustment and Retraining Notification Act, Section 4980 of the Code, or any labor or similar applicable law, that are incurred, accrued or arise prior to, or in connection with, the Closing, including any Taxes imposed under Sections 3101, 3111 or 3301 of the Code, whether or not yet required to be paid or recognized, (iii) any Employee Plan or (iv) the employment, transfer or termination of employment.

 
- 7 - “Excluded Liabilities” means all Liabilities in respect of (i) Indemnified Taxes, (ii) Excluded Employee Liabilities, (iii) any Reorganization and any ownership or operation of any Person that was a Subsidiary of the Company prior to the date hereof, (iv) any Security Breach at the Company or Abacus or at a third party service provider (including any third-party administrators) to which the Company or Abacus provides or has ever provided Personal Information or other confidential information that is known to have occurred on or prior to the Closing Date, whenever or however arising, including any Security Breach identified in the Parent Disclosure Schedule, (v) the FCE and RSA Liabilities or any Proceedings or Orders set forth or required to be set forth on Section 3.15 of the Parent Disclosure Schedule, or any other Action, fine or penalties by or imposed by any Governmental Authority against Buyer or its Affiliates (including the Company and Abacus following Closing) relating to acts, omissions, or occurrences by the Company or Abacus or their representatives occurring prior to Closing, (vi) the Reinsurance Transactions Excluded Liabilities and (vii) any claim that the PolicyPro Software or its intended use infringes or misappropriates the intellectual property or other proprietary rights of any other Person or any other claim or dispute against the Company or Abacus (or, following the Closing, Buyer or its Affiliates) in connection with or challenging the ownership of or right to use the PolicyPro Software and all related pre-existing works therein and other deliverables under the Software Agreements. “FCE and RSA Liabilities” means any and all awards, judgments, fines, penalties, expenses, interest and other costs imposed, relating to (i) the litigation between the Company and its Affiliates and FCE Benefits Administrators, Inc. pending in the United States District Court, Northern District of Texas, Dallas Division and disclosed on Section 3.15 of the Parent Disclosure Schedule, or (ii) the Regulatory Settlement Agreement, including any failure to materially comply with the terms thereof. “Filing” means any registration, petition, statement, application, schedule, form, declaration, notice, notification, report, submission or other filing. “Financial Statements” means, collectively, the Statutory Statements and the Consolidated Statements. “GAAP” means generally accepted accounting principles consistently applied. “Governmental Approval” means any consent, approval or authorization of, or registration, declaration or filing with, any Governmental Authority. “Governmental Authority” means any governmental agency or authority of the United States, any domestic state, any foreign country and any political subdivision or agency thereof, including any administrative agency, board or commission. “IAIC” means Independence American Insurance Company, a Delaware corporation. “Indebtedness” means, without duplication, the Company’s and Abacus’ (i) outstanding indebtedness for borrowed money and all obligations represented by or owed under bonds, notes, debentures, loan agreements, reimbursement agreements or other similar instruments and debt securities, including accrued interest and prepayment premiums, penalties and breakage fees

 
- 8 - related thereto, (ii) obligations (including breakage costs and termination payments) payable under interest rate protection agreements, swaps, hedges or other instruments, (iii) all or any part of the deferred purchase price of property or services (other than trade payables), including any “earnout” or similar payments or any non-compete payments, (iv) all indebtedness secured by a Lien to secure all or part of the purchase price of the property subject to such Lien, (v) deferred revenue, (vi) self-insurance accruals, (vii) all Liabilities with respect to accrued but unpaid bonus payments, accrued or owed by the Company as of the Closing in respect of any performance period (or portion thereof) prior to and up to the Closing, together with the employer portion of any Taxes arising therefrom, to the extent not included in the Transaction Expenses, (viii) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Employee is entitled pursuant to the policies applicable to such Employee immediately prior to the Closing, (ix) all obligations with respect to the net current Tax liabilities of the Company that are allocable to any taxable year (or portion thereof) ending on (and including), or prior to, the Closing Date (treating for purposes of this Agreement the taxable year of the Company that includes the Closing Date as closing on (and including) the Closing Date), and (x) guarantees of any of the foregoing. “Indemnified Taxes” means, except to the extent taken into account in determining the Purchase Price as finally determined pursuant to Section 2.5, (a) any and all Taxes imposed on or with respect to the Company or Abacus for any Pre-Closing Tax Period, (b) Taxes of any other Person for which the Company or Abacus becomes liable (i) as the result of being a member of an affiliated, combined, unitary, consolidated or similar group, (ii) as a transferee or successor, by contract or otherwise or (iii) under any Tax allocation, Tax sharing, Tax indemnity or similar agreement (excluding any commercial agreement entered into in the ordinary course of business and not primarily relating to Taxes), in each case of clauses (i)-(iii), as a result of a relationship or arrangement in existence prior to the Closing Date, (c) Taxes attributable to any increase in the transition amount under section 13517(c)(3) of the Tax Cuts and Jobs Act, P.L. No. 115-97 as a result of any Tax adjustment to such amount after the date hereof, and (d) Transfer Taxes. For purposes of this Agreement, whenever it is necessary to determine the portion of any Taxes imposed on or with respect to the Company or Abacus for the Straddle Period, the amount of any real property, personal property or similar ad valorem Taxes which are imposed on a periodic basis shall be determined ratably on a per diem basis, and the amount of any other Taxes that are allocable to the Pre-Closing Tax Period shall be determined based on an interim closing of the books of the Company or Abacus as of the Closing Date and, to the extent relevant, in accordance with the provisions of Treasury Regulations Section 1.1502-76(b)(1)(ii)(A) and (B) (and similar provisions of state, local or non-U.S. Law). “Independent Producer” means any Person, other than the Company, Abacus or any Employee, engaged in the solicitation, negotiation, effectuation, marketing, sale or placement of any insurance policy underwritten by the Company or of any other products or services marketed, sold or provided by the Company or Abacus. “Insurance Contract” means any contract or policy of insurance or reinsurance, binder, slip, endorsement or certificate, and forms with respect thereto, including any life, health, accident and disability insurance policy and any other insurance policy or insurance contract or certificate, in each case issued, reinsured or assumed by the Company.

 
- 9 - “Insurance Regulator” means, with respect to any jurisdiction, the Governmental Authority charged with the supervision of insurance companies in such jurisdiction. “Intellectual Property” means, on a worldwide basis, any or all of the following: (i) trademarks, service marks, trade dress, and other indicia of source, and any pending applications and registrations therefor now or hereafter in force, and all goodwill related thereto; (ii) trade names, corporate names, assumed names or fictitious names and any registrations or foreign qualifications therefor now or hereafter in force; (iii) domain names and any registrations therefor now or hereafter in force, including access to the codes necessary to transfer such domain registrations; (iv) copyrights and any registrations or applications therefor now or hereafter in force; (v) intellectual property rights with regard to the Computer Programs; (vi) patents and patent applications, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues thereof now or hereafter in force; (vii) know-how and trade secrets under applicable Law; and (viii) in each case, all administrative and legal rights arising therefrom and relating thereto. “Investment Assets” means any interest in any bonds, notes, debentures, mortgage loans, real estate, instruments of indebtedness, stocks, partnership, membership or joint venture interests, and all other equity interests, certificates issued by or interests in trusts, derivatives, or other assets acquired for investment purposes. “IT Systems” means the hardware, Software, data, databases, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, wide area network and other information technology equipment owned, leased or licensed by the Company or Abacus. “Knowledge” means, with respect to Parent or Seller, the actual knowledge, after reasonable inquiry, of those Persons listed in Section 1.1(a) of the Parent Disclosure Schedule, and, with respect to Buyer, the actual knowledge, after reasonable inquiry, of those Persons listed in Section 1.1(a) of the Buyer Disclosure Schedule. “LA County Policies” means all insurance policies or related business issued by the Company that are described on Annex B. “LA County Policies Excess Loss” means any excess loss in respect of the LA County Policies, determined and calculated in accordance with Annex B. “Law” means all laws, statutes, ordinances, directives, Regulations and similar mandates of any Governmental Authority, including all Orders having the effect of law in any jurisdiction. “Liabilities” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise.

 
- 10 - “Lien” means any mortgage, deed of trust, pledge, hypothecation, security interest, encumbrance, claim, lien or charge of any kind. “Material Independent Producers” means the ten (10) largest Independent Producers (determined by reference to gross premium volume on Insurance Contracts placed by such Independent Producers in aggregate for the (i) six (6) months ended June 30, 2021, and (ii) the twelve (12) months ended December 31, 2020 and December 31, 2019) that have produced at least 80% of the Company’s business in each of such period. “NAIC” means the National Association of Insurance Commissioners. “Net Investment Income Adjustment” has the meaning set forth in Annex G. “Non-Guaranteed Elements” means cost of insurance charges, loads and expense charges, credited interest rates, discretionary bonus features, mortality and expense charges, administrative expense risk charges, variable premium rates and variable paid-up amounts, retrospective bonuses, and any other unspecified premiums, features or charges that the Company can unilaterally change, each as applicable under the Insurance Contracts. “Order” means any binding judgment, order, writ, injunction, ruling or decree of, or any settlement under the jurisdiction of, any Court or Governmental Authority. “Organizational Documents” means, with respect to any Person, the certificate of incorporation, bylaws, certificate of organization, operating agreement or other applicable organizational documents of such Person. “Parent Disclosure Schedule” means the Parent Disclosure Schedule delivered by Parent to Buyer concurrently with the execution of this Agreement. “Parent Voting Matters” means, collectively, the approval of (i) the transactions contemplated hereby, and (ii) any other matters required by applicable Law to be approved or adopted by the Stockholders to effect the transactions contemplated hereby. “Permits” mean all franchises, authorizations, consents, approvals, licenses, registrations, certificates, Orders, permits or other rights and privileges issued by any Governmental Authority. “Permitted Lien” means, with respect to any asset, any: (i) carriers’, mechanics’, materialmens’ or similar Lien with respect to amounts not yet due which do not interfere in any material respect with the conduct of the Business of the Company or Abacus as it is currently conducted; (ii) Lien related to deposits required by applicable Law to be made to any Insurance Regulator; or (iii) Lien for Taxes, assessments or other governmental charges not yet due and payable or due and payable but not delinquent or the amount or validity of which is being contested in good faith and for which adequate reserves are set forth in the financial statements of the Company and Abacus. “Person” means an individual, corporation, partnership, association, trust, estate, unincorporated organization, limited liability company or other entity or group (as defined in Section 13(d)(3) of the Exchange Act).

 
- 11 - “Personal Information” means any of the following categories of information, in any format whether written, electronic, or otherwise: (i) any “nonpublic personal information” as such term is defined under Title V of the U.S. Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., and the rules and regulations issued thereunder, (ii) any personally identifiable information in the possession of or applicable to the Company that is protected by applicable Law related to data security and privacy, such as the following identifiers to the extent protected by applicable Law: name, signature, address, social security number, telephone number or other unique identifier, (iii) information in the possession of or applicable to the Company that can be used to authenticate an individual that is protected by applicable Law related to data security and privacy, such as the following identifiers to the extent protected by applicable Law: including passwords or PINs, biometric data, unique identification numbers, answer to security questions, or other personal identifiers, or (iv) any “protected health information” in the possession of or applicable to the Company as such term is defined under the Health Insurance Portability and Accountability Act of 1996, as amended and the rules and regulations issued thereunder. “PolicyPro Software” means all Software Programs, Covered Software and Deliverables (each as defined in the Software Agreements), including for the platform referred to as “PolicyPro” and “MNL Customer Portal” and other commonly used names to describe the same, under the Software Agreements. “Post-Closing Tax Period” means any taxable period or portion of a taxable period that is not a Pre-Closing Tax Period. “Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and that portion of any Straddle Period through the end of the Closing Date determined in accordance with Section 8.2. “Proceeding” means any legal, administrative, arbitral or other proceeding, suit, claim, investigation, demand, complaint, hearing, dispute or other action by or before any Governmental Authority, mediator or arbitrator. “Prorated Portion” means the percentage derived by dividing (a) the amount by which Company Statutory Earnings exceed $15,250,000 by (b) $1,250,000. “RBC Ratio” means with respect to the Company as of any date of determination the ratio of its “total adjusted capital” as defined in Wis. Admin. Code § Ins 51.01(23) as in effect on the date of determination and calculated in accordance with the Specified Accounting Principles over its Authorized Control Level RBC. “Regulation” means any rule, regulation, policy or interpretation (regarding such rule, regulation or policy) of any Governmental Authority. “Regulatory Settlement Agreement” means that certain Regulatory Settlement Agreement by and among the Company and the states and other jurisdictions party thereto, executed by the Company on June 25, 2020.

 
- 12 - “Reinsured Business Statutory Earnings” means, for any calendar year, the amount calculated pursuant to Annex F. “Reinsurance Transactions Excluded Liabilities” means (i) all extra-contractual Liabilities relating to the business covered under the SSL Reinsurance Agreement or the IAIC Reinsurance Agreement, including for consequential, exemplary, punitive, compensatory, special, statutory or regulatory damages (or fines, penalties, forfeitures or similar charges of a penal or disciplinary nature) or any other form of extra-contractual damages or liability arising from any alleged or actual act, error or omission (whether or not intentional, in bad faith or otherwise) of either ceding company thereunder, their respective Affiliates, or Parent and any of its Affiliates (including the Company and Abacus before Closing) including relating to (a) the marketing, underwriting, production, sale, issuance, cancellation or administration (through any third party administrator or otherwise) of such reinsured business, (b) the investigation, defense, trial, settlement or handling of claims, benefits or payments arising out of, under or with respect to such reinsured business, (c) the failure to pay, or the delay in payment, of benefits, claims or any other amounts due or alleged to be due under or in connection with such reinsured business or errors in calculating or administering the payment of, benefits, claims or any other amounts due or alleged to be due under or in connection with such reinsured business, (d) any ex-gratia payment made with respect to such reinsured business, (e) the failure of any such reinsured business to comply with the requirements of applicable Law or to provide the purchaser, policyholder, account holder or other holder or intended beneficiaries thereof with Tax treatment under the Code that is the same as or more favorable than the Tax treatment under the Code, (ii) any costs of the Company to establish and maintain one or more trust accounts pursuant to SSL Reinsurance Agreement or the IAIC Reinsurance Agreement, or in respect of any security account, control account or similar accounts relating to the business reinsured under the SSL Reinsurance Agreement or the IAIC Reinsurance Agreement, (iii) any costs or expenses in incurred by the Company in any enforcing any of its rights or any obligations of the applicable counterparty under the SSL Reinsurance Agreement or the IAIC Reinsurance Agreement, (iv) any Liability or losses other than arising from the reinsured business that are assumed, suffered or incurred by the Company under the SSL Reinsurance Agreement or the IAIC Reinsurance Agreement, and (v) any negative Reinsured Business Statutory Earnings; provided however, that the Reinsurance Transaction Excluded Liabilities will not include any Liabilities which directly arise from and after the Closing Date out of the failure of the Company or Buyer to comply with (1) the applicable reinsurance treaties relating to the foregoing (unless such failure is due to any breach of obligation by Parent or its Affiliates) or (2) applicable Law. “Representatives” means, with respect to any Person, its officers, managers, employees, investment bankers, attorneys, accountants, financial or other advisors or other agents. “Reserves” means all reserves and other liabilities for claims, benefits, losses (including incurred but not reported losses and losses in the course of settlement), expenses and unearned premium arising under or in connection with an Insurance Contract. “SAP” means, with respect to any regulated insurance company, the statutory accounting practices prescribed by the Governmental Authority responsible for the regulation of insurance companies in the jurisdiction in which such company is domiciled, consistently applied.

 
- 13 - “SEC” means the Securities and Exchange Commission. “Schedules” means collectively the Parent Disclosure Schedules and the Buyer Disclosure Schedules. “Security Breach” means any actual or reported (i) loss or misuse (by any means) of Personal Information, (ii) unauthorized access to any IT System that compromises the privacy or security of Personal Information, (iii) inadvertent, unauthorized and/or unlawful processing of Personal Information, or (iv) other act or omission that compromises or may compromise the security, confidentiality or integrity of Personal Information or the security or operation of any IT System. “Seller Party” means Parent, Seller and any of their Affiliates that is or will be a party to a Transaction Document; provided, however, that none of the Stockholders will be a Seller Party hereunder. “Software” means all computer software, including but not limited to application software, system software, firmware, middleware, mobile digital applications, application programing interfaces (APIs) and other software interfaces, software development kits (SDKs), assemblers, applets, compilers and binary libraries including all source code and object code versions and materials pertaining thereto of any and all of the foregoing, in any and all forms and media, and all related documentation. “Software Agreements” means collectively, (i) that certain Master Services Agreement, dated August 15, 2016, by and between the Company and the Developer, (ii) that certain Software Development Agreement, dated June 27, 2018, by and between the Company and the Developer, (iii) that certain Software Maintenance Agreement effective July 1, 2021 by and between the Company and the Developer, and (iv) any other agreements between the Company and the Developer in respect of Software, corrections, improvements, updates and releases thereof. “Specified Accounting Principles” means the principles, practices and methodologies set forth on Annex C. “SSL” means Standard Security Life Insurance Company of New York, a New York domiciled insurance company. “SSL Stock Purchase Agreement” means that certain Stock Purchase Agreement, dated as of April 14, 2021, by and among Parent, Seller and Reliance Standard Life Insurance Company. “Straddle Period” means any taxable period beginning before and ending after the Closing Date. “Subsidiary” with respect to any Person, means any corporation, partnership, joint venture, limited liability company or other legal entity of which such Person owns, directly or indirectly, greater than 50% of the capital stock or other equity interests that are generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, joint venture, limited liability company or other legal entity or to vote as a general partner thereof.

 
- 14 - “Tax” or “Taxes” means any federal, state, local or non-U.S. income, excise, environmental, capital stock, profits, social security (or similar), disability, registration, value added, estimated, gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, unemployment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes or assessments of any kind whatsoever, together with all interest, fines, penalties or additions imposed by any taxing authority (domestic or foreign) on such entity. “Tax Returns” means all returns, declarations, reports, and information statements and returns required or permitted to be filed with a Governmental Authority relating to Taxes, including, but not limited to, original returns and filings, amended returns, claims for refunds, and information returns (federal, state, foreign, municipal or local), and any schedules attached to any of the foregoing. “TPA Audit” means one or more audits performed by one or more third parties engaged by Buyer following Closing with respect to any of the third party administrators of the Company that were acting as third party administrators of the Company on or prior to the Closing Date. “Transaction Documents” means this Agreement, the Transition Services Agreement and such other instruments and agreements required by this Agreement to be executed and delivered hereunder. For the avoidance of doubt, the SSL Stock Purchase Agreement, the SSL Reinsurance Agreement and the IAIC Reinsurance Agreements will not be deemed Transaction Documents hereunder. “Transaction Expenses” means the sum, without duplication, of the following and to the extent not included in Indebtedness: (i) all fees and expenses incurred or payable by or on behalf of the Company or Abacus which are incurred by or on behalf of the Company or Abacus prior to, and remain unpaid at, the Closing in connection with this Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, regulatory or consent fees, consulting, finders and all other fees and expenses (in each case whether or not billed or invoiced prior to the Closing); (ii) any unpaid bonus, retention, change-in-control, transaction or similar payment obligations, or any severance payments, of the Company or Abacus to any Person resulting from, or in connection with, the transactions contemplated hereby or any commitment made prior to the Closing by the Company or Abacus to make any bonus, retention, change-in- control, transaction or similar payments to any Person (regardless of when payment is due); (iii) all unpaid Transaction Payroll Taxes related to the payment Transaction Expenses described in clause (ii) above; (iv) all unpaid Transfer Taxes, and (v) the cost of purchasing the tail policy referred to in Section 5.11, all to the extent not otherwise unaccrued. For purposes of clarity, “Transaction Expenses” shall be calculated prior to giving effect to any payment of such amounts by or on behalf of Parent, Seller, the Company, Abacus or Buyer in connection with or following the Closing. “Transaction Payroll Taxes” means the employer portion of any payroll or similar Taxes, including employment insurance contributions and premiums incurred by the Company prior to the Closing in connection with any bonuses, retention, change-in-control or similar payments in connection with the transactions contemplated hereby, and any employment taxes due from the

 
- 15 - Company on or after the Closing Date resulting from exercise of options or stock appreciation rights that the Employees have as of the Closing Date. “Transfer Taxes” means all sales, use, transfer, valued added, goods and services, gross receipts, excise, conveyance, documentary, stamp duty, recording, registration and other similar Taxes, charges and fees (including any penalties, interest and additions to Tax) incurred in connection with the Transactions, whether payable by Parent, Seller, the Company, Abacus or Buyer. “Transition Services Agreement” means the Transition Services Agreement by and between Buyer and Parent to be entered into at Closing pursuant to Section 5.23. “Treasury Regulations” means all proposed, temporary and final regulations promulgated under the Code, as such regulations may be amended from time to time. “Unclaimed Property Matter” means any and all matters to the extent arising out of or reflecting (i) the use or non-use of the Social Security Death Master File in the administration of the Insurance Contracts, (ii) amounts of unclaimed property or escheat obligations relating to the Insurance Contracts, the Company or Abacus, including, without limitation, in respect of unclaimed life insurance or other benefits and amounts payable to beneficiaries or any other Persons under the Insurance Contracts or otherwise or (iii) any audit or investigation by or on behalf of any Governmental Authority or third party relating to the foregoing. 1.2 Table of Defined Terms. Terms that are not defined in Section 1.1 have the meanings set forth in the following Sections: Abacus ........................................................................................................... Recitals Abacus Membership Interests ....................................................................... Recitals Abacus Purchase Date ................................................................................... 3.3(d) Accounting Arbitrator ................................................................................... 8.7(b) Acquired Business ......................................................................................... 5.10(c)(ii) Adjustment Report ........................................................................................ 2.5(c)(v) Agreed Allocation ......................................................................................... 8.7(b) Agreement ..................................................................................................... Preamble Alternative Transaction ................................................................................. 5.14(b) Assumed Reinsurance Contracts ................................................................... 3.12(b) Audited Financials Delivery Date ................................................................. 5.22 Buyer ............................................................................................................. Preamble Buyer 401(k) Plan ......................................................................................... 5.12(b) Buyer’s Allocation ........................................................................................ 8.7(b) Buyer Indemnified Persons ........................................................................... 9.2(a) Ceded Reinsurance Contracts ....................................................................... 3.12(a) Closing .......................................................................................................... 2.2 Closing Date .................................................................................................. 2.2 Closing Payment ........................................................................................... 2.4(b)(i) Closing Statement ......................................................................................... 2.5(b) COBRA ......................................................................................................... 5.12(f)

 
- 16 - Company ....................................................................................................... Recitals Company 401(k) Plan ................................................................................... 5.12(b) Company Actuarial Analyses ........................................................................ 3.26 Company Employee Plan .............................................................................. Company Intellectual Property Rights .......................................................... 3.16(a) 3.20(a) Company Real Property Leases .................................................................... 3.18(a) Competing Business ...................................................................................... 5.10(a) Condition Satisfaction ................................................................................... 2.2 Confidential Information ............................................................................... 5.2(b) Consolidated Statements ............................................................................... 3.9(b) Continuing Employee ................................................................................... 5.12(a)(i) Deductible ..................................................................................................... 9.3(a) Definitive Consent Statement ....................................................................... 5.3(e) Delaware Court ............................................................................................. 10.12(a) Dispositions ................................................................................................... Recitals Dispute Notice ............................................................................................... 2.5(c)(ii) Distribution Recovery Right ......................................................................... 5.18(b) Earn-Out Payment ......................................................................................... 2.6(b) Effective Time ............................................................................................... 2.2 Effective Time ............................................................................................... 3.17(a) Enforceability Exceptions ............................................................................. 3.5 Environmental Laws ..................................................................................... 3.22(c)(i) Environmental Permits .................................................................................. 3.22(c)(ii) Estimated Closing Statement ........................................................................ 2.4(a) Final Closing Payment .................................................................................. 2.5(b) Fundamental Representations ....................................................................... 9.1 Hazardous Substances ................................................................................... 3.22(c)(iii) HSR Act ........................................................................................................ 3.6(b) IAIC Reinsurance Agreement ....................................................................... 5.20 Indemnifiable Loss ........................................................................................ 9.4(c) Indemnitee ..................................................................................................... 9.4(a) Indemnitor ..................................................................................................... 9.4(b) Indemnity Payment ....................................................................................... 9.4(d) Independent Accounting Firm ...................................................................... 2.5(c)(iv) Intercompany Agreements ............................................................................ 3.23(a) Interested Party ............................................................................................. 3.23(c) Investment Asset Report ............................................................................... 5.17 Investment Guidelines ................................................................................... 3.25(b) Key Employees ............................................................................................. Recitals Leased Real Property .................................................................................... 3.18(a) Material Contracts ......................................................................................... 3.7(a) Most Recent Statutory Statement .................................................................. 3.9(a) New Employment Arrangements .................................................................. Recitals Outside Date .................................................................................................. 7.1(b) Parent ............................................................................................................ Preamble Parent Board .................................................................................................. Recitals

 
- 17 - Parent Common Stock .................................................................................. 3.3(e) Parent Indemnified Persons .......................................................................... 9.2(c) Preliminary Consent Statement ..................................................................... 5.3(e) Pro Forma Closing Statement ....................................................................... 2.4(a) Purchase Price ............................................................................................... 2.1 RBC Reports ................................................................................................. 3.9(d) Recourse Distribution ................................................................................... 5.18(b) Reinsurance Contracts ................................................................................... 3.12(b) Release .......................................................................................................... 3.22(c)(iv) Reorganizations ............................................................................................. 3.4(a) Required Governmental Authorizations ....................................................... 3.6(b) Review Period ............................................................................................... 2.5(c)(i) Scheduled Company Intellectual Property .................................................... 3.20(a) Section 338(h)(10) Election .......................................................................... 8.7(a) Seller ............................................................................................................. Preamble Shareholder Approval ................................................................................... 5.3(e) Shares ............................................................................................................ Recitals SSL Reinsurance Agreement ........................................................................ 5.20 Statutory Statements ..................................................................................... 3.9(a) Stockholder ................................................................................................... Recitals Survival Period .............................................................................................. 9.1 Tax Agreement .............................................................................................. 3.19(f) Tax Claim ...................................................................................................... 8.4 Third-Party Claim ......................................................................................... 9.4(e) Voting Agreement ......................................................................................... Recitals WARN .......................................................................................................... 3.17(d) WARN Acts .................................................................................................. 3.17(d) ARTICLE II. PURCHASE AND SALE 2.1 Purchase and Sale of the Shares. Upon the terms and subject to the conditions of this Agreement, Parent agrees to cause Seller to sell to Buyer, and Buyer agrees to purchase from Seller, all of the Shares, free and clear of any Liens, for an aggregate purchase price (the “Purchase Price”) in cash equal to (i) the Base Price, as adjusted pursuant to Section 2.4 and Section 2.5, and (ii) the contingent right to receive the Earn-Out Payment that may become payable as provided in Section 2.6; provided that, upon written notice to Parent prior to the Closing Date, Buyer may assign its right to receive the Shares to any Affiliate of Buyer by designating such Affiliate in such notice. 2.2 Closing. The closing of the purchase and sale of the Shares and other transactions contemplated by this Agreement (the “Closing”) shall take place by mutual exchange of electronic transmission of documents and instructions at 10:00 a.m., Eastern time, on the later of (i) the first Business Day of the calendar quarter immediately following the calendar quarter in which all the conditions set forth in Article VI have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such

 
- 18 - conditions at the Closing) in accordance with this Agreement (the “Condition Satisfaction”), and (ii) the first Business Day following the twentieth (20th) calendar day following the date on which the Definitive Schedule 14C was mailed to the Parent stockholders; provided, however, that if the Closing would otherwise occur on the date specified in the foregoing (i), if the Condition Satisfaction occurs less than thirty (30) days prior to the end of a calendar quarter, then, at Buyer’s sole option, the Closing shall take place on the first Business Day of the second calendar quarter immediately following the calendar quarter in which the Condition Satisfaction occurs, in each case provided that all conditions set forth in Article VI are satisfied or waived at the Closing, provided; further, that in each case the Closing shall not occur before January 1, 2022, unless another date, time or place is agreed to in writing by the parties hereto. Upon the occurrence of the Closing, the date and time that the Closing shall become effective shall be 12:00:01 a.m., Eastern Time, on the date on which the Closing occurs (such date and time are herein referred to as the “Closing Date”). The Closing shall, for purposes of preparing the Estimated Closing Statement and Closing Statement, and calculating all amounts required to be calculated therein, be deemed effective as of 12:00:01 a.m., Eastern Time, on the first calendar day of the month in which the Closing occurs, and such date and time are herein referred to as the “Effective Time”. 2.3 Closing Deliveries. (a) At the Closing, Parent shall deliver or cause to be delivered to Buyer: (i) certificates representing the Shares, duly endorsed in blank or accompanied by sufficient instruments of transfer and bearing all requisite stock transfer stamps; (ii) counterparts of each Transaction Document other than this Agreement to which a Seller Party is a party, duly executed by such Seller Party; (iii) a duly executed “certificate of non-foreign status”, in a form reasonably acceptable to Buyer, that complies with the requirements of the Treasury Regulations under Section 1445(b)(2) of the Code; (iv) a certificate of an officer of Parent and Seller executed by authorized senior officers of Parent and Seller, dated as of the Closing Date, certifying as to Parent’s and Seller’s compliance with the conditions set forth in Section 6.2(a) and Section 6.2(b) and the satisfaction of the other condition set forth in Section 6.2; (v) a certificate of an officer of Parent in the form reasonably acceptable to the Buyer executed by an authorized senior officer of Parent, dated no more than five (5) days prior to the Closing Date, setting forth the true, accurate and complete information required to be listed on Section 3.17(a) of the Parent Disclosure Schedule, but updated as of the date of such certificate; (vi) a certificate of good standing or equivalent certificate from the applicable jurisdiction of incorporation or formation of the Company and Abacus; (vii) resignations of those directors, managers and officers of the Company and Abacus designated by Buyer prior to Closing as of the Effective Time;

 
- 19 - (viii) two (2) originally signed copies of IRS Form 8023, with attached schedules as required, containing all information required by the IRS with respect to each shareholder (as defined in the Treasury Regulations) of the Company and Abacus, and signed by Parent and its appropriate Affiliates in accordance with the IRS instructions to such form; (ix) evidence reasonably satisfactory to Buyer demonstrating that the Company is in direct possession of or has access through an escrow arrangement to the source code and object code of the PolicyPro Software and all deliverables set forth in the Software Agreements; and (b) At the Closing, Buyer shall make the payments and contributions contemplated by Section 2.4 and also deliver or cause to be delivered to Parent: (i) counterparts of each Transaction Document other than this Agreement to which Buyer is a party, duly executed by Buyer; (ii) a certificate of Buyer duly executed by an authorized senior officer of Buyer, dated as of the Closing Date, certifying as to Buyer’s compliance with the conditions set forth in Section 6.3(a) and Section 6.3(b); (iii) a certificate of good standing from the applicable jurisdiction of incorporation or formation of Buyer; and (iv) two (2) original counterpart signatures to the IRS Form 8023 referenced in Section 2.3(a)(viii) above. 2.4 Payment at Closing. (a) No later than ten (10) Business Days prior to the anticipated Closing Date, Parent shall cause to be prepared and delivered to Buyer a statement (the “Estimated Closing Statement”) consisting of (i) an estimated balance sheet of the Company as of the Effective Time, prepared in accordance with the Specified Accounting Principles and taking into account the transactions contemplated by this Agreement that are to occur at or immediately prior to the Closing, (ii) a good faith estimated calculation (in reasonable detail) of the amount of the Adjusted Statutory Book Value as of the Effective Time, Closing Indebtedness and Transaction Expenses each as of the Closing Date, derived from such estimated balance sheet, and (iii) the amount of any adjustment to the Base Price to arrive at the Closing Payment pursuant to Section 2.4(b). The Estimated Closing Statement shall be (i) in the same format as set forth in Annex D (the “Pro Forma Closing Statement”); (ii) accompanied by work papers and other supporting documentation with respect to the calculation of the amounts set forth thereon; and (iii) accompanied by a written certificate of the chief financial or accounting officer of Parent certifying that the Estimated Closing Statement (x) was prepared in good faith, (y) is derived from the Books and Records, and (z) was prepared in accordance with the Specified Accounting Principles and this Section 2.4. If Buyer believes that the Estimated Closing Statement (including any amount or computation set forth therein) contain errors, deviates from the Pro Forma Closing Statement or was not prepared in accordance with the Specified Accounting Principles or this Section 2.4, Buyer may, on or prior to the second (2nd) Business Day prior to the anticipated Closing Date, deliver a notice to Parent

 
- 20 - setting forth, in reasonable detail, each such disputed item or amount and the basis for Buyer’s disagreement therewith, and for the period from Parent’s receipt of such notice to the Closing Date, the parties shall cooperate in good faith to resolve any such disputes and agree upon a revised Estimated Closing Statement. (b) In addition to the deliveries contemplated by Section 2.3, at the Closing, Buyer shall pay to Seller, by wire transfer of immediately available funds to an account designated by Seller, an amount equal to (i) the Base Price, plus (ii) any Adjusted Statutory Book Value Surplus, minus (iii) any Adjusted Statutory Book Value Deficit, minus (v) the Closing Indebtedness (without duplication of amounts that are specific components of, and cause a reduction to, Adjusted Statutory Book Value as of the Effective Time), minus (vi) any Transaction Expenses (without duplication of amounts that are specific components of, and cause a reduction to, Adjusted Statutory Book Value as of the Effective Time) (the “Closing Payment”). 2.5 Post-Closing Payment. (a) In the event that the Final Closing Payment as finally determined pursuant to subsections (b) and (c) of this Section 2.5 is greater than the Closing Payment, Buyer shall pay Seller an amount in cash equal to the difference within five (5) Business Days after the final determination thereof. In the event that the Final Closing Payment as finally determined pursuant to subsections (b) and (c) of this Section 2.5 is less than the Closing Payment, Seller shall, and Parent shall cause Seller to, pay Buyer an amount in cash equal to the difference within five (5) Business Days after the final determination thereof. Any payments required to be made by either party pursuant to this Section 2.5(a) shall (i) be made by wire transfer of immediately available funds and (ii) include interest on the amount required to be paid at the Applicable Rate, compounded annually on the basis of a year of 365 days, from (and including) the Closing Date to (but excluding) the date such payment is made. (b) No later than one hundred twenty (120) days after the Closing Date, Buyer shall deliver to Parent a statement (the “Closing Statement”) consisting of (i) a balance sheet of the Company as of the Effective Time, prepared in accordance with the Specified Accounting Principles and taking into account the transactions contemplated by this Agreement that are to occur at or immediately prior to the Closing, (ii) a calculation (in reasonable detail) of the amount of the Adjusted Statutory Book Value, the Adjusted Statutory Book Value Target, each as of the Effective Time, Closing Indebtedness and Transaction Expenses each as of the Closing Date, derived from such balance sheet (provided that for purposes of such calculation, the Adjusted Statutory Book Value will reflect any payment of Closing Indebtedness or Transaction Expenses made by the Company between the Effective Time and the Closing) and (iii) the items of adjustment to the Base Price to arrive at the Closing Payment pursuant to Section 2.4(b) based on the Closing Statement as of the Effective Time (the amount based thereon, the “Final Closing Payment”). The Closing Statement shall be (i) in the same format as the Pro Forma Closing Statement; (ii) accompanied by work papers and other supporting documentation with respect to the calculation of the amounts set forth thereon; and (iii) accompanied by a written certificate of the chief financial or accounting officer of the Company certifying that the Closing Statement (x) was prepared in good faith, (y) is derived from the Books and Records, and (z) was prepared in accordance with the Specified Accounting Principles and this Section 2.5. In furtherance of such preparation, Parent will make reasonably available the employees of Parent and its Affiliates to

 
- 21 - Buyer and Buyer’s Representatives to the extent such employees are responsible for or knowledgeable about the preparation of the Closing Statement and shall provide access to all documentation, records and other information of Parent and its Affiliates as Buyer or any of its Representatives may reasonably request to the extent reasonably relevant to the preparation of the Closing Statement; provided, that such access does not unreasonably interfere with the conduct of the business of Parent and its Affiliates. (c) (i) Parent shall have forty-five (45) days from the date on which the Closing Statement is delivered to it to review the calculations of the Adjusted Statutory Book Value, Adjusted Statutory Book Value Target, Closing Indebtedness and Transaction Expenses and the Final Closing Payment based thereon (the “Review Period”). In furtherance of such review, Buyer and the Company will make reasonably available the employees of Buyer, the Company and Abacus to Parent and Parent’s Representatives to the extent such employees are responsible for or knowledgeable about the preparation of the Closing Statement and shall provide access to all documentation, records and other information of Buyer, the Company and Abacus as Parent or any of its Representatives may reasonably request to the extent reasonably relevant to the preparation of the Closing Statement; provided, that such access does not unreasonably interfere with the conduct of the business of Buyer, the Company or Abacus. (ii) If Parent believes that the Closing Statement (including any amount or computation set forth therein) contains errors, deviates from the Pro Forma Closing Statement or was not prepared in accordance with the Specified Accounting Principles, Parent may, on or prior to the last day of the Review Period, deliver a notice to Buyer setting forth, in reasonable detail, each such disputed item or amount and the basis for Parent’s disagreement therewith (the “Dispute Notice”). The Dispute Notice shall set forth, with respect to each disputed item, Parent’s position as to the correct amount or computation that should have been included in the Closing Statement and as to the Final Closing Payment. (iii) If no Dispute Notice is received by Buyer with respect to any item in the Closing Statement on or prior to the last day of the Review Period, the amount or computation with respect to such item as set forth in the Closing Statement shall be deemed accepted by Parent, whereupon the amount or computation of such item or items shall be final and binding on the parties. For purposes of this Section 2.5, “final and binding” shall mean that the applicable determination shall have the same preclusive effect for all purposes as a determination embodied in a final judgment, no longer subject to appeal and entered by a Court of competent jurisdiction after full and fair litigation on the merits. (iv) For a period of ten (10) Business Days beginning on the date that Buyer receives a Dispute Notice, if any, Buyer and Parent shall endeavor in good faith to resolve by mutual agreement all matters identified in the Dispute Notice. In the event that the parties are unable to resolve by mutual agreement any matter in the Dispute Notice within such ten (10) Business Day period, Buyer or Parent may engage Ernst & Young, or if Ernst & Young is unwilling or unable to serve, another accounting firm of national reputation, as mutually agreed by the parties hereto (the “Independent Accounting Firm”), to make a

 
- 22 - determination with respect to the matters identified in the Dispute Notice that are still in dispute. (v) Buyer and Parent will direct the Independent Accounting Firm to render a determination within sixty (60) days after its retention, and Buyer, Parent and their respective employees and agents will cooperate with the Independent Accounting Firm during its engagement. Buyer, on the one hand, and Parent, on the other hand, shall promptly (and in any event within ten (10) Business Days) after the Independent Accounting Firm’s engagement, each submit to the Independent Accounting Firm their respective computations of the disputed items identified in the Dispute Notice and information, arguments and support for their respective positions, and shall concurrently deliver a copy of such materials to the other party. Each party shall then be given an opportunity to supplement the information, arguments and support included in its initial submission with one additional submission, delivered concurrently to the Independent Accounting Firm and the other party, to respond to any arguments or positions taken by the other party in such other party’s initial submission, which supplemental information shall be submitted to the Independent Accounting Firm (with a copy thereof to the other party) within five (5) Business Days after the first date on which both parties have submitted their respective initial submissions to the Independent Accounting Firm. The Independent Accounting Firm shall thereafter be permitted to request additional or clarifying information from the parties, and each of the parties shall cooperate and shall cause their Representatives to cooperate with such requests of the Independent Accounting Firm, provided that both parties are copied on all written communications and allowed to participate in all discussion with the Independent Accounting Firm. The Independent Accounting Firm shall determine, based solely on the materials so presented by the parties and upon information received in response to such requests for additional or clarifying information and not by independent review, only those issues in dispute specifically set forth in the Dispute Notice and shall render a written report to Buyer and Parent (the “Adjustment Report”) in which the Independent Accounting Firm shall, after considering all matters set forth in the Dispute Notice, determine what adjustments, if any, should be made to the amounts and computations set forth in the Closing Statement solely as to the disputed items and shall determine the appropriate Final Closing Payment on that basis. (vi) The Adjustment Report shall set forth, in reasonable detail, the Independent Accounting Firm’s determination with respect to each of the disputed items or amounts specified in the Dispute Notice, and the revisions, if any, to be made to the Closing Statement, together with supporting calculations. In resolving any disputed item, the Independent Accounting Firm (i) shall be bound to the principles of this Section 2.5 and the terms of this Agreement, (ii) shall limit its review to matters specifically set forth in the Dispute Notice the basis of which are errors or failure of Buyer to prepare the Closing Statement in accordance with the Pro Forma Closing Statement and the Specified Accounting Principles and (iii) shall not assign a value to any item higher than the highest value for such item claimed by either party or less than the lowest value for such item claimed by either party. (vii) All fees and expenses relating to the work of the Independent Accounting Firm shall be shared equally by Buyer and Parent. The Adjustment Report, absent fraud,

 
- 23 - shall be final and binding upon Buyer, Parent and Seller, and shall be deemed a final arbitration award that is binding on each of Buyer, Parent and Seller, and no party shall seek further recourse to Courts, other tribunals or otherwise, other than to enforce the Adjustment Report or to adjudicate any fraud claims. (viii) Any adjustments pursuant to this Section 2.5 shall be reflected in the Purchase Price for all Tax purposes. 2.6 Earn-Out Payment. (a) Subject to the terms of this Section 2.6, Seller shall be eligible to receive an earn-out payment described in Section 2.6(b) if the Company achieves the statutory earnings target set forth below. Any such earn-out payment shall be calculated as of the Earn-Out End Date and payable in accordance with this Section 2.6. (b) Buyer shall provide Seller written notice of Buyer’s calculation of the following amount (the “Earn-Out Payment”) within fifteen (15) days following the date on which the Company’s audited annual statutory financial statement for the calendar year ended on December 31, 2023 is filed with the Insurance Regulator in the Company’s domiciliary jurisdiction: (i) if the Company Statutory Earnings do not exceed $15,250,000, zero; (ii) if the Company Statutory Earnings exceed $15,250,000 but are less than $16,500,000, an amount equal to the product of (y) the Prorated Portion and (z) $12,500,000; and (iii) if the Company Statutory Earnings equal or exceed $16,500,000, $12,500,000. The Earn-Out Payment, if any, will be payable to Seller by wire transfer of immediately available funds to bank account designated by Seller no later than the fifth (5th) Business Day following the notice delivered by Buyer pursuant to this Section 2.6(b). (c) Notwithstanding anything herein to the contrary, to the extent that Buyer is entitled to payment of Indemnifiable Losses under Article IX, on or prior to the Earn-Out Payment date, Buyer may deduct the amount of such Indemnifiable Losses from the Earn-Out Payment payable by Buyer to Seller up to the Earn-Out Payment. (d) Buyer shall provide its documentation in support of its calculation of the Earn-Out Payment to the Seller at the time of its notice to the Seller of its calculation delivered under Section 2.6(b), and the Seller shall have thirty (30) days from the date of receipt of such Earn-Out Payment or such notice, as the case may be, to deliver written notice of its objections to the calculation of the Earn-Out Payment, specifying in reasonable detail the basis for the objections. If Seller does not timely object, Buyer’s calculation of the Earn-Out Payment shall be binding and conclusive. If the Seller objects on a timely basis, the calculation of the Earn-Out Payment shall not be binding and conclusive, and Buyer and the Seller shall negotiate in good faith to resolve the Sellers’ objections. If Buyer and Seller resolve such objections, the amount they

 
- 24 - agree upon shall be final and binding, but if the objections cannot be resolved by such negotiation within thirty (30) days after Buyer’s receipt of the Seller’s objections, Buyer and Seller shall cause the calculation of the Earn-Out Payment, and all documents related thereto, to be submitted to the Independent Accounting Firm and the procedures, timelines and expense allocations set forth in Section 2.5 with respect to the resolution of the Closing Payment shall be followed to obtain final resolution of such Earn-Out Payment. (e) Any increase or decrease in the Earn-Out Payment to be paid to Seller determined pursuant to Section 2.6(d) shall be made within three (3) Business Days after such payment has been finally determined. (f) From and after the Closing until the Earn-Out End Date, (i) Buyer shall and shall cause any Affiliates of Buyer to, operate the Company in a commercially reasonable manner, and Buyer shall not take any action or inaction in bad faith with the intention of decreasing the amount of any Earn-Out Payment or impairing Buyer’s ability to make any Earn-Out Payment; provided that, except as set forth in the foregoing clause, the provisions of this Section 2.6(f) shall not (x) require Buyer or any Affiliate of Buyer (including the Company) to continue any line of business or service conducted or offered by the Company as of any date or (y) limit Buyer or any Affiliate of Buyer (including the Company) from modifying or changing any aspect of the Company’s Business. (g) Any Earn-Out Payment pursuant to this Section 2.6 shall be reflected in the Purchase Price for all Tax purposes. (h) Parent and Seller each acknowledges that the contingent right of Seller to receive the Earn-Out Payment, if any, pursuant to this Section 2.6 (i) is speculative in nature and not guaranteed; (ii) is solely a contractual right and is not a security for purposes of any federal or state securities laws (and shall confer upon Seller only the rights of a general, unsecured creditor under applicable Law); (iii) will not be represented by any form of certificate or instrument; (iv) does not give Parent or Seller any dividend rights, voting rights, liquidation rights, preemptive rights or other rights of holders of equity securities; and (v) is not assignable or otherwise transferable by Seller. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER Except as set forth in the Parent Disclosure Schedule, Parent and Seller hereby jointly and severally represent and warrant to Buyer, as of the date hereof and as of the Closing Date, as follows: 3.1 Organization and Qualification. (a) Each of Parent, Seller, the Company and Abacus is a corporation or limited liability company duly incorporated or organized, validly existing and in good standing under the Law of the jurisdiction of its organization or incorporation and each (i) has all the requisite corporate or

 
- 25 - limited liability company power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and (ii) is duly qualified to do business and is in good standing in each of the jurisdictions in which the ownership, operation or leasing of its properties and assets and the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not reasonably be expected to have a Company Material Adverse Effect. (b) Neither the Company nor Abacus is required to be registered as an “investment company” within the meaning of the Investment Company Act and neither the Company nor Abacus is relying on the exception from the definition of “investment company” in Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder. Abacus is duly licensed as an insurance producer in all jurisdictions relevant to the conduct of its Business. 3.2 Organizational Documents. Parent has made available to Buyer a true, complete and correct copy of the Organizational Documents of Parent, Seller, the Company and Abacus, each as amended. None of Parent, Seller, the Company nor Abacus is in violation of its Organizational Documents. The Organizational Documents of Parent, Seller, the Company and Abacus that have been so delivered are in full force and effect. 3.3 Capitalization. (a) The issued and outstanding capital stock of the Company consists of 60 shares of common stock, $60,000 par value per share, which constitute all of the Shares. No other equity interests or other voting securities of the Company are issued, reserved for issuance or outstanding. The Shares have been duly authorized and validly issued, fully paid and non-assessable. Seller owns beneficially and of record, and has good and valid title to, the Shares, free and clear of all Liens. Upon consummation of the transactions contemplated hereby, Seller shall, and Parent shall cause Seller to, convey to Buyer, and Buyer shall own, all of the Shares free and clear of all Liens. (b) The Shares were issued in compliance with applicable Law. The Shares were not issued in violation of the Organizational Documents of the Company or any other agreement, arrangement or commitment to which Seller or the Company is a party and are not subject to or in violation of any preemptive or similar rights of any person. (c) There are no (i) outstanding securities or obligations convertible into or exchangeable for capital stock of the Company, (ii) outstanding or authorized securities, options, warrants, call rights or other similar rights obligating the Company to issue, transfer or sell or cause to be issued, transferred or sold any capital stock in the Company or (iii) contracts or other agreements to which the Company or any of its Affiliates is a party relating to the voting, issuance, purchase, redemption, registration, repurchase, sale or transfer of any capital stock in the Company. There are no preemptive rights, rights of first refusal (other than as set forth in the Organizational Documents of the Company) or other similar rights with respect to the Shares or other interests in the Company. (d) Except as set forth in Section 3.3(d) of the Parent Disclosure Schedule, since January 1, 2018, there has been no distribution from the Company and since January 1, 2020 (the “Abacus Purchase Date”) there has been no distribution from Abacus. There are no contracts or

 
- 26 - other oral or written agreements in place that allow any equity owner of the Company or Abacus to withdraw any equity or capital of the Company or Abacus. (e) Each of the Stockholders is the “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) and/or holder of record of certain shares of common stock, par value $1.00 per share, of Parent (the “Parent Common Stock”), and each such Stockholder has the right to vote, or to cause to be voted, the shares of Parent Common Stock set forth under the heading “Shares Held of Record or Beneficially” in respect of such Stockholder on the signature page of the Voting Agreement. The vote of the Parent Common Stock held by the Stockholders in favor of the Parent Voting Matters will be sufficient to approve or adopt (i) this Agreement and the transactions contemplated hereby, and (ii) any other matters required by applicable Law to be approved or adopted by the Stockholders to effect the transactions contemplated hereby. 3.4 Subsidiaries. (a) The issued and outstanding equity interests of Abacus consist of one thousand five hundred (1,500) units, which constitute all of the Abacus Membership Interests. Except for Abacus, the Company has no Subsidiaries and, except as contemplated by the immediately following sentence, the Company has not had any Subsidiaries since January 1, 2016. Section 3.4(a) of the Parent Disclosure Schedule sets forth a description of any reorganizations since January 1, 2016 pursuant to which any former Subsidiary of the Company was contributed, distributed or transferred to any Affiliate of the Company (the “Reorganizations”). The Reorganizations were effectuated in accordance with applicable Law and the Organizational Documents of the Persons involved, and the Company has no outstanding Liabilities relating to the Reorganizations or the ownership of any former Subsidiary. (b) The Abacus Membership Interests have been duly authorized and validly issued, are fully paid and are owned beneficially and of record directly by the Company, and the Company has good and valid title to the Abacus Membership Interests, free and clear of any Liens. (c) None of the outstanding equity interests of Abacus are subject to, nor were they issued in violation of, any purchase option, call option, right of first refusal, first offer, co-sale or participation, preemptive right, subscription right or any similar right. There are no outstanding securities, options, warrants, calls, rights, convertible or exchangeable securities or contracts or obligations of any kind (contingent or otherwise) to which Abacus is a party or by which it is bound obligating Abacus to issue, deliver or sell additional shares of capital stock or other voting securities of Abacus or obligating Abacus to issue, grant, extend or enter into any such security, option, warrant, call, right, contract or obligation. Except as set forth in the Organizational Documents of Abacus, there are no (i) outstanding obligations of Abacus to repurchase, redeem or otherwise acquire, directly or indirectly, any shares of capital stock (or options or warrants to acquire any such shares) of Abacus, or (ii) outstanding or authorized securities, options, warrants, call rights or other similar rights obligating Abacus to issue, transfer or sell or cause to be issued, transferred or sold any equity interests in Abacus. Except for Investment Assets and Abacus, the Company does not own any shares of capital stock of or other voting or equity interests (including any securities exercisable or exchangeable for or convertible into shares of capital stock of or other voting or equity interests in) in any other Person.

 
- 27 - 3.5 Authority; Enforceability. Each of Parent and Seller has the requisite corporate power and authority to execute and deliver this Agreement, and each of Parent, Seller and each Seller Party has the requisite corporate power and authority to execute and deliver each other Transaction Document to which it is a party and each instrument required to be executed and delivered by it prior to or at the Closing and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Parent and Seller of this Agreement, and of Parent, Seller and each Seller Party of each other Transaction Document and each instrument required to be executed and delivered by it prior to or at the Closing, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been, or (with respect to Transaction Documents and instruments that will be executed and delivered after the date of this Agreement) will be, duly and validly authorized by all necessary corporate action on the part of Parent, Seller or such Seller Party no later than the Closing Date, and no other corporate or similar proceedings on the part of Parent, Seller, any Seller Party or any of their Affiliates are necessary to authorize this Agreement, any Transaction Document to which it is a party or any instrument required to be executed and delivered by it prior to or at the Closing or the consummation of transactions contemplated hereby or thereby. Each of the Transaction Documents to which Parent, Seller or any Seller Party is or will be a party have been or, with respect to the Transaction Documents to be executed and delivered at Closing, will be, duly and validly executed and delivered by Parent, Seller or such Seller Party and, assuming the due authorization, execution and delivery hereof by the other parties hereto or thereto, constitute legal, valid and binding obligations of Parent, Seller or such Seller Party, enforceable against it in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Law relating to or affecting creditors’ rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the Court before which any Proceeding therefor may be brought (the “Enforceability Exceptions”). Parent, Seller and each Seller Party has obtained any necessary approvals from its shareholders to enter into this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby. Except as set forth on Section 3.5 of the Parent Disclosure Schedules, no vote or consent of the holders of any class or series of capital stock or other equity interest of Parent, Seller or the Company is necessary to approve this Agreement, any other Transaction Document or the transactions contemplated hereunder or thereunder. Parent has duly approved this Agreement, any other Transaction Document and the transactions contemplated hereunder or thereunder. 3.6 No Conflict; Required Filings and Consents. (a) Except as set forth on Section 3.6(a) of the Parent Disclosure Schedules, the execution and delivery by Parent and Seller of this Agreement, and by Parent, Seller and other Seller Parties of the other Transaction Documents to which such Person is party or any instrument required by this Agreement to be executed and delivered by Parent, Seller or any Seller Party on or prior to the Closing do not, and the performance of this Agreement, the other Transaction Documents to which such Person is a party and any instrument required by this Agreement to be executed and delivered by it on or prior to the Closing do not and will not, (i) conflict with, require a vote, consent or notice (including a vote of the holders of any class or series of capital stock or

 
- 28 - any other equity interest) under or violate the Organizational Documents of Parent, Seller, the Seller Parties or the Company or Abacus, (ii) with or without notice or the passage of time or both, conflict with, require a consent or notice under or violate in any material respect any Law, Permit or Order applicable to Parent, any Seller Party, the Company or Abacus or by which any of their properties, rights or assets is bound or affected, or (iii) with or without notice or the passage of time or both, violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with the giving of notice, the passage of time or otherwise would constitute a default) under or entitle any Person to terminate, accelerate or cause a breach or material default of, or result in the creation of any Lien upon any of the properties or assets of the Company or Abacus under, or create any right of acceleration, termination, vesting, payment, exercise, suspension, revocation or cancellation of the loss of any right or benefit under any contract, mortgage, lien, lease, agreement, indenture, trust, instrument, order, judgment or decree to which the Company or Abacus is a party or which is binding upon the Company or Abacus or upon any of the assets of any of the foregoing. (b) No Governmental Approval or Filing with any Governmental Authority is required to be obtained or made by the Company, Abacus, Parent, Seller or any Seller Party in connection with the consummation of the transactions contemplated by this Agreement, except (i) for compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), and (ii) Filings with Insurance Regulators and other Filings and approvals that, in each case of this clause (ii) are listed on Section 3.6(b) of the Parent Disclosure Schedule (the consents, approvals, Orders, authorizations, acknowledgements and Filings required under or in connection with this clause (ii), the “Required Governmental Authorizations”). 3.7 Material Contracts. (a) Section 3.7(a) of the Parent Disclosure Schedule sets forth a true and complete list of each contract, agreement, commitment, arrangement, plan, lease, license or other instrument (whether or not reduced to writing) in force as of the date hereof to which the Company or Abacus is a party or by which any of its assets are bound (and any amendments, supplements and modifications thereto), in each case, that: (i) is for the employment of, or any offer of employment to, any officer, Employee or other individual on a full-time basis, which provides for annual payments (excluding any incentive payments or commissions) in excess of $75,000; (ii) (other than Reinsurance Contracts and contracts covered by Section 3.7(a)(iii) or agreements set forth in Section 3.23 of the Parent Disclosure Schedule) provides for the provision of goods and services involving expenditures or payables in excess of $75,000 in the aggregate during the last trailing twelve months ended December 31, 2020; (iii) is with any Material Independent Producer; (iv) is a network agreement pursuant to which the Company or Abacus obtains or leases access to any provider network of a third party (but excluding, for purposes of clarification, any such networks accessed through any Employee Plan) and any customer account agreement to which the Company or Abacus derives revenues in excess of $75,000 on an annualized basis;

 
- 29 - (v) is a credit agreement, mortgage, loan agreement, indenture, letter of credit, swap agreement and any other agreement, in each case relating to Indebtedness or other borrowing of money or extension of credit and each agreement guaranteeing, or providing security for, Indebtedness or mortgaging, pledging or otherwise placing a Lien on the assets of the Company or Abacus; (vi) contains (A) a restriction on the ability of the Company or Abacus to solicit specified customers or prospective customers for the purchase, renewal, lapse, or amendment of an Insurance Contract, (B) a restriction on the payment of dividends in respect of the capital stock of the Company or Abacus, or (C) covenants limiting in any way the freedom of the Company or Abacus to compete in any line of business or in the marketing, selling or administration of any Insurance Contract and which is not terminable on ninety (90) days’ notice or less by the Company or Abacus without restriction, liability or penalty, in each case that would be legally binding on the Company or Abacus following the consummation of the transactions contemplated hereby; (vii) (A) requires payments to or from the Company or Abacus in excess of $75,000 per annum representing an interest in or in respect of any material rights, assets or property, but excluding contracts for commercial generally available Software for an annual fee of less than $75,000, or (B) relates to any Leased Real Property; (viii) restricts or grants rights to use or practice rights under Intellectual Property that is material to the Business of the Company or Abacus, but in each case excluding contracts for commercial generally available Software for an annual fee of less than $75,000, or relates to cybersecurity or information technology security services; (ix) is a contract which provides for annual payments in excess of $75,000 pursuant to which any material function of the Company’s or Abacus’ business is outsourced or otherwise performed by an unaffiliated Person, or is a contract pursuant to which the Company or Abacus has appointed or is appointed a third party administrator, managing general agent or other Material Independent Producer or that relates to insurance policy administration, claims, or underwriting, or is a third party administration or other insurance policy administration agreement relating to the Insurance Contracts; (x) is with a custodian or otherwise relating to custodial services with respect to assets of the Company or Abacus; (xi) relates to any material interest rate, derivatives or hedging transaction, or is an investment advisory agreement or any other contract relating to investment management, investment advisor or subadvisory services; (xii) relates to the allocation or sharing of Taxes, costs, or expenses; (xiii) is a joint venture, investment, partnership, stockholder, limited liability or other similar contract; (xiv) is with a Governmental Authority or relates to any settlement of any Proceeding;

 
- 30 - (xv) is a contract that is material to the Company’s or Abacus’ operation or as to which the consequences of its existence or a default, a nonrenewal or a termination thereof would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect; (xvi) except for contracts that are terminable within ninety (90) days, contracts that require the consent of, or grant a termination right to, any party thereto in connection with the consummation of the transactions contemplated hereby; and (xvii) relates to the acquisition or disposition of any material business or operation of the Company or Abacus, or any other similar contract that includes an ongoing material indemnification obligation or guarantee of the Company or Abacus (all such instruments, collectively, the “Material Contracts”). (b) True and complete copies of all Material Contracts, including all amendments thereto, have been made available to Buyer by Parent. Each Material Contract is in full force and effect, is a valid and binding obligation of the Company or Abacus, to the Knowledge of Parent or Seller, of each other party thereto and is enforceable in accordance with its terms against the Company or Abacus and, to the Knowledge of Parent or Seller, against each other party to such Material Contract, subject in each case to the Enforceability Exceptions. Neither the Company, Abacus, nor, to the Knowledge of Parent or Seller, any other party to any such Material Contract is in material default, breach or violation of any Material Contract and no party has given written notice to the Company or Abacus of any material default, breach or violation. Neither the Company nor Abacus has received written or, to the Knowledge of Parent or Seller, oral notice of cancellation of any Material Contract, and, except as set forth in Section 3.7(b) of the Parent Disclosure Schedule, the Material Contracts do not contain any provision that would allow any party to a Material Contract to (i) terminate the agreement, or (ii) increase any amount payable thereunder, in each case as a result solely of the consummation of the transactions contemplated by this Agreement. 3.8 Compliance with Law; Permits. (a) The Company and Abacus are and have been conducting their respective businesses in compliance in all material respects with applicable Law of any Governmental Authority applicable to the Company or Abacus. Neither the Company, since January 1, 2018, nor Abacus, since the Abacus Purchase Date, (i) has committed any breach or violation of applicable Law that has resulted in, or would reasonably be expected in the future to result in, any material penalty, fine, assessment, damages, suspension or loss of any material Permit, or any other material adverse remedial action with respect to the Company or Abacus, taken as a whole, (ii) has received any written notice from any Governmental Authority or paid or incurred any penalty or fine imposed by a Governmental Authority, in each case, regarding any actual or alleged material violation of, or failure to comply with, any applicable Law, or (iii) is under investigation, examination or audit with respect to any violation of any applicable Law. (b) All material deficiencies or violations in all reports of examinations of the affairs of the Company or Abacus (including financial, market conduct and similar examinations) issued by any Insurance Regulator to the Company on or after January 1, 2016 or to Abacus on or after

 
- 31 - the Abacus Purchase Date have been resolved, to the Knowledge of Parent or Seller, to the reasonable satisfaction of the Insurance Regulator that noted such deficiencies or violations. The Company is in full compliance with its obligations under the Regulatory Settlement Agreement, and the Company has implemented a compliance plan that, based on the Company’s discussions with the relevant regulators to date, satisfies the concerns and exceptions noted in such agreement. Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the transactions contemplated hereby, Parent and Seller are in compliance with all Laws applicable to Parent and Seller, respectively. (c) Except as set forth on Section 3.8(c) of the Parent Disclosure Schedules, the Company, since January 1, 2018, and Abacus, since the Abacus Purchase Date, have each filed all material reports, statements, documents, registrations, filings or submissions required to be filed by such Person with any Governmental Authority. All such registrations, filings and submissions were in compliance in all material respects with applicable Law when filed or as amended or supplemented, and no material deficiencies have been asserted by any Governmental Authority with respect to such registrations, filings or submissions that have not been satisfied. Parent has made available to Buyer true and complete copies of all such reports, statements, documents, registrations, filings or submissions filed with any Governmental Authority since January 1, 2018 with respect to the Company and since the Abacus Purchase Date with respect to Abacus, other than renewals of Permits and other registrations, filings and submissions made in the ordinary course of business. (d) The Company and Abacus hold all material Permits required under applicable Law and necessary in connection with the conduct of their businesses. All such Permits are valid and in full force and effect in accordance with their terms, and each of the Company, since January 1, 2018, and Abacus, since the Abacus Purchase Date, has been in compliance in all material respects with the terms and requirements of each such Permit. Except as set forth on Section 3.8(d) of the Parent Disclosure Schedules, neither the Company, since January 1, 2018, nor Abacus, since the Abacus Purchase Date, has received any written or, to the Knowledge of Parent or Seller, oral notice from any Governmental Authority regarding any (i) actual, alleged, or potential material violation of, or failure to comply with, the terms or requirements of any such Permit, or (ii) actual or proposed revocation, suspension or termination of, or material modification to, any such Permit. Neither the Company nor Abacus is in material default under, and to the Knowledge of Parent or Seller, no condition exists that with notice or lapse of time or both would constitute material default under, any such Permit, and no such Permit will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated hereby. Section 3.8(d) of the Parent Disclosure Schedule sets forth a true and complete list of each jurisdiction where each of the Company and Abacus is licensed by any Insurance Regulator and its material Permits. (e) Parent has previously made available to Buyer the Social Security Death Master File-related state protocols and any other state protocols of the Company and Abacus related to Unclaimed Property Matters and their effective dates, which the Company or Abacus use to determine the payment of life insurance or other benefits and amounts under Insurance Contracts. The Company or Abacus, if applicable, administers all such Insurance Contracts in accordance with these protocols and applicable Law and is not currently under any audit with respect to such matters. Parent has made available to Buyer (i) all workpapers, estimations, analyses and reviews of amounts as may be or become due under the terms of the insurance policies or otherwise by the

 
- 32 - Company or Abacus with respect to the Social Security Death Master File-related review processes or other resources which meet state requirements, (ii) true and correct copies of all written correspondence between the Company or Abacus and any Governmental Authority or any Person acting on behalf of a Governmental Authority since January 1, 2016, with respect to the Company, and the Abacus Purchase Date with respect to Abacus, regarding any pending or, to the Knowledge of Parent or Seller, threatened Proceedings relating to Unclaimed Property Matters, (iii) true and correct copies of all correspondence with any contractual counterparties relating to Unclaimed Property Matters, and (iv) a schedule of the balance sheet accruals made and maintained by the Company and Abacus at and as of December 31, 2020, with respect to Unclaimed Property Matters. There are no orders, decrees, injunctions, judgments, or settlement agreements issued by, entered before, or agreed to with any arbitrator or Governmental Authority outstanding against the Company or Abacus or any of their assets, properties or businesses relating to any Unclaimed Property Matters, and the Company and Abacus are not under any audit with respect to such matters. (f) In the last five (5) years, (i) to the Knowledge of Parent or Seller, no allegations of harassment or other misconduct have been made against any Employee or former Employee (while an employee of the Company or Abacus), and (ii) neither the Company nor Abacus has entered into any settlement agreements related to allegations of harassment or other misconduct by any Employee or former Employee. 3.9 Financial Statements. (a) Parent has made available to Buyer true, correct and complete copies of (i) the annual statutory financial statement of the Company, together with the report of the Company’s independent auditors thereon, as of and for the years ended December 31, 2018, 2019 and 2020, and (ii) the quarterly statutory financial statement of the Company as of and for the three (3) month period ended March 31, 2021, in each case of (i) and (ii), as filed with the Wisconsin Office of the Commissioner of Insurance (the financial statements for the period ending on March 31, 2021, the “Most Recent Statutory Statement” and, collectively with the statements set forth in clause (i), the “Statutory Statements”). The Statutory Statements were prepared from the Books and Records of the Company and in accordance with applicable Law and SAP applicable to the Company consistently applied throughout all such periods and fairly present in all material respects the financial position, admitted assets, liabilities and capital and surplus of the Company at the respective dates, and the results of operations, changes in surplus, and cash flows of the Company for the periods covered thereby, subject, in the Most Recent Statutory Statement, to the absence of full footnote disclosures and other presentation items. No deficiency has been asserted by any Governmental Authority with respect to any Statutory Statement. (b) Parent has made available to Buyer true, correct and complete copies of (i) the unaudited consolidated annual financial statements of the Company and Abacus as of and for the year ended December 31, 2020, (ii) the unaudited consolidated financial statement of the Company and Abacus as of and for the three (3) month period ended March 31, 2021 (clauses (i) and (ii) of this Section 3.9(b), collectively, the “Consolidated Statements”). The Consolidated Statements were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), consistently applied throughout all such periods and fairly present in all material respects the financial position of the Company and Abacus at the respective dates.

 
- 33 - (c) The Reserves of the Company as of March 31, 2021 recorded in the Most Recent Statutory Statement and otherwise recorded in the Statutory Statements were determined: (i) in accordance with generally accepted actuarial standards consistently applied and were fairly stated, in accordance with sound actuarial provisions in effect as of the date of such Statutory Statements, (ii) in accordance with SAP and applicable Law, and (iii) based on actuarial assumptions consistent with or more conservative than those called for in relevant provisions of the Insurance Contracts. For clarity, Parent and Seller make no representation, warranty or guarantee under this Agreement that the Reserves held by or on behalf of the Company are or will be sufficient for the purposes for which they were established. (d) Parent has made available all analyses and reports relating to the risk-based capital calculations of the Company submitted by the Company since January 1, 2020, to the Insurance Regulator in each state in which such analyses and reports are required to be filed (the “RBC Reports”). The RBC Reports were prepared in accordance with SAP applicable to the Company and the applicable risk-based capital instructions and were true and correct on and as of the date filed with each such Insurance Regulator. No Insurance Regulator has notified the Company of any inaccuracy in any RBC Report. Each of the Company and Abacus is solvent. (e) Section 3.9(e) of the Parent Disclosure Schedule sets forth a true and complete list of all outstanding Indebtedness, if any. Neither the Company nor Abacus is in default, nor is any waiver of default presently in effect, in the payment of any principal or interest on any such Indebtedness. (f) The Books and Records (i) are true, complete and correct in all material respects, (ii) have been maintained in all material respects in accordance with sound business practices, any applicable record keeping or maintenance requirements in the Material Contracts, Insurance Contracts and Reinsurance Contracts, and applicable Law, (iii) accurately present and reflect in all material respects all of the Business of the Company and Abacus and all transactions and actions related thereto, (iv) have been prepared using processes and procedures for which there are no material weaknesses or significant deficiencies in internal controls over financial reporting that adversely affect the ability of Parent and Seller to accurately present and reflect in all material respects the Business of the Company and Abacus and other transactions and actions related thereto, and (v) contain no material Data Input Inaccuracies. (g) Each of the Company and Abacus have devised and maintained systems of internal accounting controls with respect to its business that are reasonably sufficient to provide reasonable assurances that (i) all transactions are executed in accordance with management’s general or specific authorization, (ii) all transactions are recorded as necessary to permit the preparation of financial statements in conformity with SAP applicable to the Company, and to maintain proper accountability for items, (iii) access to its property and assets is permitted only in accordance with management’s general or specific authorization and (iv) recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (h) No representation or warranty or other statement made by Parent and Seller in this Agreement, the Parent Disclosure Schedule, any supplement to the Parent Disclosure Schedule, the certificate delivered pursuant to Section 2.3(a)(iv), or otherwise in connection with the

 
- 34 - transactions contemplated by this Agreement contains any untrue statement of material fact or omits to state a material fact necessary to make the statements in this Agreement or therein, in light of the circumstances they were made, not misleading. (i) The Pro Forma Closing Statement was (i) derived from, prepared using and in all material respects consistent with, the Books and Records, (ii) determined in accordance with SAP, applied on a consistent basis with the periods presented in the Statutory Statements (except to the extent of any adjustments to SAP expressly embedded in the Accounting Principles), and, subject to such adjustments, fairly presents, in all material respects, the statutory financial position, admitted assets, liabilities and capital and surplus of the Company as of December 31, 2020, and (iii) prepared in accordance with the Specified Accounting Principles. 3.10 Insurance Business. (a) Any application form, form of insurance policy, written advertising material, rate or rule utilized by the Business, the use or issuance of which requires filing or approval, has been appropriately filed, and, if required, approved by the Insurance Regulator of any state in which such application forms, forms of insurance policies, advertising materials and rates or rules are required to be filed and, if required, approved or not objected to by such authorities within the period provided for approval or objection, except for failures to effect such filings or secure such approvals, which would not be material to the Company and Abacus, taken as a whole. All such application forms, forms of insurance policies, advertising materials and rates or rules are utilized in compliance in all material respects with applicable Law and within the scope of the approvals (if any) received with respect thereto. No material deficiencies have been asserted by any Governmental Authority with respect to any such filings that have not been cured or otherwise resolved. The Insurance Contracts have been administered in accordance with the terms of such policies and in compliance in all material respects with applicable Law. All amounts owed (that are not being disputed in good faith) under any Insurance Contracts have been paid in all material respects in accordance with their terms. Except as provided under the express terms of the Insurance Contracts or otherwise provided under applicable Law, there are no agreements or commitments, written or otherwise, regarding any alterations to any applicable cost of insurance charges, credited interest rates, insurance policy premiums, features or other similar charges or rates with respect to any of the Insurance Contracts. Parent has made available to Buyer true and complete copies of specimen forms of all Insurance Contracts that are in-force or are actively being marketed by the Company and Abacus. Such specimen forms are true, correct and complete copies of the policy forms on which the Insurance Contracts are issued. Such policy forms are representative of the Insurance Contracts, except for variations that, individually or in the aggregate, would not reasonably be expected to be material to the Insurance Contracts or materially affect the valuation, projection or risk profile of the Insurance Contracts. (b) Since January 1, 2018, the Company has timely paid all guaranty fund assessments that have been due, claimed or asserted by, or are the subject of any voluntary contribution commitment to, any state guaranty fund or association or any Insurance Regulator in any jurisdiction in which the Company operates its business. Except for regular periodic assessments in the ordinary course of business or assessments based on developments that are publicly known within the insurance industry, no material claim or assessment is pending or, to the Knowledge of

 
- 35 - Parent or Seller, threatened against the Company or any Affiliate by any state insurance guaranty association in connection with such association’s fund relating to insolvent insurers. (c) Parent has made available to Buyer true and complete copies of all underwriting manuals (including each amendment thereto) utilized by the Company with respect to its Business of since January 1, 2018. The underwriting standards and ratings applied by the Company since such date with respect to the Insurance Contracts have conformed in all material respects to those contained in the applicable underwriting policies as in effect at the time such Insurance Contracts were underwritten. (d) Parent has provided Buyer information relating to the Company’s setting of any Non-Guaranteed Elements as in effect as of the date hereof and copies of the following information and analyses related to the Insurance Contracts as of the date such information and analyses were prepared: (i) current and projected cost of insurance charges and charges for mortality and administration of the Insurance Contracts; (ii) current and projected credited interest rates; and (iii) minutes of meetings of the Board of Directors of the Company (and any committee thereof) held since January 1, 2018 as the same pertained to crediting rates, cost of insurance rates or other Non- Guaranteed Elements specifically on or in respect of the Insurance Contracts, including therewith supporting materials or actuarial analyses provided thereto in connection with its assessment of such proposed changes. Since January 1, 2018, except (i) as set forth in Section 3.10(d) of the Parent Disclosure Schedule, or (ii) with respect to crediting rates applicable to the Insurance Contracts, the Company has not changed the “cost of insurance” or similar charges or other Non- Guaranteed Elements on or in respect of the Insurance Contracts and, as of the date hereof, has no agreements or commitments, written or otherwise, regarding credited interest rates to be paid with respect to any of the Insurance Contracts. (e) The Company is not “commercially domiciled” in any jurisdiction. The Company (i) has not issued or reinsured any Insurance Contract the policy value of which varies with the investment performance of a separate account or sub account thereof, or (ii) has not owned or maintained any separate account. 3.11 Producers; Sale Practices; Third Party Administrators. (a) Section 3.11(a) of the Parent Disclosure Schedule sets forth a true and correct list, to the Knowledge of Parent or Seller, of each Material Independent Producer of the Company and the gross premium volume produced by the Business of the Company in respect of each such Material Independent Producer for the twelve (12) months ended December 31, 2020. (b) Each Independent Producer was duly and appropriately appointed by the Company to act as a producer for the Company at the time such Independent Producer negotiated, placed, marketed, wrote, sold, produced or solicited any of the Insurance Contracts for which it was the producer to the extent required by applicable Law. To the Knowledge of Parent or Seller, each Independent Producer at such time was duly licensed as required by applicable Insurance Law (for the type of business written, sold, produced or solicited on behalf of the Company), except for such failures to be so licensed which have been cured, which have been resolved or settled through agreements with applicable Governmental Authorities, which are barred by an applicable statute of limitations or which would not be material to the Company.

 
- 36 - (c) Since January 1, 2018, the Company has not received written notice from any Governmental Authority that an Independent Producer is in material violation of any applicable Law applicable to the writing, sale, production or solicitation of insurance policies for the Company. (d) Except as set forth in Section 3.11(d) of the Parent Disclosure Schedule, Parent has made available to Buyer (i) the standard forms of agreements used in connection with the business of the Company for Independent Producers since January 1, 2015, and (ii) true, accurate and complete copies of any agreements in force on the date hereof between the Company and any Material Independent Producer that is substantially different from both such standard forms of agreements and other standard forms of agreements used by the Company since January 1, 2015. Except as set forth in Section 3.11(d) of the Parent Disclosure Schedule or in such standard forms, the Company does not have any compensation plans or programs for the payment of compensation to Independent Producers other than commissions based on gross premium volume produced and volume-based bonus arrangements. No Independent Producer has materially breached the terms of any agency or broker contract with or for the benefit of the Company. To the Knowledge of Parent or Seller, no Independent Producer or any Affiliate of such Independent Producer has any right to (i) receive any payment based on the profitability or financial performance of any of the Insurance Contracts or (ii) that requires the Company to reinsure or otherwise transfer the economic benefits of the Insurance Contracts (or any portion thereof) to any Person. (e) Except as set forth in Section 3.11(e) of the Parent Disclosure Schedule, to the Knowledge of Parent or Seller, since January 1, 2018, (i) each third party administrator that serviced, managed, adjusted or administered insurance business for the Company or performed any other action for or on behalf of the Company, at the time such Person serviced, managed, adjusted or administered such business or performed such action, was duly licensed and appointed as required by Law (for the type of business managed or administered on behalf of the Company) in the particular jurisdiction in which such third party administrator serviced, managed, adjusted or administered such business or performed such action and (ii) no such third party administrator was or is in violation (or with or without notice or lapse of time or both, would be or would have been in violation) of any term or provision of any Law applicable to the servicing, administration, adjustment or management of insurance business for the Company, except for such failures to be licensed or such violations which have been cured, resolved or settled through agreements with applicable Governmental Authorities. 3.12 Existing Reinsurance Contracts. (a) Section 3.12(a) of the Parent Disclosure Schedule lists each reinsurance agreement to which the Company is a party and under which the Company has ceded or retroceded any risks in respect of the Business of the Company and with respect to which the Company has any outstanding ceded reserves, as well as each material marketing agreement, administrative services agreement and any other agreement that is related to each such reinsurance agreement (the “Ceded Reinsurance Contracts”). The Company is in compliance with all statutory accounting principles, including risk transfer requirements under the Ceded Reinsurance Contracts and is entitled to take full credit in its Statutory Statements pursuant to applicable Law for all the Ceded Reinsurance Contracts. Except as set forth on Section 3.12(a) of the Parent Disclosure Schedules, since January 1, 2018, the Company has not received a written denial of any material claim from the reinsurer

 
- 37 - under any of the Ceded Reinsurance Contracts. All rights and obligations of the Company under its ceded reinsurance relating to the “Coinsured Policies” ceded by it to National Guardian Life Insurance Company under that certain Coinsurance and Administrative Services Agreement dated July 31, 2015 between such parties have been transferred to National Guardian Life Insurance Company, and, under the terms of such Coinsurance and Administrative Services Agreement, there is no residual liability under such ceded reinsurance or the coverage provided thereunder retained by the Company. (b) Section 3.12(b) of the Parent Disclosure Schedule lists each reinsurance agreement to which the Company is a party and under which the Company has assumed any risks and with respect to which the Company has any outstanding assumed reserves (the “Assumed Reinsurance Contracts” and, together with the Ceded Reinsurance Contracts, the “Reinsurance Contracts”). The Company has received all necessary approvals (or non-disapprovals) from applicable Governmental Authorities for each Assumed Reinsurance Contract and the transactions contemplated thereby. (c) True and complete copies of all Reinsurance Contracts, including all amendments thereto, have been made available to Buyer by Parent. Each of the Reinsurance Contracts constitutes a valid and binding obligation of the Company and, to the Knowledge of Parent or Seller, each other party thereto, enforceable against the Company and, to the Knowledge of Parent or Seller, each other party thereto in accordance with its terms, subject to the Enforceability Exceptions. The Company has not given notice, or received notice from a counterparty under any such contract, of termination, recapture, rescission, acceleration or breach (provisional or otherwise) in respect of any Reinsurance Contract. The Company has not, and to the Knowledge of Parent or Seller, none of the other parties to the Reinsurance Contracts have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which with or without notice, lapse of time or both would constitute a default under the provisions of, any Reinsurance Contract. No Reinsurance Contract contains any provision providing that the reinsurer may terminate, recapture, rescind, accelerate or declare the ceding company in breach under such agreement by reason of the transactions contemplated by this Agreement or the other Transaction Documents. None of the Company or, to the Knowledge of Parent or Seller, any ceding company or reinsurer under any Reinsurance Contract is insolvent or the subject of a rehabilitation, liquidation, conservatorship, receivership, bankruptcy or similar proceeding and the financial condition of any such ceding company or reinsurer is not impaired to the extent that a default thereunder is reasonably anticipated. There has not been any dispute with respect to any material amounts recoverable or payable by the Company or any of its Affiliates pursuant to any Reinsurance Contract. All amounts owed (that are not being disputed in good faith) under any Reinsurance Contracts have been paid in accordance with their terms in all material respects. 3.13 No Undisclosed Liabilities. Except for the liabilities: (i) set forth on, reflected in or reserved against on the Most Recent Statutory Statements; (ii) set forth in Section 3.13 of the Parent Disclosure Schedule; or (iii) incurred in the ordinary course of business consistent with past practice since January 1, 2021 and which does not exceed $100,000, neither the Company nor

 
- 38 - Abacus is subject to any liability, whether absolute, accrued, contingent or otherwise and whether due or to become due. 3.14 Absence of Certain Changes or Events. Except as set forth in Section 3.14 of the Parent Disclosure Schedule, since January 1, 2021 to the date hereof, the Company and Abacus have conducted their Business in the ordinary course of business consistent with past practice, and there has not been any fact, circumstance, condition, event, or change that constitutes, or would reasonably be expected to constitute, individually or in the aggregate, a Company Material Adverse Effect. Without limiting the generality of the foregoing, from April 1, 2021 to the date hereof, neither the Company nor Abacus has, except as set forth in Section 3.14 of the Parent Disclosure Schedule, taken any action or failed to take any action that would have resulted in a breach of Section 5.1 had such section been in effect since April 1, 2021. 3.15 Absence of Litigation, Claims and Orders. Except as set forth in Section 3.15 of the Parent Disclosure Schedule (i) there are no Proceedings pending or, to the Knowledge of Parent or Seller, threatened against the Company or Abacus, and (ii) there are no Orders outstanding to which the Company or Abacus or any of its or their respective properties, rights or assets is subject. 3.16 Employee Benefit Plans. (a) Section 3.16(a) of the Parent Disclosure Schedule sets forth a complete list of each Employee Plan sponsored by the Company or Abacus (a “Company Employee Plan”) and identifies the sponsor of each. (b) Each Company Employee Plan has been established, operated and administered in material compliance with its terms, ERISA, the Code and other applicable Law, and the Company and Abacus and their ERISA Affiliates have satisfied in all material respects all of their obligations for Employees with respect to each Company Employee Plan in accordance with its terms, ERISA, the Code and other applicable Law. Each Company Employee Plan that is intended to be Tax- qualified has received a favorable opinion letter from the IRS or is entitled to rely on a favorable determination letter from the IRS, or has filed a timely application therefor and no event has occurred since the date of the most recent determination letter that has not been revoked or application therefor relating to any such Company Employee Plan that would reasonably be likely to cause the loss of such qualification status of such Company Employee Plan. With respect to covered Employees, each Company Employee Plan that is a “nonqualified deferred compensation plan” (as defined under Section 409A of the Code) has been maintained and operated in material compliance with Section 409A of the Code. The Company and Abacus have complied in all material respects with all applicable disclosure, reporting and other requirements under applicable Law applicable to any Company Employee Plan. Neither the Company nor Abacus nor, to the Knowledge of Parent or Seller, any other “disqualified person” or “party in interest” (as defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to a Company Employee Plan has engaged in a prohibited transaction that would subject the Company or Abacus to a Tax or penalty imposed under Section 4975 of the Code or Sections 409, 502(i), (j) or (l) of ERISA. Neither the Company nor Abacus has maintained, contributed to (or been required to contribute to) or otherwise incurred any liability with respect to any Company Employee Plan under (i) Title IV of ERISA, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer plan” (within the meaning of Section 413 of the Code), or (iv) a “multiple

 
- 39 - employer welfare arrangement” (as defined in Section 3(40) of ERISA). Neither the Company nor Abacus has or will, as a result of the execution of this Agreement or the consummation of the transactions contemplated under this Agreement, have any liability with respect to any Employee Plan sponsored, maintained or contributed by an ERISA Affiliate of the Company or Abacus. (c) Except as set forth in Section 3.16(c) of the Parent Disclosure Schedule, neither the Company nor Abacus has any obligation to provide health benefits to any Employee following termination of employment, except continuation coverage required under Section 4980B of the Code (or equivalent state Law) with the full cost of such coverage to be borne by the qualified beneficiary (as defined in Section 4980B of the Code). (d) Parent has made available to Buyer true and complete copies of the following documents relating to Employee Plans: (i) all current Company Employee Plan documents, including any documents related to any funding medium; (ii) the three most recently filed Forms 5500 (with attachments) for each such Company Employee Plan for which a Form 5500 is required to be filed; (iii) for each such Employee Plan intended to be Tax-qualified, the most recent IRS determination, advisory or opinion letter with respect to such Employee Plan under Section 401(a) of the Code; (iv) the current summary plan description and all summaries of material modifications thereto for each such Company Employee Plan for which a summary plan description or summary of material modifications is required; (v) any contract with such Company Employee Plan’s record keepers, custodians, brokers, investment managers, advisors or other third parties; and (vi) all material written correspondence with a Governmental Authority relating thereto. (e) Full payment has been timely made, or otherwise properly accrued on the Books and Records of the Company and Abacus, of all amounts that the Company or Abacus are required under the terms of an Employee Plan to have paid as contributions to such Employee Plan on or prior to the date hereof (excluding any amounts not yet due) and the contribution requirements, have been made or otherwise properly accrued on the Financial Statements and Pro Forma Closing Statement and will be properly made or accrued through the Closing Date on the Estimated Closing Statement and Closing Statement. (f) Other than routine claims for benefits in the ordinary course of business, no Proceeding is pending or, to the Knowledge of Parent or Seller, threatened with respect to any Company Employee Plan for any Employee. No Employee Plan is the subject of a voluntary correction, amnesty, or compliance filing with a Governmental Authority. (g) Except as set forth on Section 3.16(g) of the Parent Disclosure Schedule, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (individually or together with the occurrence of any other event): (i) entitle any current or former Employee, officer, director, leased employee or independent contractor of either the Company or Abacus to severance, change-in-control or retention pay or any other payment, (ii) accelerate the time of payment, vesting or funding, or increase the amount or value of any compensation due to such person, or (iii) require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section 280G(c) of the Code. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby could result in the payment of any amount that could, individually or in the combination with any other such payment, constitute an “excess parachute payment” within the meaning of Section 280G(b) of the Code.

 
- 40 - 3.17 Labor Matters. (a) Section 3.17(a) of the Parent Disclosure Schedule contains a true, complete and correct list of each Employee as of the date hereof, including each such Employee’s employer, name, hire date and job title, current annual salary or hourly rate of pay (whichever is applicable), along with such Employee’s 2020 bonus, total commissions, part-time, full-time or temporary status, accrued unused vacation benefits, leave of absence status (including FMLA and disability), exempt or non-exempt status under the Fair Labor Standards Act, immigration status, and service credited for purposes of vesting and eligibility to participate under the Employee Plans (the “Employee Census”). The Employee Census as updated pursuant to Section 5.12(a) shall be true, complete and correct as of the Closing Date. Section 3.17(a) of the Disclosure Schedule identifies any individual employed by Parent or an Affiliate of Parent (other than the Company or Abacus) who is performing substantial services relating to the principal business operations of the Company or Abacus. Section 3.17(a) of the Disclosure Schedule identifies any Employee who is not performing substantial services relating to the principal business operations of the Company or Abacus. Except as listed on Section 3.17(a) of the Parent Disclosure Schedule, each Employee may be terminated at will by his or her employer without penalty or any continuing obligations, except for any accrued benefits under the Employee Plan or any statutory obligations to former employees. Each Employee is (i) a United States citizen or lawful permanent resident of the United States or (ii) an alien authorized to work in the United States either specifically for the Company or Abacus or for any United States employer. The Company or Abacus, as applicable, has completed a Form I-9 (Employment Eligibility Verification) for each Employee, and each such Form I-9 has since been updated as required by applicable Law and is correct and complete in all material respects. A copy of each such Form I-9 form has been provided to Buyer. Section 3.17(a) of the Parent Disclosure Schedule identifies each Employee authorized to work under a visa or other temporary work authorization, the nature of the visa or work authorization, and the expiration date of any such visa or work authorization. (b) Neither the Company nor Abacus is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. Neither the Company nor Abacus is or has been during the past three (3) years subject to a strike, work stoppage or material labor dispute. No labor organization or group of Employees has made a pending demand for recognition or certification. To the Knowledge of Parent or Seller, no organizational efforts with respect to the formation of a collective bargaining unit are being or have been made or threatened involving Employees. (c) Each of the Company, since January 1, 2018, and Abacus, since the Abacus Purchase Date, is in material compliance with all applicable Law pertaining to employment and employment practices, including those relating to labor relations. There are no pending or, to the Knowledge of Parent or Seller, threatened charges or complaints against the Company or Abacus before any Governmental Authority regarding employment discrimination, safety or other employment-related charges or complaints, wage and hour claims, unemployment compensation claims, workers’ compensation claims or any other claims arising from or relating to the employment of any of the Employees or relationship of the Company or Abacus with any independent contractor.

 
- 41 - (d) Each of the Company and Abacus is in compliance in all material respects with its obligations pursuant to the Worker Adjustment Retraining and Notification Act, 29 U.S.C. § 2101 et seq. (as amended from time to time, “WARN” and, collectively with any similar state or local law, the “WARN Acts”) and in all material respects with all other notification obligations arising under any statute or otherwise, in each case to the extent affecting, in whole or in part, any site of employment, facility, operating unit or Employee. Neither the Company nor Abacus has engaged in any transaction or engaged in layoffs, terminations or relocations sufficient in number to trigger any WARN Act obligation. No former Employee has suffered an “employment loss” (as defined in WARN) in the ninety (90) days prior to the date hereof. 3.18 Real Property. (a) Section 3.18(a) of the Parent Disclosure Schedule sets forth a list of all real property leases to which the Company or Abacus is a party (whether as a (sub)lessor, (sub)lessee, guarantor or otherwise) (the “Company Real Property Leases”; with all real property in which the Company or Abacus hold a leasehold interest, whether as lessee or sublessee, being the “Leased Real Property”) and the street address with respect to the Company Real Property Leases. Except for Investment Assets, neither the Company nor Abacus owns any interest (fee, leasehold or otherwise) in any real property. Except as set forth in Section 3.18(a) of the Parent Disclosure Schedule, the Company or Abacus has a valid leasehold interest in the Leased Real Property, free and clear of any Liens other than Permitted Lien, and enjoys peaceful and undisturbed possession of the Leased Real Property. (b) Each Company Real Property Lease is in full force and effect and enforceable by the Company or Abacus, as applicable, in accordance with its terms, subject to the Enforceability Exceptions. Since January 1, 2018, with respect to the Company and since the Abacus Purchase Date with respect to Abacus, neither the Company nor Abacus has received any written notice of default with respect to any Company Real Property Lease, and since January 1, 2018, with respect to the Company and since the Abacus Purchase Date with respect to Abacus, no event has occurred and no condition exists that, with notice or lapse of time or both, would constitute a default by the Company or Abacus or, to the Knowledge of Parent or Seller, any other party thereto, under any of the Company Real Property Leases. Neither the Company nor Abacus has assigned or placed any Lien upon any Leased Real Property. 3.19 Taxes. (a) Parent, Seller, the Company and Abacus have timely filed (after giving effect to applicable extensions) with the appropriate Governmental Authority all Tax Returns required to be filed by or with respect to the Company or Abacus, and all such Tax Returns are true, correct and complete in all material respects. Parent, Seller, the Company or Abacus have timely paid or caused to be paid all Taxes shown as due and owing on any such Tax Returns and all other Taxes due and owing by the Company or Abacus or by Parent or Seller with respect to the Company and Abacus. (b) Parent, Seller, the Company and Abacus have complied in all material respects with their obligations under applicable Law to withhold Taxes from payments to Employees, agents, independent contractors, lenders and members, and all such Taxes have been timely paid to the

 
- 42 - relevant Governmental Authority or properly set aside in accounts for such purpose. Neither the Company nor Abacus will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting under Section 481 of the Code (or any corresponding provision or state, local or non-U.S. Law) elected, requested, made or imposed prior to the Closing, (ii) installment sale or open transaction made on or prior to the Closing Date, (iii) election under Section 108(i) of the Code (or similar provision of state, local or non-U.S. Law), (iv) change in the basis for determining any item referred to in Section 807(c) of the Code (within the meaning of Section 807(f) of the Code) with respect to any taxable period (or portion thereof) ending on or prior to the Closing Date, or (v) intercompany transaction or excess loss account described in the Treasury Regulations under Section 1502 of the Code (or any corresponding provision of Law). (c) There are no Liens for Taxes upon any assets of the Company or Abacus, other than Permitted Liens. (d) No audits or other administrative or judicial actions are in progress or threatened in writing with regard to any material Taxes for which the Company or Abacus is or may become liable. (e) Neither the Company nor Abacus has participated in any “listed transaction” within the meaning of Section 1.6011-4(b)(2) of the Treasury Regulations. (f) Neither the Company nor Abacus has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return (other than a group the common parent of which was Parent) or has any liability for the Taxes of any Person (other than Parent, Seller, the Company or Abacus) under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local, or non-U.S. Law), or as a transferee or successor. Neither the Company nor Abacus is a party to, bound by or has any obligation under any Tax allocation, Tax sharing, Tax indemnity or similar agreement, arrangement or understanding (“Tax Agreement”) which will be effective following the Closing Date. (g) Neither the Company nor Abacus has distributed stock of another Person, or has had its stock distributed to another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code or Section 361 of the Code. (h) Neither the Company nor Abacus has granted any written waiver of any statute of limitations relating to Taxes that remains in effect, and no power of attorney granted by the Company or Abacus prior to the Closing with respect to any such Taxes will be in effect following the Closing. No Person has received or applied for a Tax ruling or entered into a closing agreement pursuant to Section 7121 of the Code (or any similar provision of state, local or non-U.S. Law) that would be binding upon the Company or Abacus after the Closing Date. (i) Neither the Company nor Abacus has received from any taxing authority any written notice of proposed adjustment, deficiency, underpayment of Taxes or any other such written notice which has not been satisfied by payment or been withdrawn.

 
- 43 - (j) No written claim has been made by a Governmental Authority in a jurisdiction where the Company does not file a Tax Return that the Company is or may be subject to taxation by that jurisdiction in respect of Taxes that would be covered by or the subject of such Tax Return, which claim has not been fully resolved. (k) Parent is eligible to make an election under Section 338(h)(10) of the Code and any corresponding elections under state, local or non-U.S. law with respect to the sale of stock of the Company, and no consent is required from any third party with respect to such election. (l) The Company qualifies and, for all years for which the applicable statute of limitations has not expired, qualified as a non-life insurance company for purpose of the Code and has been subject to taxation under subchapter L of the Code. None of the insurance policies issued or sold by the Company provide “health insurance coverage” as defined by Section 9832 of the Code. (m) The Company and Abacus have properly accrued or reserved for the ACA Taxes for which they are responsible for payment either directly to a Governmental Authority or to a third party under their contractual relationship as a liability on the relevant Statutory Statements in accordance with SAP applicable to the Company, consistently applied. (n) The Company has not delayed the payment of any payroll or other employment- related Taxes pursuant to Section 2302 of the CARES Act or otherwise. (o) The Tax treatment of each Insurance Contract under applicable Law is not, and, since the time of issuance (or subsequent modification) has not been, less favorable to the purchaser, policyholder or intended beneficiaries thereof than the Tax treatment (i) that was purported to apply in any written materials provided by the Company or Abacus to the purchaser (or policyholder) at the time of issuance (or any subsequent modification of such Insurance Contract), or (ii) for which such Insurance Contract was designed to qualify at the time of issuance (or subsequent modification). For purposes of this Section 3.19(o), the provisions of applicable Law relating to the Tax treatment of the Insurance Contracts include, but are not limited to, Sections 72, 79, 101, 401-409A, 412, 415, 417, 419, 419A, 430-436, 457, 501, 505, 817, 1035, 1275, 7702, 7702A and 7702B of the Code. Neither the Company nor Abacus has entered into any agreement or is involved in any discussions or negotiations with the Internal Revenue Service or any other Tax Authority, or otherwise has requested relief, regarding the Tax treatment of the Insurance Contracts under applicable Law, including any failure of any Insurance Contract to meet the requirements of Sections 72, 79, 101, 401-409A, 412, 415, 417, 419, 419A, 430-436, 457, 501, 505, 817, 1035, 1275, 7702, 7702A and 7702B of the Code. Neither the Company nor Abacus is a party to or has received notice of any federal, state, local or foreign audits or other administrative or judicial Proceedings with regard to the Tax treatment of any Insurance Contract, or of any claims by the purchasers, policyholders or intended beneficiaries of the Insurance Contracts regarding the Tax treatment of (i) the Insurance Contracts or (ii) any plan or arrangement in connection with which such Insurance Contracts were purchased or have been administered. Neither the Company nor Abacus is a party to any “hold harmless” indemnification agreement, Tax Agreement or similar agreement under which the Company or Abacus is liable for the Tax treatment of (i) the Insurance Contracts or (ii) any plan or arrangement in connection with which such Insurance Contracts were purchased or have been administered.

 
- 44 - (p) (i) All life Insurance Contracts that are subject neither to Section 101(f) nor to Section 7702 of the Code qualify as life insurance contracts for purposes of the Code, (ii) all life Insurance Contracts that are subject to Section 101(f) of the Code satisfy the requirements of that section and otherwise qualify as life insurance contracts for purposes of the Code, and (iii) all life Insurance Contracts that are subject to Section 7702 of the Code satisfy the requirements of Section 7702(a) of the Code and otherwise qualify as life insurance contracts for purposes of the Code. None of the life Insurance Contracts is a “modified endowment contract” within the meaning of Section 7702A of the Code, except for any life Insurance Contract that is being administered as a “modified endowment contract” and with respect to which the policyholder consented in writing to the treatment of such contract as a “modified endowment contract” and has not acted to revoke such consent. The Company has complied with all Tax reporting, withholding, and disclosure requirements applicable to the Insurance Contracts and, in particular, but without limitation, has reported distributions under the Insurance Contracts in compliance in all respects with all applicable requirements of the Code, Treasury Regulations, and forms issued by the Internal Revenue Service. The Company has maintained the information necessary to determine the Insurance Contracts’ qualification for any applicable Tax treatment under the Code, to monitor the Insurance Contracts for treatment as “modified endowment contracts” (if applicable), and to facilitate compliance with the Tax reporting, withholding, and disclosure requirements applicable to the Insurance Contracts in the manner required by the Internal Revenue Service. (q) Each Insurance Contract that is subject to Section 817 of the Code complies with, and, at all times since issuance, has complied with, the diversification requirements applicable thereto, and the Company is treated for federal Tax purposes as the owner of the assets underlying such Insurance Contract. (r) Abacus is a disregarded entity under Section 301.7701-3 of the Treasury Regulations and has never made any election under such regulations to treat its tax status and characterization other than the default status and characterization provided under such regulations. 3.20 Intellectual Property and Technology. (a) The Company and Abacus own or have the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary for the operation of their Business as presently conducted (the “Company Intellectual Property Rights”). Section 3.20(a) of the Parent Disclosure Schedule sets forth, as of the date hereof, all registered trademarks, service marks and trade dress and all applications for trademarks, service marks and trade dress; all registered copyrights and all applications for copyrights; all patents and patent applications; and all Internet domain names owned by the Company or Abacus (the “Scheduled Company Intellectual Property”). With respect to each item of the Company Intellectual Property Rights, except as set forth in Section 3.20(a) of the Parent Disclosure Schedule: (i) the Company or Abacus possesses all right, title, and interest in and to the item, free and clear of any Lien, license, royalty or other restriction; and (ii) none of the Company’s or Abacus’ rights will be terminated or impaired, or become terminable, in whole or in part, as a result of the transactions contemplated hereby. With respect to each item of the Scheduled Company Intellectual Property, except as set forth in Section 3.20(a) of the Parent Disclosure Schedule, the Company’s and Abacus’ rights are valid and enforceable, and all filings required to maintain the validity thereof have been made. Either the Company or Abacus (1) are in possession of all Software Programs and Deliverables

 
- 45 - under (and as defined in) the Software Agreements (including the PolicyPro Software), (2) have paid in full all development fees and other amounts due and payable to the Developer under the Software Agreements, (3) are in compliance in all material respects under the Software Agreements and (4) own the PolicyPro Software free and clear of any Liens. There has been no dispute with the Developer under the Software Agreements. (b) Except as set forth in Section 3.20(b) of the Parent Disclosure Schedule and since January 1, 2018, none of Parent or any of its Affiliates has received any written notice that the Company’s or Abacus’ use of the Company Intellectual Property Rights has infringed, misappropriated, diluted or otherwise violated any Intellectual Property rights owned by third parties. To the Knowledge of Parent or Seller, the operation by the Company and Abacus of their Business does not and has not infringed, misappropriated, diluted or otherwise violated the Intellectual Property rights owned by any third party. Except as set forth in Section 3.20(b) of the Parent Disclosure Schedule and since January 1, 2018, neither the Company nor Abacus has made any claim against any third party alleging infringement, misappropriation, dilution or other violation of any Company Intellectual Property Rights. (c) All Employees and consultants who contributed to the discovery or development of any Company Intellectual Property Rights did so either (i) within the scope of his or her employment or (ii) pursuant to written agreements assigning all Intellectual Property arising therefrom to the Company or Abacus. (d) Except as set forth in Section 3.20(d) of the Parent Disclosure Schedule, to the Knowledge of Parent or Seller, the use and dissemination by the Company and Abacus of Personal Information of consumers of its services or users of any websites operated by the Company or Abacus are in compliance, in all material respects, with all applicable privacy policies and terms of use and applicable Law. The Company and Abacus use commercially reasonable measures to protect the Personal Information that is collected and maintained by them and to require that any third party providing services to the Company or Abacus comply with applicable Law with respect to safeguarding Personal Information collected by such party. Since January 1, 2018, except as set forth in Section 3.20(d) of the Parent Disclosure Schedule, to the Knowledge of Parent or Seller, there has been no Security Breach in the safeguards for such Personal Information. The Company and Abacus use commercially reasonable measures to protect the confidentiality of the Company Intellectual Property Rights. Since January 1, 2018, except as set forth in Section 3.20(d) of the Parent Disclosure Schedule, there has been no breach in the safeguards for such confidential Company Intellectual Property Rights. (e) Section 3.20(e) of the Parent Disclosure Schedule lists all material Computer Programs and Software owned or used by the Company or Abacus, including the PolicyPro Software; provided, that “material” Computer Programs excludes all shrink-wrap and off-the-shelf Computer Programs. Such Computer Programs and Software do not contain any open source or copyleft software. Neither the Company nor Abacus is a party to any agreement, which: (i) restricts the free use, license or disclosure by the Company or Abacus of any source code or object code relating to any of the Computer Programs and Software owned or purported to be owned by the Company or Abacus, or (ii) requires the Company or Abacus to (A) include any source code relating to any of the Company’s or Abacus’ proprietary Computer Programs and Software with any distribution or delivery (whether physical or on a hosted basis) of such Computer Programs or

 
- 46 - Software or (B) permit any licensee of any Computer Programs or Software owned or purported to be owned by the Company or Abacus to modify any source code relating to such Software. (f) The IT Systems (i) operate as necessary for the conduct of the Business of the Company and Abacus in all material respects, and (ii) to the Knowledge of Parent or Seller, do not contain any “malware” or critical vulnerabilities that would reasonably be expected to interfere with the ability of Buyer to conduct the Business of the Company and Abacus as currently conducted. Since January 1, 2018, there have been no material adverse events affecting the IT Systems that have caused a material impact on the Company’s and Abacus’ operation of their respective businesses. The Company and Abacus have implemented, maintain, and comply with commercially reasonable business continuity and backup and disaster recovery plans and procedures with respect to the IT Systems. Since January 1, 2018, there has been no failure, unauthorized access or use, or other adverse event affecting any of the IT Systems that has caused or will likely cause any material disruption to the conduct of the Business of the Company or Abacus. 3.21 Insurance. Section 3.21 of the Parent Disclosure Schedule sets forth a true and complete list of all insurance policies covering the assets, Business, equipment, properties, operations, Employees, consultants, directors, officers and managers of the Company and Abacus. There is no claim by the Company or Abacus currently pending under any of such policies as to which coverage has been questioned, denied or disputed by the insurers of such policies. All such insurance policies are in full force and effect and premiums payable under all such policies have been timely paid, and the Company and Abacus are otherwise in compliance with the terms of such policies in all material respects. To the Knowledge of Parent or Seller, since the time any such policies were last issued or renewed, there has not been any threatened termination of, material premium increase with respect to, or alteration of coverage under, any such policies. None of Parent, Seller or the Company or Abacus, nor, to the Knowledge of Parent, any insurer under such insurance policies, is in violation or breach of, or default under, any provision thereof. 3.22 Environmental Matters. (a) Except as set forth in Section 3.22(a) of the Parent Disclosure Schedule, (i) neither of the Company or Abacus is in violation in any material respect of any Environmental Laws or has violated in any material respect in the past any Environmental Laws; (ii) the Company and Abacus have obtained and are in compliance in all material respects with all required Environmental Permits and have been in the past in compliance in all material respects with such Permits; and (iii) there are no actions, Orders, written claims or written notices pending or issued to or, to the Knowledge of Parent or Seller, threatened against the Company or Abacus alleging violations of or liability under any Environmental Laws or otherwise concerning the Release or management of Hazardous Substances. (b) To the Knowledge of Parent or Seller, there are no actions, activities, circumstances, facts, conditions, events or incidents, including the presence of any Hazardous Substances, that would be reasonably likely to form the basis of an obligation pursuant to applicable Environmental Laws against the Company or Abacus or, to the Knowledge of Parent or Seller, against any Person whose liability for such obligation the Company or Abacus has or may have retained or assumed either contractually or by operation of applicable Law.

 
- 47 - (c) For purposes of this Agreement: (i) “Environmental Laws” means any Laws (including common law) of the United States federal, state, local, non-United States, or any other Governmental Authority, relating to (A) Releases or threatened Releases of Hazardous Substances or materials containing Hazardous Substances; (B) the manufacture, handling, transport, use, treatment, storage, emission, discharge, or disposal of Hazardous Substances or materials containing Hazardous Substances; or (C) pollution or protection of the environment or of human health and safety as such is affected by Hazardous Substances or materials containing Hazardous Substances. (ii) “Environmental Permits” means any Permit, consent, license, registration, approval, notification or any other authorization pursuant to Environmental Laws. (iii) “Hazardous Substances” means (A) those substances, materials or wastes defined as toxic, hazardous, acutely hazardous, pollutants or contaminants in, or regulated under, the following United States federal statutes and any analogous foreign or state statutes, and all Regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum and petroleum products, including crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures thereof; and (D) polychlorinated biphenyls, asbestos, molds that would reasonably be expected to have an adverse effect on human health and urea formaldehyde foam insulation. (iv) “Release” means any release, spilling, leaking, pumping, pouring, discharging, emitting, emptying, escaping, leaching, injecting, dumping, disposing or migrating into or through the indoor or outdoor environment. 3.23 Affiliated Transactions. (a) Section 3.23(a) of the Parent Disclosure Schedule sets forth a complete and correct list of all agreements, contracts, commitments, arrangements or transactions (but excluding any Employee Plan) between Parent or any Affiliate of Parent (other than the Company or Abacus), or any of their respective directors, officers or managers, on one hand, and the Company or Abacus, on the other hand, and no unaffiliated third party (“Intercompany Agreements”). The Company and Abacus have complied in all material respects with all applicable disclosure, reporting or other requirements, including any such requirements under applicable Law, applying to the Intercompany Agreements. (b) Section 3.23(b) of the Parent Disclosure Schedule sets forth a complete and correct list of all agreements, contracts, commitments, arrangements or transactions (but excluding any Employee Plan) between the Company and Abacus. Any such agreement, contract, commitment, arrangement or transaction is on arms’-length terms and has been filed with and approved or not disapproved by the applicable Insurance Regulator if such filing and approval or non-disapproval is required by applicable Law.

 
- 48 - (c) No employee or director of the Company or any Person owning directly or indirectly one percent (1%) or more of the Shares (any such person or entity, an “Interested Party”) or, to the Knowledge of Parent and Seller, any Affiliate or family member of any such Interested Party is a party to any Contract with or binding upon the Company or Abacus or has any material interest in any property or assets owned by the Company or Abacus or has engaged in any material transaction with the Company or Abacus (in each case, other than those related to an Employee Plan or other ordinary course employment, compensation or incentive arrangements). 3.24 Assets. (a) Except as set forth on Section 3.24(a) of the Parent Disclosure Schedule, the Company and Abacus has valid title to, or a valid leasehold interest in or other valid and enforceable rights to use, all assets, rights, properties and services necessary to operate the businesses of the Company and Abacus as currently operated consistent with past practices, free and clear of all Liens, other than Permitted Liens. Except for property and assets disposed of in the ordinary course consistent with past practice and in compliance with Section 5.1, the Company and Abacus will as of the Closing own or have the right to use all of the assets necessary for the conduct of their Business as currently conducted. (b) Except as set forth on Section 3.24(b) of the Parent Disclosure Schedule and subject to receipt of the governmental approvals contemplated under Section 3.6(b) (including the Required Governmental Authorizations) and Section 4.3, the assets, rights, properties and services transferred or made available to Buyer and its Affiliates pursuant to this Agreement and the other Transaction Documents will, as of the Closing, comprise assets, rights, properties and services that are sufficient to permit Buyer to operate the Business of the Company and Abacus immediately following the Closing Date in substantially the same manner as such Business is being operated as of the date hereof. 3.25 Investment Assets. (a) Section 3.25(a)(i) of the Parent Disclosure Schedule sets forth a true, complete and correct list of all Investment Assets held by the Company and Abacus as of March 31, 2021 and as of the close of business on the Business Day immediately preceding the date hereof, with information included therein as to the Book Value and fair market value of such Investment Assets as of each such date. Except as set forth in Section 3.25(a)(ii) of the Parent Disclosure Schedule, the Company or Abacus has valid title to all such Investment Assets held by it, free and clear of all Liens, other than Permitted Liens. (b) Section 3.25(b) of the Parent Disclosure Schedule sets forth a true, complete and correct copy of the investment guidelines of the Company as in effect on the date hereof (the “Investment Guidelines”). All Investment Assets of the Company comply in all material respects with the Investment Guidelines and with applicable Law governing admittance of assets for the Company. The Investment Assets held by the Company that were listed as admitted assets on its Statutory Statements were qualified as admitted assets of the Company under applicable Law. The Company and Abacus have not taken, or omitted to take, any action which would cause any Investment Asset held thereby to be subject to any valid offset, defense or counterclaim against the right of the Company or Abacus to enforce the terms of such assets. To the Knowledge of

 
- 49 - Parent or Seller, no such Investment Asset is in arrears or default in the payment of principal or interest or dividends or has been otherwise been impaired, other than temporarily impaired, in accordance with the Specified Accounting Principles. (c) Parent has provided to Buyer (i) a written statement of the derivatives policies for the Company, including any derivative use plan or hedging guideline, in effect as of the date hereof, which policies are in compliance with applicable Law in all material respects, and (ii) true and correct copies of the asset/liability matching and impairment policies of the Company as in effect as of the date hereof. 3.26 Actuarial Data. Parent has made available to Buyer a true and complete copy of all actuarial reports and opinions prepared by actuaries, independent or otherwise, with respect to the Company or the Business, since January 1, 2018, set forth in Section 3.26 of the Parent Disclosure Schedule, and the material attachments, addenda, supplements and modifications thereto set forth in Section 3.26 of the Parent Disclosure Schedule (collectively, the “Company Actuarial Analyses”). Each such Company Actuarial Analysis (i) was based upon the Books and Records and an accurate inventory of Insurance Contracts in force at the relevant time of preparation and generated from the same underlying sources and systems that were utilized to prepare the Statutory Statements, (ii) is complete and accurate in all material respects as of the date thereof, subject to any limitations and qualifications contained therein and (iii) was prepared in accordance with sound actuarial principles, is consistent in all material respects with United States actuarial principles promulgated by the Actuarial Standards Board, and is based upon informed judgment. No actuary who prepared any of the Company Actuarial Analyses has notified Parent or any of its Affiliates in writing or, to the Knowledge of Parent or Seller, orally, that any Company Actuarial Analysis is inaccurate in any material respect. To the Knowledge of Parent or Seller, there are no omissions, errors, changes or discrepancies in the actuarial data which would materially affect the information contained in the Company Actuarial Analyses. 3.27 Bank Accounts; Power of Attorney. Section 3.27 of the Parent Disclosure Schedule sets forth a list of the bank names, locations and account numbers of all bank and safe deposit box accounts of the Company and Abacus, including any custodial accounts for securities owned by the Company or Abacus, and the names of all persons authorized to draw thereon or to have access thereto. Section 3.27 of the Parent Disclosure Schedule also sets forth the names of all persons, if any, holding powers of attorney from the Company or Abacus and a summary statement of the terms thereof. A true, accurate and complete copy of each such power of attorney has been made available to Buyer. 3.28 Privacy and Data Security. (i) To the Knowledge of Parent or Seller, the Company and Abacus have in place (A) administrative, technical and physical safeguards designed to protect against the destruction, loss, or alteration of Personal Information, (B) security measures designed to adequately protect Personal Information, and (C) privacy policies and procedures, all of which safeguards, measures and policies and procedures described in (A) – (C) above meet or exceed the requirements of applicable Law; (ii) the Company and Abacus have complied with applicable Law in all material respects, with all applicable contractual privacy obligations in all materials respects, and their respective internal privacy policies and guidelines in all material respects relating to the collection, storage, use and transfer of Personal Information; (iii) neither the Company nor Abacus is, or, since January 1, 2018, has been, under investigation or audit, by any private party or

 
- 50 - Governmental Authority, arising out of an actual or alleged Security Breach nor has any private party or Governmental Authority alleged any breach of contract or non-compliance with Law related to a data privacy or security matter, and (iv) since January 1, 2018, there has been (x) to the Knowledge of Parent or Seller, no unauthorized access, use, disclosure or transfer of any Personal Information in the possession, custody or control of the Company or Abacus, and (y) no claim communicated to the Company or Abacus in writing from any affected individual nor any written request or inspection from any Governmental Authority that, to the Knowledge of the Company, will likely give rise or has given rise to any liability under applicable Law in relation to data protection, data security or privacy. 3.29 Brokers. No broker, financial advisor, finder or investment banker or other Person is entitled to any broker’s, financial advisor’s, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company, and any such fee, if any, shall be payable by Parent. 3.30 CARES Act. Neither the Company nor Abacus has either (a) submitted any application which has not been rescinded, terminated or withdrawn in writing or (b) received any funds under or incurred any Indebtedness pursuant to the CARES Act or any other economic relief or stimulus legislation or program passed by the United States Congress or any state legislature in 2020. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER Except as set forth in the Buyer Disclosure Schedule, Buyer hereby represents and warrants to Seller, as of the date hereof and as of the Closing, as follows: 4.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the Law of the jurisdiction of its organization and (i) has all the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and (ii) is duly qualified to do business and is in good standing in each jurisdiction in which the ownership, operation or leasing of its properties and assets and the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not reasonably be expected to have a Buyer Material Adverse Effect. 4.2 Authority; Enforceability. Buyer has all necessary corporate power and authority to execute and deliver this Agreement, each other Transaction Document to which it is a party and each instrument required to be executed and delivered by it prior to or at the Closing and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement, each other Transaction Document to which it is a party and each instrument required hereby to be executed and delivered by Buyer prior to or at the Closing, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of Buyer, and no other corporate or similar proceedings on the part of Buyer are necessary to authorize this Agreement, any other Transaction Document to which it is a party or any instrument required to be executed and delivered by it prior to or at the Closing or the consummation of the transactions contemplated hereby or thereby. Each

 
- 51 - of the Transaction Documents to which Buyer is or will be a party have been or, with respect to the Transaction Documents to be executed and delivered at Closing, will be, duly and validly executed and delivered by Buyer and, assuming the due authorization, execution and delivery hereof by the other parties hereto or thereto, constitute a legal, valid and binding obligation of each of Buyer, enforceable against Buyer in accordance with its terms, subject to the Enforceability Exceptions. 4.3 No Conflict; Required Filings and Consents. The execution and delivery by Buyer of this Agreement, the other Transaction Documents to which it is a party or any instrument required by this Agreement to be executed and delivered by it on or prior to the Closing do not, and the performance of this Agreement, the other Transaction Documents to which it is a party and any instrument required by this Agreement to be executed and delivered by Buyer on or prior to the Closing do not and will not, (i) conflict with or violate the articles of incorporation or bylaws of Buyer, (ii) conflict with or violate in any respect any Law, Permit or Order applicable to Buyer or by which any of its properties, rights or assets is bound or affected, or (iii) with or without notice or the passage of time or both, violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with the giving of notice, the passage of time or otherwise would constitute a default) under or entitle any Person to terminate, accelerate or cause a breach or default of, or result in the creation of any Lien upon any of the properties or assets of Buyer under, or create any right of acceleration, termination, vesting, payment, exercise, suspension, revocation or cancellation of the loss of any right or benefit under any contract, mortgage, lien, lease, agreement, indenture, trust, instrument, order, judgment or decree to which Buyer is a party or which is binding upon Buyer or upon any of the assets of any of the foregoing, except (a) for compliance with the applicable requirements of the HSR Act, (b) filings with Insurance Regulators and other Filings and approvals that, in each case of this clause (b) are listed on Section 4.3 of the Buyer Disclosure Schedule. 4.4 Absence of Litigation, Claims and Orders. There are no claims pending or, to the Knowledge of Buyer, threatened on behalf of or against Buyer that (i) challenge (a) the validity of this Agreement or any other Transaction Document to which it is a party or (b) any action taken or to be taken by it pursuant to this Agreement or any other Transaction Documents to which it is a party or in connection with the transactions contemplated hereby and thereby, or (ii) could have a Buyer Material Adverse Effect. 4.5 Sufficient Funds. As of the Closing Date, Buyer will have immediately available funds sufficient to pay the amounts payable at Closing under Section 2.4(b) and any other payments contemplated in this Agreement and to pay all fees and expenses related to the transactions contemplated by this Agreement. 4.6 Brokers. Except for Raymond James Financial, Inc., no broker, financial advisor, finder or investment banker or other Person is entitled to any broker’s, financial advisor’s, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer. 4.7 Investment Purpose. Buyer is acquiring the Shares solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Shares are not registered under the Securities Act of 1933,

 
- 52 - as amended, or any state securities laws, and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. Purchaser is financially sophisticated and understands the risks relating to the purchase and ownership of the Shares. 4.8 Tax Election. Buyer is eligible to make an election under Section 338(h)(10) of the Code and any corresponding elections under state, local or non-U.S. law with respect to the purchase of stock of the Company, and no consent is required from any third party with respect to such election. ARTICLE V. COVENANTS 5.1 Conduct of Business Pending the Closing. During the period from the date of this Agreement and continuing through the Closing Date or the earlier termination of this Agreement pursuant to Section 7.1 hereof, except as expressly contemplated by this Agreement, as set forth in Section 5.1 of the Parent Disclosure Schedule or with the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned, or delayed, Parent and Seller shall, and shall cause the Company and Abacus to, (x) carry on the Business of the Company and Abacus in the ordinary course consistent with past practice, and (y) to the extent consistent therewith, use commercially reasonable efforts to maintain the current Business, significant business relationships and goodwill of their Business with policyholders, Employees, Independent Producers and other customers, suppliers and service providers of and to the Company and Abacus, and with the Governmental Authorities with jurisdiction over the Company and Abacus. Without limiting the generality of the foregoing, except as expressly contemplated by this Agreement or as set forth in Section 5.1 of the Parent Disclosure Schedule, Parent shall not with respect to Seller, the Company or Abacus, Seller shall not with respect to the Company and Abacus, and Parent and Seller shall not permit the Company or Abacus, without the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned, or delayed, to, directly or indirectly: (a) amend its Organizational Documents; (b) (i) issue, sell, transfer, grant, pledge or otherwise encumber any shares or other interests representing equity interests in the Company or Abacus, any other voting securities, or any securities convertible into or exchangeable for any such interests, in each case relating to equity interests in the Company or Abacus, (ii) issue, sell, grant or accelerate the timing of payment or vesting of any option, warrant, convertible or exchangeable security, subscription, call, or other agreement or right of any kind to purchase or otherwise acquire (including by exchange or conversion) any ownership interest in the Company or Abacus; (iii) directly or indirectly, purchase, redeem or acquire any equity interest (including Shares) or any other ownership interest in the Company or Abacus; (iv) change the authorized or issued equity of the Company or Abacus; (v) effect any recapitalization, reclassification, unit split, combination or similar change in the capitalization of the Company or Abacus; or (vi) enter into any contracts, agreements or arrangements to issue, redeem, acquire or sell any equity interests or any other ownership interests in the Company or Abacus;

 
- 53 - (c) (i) sell, transfer, encumber or otherwise dispose of Investment Assets other than in the ordinary course of business consistent with the Investment Guidelines; (ii) sell, terminate, transfer, exclusively license, encumber or otherwise dispose of any other material assets of the Company or Abacus; or (iii) permit the acquisition of any assets that would be material to the Company or Abacus; (d) make or authorize any capital expenditures that are, in the aggregate, in excess of $75,000; (e) make any change in the accounting, actuarial, payment, pricing, marketing, price or premium discounting (with respect to new or renewal business), reserving, risk management, underwriting or claims administration policies, practices, standards or principles, or make any change in the Investment Guidelines, or fail to manage its Investment Assets in compliance with the Investment Guidelines, in each case except as may be required by SAP applicable to the Company or applicable Law; (f) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, or recapitalization of the Company or Abacus; (g) hire any new employee who would be an Employee, except any employee with annual base compensation of less than $75,000 and who is terminable at-will, but only to the extent that the Employee is hired in the ordinary course of business consistent with past practice after providing Buyer reasonable notice thereof or transfer, reassign or reallocate the employment of any employee of Seller or any Affiliate of Seller to the Company or Abacus; (h) establish, amend or modify any Employee Plan, other than as required to comply with a change in applicable Law; (i) (i) promise, grant or agree to increase the base salary (or wages), target incentive opportunity or severance pay of, or any benefits paid or payable to, any Employee, including making any grant or award of equity compensation, or accelerate the vesting of any compensation or benefit, other than in the ordinary course of business consistent with past practice, as required by applicable Law or an Employee Plan in-force as of the date hereof, or as specifically provided for in this Agreement; (ii) enter into or amend any employment, consulting, indemnification, severance or termination agreement with any Employee; or (iii) loan or advance any money or other property to any Employee, except for advancement of expenses in the ordinary course of business consistent with past practices; (j) terminate (except in the ordinary course of business consistent with past practice for performance-related reasons, including fraud or willful misconduct), transfer the employment of, reassign or reallocate, any Employee; (k) incur, assume or guarantee any Indebtedness or guarantee the obligations of another Person, or make any loans, advances or capital contributions to, or investments in, any other Person other than investments made in the ordinary course of business in accordance with the Investment Guidelines that constitute Investment Assets;

 
- 54 - (l) declare, set aside or pay any dividends or other distributions, or permit any equity holder of the Company or Abacus to withdraw any equity or capital of the Company or Abacus; (m) acquire (by merger, consolidation, acquisition of stock or assets, reinsurance or otherwise) any other Person or substantially all of the assets of any other Person or any division thereof; (n) amend, waive any rights or delegate performance under, or assign, transfer, terminate or extend any Material Contract or Reinsurance Contract (other than contracts that terminate pursuant to their terms), or enter into any contract that would be a Material Contract or Reinsurance Contract if in effect on the date hereof; (o) outside of the ordinary course of business consistent with past practice, (i) enter into any agreement with any Independent Producer, or (ii) amend, waive any rights or delegate performance under, or assign, transfer or terminate any existing agreement with any Independent Producer; (p) pay, settle or compromise any Proceeding or threatened Proceeding, except claims under policies and certificates of insurance within applicable policy limits and in the ordinary course of business consistent with past practice; (q) except in connection with claims management activities in the ordinary course of business consistent with past practice, (i) forgive, cancel or compromise any debt or claim, (ii) waive or release any right, of material value, or (iii) fail to pay or satisfy when due any material liability (other than any such liability that is being contested in good faith); (r) acquire any real property or any direct or indirect interest in real property, other than security interests in real property included in the Investment Assets; (s) abandon, modify, waive, terminate or allow to lapse any material Permit of the Company or Abacus; (t) amend or modify any policy form on which Insurance Contracts are written or approved to be written; (u) (i) make, amend, or revoke any material election related to Taxes, (ii) settle or compromise any Tax liability or surrender any right to claim a Tax refund, offset, or other reduction in Tax liability, (iii) enter into any closing agreement related to Taxes, (iv) consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment, (v) change any Tax period, any Tax accounting method or the basis for determining any item referred to in Section 807(c) of the Code, (vi) amend any Tax Return or file any claim for Tax refunds, or (vii) make a request for a written ruling of a Governmental Authority relating to Taxes; (v) enter into any new line of business or launch, market, issue or agree to issue any new products or make material modifications or additions to the terms and conditions of the Insurance Contracts;

 
- 55 - (w) terminate, cancel or amend, or cause the termination, cancellation or amendment of, any material insurance coverage (and any surety bonds, letters of credit, cash collateral or other deposits related thereto required to be maintained with respect to such coverage), maintained by or for the benefit of the Company or Abacus that is not replaced with comparable insurance coverage; or (x) authorize or enter into any agreement in furtherance of any of the foregoing. 5.2 Access to Information; Confidentiality. (a) Prior to the Closing Date, Parent shall provide Buyer and its Representatives with reasonable access, including access upon reasonable notice at reasonable times during normal business hours, to all of the Books and Records and all of the properties and Employees of the Company and Abacus and, during such period, Parent shall and shall cause the Company and Abacus to furnish to Buyer such information concerning the Business, properties, financial condition, operations and senior personnel of the Company and Abacus as Buyer may from time to time reasonably request, other than any such properties, books, contracts, records and information that (i) are subject to an attorney-client or other legal privilege that might be impaired by such disclosure or (ii) are subject to an obligation of confidentiality; provided, that (x) in the case of clause (i) Parent shall use commercially reasonable efforts to take such action (such as entering into a joint defense agreement or other arrangement to avoid loss of the attorney-client privilege) with respect to such books, records, contracts, properties and information as is necessary to permit disclosure to Buyer and Buyer’s Representatives and (y) in the case of clause (ii) Parent shall notify Buyer promptly if any information is being withheld in reliance on clause (ii) and Parent shall use commercially reasonable efforts to obtain a waiver of the applicable obligation. (b) The terms of the Confidentiality Agreement are incorporated herein by reference and shall continue in full force and effect until the Closing, at which time the obligations under the Confidentiality Agreement shall automatically terminate. If for any reason the transactions contemplated by this Agreement are not consummated, the Confidentiality Agreement shall continue in full force and effect in accordance with its terms. From and after the Closing, Buyer and its Affiliates (including, from and after the Closing, the Company and Abacus), on one hand, and Parent and its Affiliates, on the other hand, shall and shall cause their respective Affiliates and Representatives to treat confidentially all non-public, confidential or proprietary information, including all notes, analyses, compilations, studies, copies and other documents which contain or otherwise reflect such information, provided to it by or on behalf of the other party in connection with the transactions contemplated hereby regarding such other party’s business and operations and all information provided under the Transaction Documents including the terms of the Transaction Documents, which confidential information may also include Personal Information (the “Confidential Information”). All Confidential Information provided by or on behalf of a party to the other party shall be used by such other party and its applicable Affiliates solely for the purposes of performing its obligations under the Transaction Documents and, except as may be required in carrying out the transaction contemplated hereby, shall not be disclosed to any third party (and, in the event of any disclosure to any third party as may be required to carry out the transactions contemplated hereby, such third party shall be informed by the disclosing party of the confidential nature of such information and instructed to keep such information confidential). Additionally, Confidential Information may be shared by either party on a need-to-know basis with

 
- 56 - its officers, directors, Employees, Affiliates, third party service providers, auditors, attorneys, or consultants, or in connection with the dispute resolution process specified in this Agreement. The restrictions set forth in this Section 5.2(b) shall not be applicable to any Confidential Information: (i) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of any Transaction Document or any other confidentiality obligation, or that is independently derived by any party without the use of any information provided by the other party in connection with the transactions contemplated hereby or otherwise; (ii) that is required to be disclosed in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of Law (with the relief from the requirements of this Section 5.2(b) only applying for the purposes of such disclosure); provided, that (x) the disclosing party shall provide the party whose information will be disclosed with prompt advance written notice of such requirement such that the party whose information will be disclosed may seek a protective order or other appropriate remedy to protect its interest, (y) the disclosing party shall reasonably cooperate with such party and, if a protective order or other remedy is not obtained, shall only disclose such information as is necessary to be disclosed and (z) the disclosing party shall inform any recipient of such information of the confidential nature of such information and shall instruct the recipient to keep such information confidential; or (iii) where the party seeking to disclose has received the prior written consent of the party providing the information. 5.3 Governmental Approvals and Filings; Third Party Consents; Third Party Audit. (a) Subject to the terms and conditions hereof, each of Buyer, Parent and Seller shall use its reasonable best efforts, and shall cooperate fully with each other, (i) to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as practicable after the date hereof, the transactions contemplated by the Transaction Documents and (ii) to obtain as promptly as practicable all necessary Permits, Orders or other consents, approvals or authorizations of Governmental Authorities necessary in connection with the consummation of the transactions contemplated by this Agreement. In connection therewith, Parent and Buyer shall make and cause their respective Affiliates to make all legally required filings as promptly as practicable in order to facilitate prompt consummation of the transactions contemplated hereby, shall provide and shall cause their respective Affiliates to provide such information and communications to Governmental Authorities as such Governmental Authorities may request, shall take and shall cause their respective Affiliates to use their reasonable best efforts to (x) avoid any Proceedings by any Governmental Authority with respect to the transactions contemplated hereby, and (y) defend or contest in good faith any Proceeding by any third party (other than any Governmental Authority), whether judicial or administrative, challenging any of the transactions contemplated hereby, or that could otherwise prevent, impede, interfere with, hinder or delay in any material respect the consummation of the transactions contemplated thereby. Each of the parties shall use reasonable best efforts to provide to the other party copies of all applications or other communications to Governmental Authorities in connection with this Agreement in advance of the filing or submission thereof; provided, that in connection therewith neither party shall be required to provide the other with any information or materials that are commercially sensitive or the disclosure of which would violate any of its contractual obligations or obligations with respect to confidentiality, contain personal information (including personal financial information) about an

 
- 57 - officer, director or control person of such party, are legally privileged or otherwise to the extent prohibited by applicable Law (collectively, “Sensitive Information”). (b) Without limiting the generality of the foregoing, as promptly as reasonably practicable following the date hereof, (i) Buyer shall, and shall cause its applicable Affiliates to, file with all applicable Insurance Regulators the Filings and requests for approval listed in Section 4.3 of the Buyer Disclosure Schedule and any other pre-acquisition notifications on “Form E” or similar market share notifications to be filed in each jurisdiction where required by applicable Law with respect to the transactions contemplated hereby, (ii) Parent shall, and shall cause its applicable Affiliates to, file with all applicable Insurance Regulators the Filings and requests for approval listed in Section 3.6(b) of the Parent Disclosure Schedule (except to the extent such Filing is being prepared by Buyer pursuant to the foregoing clause (i)), and (iii) if applicable, Buyer and Parent shall make an appropriate Filing of a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the transactions contemplated hereby and requesting early termination of the waiting period under the HSR Act. All filing fees payable in connection with the foregoing shall be borne by the respective filing party incurring such expense. Buyer and Parent shall, upon request, furnish each other with all information concerning themselves, their respective Affiliates, directors, officers and shareholders and members, as applicable, and such other matters as may be reasonably necessary or advisable in connection with the preparation of any statement, Filing, notice or application made by or on their behalf to any Governmental Authority in connection with the transactions contemplated by the Transaction Documents; provided, that in connection therewith neither party shall be required to provide the other with Sensitive Information. A reasonable time prior to furnishing any written materials to any Insurance Regulator or other Governmental Authority in connection with the transactions contemplated hereby, the filing party shall use reasonable best efforts to furnish the other party with a copy thereof, and such other party shall have a reasonable opportunity to provide comments thereon, which comments shall be considered by the filing party in good faith; provided, that in connection therewith neither party shall be required to provide the other with Sensitive Information. Each party shall give to the other party prompt written notice if it or any of its Affiliates receives any notice or other communication from any Insurance Regulator or other Governmental Authority in connection with the transactions contemplated by the Transaction Documents and, in the case of any such notice or communication that is in writing, shall promptly furnish the other party with a copy thereof. If any Governmental Authority requires that a hearing be held in connection with any such approval, each party shall use its reasonable best efforts to arrange for such hearing to be held promptly after the notice that such hearing is required has been received by such party. Each party shall give to the other party reasonable prior written notice of the time and place when any meetings, telephone calls, or other conferences may be held by it with any Governmental Authority in connection with the transactions contemplated by the Transaction Documents (other than (i) non-substantive scheduling or administrative calls and (ii) accepting any unscheduled telephone call from any Governmental Authority, or responding to any question during a discussion with any Governmental Authority that was scheduled for purposes of discussing matters other than the transactions contemplated hereby), and the other party shall have the right to have a representative or representatives attend or otherwise participate in any such meeting, telephone call, or other conference unless the relevant Governmental Authority does not consent to attendance or

 
- 58 - participation by such other party’s representative or such attendance or participation is prohibited by applicable Law. (c) Without limiting the foregoing, each of Buyer, Parent and Seller shall use its reasonable best efforts to avoid each and every impediment under any antitrust Law, insurance Law or other applicable Law that may be asserted by any Governmental Authority with respect to this Agreement and the transactions contemplated hereby so as to enable the Closing to occur as promptly as practicable, including, without limitation, any actions requested by any Governmental Authority that are necessary or appropriate to (i) obtain all consents and exemptions and secure the expiration or termination of any applicable waiting period under the HSR Act; (ii) resolve any objections that may be asserted by any Governmental Authority with respect to the transactions contemplated hereby; and (iii) prevent the entry of, and have vacated, lifted, reversed or overturned, any Order that would prevent, prohibit, restrict or delay the consummation of the transactions contemplated hereby); provided, that, in each case, in no event will a party be obligated to pursue or participate in litigation in connection with the covenants contained in this Section 5.3 or to respond to any “second request” or other request to provide additional information. Notwithstanding anything to the contrary in this Agreement, none of Parent, Seller, the Company, Abacus, or Buyer shall be obligated to take or refrain from taking any action or to become subject to any condition, limitation, restriction or requirement, that is imposed by a Governmental Authority on it or its Affiliates in connection with the pursuit of the consent or approval of a Governmental Authority for the transactions contemplated hereby, that would reasonably be expected to result in a Burdensome Condition. (d) Parent shall, and shall cause its Affiliates to, use reasonable best efforts to obtain, prior to the Closing, any consent or waiver from any third party (other than a Governmental Authority) that is required for the consummation of the transactions contemplated by this Agreement and the other Transaction Documents or that is necessary in order to ensure that any Material Contracts or Reinsurance Contracts will not be terminated as a result of consummating the transactions contemplated by this Agreement. Buyer shall, and shall cause its Affiliates to, cooperate with Parent at Parent’s reasonable request to assist in obtaining such consents or waivers. Each of Buyer and Parent shall bear its own and its Affiliates’ internal costs to obtain such consents and waivers, and the costs payable to third parties for obtaining such consents and waivers shall be borne by Parent and Seller. In connection therewith, Parent and Seller shall not, and shall cause the Company and Abacus not to without the prior written consent of Buyer, (a) make any payment of a consent fee, “profit sharing” payment or other consideration (including increased or accelerated payments) or concede anything of value, (b) materially amend, supplement or otherwise modify any such contract or Reinsurance Contracts, or (c) agree or commit to do any of the foregoing, in each case, for the purposes of giving, obtaining and/or effecting any third-party consents; provided, however, that Buyer may compel Parent or Seller to cause the Company and Abacus to take any of the actions referred to in this sentence if such actions are only effective after the Closing. Parent and Seller shall (and shall cause the Company and Abacus to) keep Buyer reasonably informed regarding the process of obtaining such third-party consents. (e) Without in any way limiting the foregoing, as soon as reasonably practicable following the date hereof, Parent shall (i) obtain the necessary written shareholder consents to approve the transactions contemplated hereby (the “Shareholder Approval”), (ii) file with the SEC a preliminary information statement on Schedule 14C with respect to the transactions

 
- 59 - contemplated hereby (the “Preliminary Consent Statement”), and (iii) file with the SEC, and mail or deliver to the Parent shareholders, a definitive information statement on Schedule 14C with respect to the transactions contemplated hereby (the “Definitive Consent Statement”). Parent shall use its reasonable best efforts to have the Preliminary Consent Statement cleared by the staff of the SEC as promptly as practicable after such filing, and Parent shall thereafter mail or deliver the Definitive Consent Statement to the Parent shareholders at least twenty (20) calendar days prior to the anticipated date of Closing. Buyer shall furnish all information concerning Buyer and its Subsidiaries for inclusion in the Preliminary Consent Statement and Definitive Consent Statement as may be reasonably requested by Parent, and shall have the right to review in advance, and, to the extent practicable, to provide comments on, the Preliminary Consent Statement prior to its filing and the Definitive Consent Statement prior to its and mailing to Parent shareholders. (f) Prior to Closing Parent and Seller shall and shall cause the Company to maintain sufficient personnel to perform all claims management functions of the Company in conformity with industry standards and quality so as to minimize any policyholder complaints and errors. 5.4 Notification of Certain Matters. Between the date of this Agreement and the Closing Date, each party shall give prompt notice to the other party at such time that such party becomes aware of the occurrence, or nonoccurrence, of any event which, if existing, occurring or known on the date hereof should have been so disclosed, or which is necessary to correct any information in the Parent Disclosure Schedule or the Buyer Disclosure Schedule; provided, however, that for purposes of determining the rights and obligations of the parties under this Agreement, any such supplemental disclosure by any party shall not be deemed to have been disclosed as of the date hereof, to constitute a part of, or an amendment or supplement to the Parent Disclosure Schedule or the Buyer Disclosure Schedule (as applicable), or to cure any breach or inaccuracy of a representation, warranty, covenant, condition or agreement as of the date hereof unless so agreed to in writing by the other party. 5.5 Interim Financial Statements; Investment Reports. (a) From the date hereof until the Closing Date, Parent shall deliver to Buyer true and complete copies of the unaudited and audited financial statements of the Company and Abacus when and as prepared in the ordinary course of business, consistent with past practice, together with any applicable actuarial opinion thereon. (b) From the date hereof until the Closing Date, Parent will forward to Buyer copies of all monthly or quarterly investment reports prepared by or for the Company regarding the Investment Assets, in each case within five (5) Business Days following creation or receipt of such reports by the Company. At least three (3) Business Days prior to the Closing Date, Parent shall deliver to Buyer a true, complete and correct list of all Investment Assets of the Company and Abacus with information included therein as to the Book Value and fair market value of such Investment Assets calculated in a manner consistent with the calculations with respect to such assets in Section 3.25(a)(i) of the Parent Disclosure Schedule, in each case, as of the close of business on a day requested by Buyer in a written notice that is delivered to Parent at least five (5) Business Days prior to the Closing Date.

 
- 60 - 5.6 Public Announcements. Buyer and Parent shall mutually agree on the form and timing of an initial joint press release to be issued with respect to this Agreement and the transactions contemplated hereby. In addition, prior to the Closing Date, each party shall consult with and obtain the approval of the other before issuing any press release or making any other public disclosure with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public disclosure prior to such consultation and approval (except as may be required by Law, in which event the Person proposing to issue such press release or make such public disclosure shall use its reasonable best efforts to consult in good faith with the other party before issuing any such press release or making any such public disclosure and shall cooperate to limit the scope of disclosure to the minimal amount of information required by Law). 5.7 Further Assurances. On and after the Closing Date, Parent and Buyer shall, and shall cause their respective Affiliates to, use reasonable best efforts to execute and deliver, or shall cause to be executed and delivered, such documents, certificates, agreements and other writings and shall take, or shall cause to be taken, such further actions as may be reasonably required or requested by any party to carry out the provisions of the Transaction Documents and consummate or implement expeditiously the transactions contemplated by the Transaction Documents. Parent and Seller further acknowledge and agree that Buyer will engage in TPA Audits following Closing. 5.8 Delivery of Books and Records. At the Closing, Parent shall cause all Books and Records in the possession of or reasonably available to Parent or any of Parent’s Affiliates to be delivered to Buyer (or a Person designated by Buyer) in the manner (and in the case of physical Books and Records at the location(s)) reasonably requested by Buyer, to the extent not located at an office of the Company or Abacus. 5.9 Access to Books and Records. (a) Until the seventh (7th) anniversary of the Closing (provided, that Buyer shall give thirty (30) days’ notice to Parent prior to destroying any records to permit Parent, at its expense, to examine, duplicate or repossess such books and records), Buyer shall afford promptly to Parent and its Representatives reasonable access to the books, records, officers, employees, auditors and other advisors of the Company and Abacus, and provide information with respect to the Company Abacus in a readily accessible form (including financial information in a form consistent with the Company’s and Abacus’ historical practice for the preparation of such financial information), to the extent related to periods prior to the Closing and to the extent reasonably required by Parent for any lawful business purpose, including litigation, disputes, compliance, financial reporting (including financial audits of historical information), loss reporting, regulatory and accounting matters, and Buyer shall reasonably cooperate with Parent and Parent’s Representatives, to furnish such books and records and information and make available such officers, employees, auditors and other advisors of the Company and Abacus; provided, that such access does not unreasonably interfere with the conduct of the business of Buyer, the Company or Abacus, and that Parent shall reimburse Buyer promptly for all reasonable and documented out-of-pocket costs and expenses incurred in connection with any such request. (b) Until the seventh (7th) anniversary of the Closing (provided, that Parent shall give thirty (30) days’ notice to Buyer prior to destroying any records to permit Buyer, at its expense, to

 
- 61 - examine, duplicate or repossess such books and records), Parent shall, and shall cause Parent’s Affiliates to, afford promptly to Buyer and its Representatives reasonable access to the books, records, officers, employees, auditors and other advisors relating to the Company and Abacus, and provide information with respect to the Company and Abacus in a readily accessible form (including financial information in a form consistent with Parent’s or such Affiliate’s historical practice for the preparation of such financial information), to the extent related to periods prior to the Closing and to the extent reasonably required by Buyer for any lawful business purpose, including litigation, disputes, compliance, financial reporting (including financial audits of historical information), loss reporting, regulatory and accounting matters, and Parent shall, and shall cause its Affiliates to, reasonably cooperate with Buyer and Buyer’s Representatives to furnish such books and records and information and make available such officers, employees, auditors and other advisors with respect to the Company and Abacus; provided, that such access does not unreasonably interfere with the conduct of the business of Parent or Parent’s Affiliates and that Buyer shall reimburse Parent promptly for all reasonable and documented out-of-pocket costs and expenses incurred in connection with any such request. 5.10 Non-Competition; Non-Solicitation. (a) For a period of five (5) years following the Closing Date, Parent shall not, and shall cause its Affiliates not to, engage in the business of targeting for the sale or administration of any insurance or financial service product to any public sector employees within the United States or any customer of the Company as of the date hereof or at any time in the twelve (12) months preceding the date hereof (“Competing Business”) directly or indirectly through any producer or otherwise. (b) Following the Closing Date, Parent shall not, and shall cause its Affiliates to not (i) initiate, promote or establish any program for the substitution, surrender, exchange, termination or systematic replacement of all or any portion of the coverage provided by any Insurance Contract with an insurance policy or coverage written or sold by Parent or any of its Affiliates, (ii) induce or provide any incentive (financial or otherwise) to any Independent Producer to terminate its relationship with the Company, (iii) induce or provide any incentive (financial or otherwise) to any Independent Producer to target or solicit, or cause to be targeted or solicited (on a systematic basis or otherwise) any holder of an Insurance Contract to replace all or any portion of the coverage provided by such Insurance Contract with an insurance policy or coverage written or sold by Parent or any of its Affiliates, or (iv) use the list of holders of Insurance Contracts or information related to pricing or forms of such policies and contracts or similar proprietary information of the Company or Abacus for any purpose without Buyer’s prior written consent. (c) Notwithstanding anything to the contrary set forth in Section 5.10(a), and without implication that the following activities otherwise would be subject to the provisions of this Section 5.10, nothing in Section 5.10(a) shall preclude, prohibit or restrict Parent from engaging, or require Parent to cause any of its Affiliates not to engage, in any manner in any of the following: (i) making passive investments in the ordinary course of business, including in a general or separate account of an insurance company, in Persons engaged in a Competing Business; provided, that Parent or such Affiliate of Parent: (A) does not have the right to designate a majority of the members of the board of directors or other governing body of

 
- 62 - such entity or otherwise to direct the operation or management of any such entity, (B) is not a participant with any other Person in any group (as such term is used in Regulation 13D of the Exchange Act) with such right and (C) owns less than 10% of the outstanding voting securities (including convertible securities) of such entity; (ii) acquiring any business, or acquiring, merging or combining with any Person (an “Acquired Business”) where the Acquired Business derived more than 10% of its net operating revenue on a consolidated basis for the most recent fiscal year from a Competing Business; provided, that within one year after such acquisition, merger or combination, either (A) Parent or Parent’s applicable Affiliate shall have disposed of the relevant portion of such Acquired Business that engages in the Competing Business or (B) Parent or Parent’s applicable Affiliate shall have modified the Acquired Business such that the Acquired Business will thereafter derive less than 10% of its net operating revenue on a consolidated basis from such Competing Business or; (iii) Servicing business that represents renewals of existing policies offered through Specialty Health. (d) Except as set forth in Section 5.10(d) of the Parent Disclosure Schedule, for a period of five (5) years following the Closing Date, without the prior written consent of Buyer, Parent shall not, and shall cause its Affiliates to not, solicit for employment, employ or contract for the services of any Employee; provided, that nothing in this Section 5.10(d) shall prohibit Parent or its Affiliates from engaging in general solicitations not directed at such Persons or from soliciting, employing or contracting for the services of any such Person whose employment with or engagement by Buyer or any of its Affiliates has been terminated by Buyer or its applicable Affiliate or who has otherwise ceased to be employed or engaged by Buyer or any of its Affiliates for a period of at least twelve (12) months. (e) For the avoidance of doubt, notwithstanding the terms of this Section 5.10, the restrictions set forth in this Section 5.10 will not apply to PetPartners, Inc. or Iguana Capital, Inc. following closing of the transactions contemplated by the IAIC Reinsurance Agreement and related stock purchase agreement because such entities will not be Affiliates of the Company. 5.11 D&O Liabilities. Prior to Closing, Buyer shall use reasonable best efforts to have available (subject to the payment of premium) director and officer and director “tail coverage” insurance for the Company and Abacus with respect to the period prior to Closing. Prior to or at the Closing, Company shall directly pay the insurance company for all costs of securing such policy. 5.12 Employee Matters. (a) Employees. (i) Continuing Employees. No earlier than five (5) Business Days prior to the Closing Date, Parent or Seller shall provide as updated Employee list as of such day with all information required to be provided under Section 3.17(a) of the Parent Disclosure Schedule. For the period of at least six (6) months from and after the Closing Date, Buyer shall provide each

 
- 63 - Employee (other than Excluded Employees) who continues in employment as of the Closing Date (each a “Continuing Employee”) base compensation and bonus opportunities that, in the aggregate, are comparable to those in effect for such Continuing Employee immediately prior to the Closing Date. Parent shall cause the Company or the applicable Subsidiary to provide to Buyer a completed Employment Eligibility Verification USCIS Form I-9, verifying the identity and employment authorization of each Continuing Employee and in the event that any such documentation is not provided to cooperate with Buyer in obtaining such documentation from any Continuing Employee, as applicable, in each case, prior to the Closing Date. (ii) Prior to, or as of the Closing, Parent shall cause the Company and Abacus to pay its Employees or accrue on its financial statements (including for the Estimated Closing Statement and Closing Statement) all compensation accrued but unpaid as of the Closing Date with respect to the Employees (including, for the avoidance of doubt the Excluded Employees), including wages, business expense, and other reimbursements and all severance payments. (iii) Terminating Employees. Parent shall cause the Company to terminate the employment of those Employees identified in Section 5.12(a)(iii) of the Parent Disclosure Schedule. Parent shall reimburse the Company for any amounts paid by the Company in respect of any severance pay or benefits provided to such terminating employees including, without limitation, any payroll taxes paid by the Company with respect to such severance pay or benefits. (iv) Employment Agreements. Parent shall and shall cause the Company to cooperate with Buyer in negotiating new employment arrangements or amendments to existing employment agreements with respect to certain Continuing Employees of the Company who are subject to employment agreements with the Company, including, without limitation, providing reasonable access to such Employees. (b) Company 401(k) Plan. Following the Closing, Parent agrees to provide each Continuing Employee an opportunity, within a period of time that will avoid default under an existing participant loan, to make a direct rollover to a 401(k) plan sponsored by Buyer or one of its Affiliates of an eligible rollover distribution from a 401(k) plan sponsored or maintained by the Company, Abacus or an ERISA Affiliate for the benefit of the Employees that includes promissory notes reflecting such Continuing Employee’s then outstanding participant loans under a 401(k) plan sponsored or maintained by the Company, Abacus or an ERISA Affiliate for the benefit of the Employees. (c) Employee Benefit Plans and Past Service Credit. Effective no later than immediately prior to the Closing Date, Parent shall take all actions necessary and appropriate to terminate the participation of the Continuing Employees in any Employee Plan maintained for the benefit of such Continuing Employees, and the Continuing Employees shall, from and after the Closing Date, be eligible to participate in employee plans that are generally available to similarly situated employees of Buyer. With respect to severance and vacation benefits and any Employee Plan maintained by Buyer or an Affiliate of Buyer for the benefit of any Continuing Employee, effective as of the Closing Date, Buyer shall, or shall cause its Affiliate to, subject to subclause (d) below, recognize all service with the Company of the Continuing Employee, as if such service were with Buyer, for vesting, eligibility and severance and vacation accrual rate purposes (but not for any purposes under any defined benefit plan or eligibility under any retiree life or medical

 
- 64 - plan), provided, however, such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. (d) Accrued PTO. To the extent reflected on the Estimated Closing Statement and Closing Statement, Buyer shall or shall cause the Company or Abacus to credit each Continuing Employee with the amount of accrued but unused paid time off credited for the benefit of such Continuing Employee as of the Closing Date. Each Continuing Employee shall be entitled to use such time off in accordance with the applicable policies of the Company and Abacus as in effect from time to time following the Closing Date. (e) COBRA Coverage. Parent will or will cause an Affiliate of Parent to retain liability for any required continuation coverage pursuant to Code §4980B (“COBRA”) for any Employees and their “qualified beneficiaries” (as defined in Code §4980B(g)(1)) with respect to any “qualifying event” (as defined in Code §4980B(f)(3)) that occurs on or prior to the Closing Date. Buyer will provide, or cause the Company or Abacus to provide, COBRA coverage for the Continuing Employees and their qualified beneficiaries with respect to “qualifying events” occurring on or after the Closing Date. 5.13 Release. If, but only if, the Closing occurs, then Parent, Seller and their Affiliates hereby forever, absolutely, unconditionally and irrevocably release and discharge the Company, Abacus, Buyer, and Buyer’s Affiliates from all obligations and liabilities of the Company or Abacus to Parent, Seller or any of its Affiliates, all agreements and understandings of the Company or Abacus involving Parent, Seller or any of their Affiliates, and all rights, claims and causes of action (whether at law or in equity and whether or not currently known to exist) of Parent, Seller or any of their Affiliates against the Company or Abacus that are a result of, involve or otherwise exist by reason of any act, omission, fact, circumstance or other matter, cause or thing whatsoever that arose, occurred or existed before the Closing, including without limitation any indemnification obligations to Parent, Seller or any of their Affiliates, and the right to advancement and reimbursement of expenses, pursuant to the organizational documents of the Company or Abacus; provided, however, that nothing in this Section 5.13 waives, releases or restricts in any manner whatsoever any of Parent’s or Seller’s rights arising out of this Agreement or any of the Transaction Documents. 5.14 No Shop. (a) From the date hereof until the earlier of the Closing and the date that this Agreement is terminated pursuant to Article VII, Parent and Seller shall not, and shall cause their Affiliates and its and their respective Representatives not to, directly or indirectly: (i) solicit, initiate, encourage, accept or facilitate any inquiry, indication of interest, proposal or offer from any person or entity (other than Buyer or its Affiliates) relating to or in connection with an Alternative Transaction (as defined below); (ii) participate in, negotiate, discuss, accept or enter into any agreement, arrangement or understanding with any person (other than Buyer or its Affiliates) relating to, or reasonably expected to lead to, an Alternative Transaction; (iii) provide information to any Person with respect to, or otherwise cooperate in any way or assist or participate in connection with, any proposal that constitutes or could reasonably be expected to lead to, an Alternative Transaction or (iv) commit to, enter into or consummate any Alternative Transaction.

 
- 65 - (b) For purposes hereof, “Alternative Transaction” means any offer or proposal by a third party for (1) any acquisition or purchase, direct or indirect, of any shares or equity interests or other security of Seller, the Company or Abacus, including any security convertible into or exercisable or exchangeable for, any shares or equity interests or other security of Seller, the Company or Abacus, or (2) a merger, amalgamation, consolidation, share exchange, business combination, sale of a portion of the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving Seller, the Company or Abacus. (c) Parent and Seller acknowledge and agree that the restrictions contained herein are reasonable and necessary to protect Buyer’s legitimate business interest and, if violated, may cause Buyer irreparable harm for which monetary damages would not be an adequate remedy. Accordingly, Parent and Seller agree that if any portion of this Section 5.14 is breached, then Buyer may at its election in any court of competent jurisdiction, and in addition to any other remedy available to it, obtain specific performance of such provision or enjoin Parent, Seller or their Affiliates from engaging in the activities proscribed by this Section 5.14, in each case without any requirement to post a bond for such purpose. 5.15 Intercompany Agreements (a) Parent shall cause the termination of all Intercompany Agreements on or prior to the Closing Date. Parent shall cause all intercompany balances between Parent or any Affiliate of Parent (other than the Company or Abacus), or any of their respective directors, officers or managers, on one hand, and the Company or Abacus, on the other hand, to be paid in full and settled immediately prior to the Closing. As of immediately after the Closing, the Company and Abacus shall have no further liability for any intercompany balances. Parent shall, and shall use commercially reasonable efforts to cause the parties to any agreement entered into by (i) a party unaffiliated with Parent, (ii) the Company or Abacus and (iii) Parent or any Affiliate of Parent other than the Company or Abacus (including SSL), to enter into one or more new agreements, or an amendment or assignment of such agreement, such that only the portions of such agreements that are related to the Company or Abacus will be agreements of the Company or Abacus, as applicable, following the Closing, and no other Affiliates of Parent will be a party to such agreements following Closing. (b) Effective at the time of the Closing, with respect to occurrences taking place from and after the Closing Date, Parent shall cause the Company and Abacus to cease to be insured by any insurance policies of Parent, Seller or any of their Affiliates (other than any policies held directly by the Company or Abacus) or by any of their self-insured programs. With respect to events or circumstances relating to the Company or Abacus that occurred or existed prior to the Closing Date that are covered by occurrence-based third-party liability insurance policies of Parent, Seller or their Affiliates (other than the Company or Abacus) and any workers’ compensation insurance policies or comparable workers’ compensation self-insurance programs sponsored by Parent, Seller or their Affiliates and that apply to the locations at which the Company or Abacus operates their respective businesses, Buyer may, and may cause the Company and Abacus to, make claims under such policies and programs. Parent and Seller shall provide reasonable cooperation and assistance in the pursuit of such claims. With respect to any open claims against the insurance policies of Parent and Seller or their Affiliates (other than the Company or Abacus) relating to losses or damages suffered by the Company or Abacus prior to

 
- 66 - the Closing, Parent or Seller shall reasonably assist and cooperate with Buyer in the pursuit and collection of such claims and remit any net proceeds they realize from such claims to Buyer upon full and final settlement of such claims. 5.16 Bank Accounts. Prior to the Closing, Parent shall change, effective as of the Closing, the individuals authorized to draw on or having access to the bank, savings, deposit or custodial accounts and safe deposit boxes maintained by the Company and Abacus to the individuals designated in writing by Buyer. 5.17 Investment Assets. From the date hereof until the Closing, Parent shall, within fifteen (15) Business Days following the end of each calendar month, deliver to Buyer a report (the “Investment Asset Report”) consisting of (a) a list of all Investment Assets of the Company and Abacus as of the end of such month, including the Book Value and fair market value of each such Investment Asset as of such month end; (b) a list of all Investment Assets included in the prior month’s Investment Asset Report sold or otherwise disposed of by the Company or Abacus during the preceding month; (c) a list of the Investment Assets acquired by the Company or Abacus that have been acquired in the preceding month; and (d) a list of all Investment Assets of the Company or Abacus that are in arrears or in breach or default in the payment of principal or interest or dividends or are, or should be, classified as non-performing, non-accrual, ninety (90) days past due, still accruing and doubtful of collections, in foreclosure or any comparable classification, or are other than temporarily impaired as determined in accordance with the Specified Accounting Principles. 5.18 Transaction Expenses. Parent and Seller shall, or shall cause the Company and Abacus to, pay all Transaction Expenses prior to the Closing. 5.19 PolicyPro Software. Prior to the Closing, Parent and Seller shall, and shall cause the Company and Abacus to, (a) permit Buyer, Buyer’s Affiliates and their respective Representatives to conduct a full due diligence review of the PolicyPro Software (including the source code and object code thereof), the Software Agreements and the Developer, (b) cooperate with Buyer, its Affiliates and their respective Representatives in connection therewith, and (c) at the request of Buyer, arrange for one or more meetings, and otherwise facilitate continuing discussions, between the Developer on one hand, and Buyer, its Affiliates and their respective Representatives on the other. 5.20 Reinsurance Agreements. (a) Following the date hereof and prior to Closing, Parent and Seller shall provide to Buyer a copy of (x) the draft form of the “Reinsurance Agreement” (as such term is defined in the SSL Stock Purchase Agreement) between SSL and the Company with respect to certain “Excluded Business” (as such term is defined in the SSL Stock Purchase Agreement), and related trust agreement, administrative services agreement, and any other related agreement thereto (collectively, the “SSL Reinsurance Agreement”), if any, and (y) the draft form of reinsurance agreement between Independence American Insurance Company, as ceding company, and the Company, as reinsurer, as contemplated by that certain Stock Purchase Agreement, dated as of May 17, 2021, among Parent, AMIC Holdings, Inc. and Iguana Capital, Inc., and related trust agreement, security account control agreement, administrative services agreement, and any other

 
- 67 - related agreement thereto (the “IAIC Reinsurance Agreement). To the extent not executed prior to the date hereof, Parent and Seller shall consider in good faith any reasonable comments of Buyer in respect of the SSL Reinsurance Agreement, if any, or the IAIC Reinsurance Agreement prior to execution thereof, and if either the SSL Reinsurance Agreement or the IAIC Reinsurance Agreement is entered into in a form that, in Buyer’s reasonable opinion, materially alters the expected economic impacts of such transaction on Buyer and its Affiliates (including the Company), then the parties shall use their reasonable best efforts to amend this Agreement (including Annex F) to put Buyer and its Affiliates (including the Company) in the economic position expected by Buyer. (b) Notwithstanding anything herein to the contrary, if either the SSL Reinsurance Agreement, or the IAIC Reinsurance Agreement or both agreements have been entered into with the Company on or prior to the Closing Date, Buyer and the Company shall comply in all material respects with the applicable reinsurance treaties, but will otherwise have no obligation to seek recourse against SSL or IAIC or their respective Affiliates with respect to Reinsurance Transaction Excluded Liabilities and may seek recourse directly from Parent and Seller pursuant to Section 9.2(a). (c) The amount of Reinsured Business Statutory Earnings, positive or negative, will be settled on a quarterly basis in accordance with Annex F. 5.21 Voting Agreement. Between the date hereof and the Closing, Parent shall enforce the terms of the Voting Agreement and will not amend, modify, supplement or terminate the Voting Agreement without the prior written consent of Buyer. 5.22 Escrow Agreement. For each of the three (3) full calendar years following the calendar year in which the Closing Date occurs (provided that if the Closing occurs on the first (1st) Business Day of January 2022, such obligation shall commence with calendar year 2022) Parent shall provide to Buyer a copy of Parent’s audited financial statements for such calendar year. Parent shall deliver the audited financial statements for each such calendar year no later than April 30th of the subsequent calendar year (each, a “Audited Financials Delivery Date”). If (i) Parent fails to deliver its audited financial statements by the date that is ten (10) Business Days following the applicable Audited Financials Delivery Date, or (ii) or if any audited financial statements delivered in accordance with this Section 5.22 reflect total net worth of Parent (determined using only those assets of Parent consisting of cash and marketable securities) of $100 million or less, then in each case Parent shall establish, within thirty (30) days following the applicable Audited Financials Delivery Date, an escrow account in the name of Parent with escrowed funds in the amount of $5 million, which escrowed funds shall be held by the escrow agent as a source of funds for amounts owing to Buyer under Article IX. Any interest accruing on such escrowed funds will be for the account of Parent. Each of Buyer and Seller shall cooperate to give the escrow agent timely instructions to implement any distributions of such escrowed funds for amounts owing to Buyer under Article IX. 5.23 Transition Services Agreement. From the date hereof through the Closing, each of the Buyer, Seller and Parent shall cooperate and negotiate with each other in good faith and use reasonable best efforts to determine the form, terms, conditions and provisions of the Transition Services Agreement for execution and delivery at Closing, including such terms providing for the

 
- 68 - provision of transitional services by Parent or its Affiliates as required or reasonably requested by Buyer for a period of time following the Closing as required or reasonably requested by Buyer; provided that the fees chargeable for any individual transitional services shall be limited to Parent’s reasonable out-of-pocket expenses and at its actual cost without allocation of overhead expenses or mark-up and agreed to by Buyer. ARTICLE VI. CONDITIONS PRECEDENT 6.1 Conditions to Each Party’s Obligations. The obligations of Buyer, Parent and Seller to consummate the transactions contemplated hereby shall be subject to the satisfaction or waiver in writing at or prior to the Closing of the following conditions: (a) No Injunctions or Restraints; Illegality. (i) There shall not be in effect any Order, injunction (whether temporary, preliminary or permanent) or other legal restraint or prohibition issued by any Court or Governmental Authority of competent jurisdiction that has the effect of making the transactions contemplated hereby illegal or otherwise prohibiting the consummation of the transactions contemplated hereby, and (ii) there shall not be any Law or Order enacted, entered, enforced or deemed applicable to the transactions contemplated hereby which makes the consummation of the transactions contemplated hereby illegal. (b) Waiting Period. Any required waiting period under the HSR Act shall have expired or been terminated. 6.2 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated hereby shall be subject to the satisfaction or waiver in writing at or prior to the Closing of the following additional conditions: (a) Representations and Warranties. (i) The Fundamental Representations of Parent and Seller shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date in all respects, and (ii) each of the other representations and warranties of Parent and Seller contained in this Agreement, disregarding all qualifications and exceptions contained therein relating to materiality or Company Material Adverse Effect, shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date with the same effect as if made on and as of the Closing Date (other than such representations and warranties that are made as of a specified date, which representations and warranties shall be true and correct as of such date), in the case of the foregoing clause (ii), except where the failure of any such representations and warranties to be so true and correct would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (b) Covenants and Agreements. Parent and Seller shall have performed and complied in all material respects with each covenant and agreement required by this Agreement to be performed or complied with by it on or prior to the Closing Date; (c) Closing Deliveries. Parent and Seller shall have delivered or caused to be delivered to Buyer each of the documents required to be delivered pursuant to Section 2.3(a);

 
- 69 - (d) No Litigation. No Proceeding shall be pending or threatened before any Governmental Authority that could reasonably be expected to prevent the consummation of the purchase and sale of the Shares or any other material transaction contemplated by the Transaction Documents, declare unlawful the transactions contemplated by this Agreement, cause such transactions to be rescinded or materially and adversely affect Buyer or the right of Buyer to own, operate or conduct the Company or Abacus or their respective businesses, and no Order shall have been issued by any Governmental Authority that has any of the foregoing effects; (e) Approvals. All consents, approvals or authorizations of, declarations or filings with or notices to any Governmental Authority required to be obtained or made prior to the Closing Date in connection with the transactions contemplated hereby, including the Required Governmental Approvals set forth in Section 3.6(b) of the Parent Disclosure Schedule and those approvals set forth in Section 4.3 of the Buyer Disclosure Schedule, shall have been obtained or made and shall be in full force and effect and all waiting periods required by applicable Law shall have expired or been terminated, in each case without the imposition of a Burdensome Condition; (f) Material Adverse Effect. Since the date hereof, there shall not have been any Company Material Adverse Effect; (g) Third Party Consents. The parties shall have received the consents set forth on Annex E; (h) Company RBC. The Company shall have an RBC Ratio as of the end of the calendar quarter immediately prior to the anticipated Closing Date, and as of the anticipated Closing Date, equal to or greater than 807%; (i) Reinsurance Agreements. Unless neither the SSL Reinsurance Agreement nor the IAIC Reinsurance Agreement is required to be entered into with the Company, each such agreement shall have been entered into in a form reasonably acceptable to Buyer. (j) Parent Shareholder Approval. Approval of the Parent Voting Matters shall have been obtained, and the Definitive Consent Statement shall have been mailed to shareholders of Parent in accordance with SEC rules, and all waiting periods required under applicable Law with respect thereto, including the expiration of any applicable Schedule 14C information statement notice period, shall have expired or been terminated, without any condition. 6.3 Conditions to Obligations of Parent and Seller. The obligations of Parent and Seller to consummate the transactions contemplated hereby shall be subject to the satisfaction or waiver in writing at or prior to the Closing of the following additional conditions: (a) Representations and Warranties. (i) The Fundamental Representations of Buyer shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date in all respects, and (ii) each of the other representations and warranties of Buyer contained in this Agreement (other than the Fundamental Representations), disregarding all qualifications or exceptions contained therein relating to materiality or Buyer Material Adverse Effect, shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date with the same effect as if made on and as of the Closing Date (other than such representations and

 
- 70 - warranties that are made as of a specified date, which representations and warranties shall be true and correct as of such date), in the case of the foregoing clause (ii), except where the failure of any such representations and warranties to be so true and correct would not reasonably expected to have, individually or in the aggregate, a Buyer Material Adverse Effect; (b) Covenants and Agreements. Buyer shall have performed and complied in all material respects with each covenant and agreement required by this Agreement to be performed or complied with by it on or prior to the Closing Date; (c) Closing Deliveries. Buyer shall have delivered or caused to be delivered to Parent and Seller each of the documents required to be delivered pursuant to Section 2.3(b); (d) No Litigation. No Proceeding shall be pending or threatened before any Governmental Authority that could reasonably be expected to prevent the consummation of the purchase and sale of the Shares or any other material transaction contemplated by the Transaction Documents, declare unlawful the transactions contemplated by this Agreement, or cause such transactions to be rescinded, and no Order shall have been issued by any Governmental Authority that has any of the foregoing effects; and (e) Approvals. All consents, approvals or authorizations of, declarations or filings with or notices to any Governmental Authority required to be obtained or made prior to the Closing Date in connection with the transactions contemplated hereby, including the Required Governmental Approvals set forth in Section 3.6(b) of the Parent Disclosure Schedule and those set forth in Section 4.3 of the Buyer Disclosure Schedule, shall have been obtained or made and shall be in full force and effect and all waiting periods required by applicable Law shall have expired or been terminated. ARTICLE VII. TERMINATION PRIOR TO CLOSING 7.1 Termination. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of Buyer, on the one hand, and Parent or Seller, on the other hand; (b) by either Buyer, on the one hand, or Parent and Seller, on the other hand, in writing, if the Closing has not occurred on or prior to the Outside Date, unless the failure of the Closing to occur has been principally caused by a material breach of this Agreement by any party seeking to terminate this Agreement. “Outside Date” means April 14, 2022; provided, however, that the Outside Date shall be extended to April 14, 2022 automatically if, prior to April 14, 2022, Buyer has satisfied all conditions to Closing set forth in Section 6.3 other than obtaining approval from the Wisconsin Office of the Commissioner of Insurance as contemplated by Section 5.3; (c) by either Buyer, on the one hand, or Parent and Seller, on the other hand, in writing, if there shall be any order, injunction or decree of any Governmental Authority that prohibits or restrains any party from consummating the transactions contemplated hereby, and such order, injunction or decree shall have become final and non-appealable, unless the fact that such order,

 
- 71 - injunction or decree has become final and non-appealable has been principally caused by a material breach of this Agreement by the party seeking to terminate this Agreement; or (d) by either Buyer, on the one hand, or Parent and Seller, on the other hand (but only so long any party seeking to terminate is not in material breach under this Agreement) in writing, if a breach of any provision of this Agreement that has been committed by the Buyer, in the case of a termination by Parent and Seller, or by Parent or Seller, in the case of a termination by Buyer, would cause the failure of any mutual condition to Closing or any condition to Closing for the benefit of the non-breaching party and such breach is not capable of being cured by the Outside Date or is not cured within twenty (20) calendar days after the breaching party receives written notice from the non-breaching party that the non-breaching party intends to terminate this Agreement pursuant to this Section 7.1(d). 7.2 Effect of Termination. If this Agreement is terminated pursuant to Section 7.1, this Agreement shall become null and void and of no further force and effect without liability of either party (or any Representative of such party) to the other party to this Agreement; provided, that no such termination shall relieve a party from liability for any material breach of this Agreement occurring prior to such termination. Notwithstanding the foregoing, Section 1.1, Section 5.2(b), this Section 7.2, Article IX and Article X shall survive termination hereof pursuant to Section 7.1. Parent and Seller agree that the provisions of this Section 7.2 regarding the payment of a termination fee and reimbursement of Buyer Expenses are an integral part of the transactions contemplated by this Agreement and that, without such provisions, Buyer would not have entered into this Agreement. ARTICLE VIII. TAX MATTERS The following provisions shall govern the allocation of responsibility as between Buyer and Parent for certain Tax matters following the Closing Date: 8.1 Responsibility for Filing Tax Returns. (a) Filing of Tax Returns. Parent shall prepare or cause to be prepared and file or cause to be filed (i) all Tax Returns that include the Company or Abacus and that are due to be filed prior to the Closing Date and (ii) all U.S. federal, state and local consolidated, affiliated, combined or similar Tax Returns that include Parent, the Company and Abacus that relate solely to Pre-Closing Tax Periods. Buyer shall prepare or cause to be prepared and file or cause to be filed all other Tax Returns for the Company and Abacus. All Tax Returns that include Pre-Closing Tax Periods shall be prepared in a manner consistent with the Company’s and Abacus’ past practice and custom unless otherwise required by applicable Law. (b) Review Rights. Buyer shall provide Parent with drafts of all Tax Returns that Buyer is obligated to prepare under Section 8.1(a) to the extent such Tax Returns include Pre-Closing Tax Periods, no later than twenty (20) days prior to the due date for filing thereof. Parent shall have the right to review and provide reasonable comments on such Tax Returns during the fifteen (15) days following the receipt of such Tax Returns, which reasonable comments shall be accepted by Buyer and reflected in the applicable Tax Return.

 
- 72 - 8.2 Straddle Periods. For purposes of this Agreement, whenever it is necessary to determine the liability for Taxes of the Company and Abacus for any Straddle Period, the determination of the Taxes of the Company and Abacus for the portion of the Straddle Period including and ending on, and the portion of the Straddle Period beginning immediately after, the Closing Date shall be determined by assuming that the Straddle Period consisted of two (2) taxable years or periods, one which ended at the close of the Closing Date and the other which began at the beginning of the day immediately after the Closing Date, and items of income, premiums, gain, deduction, loss or credit (or other relevant Tax items) of the Company and Abacus for the Straddle Period shall be allocated between such two taxable years or periods on a “closing of the books basis” by assuming that the books of the Company and Abacus were closed at the close of the Closing Date; provided, however, that (i) exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation, and (ii) periodic Taxes (other than income, franchise/capital, sales, use, or withholding Taxes) such as real and personal property Taxes, shall be apportioned ratably between such periods based on the number of days for the portion of the Straddle Period ending on and including the Closing Date, on the one hand, and the number of days for the portion of the Straddle Period beginning on and including the day immediately after the Closing Date, on the other hand. 8.3 Tax Covenants. (a) Buyer shall not cause or permit the Company or Abacus to take any action on the Closing Date that is outside the ordinary course of business, if such action could have the effect of increasing the Tax liability or reducing any Tax asset of the Company, Abacus or Parent in respect of any Pre-Closing Tax Period or increasing the liability of Parent under this Agreement. (b) Buyer covenants that without the prior written consent of Parent it shall not, and shall not cause or permit its Subsidiaries to, make or change any material Tax election, amend any Tax Return, take any Tax position on any Tax Return, or compromise or settle any Tax liability, in each case if such action could have the effect of increasing the Tax liability or reducing any Tax asset of the Company, Abacus or Parent in respect of any Pre-Closing Tax Period or increasing the liability of Parent under this Agreement. (c) Parent covenants that without the prior written consent of Buyer it shall not, and shall not cause or permit its Subsidiaries to, amend any Tax Return or compromise or settle any Tax liability, in each case if such action could have the effect of increasing the Tax liability or reducing any Tax asset of the Company, Abacus or Buyer in respect of any Post-Closing Tax Period. (d) After the Closing Date, Buyer and its Affiliates shall not, without the written consent of Parent, agree to the waiver or any extension of the statute of limitations relating to any Taxes of the Company or Abacus for any Pre-Closing Tax Period. (e) Any Tax refund received by Buyer or its Subsidiaries that relates to a Pre-Closing Tax Period of the Company or Abacus shall be for the account of Parent. Buyer shall pay or cause to be paid any such refund to Parent within fifteen (15) days after receipt thereof, reduced by any increase in the federal income taxes owed, in the aggregate, by Buyer or its Subsidiaries attributable to such refund. All other Tax refunds that relate to the Company or Abacus shall be

 
- 73 - for the account of Buyer. Parent shall pay or cause to be paid any such refund to Buyer within fifteen (15) days after receipt thereof, reduced by any increase in the federal income taxes owed, in the aggregate, by Parent or its Subsidiaries attributable to such refund. (f) Parent shall, and shall cause Seller, the Company and its Affiliates to, enter into a written agreement to terminate any Tax Agreement between the Company and Parent at or prior to Closing and, for the avoidance of doubt, such written agreement shall specifically terminate any provision of the Tax Agreement that purports to have continued effect after the termination of such Tax Agreement. 8.4 Contests Related to Taxes. Notwithstanding Section 9.5, in the event Buyer receives notice of a claim by a Governmental Authority in respect of Taxes of the Company or Abacus (other than Taxes imposed under any U.S. federal, state and local consolidated, affiliated, combined or similar Tax Returns that include Parent, the Company and Abacus) for any Tax period ending on or before the Closing Date (a “Tax Claim”), Buyer shall give written notice to Parent of such claim; provided, however, that the failure to give such notice shall not relieve Parent from any obligation under this Agreement unless Parent is actually harmed by such failure. Parent shall have the right to defend any Tax Claim for which Parent would have an indemnification obligation hereunder so long as (i) Parent gives written notice to Buyer within fifteen (15) Business Days after Buyer has given written notice of the Tax Claim, and (ii) Parent conducts the defense of the Tax Claim actively and diligently. Buyer may retain separate co-counsel at its sole cost and expense and consult in the defense of the Tax Claim. Buyer shall also be permitted to receive copies of any pleadings, correspondence with the Governmental Authority or any Court handling the Tax Claim, and other documents filed with the Governmental Authority or such Court as Buyer may reasonably request related to the Tax Claim and to attend any and all meetings, hearings and proceedings concerning such Tax Claim. If Parent does not assume the defense of any Tax Claim (including if Parent does not deliver the notice required by this Section 8.4), Buyer may defend such Tax Claim at the sole cost and expense of Parent. In any such case, Buyer will not consent to a settlement of, or the entry of any judgment arising from, any such claim without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed). If Parent conducts the defense of a Tax Claim, Parent will keep Buyer reasonably informed as to the status of such Tax Claim, including all compromise or settlement offers. Parent shall consult with Buyer prior to the settlement of any such Tax Claim and shall obtain the prior written consent of Buyer prior to the settlement of any such Tax Claim that would adversely affect Buyer or its Affiliates in any taxable period ending after the Closing Date (such consent not to be unreasonably withheld, conditioned or delayed). 8.5 Cooperation on Tax Matters. Buyer and Parent shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Article VIII and any audit, litigation or other Proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other Proceeding and making Employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Any information obtained pursuant to this Section 8.5 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes with respect to the

 
- 74 - Company or Abacus shall be kept confidential by the parties hereto and their respective legal and Tax advisors. 8.6 Transfer Taxes; Withholding Taxes. All Transfer Taxes incurred in connection with the transactions contemplated hereby shall be borne by Parent. Notwithstanding anything to the contrary contained in this Agreement, Buyer and the Company (following Closing) shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as may be required to be deducted and withheld under the Code, or under any provision Tax Law. Buyer, Parent and Seller shall cooperate, and Parent and Seller shall cause the Company to cooperate, as reasonably requested by another party to establish any applicable exemption or reduction to such deduction or withholding, including by providing any applicable withholding forms or certificates. Amounts deducted and withheld pursuant to this Agreement will be treated as having been paid to the Person in respect of which such deduction or withholding was made. 8.7 Section 338(h)(10) Election. (a) Buyer and Parent may make a joint election under Section 338(h)(10) of the Code and comparable provisions of state law with respect to the Company, Abacus, or both (a “Section 338(h)(10) Election”) and if elected will timely file with the proper authorities executed copies of Internal Revenue Service Forms 8023 and 8883, and any similar state forms, with respect to the Company and Abacus, as applicable. (b) As soon as practicable after the Closing Date, but in no event later than 150 days after the Closing Date, Buyer shall deliver to Parent a written notice setting forth (with reasonable specificity) Buyer’s good faith calculation of the aggregate deemed sales price (ADSP) and adjusted grossed up basis (AGUB) within the meaning of the Treasury Regulations under Section 338 of the Code and the allocation thereof among the assets of the Company and Abacus, as applicable, in accordance with the principles of the applicable Treasury Regulations, including, but not limited to, Treasury Regulation Sections 1.338-6 and 1.338-7 (the “Buyer’s Allocation”). Within thirty (30) days after receipt thereof, Parent shall deliver to Buyer written notice indicating whether Parent disagrees with the Buyer’s Allocation. If Parent agrees with the Buyer’s Allocation, or if Parent fails to deliver such written notice within thirty (30) days the Buyer’s Allocation shall constitute the agreed-upon Allocation (the “Agreed Allocation”). If Parent provides timely written notice to Buyer of any disagreement with the Buyer’s Allocation, the parties shall negotiate in good faith to determine the Agreed Allocation. If they do not reach agreement within thirty (30) days after commencing negotiations, the parties shall promptly submit the items in dispute to a mutually agreed-upon nationally-recognized accounting firm (or if they cannot mutually agree on such firm, each party shall select a nationally-recognized accounting firm which two firms shall agree on a third nationally-recognized accounting firm) (the “Accounting Arbitrator”) to resolve the dispute. The Accounting Arbitrator shall determine the Agreed Allocation in accordance with the Treasury Regulations, and deliver to Buyer and Parent the Agreed Allocation as soon as possible, but not later than the thirtieth day after the Accounting Arbitrator is instructed to resolve the dispute. Any expenses relating to the engagement of the Accounting Arbitrator shall be shared equally by the parties. (c) Each of the parties shall file or cause to be filed all relevant Tax Returns consistent with the Agreed Allocation and shall not take any position inconsistent with the Agreed Allocation.

 
- 75 - ARTICLE IX. SURVIVAL AND INDEMNIFICATION 9.1 Survival of Representations and Warranties. All representations and warranties made by Parent, Seller and Buyer in this Agreement shall survive the Closing Date and expire on the date that is eighteen (18) months from the Closing Date; provided, however, that the representations and warranties set forth in Section 3.19 (Taxes) shall survive until sixty (60) days after the expiration of the applicable statute of limitations, and the representations and warranties set forth in Sections 3.1(a) (Organization and Qualification), 3.3 (Capitalization), 3.4 (Subsidiaries), 3.5 (Authority; Enforceability), 3.29 (Brokers), 4.1 (Organization), 4.2 (Authority; Enforceability) and 4.6 (Brokers) (such representations and warranties, together with the representations and warranties set forth in Section 3.19 (o), (p) and (q) (for purposes of it being a Fundamental Representation only, the “Fundamental Representations”) shall survive the Closing for the maximum period of time allowed under Law. The covenants or other agreements made by Parent, Seller or Buyer in this Agreement which by their terms contemplate performance prior to the Closing Date shall survive the Closing Date and expire on the date that is twenty-four (24) months from the Closing Date. Each covenant or other agreement made by Parent, Seller or Buyer which by its terms contemplate performance after the Closing Date shall survive the Closing indefinitely until sixty (60) days after it is fully performed. The period of time a covenant, agreement, representation or warranty survives the Closing pursuant to this Section 9.1 shall be the “Survival Period” with respect to such covenant, agreement, representation or warranty. The parties acknowledge that the time periods set forth in this Article IX for the assertion of claims under this Agreement are the result of arms-length negotiation among the parties and that the parties intend for such time periods to be enforced as agreed by the parties. 9.2 Indemnification. (a) Subject to the limitations set forth in this Article IX, Parent and Seller shall jointly and severally indemnify and hold harmless Buyer, its Affiliates (including the Company and Abacus) and their respective Representatives (the “Buyer Indemnified Persons”) from and against Indemnifiable Losses incurred by them arising out of or resulting from any of the following matters: (i) any breach of any representation or warranty of Parent or Seller contained in this Agreement or in any certificate furnished by Parent or Seller pursuant to this Agreement (other than those with respect to any Fundamental Representation by Parent or Seller); (ii) any breach of any representation or warranty of any Fundamental Representation of Parent or Seller made in this Agreement or in any certificate furnished by Parent or Seller pursuant to this Agreement with respect thereto; (iii) any breach or nonfulfillment by Parent or Seller of its covenants or agreements contained in this Agreement or any other Transaction Document; (iv) all remedial costs and other Liabilities incurred by Buyer and any of its Affiliates during the two year period following Closing relating to the correction of any issue noted in the TPA Audits which related to any period on or prior to the Closing Date or replacement of any third

 
- 76 - party administrator performing services for the Company or Abacus on or prior to the Closing Date; (v) any LA County Policies Excess Loss during the twelve months following the Closing Date; and (vi) any Excluded Liabilities. (b) Subject to the limitations set forth in this Article IX, Buyer shall indemnify and hold harmless Parent, its Affiliates and their respective Representatives, successors and permitted assigns (the “Parent Indemnified Persons”) from and against any Indemnifiable Losses incurred by them arising out of or resulting from any of the following matters: (i) any breach of any representation or warranty of Buyer contained in this Agreement or in any certificate furnished by Buyer pursuant to this Agreement (other than with respect to any Fundamental Representations by Buyer); (ii) any breach of any representation or warranty of any Fundamental Representation of Buyer made in this Agreement or in any certificate furnished by Buyer pursuant to this Agreement with respect thereto; or (iii) any breach or nonfulfillment by Buyer of its covenants or agreements contained in this Agreement or any other Transaction Document. (c) For purposes of determining whether any representation or warranty has been breached and the amount of the Indemnifiable Losses under this Article IX, each representation and warranty contained in this Agreement (other than the first sentence of Section 3.14) shall be read without regard to any materiality, Company Material Adverse Effect or Buyer Material Adverse Effect qualifier contained therein. 9.3 Certain Limitations. (a) No party shall be obligated to indemnify and hold harmless its respective Indemnitees under Section 9.2(a)(i) (in the case of Parent) or Section 9.2(b)(i) (in the case of Buyer) (i) unless and until the aggregate amount of all Indemnifiable Losses of the Indemnitees under such Section 9.2(a)(i) or Section 9.2(b)(i), as the case may be, exceeds one million two hundred ninety thousand dollars ($1,290,000.00) (the “Deductible”), at which point such Indemnitor shall be liable to its respective Indemnitees for the value of the Indemnitee’s claims under Section 9.2(a)(i) or Section 9.2(b)(i), as the case may be, for amounts in excess of the Deductible, subject to the limitations set forth in this Article IX. Except in the case of fraud, the maximum aggregate liability of Parent for any and all Indemnifiable Losses under Section 9.2(a)(i) shall be a dollar amount equal to (x) twelve and one-half percent (12.5%), multiplied by (y) the Base Price. Except in the case of fraud, the maximum aggregate liability of Buyer for any and all Indemnifiable Losses under Section 9.2(b)(i), shall be a dollar amount equal to nineteen million three hundred fifty thousand dollars ($19,350,000). (b) Except in the case of fraud, the maximum aggregate liability of Parent, on the one hand, and Buyer on the other hand, to their respective Indemnitees for any and all Indemnifiable

 
- 77 - Losses under Section 9.2(a)(ii), in the case of Parent, or Section 9.2(b)(ii), in the case of Buyer, shall be an amount equal to the Purchase Price. (c) The representations, warranties and covenants of Parent and Seller, and the Buyer Indemnified Persons’ rights to indemnification with respect thereto, shall not be affected or deemed waived by reason of (and the Buyer Indemnified Persons shall be deemed to have relied upon the representations and warranties of Parent and Seller set forth herein notwithstanding) (i) any investigation made by or on behalf of any of the Buyer Indemnified Persons (including any of their Representatives) or by reason of the fact that any of the Buyer Indemnified Persons or their Representatives knew or should have known that any such representation or warranty is, was or might be inaccurate, regardless of whether such investigation was made or such knowledge was obtained before or after the execution and delivery of this Agreement or (ii) Buyer’s waiver of any condition set forth in Article VI. (d) Once an Indemnifiable Loss is agreed to by the Indemnitor or finally adjudicated to be payable pursuant to this Article IX, the Indemnitor shall satisfy its obligations within ten (10) Business Days. (e) Any claim for indemnification by any of the Buyer Indemnified Parties under Section 9.2(a)(iv) or under Section 9.2(a)(vi) (solely to the extent such claim relates to an Excluded Liability for a Security Breach as contemplated by clause (iv) in the definition of “Excluded Liability”) must be made on or prior to the third anniversary of the Closing Date. 9.4 Definitions. As used in this Agreement: (a) “Indemnitee” means any Person entitled to indemnification under this Agreement; (b) “Indemnitor” means any Person required to provide indemnification under this Agreement; (c) “Indemnifiable Losses” means any and all damages, losses, liabilities, obligations, costs and expenses (including reasonable attorneys’ fees and expenses), reasonably foreseeable lost profits, diminution of value and any claim properly paid to a third party in connection with a Third Party Claim, in each case, whether known or unknown, whether asserted or unasserted, and whether accrued or unaccrued. (d) “Indemnity Payment” means any amount of Indemnifiable Losses required to be paid pursuant to this Agreement; and (e) “Third Party Claim” means any claim, action, suit, or proceeding made or brought by any Person that is not an Indemnitee. 9.5 Procedures for Third Party Claims. (a) If any Indemnitee receives notice of assertion or commencement of any Third Party Claim against such Indemnitee in respect of which an Indemnitor may be obligated to provide indemnification under this Agreement, the Indemnitee shall give such Indemnitor reasonably prompt written notice (but in no event later than thirty (30) days after becoming aware) thereof

 
- 78 - and such notice shall include a reasonable description of the claim and any documentation of the Third Party Claim and, to the extent identifiable, an estimate of the Indemnifiable Loss and shall reference the specific sections of this Agreement that form the basis of such claim; provided, that no delay on the part of the Indemnitee in notifying any Indemnitor shall relieve the Indemnitor from any obligation hereunder unless (and then solely to the extent) the Indemnitor is actually prejudiced by such delay (except that the Indemnitor shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnitor, promptly after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. (b) Subject to this Section 9.5(b), the Indemnitor shall be entitled to participate in the defense of any Third Party Claim and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnitor that is reasonably acceptable to the Indemnitee. Should the Indemnitor so elect to assume the defense of a Third Party Claim, the Indemnitor shall not as long as it conducts such defense be liable to the Indemnitee for legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof except as set forth in the next sentence. If the Indemnitor assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnitor; provided, that Indemnitee shall have the right to assume the defense and/or receive reimbursement from Indemnitor for the costs and expense of such separate counsel if (i) Indemnitor and Indemnitee are both named parties to the proceedings and Indemnitee shall have concluded in good faith that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or the availability to Indemnitee of one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to Indemnitor in respect thereof or (ii) Indemnitor fails to diligently defend a Third Party Claim for which it has assumed defense. The Indemnitor shall be liable for the reasonable fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnitor has not assumed the defense thereof (other than during any period in which the Indemnitee shall have not yet given notice of the Third Party Claim as provided above). In no event shall the Indemnitee’s right to indemnification for a Third Party Claim be adversely affected by its assumption of the defense of such Third Party Claim. All of the parties hereto shall reasonably cooperate in the defense of any Third Party Claim. Such cooperation shall include the retention and (upon request) the provision to the other of reasonably requested records and information that are relevant to such Third Party Claim, and making employees reasonably available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the Indemnitor shall have assumed the defense of a Third Party Claim, the Indemnitee shall not pay, settle, compromise or discharge, such Third Party Claim without the Indemnitor’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). If the Indemnitor has assumed the defense of a Third Party Claim, the Indemnitor may only pay, settle, compromise or discharge a Third Party Claim with the Indemnitee’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed); provided, that the Indemnitor may pay, settle, compromise or discharge such a Third Party Claim without the written consent of the Indemnitee if such settlement (i) includes a release of the Indemnitee from all liability in respect of such Third Party Claim, (ii) does not subject the Indemnitee to any injunctive relief or other equitable remedy, (iii) does not include a statement or

 
- 79 - admission of fault, culpability or failure to act by or on behalf of the Indemnitee and (iv) only involves the payment of monetary damages by the Indemnitor. 9.6 Direct Claims. The Indemnitor will have a period of thirty (30) days within which to respond in writing to any written claim by an Indemnitee on account of an Indemnifiable Loss that does not result from a Third Party Claim. If the Indemnitor does not so respond within such thirty (30) day period, the Indemnitor will be deemed to have rejected such claim, in which event the Indemnitee will be entitled to pursue such remedies as may be available to the Indemnitee. 9.7 Adjustment to Purchase Price. The parties agree that any indemnification payments made pursuant to this Agreement shall be treated for income Tax purposes as an adjustment to the Purchase Price, unless otherwise required by applicable Law. 9.8 Exclusive Remedy. Notwithstanding Section 10.10, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Section 9. In furtherance of the foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their affiliates and each of their respective representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Section 9. Nothing in this Section 9.8 shall limit (i) any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled under Section 10.5; or (ii) a party’s right to seek any remedy on account of fraud by any party hereto. For purposes of this Agreement, “fraud” means, with respect to any Person, the knowing and intentional misrepresentation of material facts that constitutes actual common law fraud under the Law of the State of Delaware. ARTICLE X. MISCELLANEOUS 10.1 Amendment. This Agreement may not be amended other than in an instrument in writing signed by all of the parties hereto. 10.2 Waiver. Any party hereto may extend the time for the performance of any of the obligations or other acts required to be performed by another party hereunder, waive any inaccuracies in the representations and warranties of another party contained herein or in any document delivered pursuant hereto and waive compliance with any of such party’s agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. 10.3 Expenses. Except as otherwise expressly provided herein, the parties shall pay their own fees and expenses (including attorneys’ and accountants’ fees and expenses) in connection

 
- 80 - with the negotiation of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated by this Agreement (whether consummated or not). 10.4 Notices. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by nationally recognized overnight courier or by registered or certified mail (postage prepaid, return receipt requested), or sent by email, as follows: (a) If to Buyer: Horace Mann Educators Corporation 1 Horace Mann Place Springfield, IL 62715 Attention: Donald M. Carley, EVP & General Counsel Email: Donald.Carley@horacemann.com with a copy (which shall not constitute notice) to: Eversheds Sutherland (US) LLP 700 Sixth Street, NW, Suite 700 Washington, DC 20001 Attention: Ling Ling E-mail: lingling@eversheds-sutherland.com (b) If to Parent or Seller: Independence Holding Company 96 Cummings Point Road Stanford, CT 06902 Attn: Theresa A. Herbert E-mail: therbert@ihc-geneve.com with a copy (which shall not constitute notice) to: Quarles & Brady LLP 33 East Main Street, Suite 900 Madison, WI 53703 Attn: Mark T. Ehrmann E-mail: mark.ehrmann@quarles.com or to such other address as the party to whom notice is to be given may have furnished to the other parties in writing in accordance with this Section 10.4. All such notices or communications shall be deemed to be received (i) in the case of personal delivery, nationally recognized overnight courier or registered or certified mail, on the date of such delivery and (ii) in the case of email, upon confirmed receipt.

 
- 81 - 10.5 Specific Performance. Each of Parent and Seller acknowledges and agree that Buyer could be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or any provisions are breached and that any breach of this Agreement by Parent or Seller may not be adequately compensated by monetary damages. Accordingly, each of Parent and Seller agrees that, in addition to any other right or remedy to which Buyer may be entitled (subject to the limitations herein), at Law or in equity, it will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of the provisions of this Agreement, without posting any bond or other undertaking. Buyer acknowledges and agrees that Parent and Seller could be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or any provisions are breached and that any breach of this Agreement by Buyer may not be adequately compensated by monetary damages. Accordingly, Buyer agrees that, in addition to any other right or remedy to which Parent and Seller may be entitled (subject to the limitations herein), at Law or in equity, Parent and Seller will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of the provisions of this Agreement, without posting any bond or other undertaking. 10.6 Interpretation. When a reference is made in this Agreement to a Section, Exhibit, Annex or Schedule, such reference shall be to a Section of, or an Exhibit, Annex or Schedule to, this Agreement unless otherwise indicated. Any fact or item disclosed in any section of each of the Buyer Disclosure Schedule and Parent Disclosure Schedule shall be deemed disclosed in all other sections of such Disclosure Schedule to the extent the applicability of such fact or item to such other section of such Disclosure Schedule is readily apparent from the text or information disclosed. Disclosure of any item in the Buyer Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, shall not be deemed an admission that such item represents a material item, fact, exception of fact, event or circumstance or that occurrence or non-occurrence of any change or effect related to such item would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or Buyer Material Adverse Effect The table of contents, articles, titles and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever the singular is used herein, the same shall include the plural, and whenever the plural is used herein, the same shall include the singular, where appropriate. Whenever the word “Dollars” or the “$” sign appear in this Agreement, they shall be construed to mean United States Dollars, and all transactions under this Agreement shall be in United States Dollars. This Agreement has been fully negotiated by the parties hereto and shall not be construed by any Governmental Authority against either party by virtue of the fact that such party was the drafting party. Other than references to agreements or documents in the Parent Disclosure Schedule or Buyer Disclosure Schedule, any reference herein to any applicable Law, agreement (including this Agreement) or document, or any section thereof, shall, unless otherwise expressly provided, be a reference to such applicable Law, agreement, document or section as amended, modified or supplemented (including any successor section) and in effect from time to time. References to “made available,” “provided to” or “delivered to” (or words of similar import) in respect of information made available (or words of similar import) by Parent or Seller means

 
- 82 - that such information has been uploaded, not later than three (3) Business Days prior to the date of this Agreement, to the virtual data room maintained by box.com established in connection with the transaction contemplated under this Agreement and made available in electronic form to Buyer and its Representatives, 10.7 Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and provisions of this Agreement shall remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to the parties. Upon such determination that any term or provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to amend or otherwise modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner such that the transactions contemplated hereby are fulfilled to the extent possible. 10.8 Entire Agreement; Third Party Beneficiaries. This Agreement, the Confidentiality Agreement and the Transaction Documents (including all exhibits and schedules hereto and thereto) and other documents and instruments delivered in connection herewith constitute the entire agreement and supersede all prior representations, agreements, understandings and undertakings, whether written or oral, among the parties, or any of them, with respect to the subject matter hereof and thereof, and no party is relying on any other prior oral or written representations, agreements, understandings or undertakings with respect to the subject matter hereof and thereof. Except as set forth in Article IX with respect to the Buyer Indemnified Persons and the Parent Indemnified Persons, nothing in this Agreement, express or implied, is intended or shall be construed to confer upon any Person other than the parties hereto any right, remedy or claim under or by reason of this Agreement. 10.9 Assignment. Except as set forth in Section 2.1, this Agreement and the rights and obligations hereunder may not be assigned without the prior written consent of each of the parties hereto, except that Buyer may assign any and all of its rights or obligations under this Agreement or any other Transaction Document to any of its Affiliates. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns; provided, that Buyer will remain liable for performing the obligations under this Agreement and the other Transaction Documents. 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor will any single or partial exercise of any such right preclude any other (or further) exercise thereof or of any other right. Any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by Law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 10.11 Governing Law. This Agreement and any dispute arising hereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 
- 83 - 10.12 Jurisdiction; Enforcement. (a) Each of the parties hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of any Court of the United States or the Delaware Court of Chancery, which in either case is located in the State of Delaware (each, a “Delaware Court”) for purposes of enforcing this Agreement or determining any claim arising from or related to the transactions contemplated by this Agreement. In any such action, suit or other proceeding, each of the parties hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claim that it is not subject to the jurisdiction of any such Delaware Court, that such action, suit or other proceeding is not subject to the jurisdiction of any such Delaware Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper; provided, that nothing set forth in this sentence shall prohibit any of the parties hereto from removing any matter from one Delaware Court to another Delaware Court. Each of the parties hereto also agrees that any final and unappealable judgment against a party hereto in connection with any action, suit or other proceeding will be conclusive and binding on such party and that such award or judgment may be enforced in any Court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment will be conclusive evidence of the fact and amount of such award or judgment. Any process or other paper to be served in connection with any action or proceeding under this Agreement shall, if delivered or sent in accordance with Section 10.4, constitute good, proper and sufficient service thereof. (b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12. 10.13 Certain Limitations. (a) Notwithstanding anything to the contrary contained herein, the other Transaction Documents, the Parent Disclosure Schedule or any of the Schedules, Annexes or Exhibits hereto or thereto, Buyer acknowledges and agrees that neither Parent nor any of its Affiliates (including the Company), nor any Representative of any of them, makes or has made, and Buyer has not relied on, any representation or warranty to Buyer, oral or written, express or implied, other than as expressly set forth in Article III or any certificate delivered by Parent or Seller pursuant to this Agreement. (b) Notwithstanding anything to the contrary contained in this Agreement, the other Transaction Documents, the Buyer Disclosure Schedule or any of the Schedules, Annexes or

 
- 84 - Exhibits hereto or thereto, each of Parent and Seller acknowledges and agrees that neither Buyer nor any of its Affiliates, nor any Representative of any of them, makes or has made, and Seller has not relied on, any representation or warranty to Parent or Seller, oral or written, express or implied, other than as expressly set forth in Article IV or any certificate delivered by Buyer pursuant to this Agreement. 10.14 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile transmission or electronic transmission in portable document format (pdf)), which when taken together shall constitute one and the same agreement. [Remainder of this page intentionally left blank]

 
[Signature Page to Stock Purchase Agreement] IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. HORACE MANN EDUCATORS CORPORATION By: ___________________________________ Name: Marita Zuraitis Title: President & Chief Executive Officer INDEPENDENCE HOLDING COMPANY By: ____________________________________ Name: Title: INDEPENDENCE CAPITAL CORP. By: ____________________________________ Name: Title:

 

 

Exhibit 11

 
Horace Mann Educators Corporation
Computation of Net Income per Share (Unaudited)
For the Three and Nine Months Ended September 30, 2021 and 2020
(in millions, except per share data)
 
Three Months Ended
September 30, 		Nine Months Ended
September 30,
  2021 2020 2021 2020
Basic:
Net income $ 16.3  $ 36.5  $ 102.3  $ 85.5 
Weighted average number of common
   shares during the period 		42.0  41.9  42.0  41.9 
Net income per share – basic $ 0.39  $ 0.87  $ 2.44  $ 2.04 
Diluted:
Net income $ 16.3  $ 36.5  $ 102.3  $ 85.5 
Weighted average number of common
   shares during the period 		42.0  41.9  42.0  41.9 
Weighted average number of common equivalent
   shares to reflect the dilutive effect of common
   stock equivalent securities:
Stock options 0.1  0.1  0.1  — 
Common stock units related to deferred
   compensation for employees 		—  —  —  — 
Restricted common stock units related
   to incentive compensation 		0.1  0.1  0.1  0.1 
Total common and common equivalent shares
adjusted to calculate diluted earnings per share
42.2  42.1  42.2  42.0 
Net income per share – diluted $ 0.39  $ 0.87  $ 2.43  $ 2.03 



Exhibit 15


November 5, 2021

Horace Mann Educators Corporation
Springfield, Illinois
 
Re: Registration Statements on Form S-3 (No. 333-223627), Form S-4 (No. 333-223628) and Form S-8 (No. 33-47066, No. 33-45152, No. 333-16473, No. 333-74686, No. 333-98917, No. 333-171384 and No. 333-185231).
With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated November 5, 2021 related to our review of interim financial information.
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  






Exhibit 31.1

Chief Executive Officer Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Marita Zuraitis, certify that:
1.   I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2021 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/ Marita Zuraitis  
Marita Zuraitis, Chief Executive Officer  
Horace Mann Educators Corporation  
     
Date: November 5, 2021  



Exhibit 31.2

Chief Financial Officer Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Bret A. Conklin, certify that:
1.   I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2021 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/ Bret A. Conklin  
Bret A. Conklin,  Chief Financial Officer  
Horace Mann Educators Corporation  
     
Date: November 5, 2021  


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, 2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marita Zuraitis, 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/ Marita Zuraitis  
Marita Zuraitis  
Chief Executive Officer  
     
Date: November 5, 2021  
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.



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, 2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bret A. Conklin, 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/ Bret A. Conklin  
Bret A. Conklin  
Chief Financial Officer  
     
Date: November 5, 2021  
 
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.


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, are not based on accounting principles generally accepted in the United States of America (non-GAAP) under applicable SEC rules because they are not displayed as separate line items in the Consolidated Statements of Operations or Consolidated Balance Sheets or are not required to be disclosed in the Notes to the Consolidated Financial Statements or, in some cases, there is inclusion or exclusion of certain items not ordinarily included or excluded in accordance with accounting principles generally accepted in the United States of America (GAAP).
In the opinion of the Company’s management, a discussion of these measures provides investors, financial analysts, rating agencies and other financial statement users with a better understanding of the significant factors that comprise the Company’s periodic results of operations and how management evaluates the Company's financial performance. Internally, the Company's management uses the measures to evaluate performance against historical results, to establish financial targets on a consolidated basis and for other reasons.
Some of these measures exclude net investment gains (losses), net of tax, and/or net unrealized investment gains on fixed maturity securities, net of tax, which can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by the Company’s management.
Book value per share excluding the fair value adjustment for investments - The result of dividing total shareholders’ equity excluding after tax net unrealized investment gains and losses on securities, including the related effect on certain deferred policy acquisition costs, by ending shares outstanding. Book value per share is the most directly comparable GAAP measure. Management believes it is useful to consider the trend in book value per share excluding net unrealized investment gains and losses on securities in conjunction with book value per share to identify and analyze the change in net worth. Management also believes the non-GAAP measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily financial market conditions, the magnitude and timing of which are generally not influenced by the Company’s underlying insurance operations.
Catastrophe costs - The sum of catastrophe losses, net of reinsurance and before income tax benefits that includes allocated loss adjustment expenses and reinsurance reinstatement premiums; excluding unallocated loss adjustment expenses.
Catastrophe losses - In categorizing property and casualty claims as being from a catastrophe, the Company utilizes the designations of the Property Claim Services, 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 claims and claim 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 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.







1

Core earnings (loss) - Consolidated net income (loss) excluding the after-tax impact of net investment gains (losses), discontinued operations, the after-tax impact of goodwill and intangible asset impairments, the effect of a change in tax laws and tax rates at enactment date, and cumulative effect of changes in accounting principles when applicable. Net income is the most comparable GAAP measure.
•Pretax core earnings (loss) - Pretax net income (loss) excluding pretax impact of net investment gains (losses), discontinued operations, pretax impact of goodwill and intangible asset impairments and cumulative effect of changes in accounting principles when applicable. Income before income taxes is the most comparable GAAP measure.
•Segment core earnings - Determined in the same manner as core earnings on a consolidated basis. Management uses segment core earnings to analyze each segment's performance and as a tool in making business decisions. Financial statement users also consider core earnings when analyzing the results and trends of insurance companies.
Core earnings (loss) per share - Core earnings on a per common share basis. Earnings per share is the most comparable GAAP measure.
Premiums written and contract deposits – Management utilizes this non-GAAP measure, which is based on statutory accounting principles, in analyzing and evaluating business growth. Premiums and contract charges earned is the most comparable GAAP measure.
Premiums written and contract deposits for the Company’s operating segments are as follows:
Property and Casualty
•Premiums written: Reflects the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the contract and reflect gross premiums written less premiums ceded to reinsurers. The difference between premiums written and premiums earned is premiums unearned.
Supplemental and Life
•Premiums written and contract deposits: Reflects (1) the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the contract and reflect gross premiums written less premiums ceded to reinsurers, and (2) the amount charged for policies in force during a fiscal period for traditional life business. Contract deposits include amounts received from customers on deposit-type contracts.
Retirement
•Net annuity contract deposits: Reflects total recurring deposits and single deposits/rollovers – net of contract deposits ceded to reinsurers.
Investment yield, excluding limited partnership interests, pretax and after tax - For the three month periods presented, investment yields are calculated by annualizing the result of year-to-date net investment income (adjusted to exclude net investment income from limited partnership interests for the corresponding period) divided by the average quarter-end and beginning of quarter carrying amount of invested assets as presented in the Consolidated Balance Sheets adjusted to exclude FHLB funding agreements, the carrying amount of limited partnership interests, and gross unrealized investment gains/losses. For full year periods presented, investment yields are calculated by (i) summing the investment yields for each respective three month period applicable to the year and (ii) dividing that sum per the calculation in (i) by four. Net investment income is the most directly comparable GAAP measure.






2

Net income return on equity - LTM: 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 - referred to as 5 quarter average shareholder's equity.
•Core return on equity - LTM: The ratio of (1) trailing 12 month core earnings to (2) 5 quarter average shareholders’ equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date. Net income return on equity - LTM is the most comparable GAAP measure.
•Net income return on equity - Annualized: The ratio of (1) annualized net income to (2) the 2 quarter average shareholders' equity.
•Core return on equity - Annualized: The ratio of (1) annualized core earnings to (2) the 2 quarter average shareholders’ equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date. Net income return on equity - Annualized is the most comparable GAAP measure.
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 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.
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 - The ratio of (1) the sum of net incurred losses and loss adjustment expenses to (2) net earned premiums.
•Underlying loss ratio - The sum of the Loss Ratio adjusted to remove the effect of catastrophe costs and prior years' reserve development. The Loss Ratio is the most directly comparable GAAP measure. Management believes this ratio provides a valuable measure of the Company's underlying underwriting performance that may be obscured by the effects of catastrophe costs and prior years' reserve development, the amounts of which may be significant and may vary significantly between periods.
•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 net investment income.
•Underlying combined ratio or combined ratio excluding catastrophe costs 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.  Management believes this ratio provides a valuable measure of the Company’s underlying underwriting performance that may be obscured by the effects of catastrophe costs and prior years’ reserve development, the amounts of which may be significant and may vary significantly between periods.

3

Sales – Sales data pertains to Horace Mann products and excludes authorized products sold by exclusive agents that are underwritten by third-party vendors Sales should not be viewed as a substitute for any GAAP measure, including "sales" as it relates to non-insurance companies, and the Company’s definition of sales, sales deposits or new annualized 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.
Sales for the Company’s operating segments are as follows:
Property and Casualty
•Sales: Sales are measured as premiums to be collected over the 12 months following the sale of new automobile and property policies.
Supplemental
•Sales: Based on application received date on the submitted policy and measured as the submitted annual premium.
Life
•Sales: Sales are measured as premiums to be collected over the 12 months following the sale of new life policy as well as increases in contributions to certain life business.
•Annualized sales: Annualized sales are based on the total yearly premium that the Company would expect to receive if all first year recurring premium policies would remain in-force, plus 10% of single and indexed universal life excess premiums. Annualized sales measure activity associated with gaining new insurance business in the current period, and includes deposits received related to universal life-type products.

4