SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001.
-----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15 [d] OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to _________
Commission file number 1-10890
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HORACE MANN SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
(Full title of the Plan)
HORACE MANN EDUCATORS CORPORATION
1 Horace Mann Plaza, Springfield, Illinois 62715
Registrant's telephone number, including area code:
(217) 789 - 2500
(Name, Address and Telephone Number of Issuer)
1
REQUIRED INFORMATION
Financial Statements:
Item 4. In lieu of the requirements of Items 1-3, audited statements and
schedule are prepared in accordance with the requirements of ERISA for the
Plan's fiscal years ended December 31, 2001 and 2000 are presented on pages 3
through 17.
2
Financial Statements and Supplemental Schedule
Horace Mann Service Corporation
Retirement and Savings Plan
Years ended December 31, 2001 and 2000
with Report of Independent Auditors
3
Horace Mann Supplemental
Retirement and Savings Plan
Financial Statements
and Supplemental Schedule
Years ended December 31, 2001 and 2000
Contents
Report of Independent Auditors........................................................................... 5
Financial Statements
Statements of Net Assets Available for Benefits.......................................................... 6
Statements of Changes in Net Assets Available for Benefits............................................... 7
Notes to Financial Statements ........................................................................... 8
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)........................................... 17
4
Report of Independent Auditors
Pension Committee and The Board of Directors
Horace Mann Educators Corporation
We have audited the accompanying statements of net assets available for benefits
of Horace Mann Supplemental Retirement and Savings Plan as of December 31, 2001
and 2000, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying schedule of assets (held at end of
year) as of December 31, 2001, is presented for purposes of additional analysis
and is not a required part of the financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in our audits of the financial statements and, in our opinion, is fairly stated
in all material respects in relation to the financial statements taken as a
whole.
May 10, 2002
5
Horace Mann Supplemental Retirement and Savings Plan
Statements of Net Assets Available for Benefits
December 31
2001 2000
-----------------------------
Assets
Investments:
Equity securities $35,075,088 $33,675,390
Fixed income securities 10,386,614 15,123,378
Group Annuity contract, at contract value 36,447,269 35,701,798
Horace Mann Educators Corporation Common Stock,
at fair value (cost $9,372,748 in 2001, $11,033,924
In 2000) 10,279,600 12,098,150
-----------------------------
Total assets 92,188,571 96,598,716
Liabilities
Withdrawals payable to participants - 1,148,367
-----------------------------
Net assets available for benefits $92,188,571 $95,450,349
=============================
See accompanying notes to financial statements.
6
Horace Mann Supplemental Retirement and Savings Plan
Statements of Changes in Net Assets Available for Benefits
Year ended December 31
2001 2000
------------------------------
Additions
Investment income (loss):
Net realized and unrealized depreciation
of investments $ (4,507,978) $ (3,049,467)
Interest 2,001,458 2,168,375
Dividends - 1,328,618
------------------------------
(2,506,520) 447,526
Contributions:
Employer 2,301,217 2,312,738
Employee 6,266,060 5,629,937
------------------------------
Total additions 6,060,757 8,390,201
Deductions
Withdrawals by participants (9,082,208) (12,229,568)
Management fees (240,327) (47,831)
------------------------------
Total deductions (9,322,535) (12,277,399)
------------------------------
Net decrease (3,261,778) (3,887,198)
Net assets available for benefits
Beginning of year 95,450,349 99,337,547
------------------------------
End of year $ 92,188,571 $95,450,349
==============================
See accompanying notes to financial statements.
7
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements
December 31, 2001
1. General Plan Information
Description of the Plan
The Horace Mann Supplemental Retirement and Savings Plan (the Plan) is sponsored
by Horace Mann Service Corporation (HMSC) which is a wholly owned subsidiary of
Horace Mann Educators Corporation (HMEC, HMSC and HMEC, collectively referred to
as the Company). The following brief description of the Plan is provided for
general information purposes. Readers should refer to the actual Plan Document
or the employee Summary Plan Description entitled Your Horace Mann Benefits
Program for additional information.
The Plan is a voluntary defined-contribution plan covering all employees of the
Company. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Contributions and Vesting
Participating employees may contribute up to 10% of eligible compensation,
including salary, overtime, commissions, and certain incentive bonuses on a
before-tax basis to one or more of twenty available investment funds. Effective,
April 1, 2002, participants will be able to contribute 20% of eligible
compensation.
Prior to January 1, 2002, the Company contributed an amount equal to 50% of the
first 6% of eligible compensation contributed by participating employees.
Employer contributions and earnings thereon are 20% vested for each year of
service, with full vesting occurring after five years of service. In addition,
employer contributions generally become fully vested in the event of disability
or death. Forfeitures of nonvested employer contributions serve to reduce future
Company matching contributions. Participant contributions and earnings thereon
are fully vested at all times. Effective January 1, 2002, an automatic 3%
Company contribution will replace the 50% Company match of the first 6%
contributed. The 3% Company contribution will be 100% vested at the time the
contribution is made and will be participant-directed. Company match
contributions made prior to January 1, 2002, will continue to vest at the rate
of 20% per year of service.
In accordance with the Omnibus Budget Reconciliation Act of 1993, eligible
compensation for purposes of contributions were limited to $170,000 in 2001 and
2000. Prior to January 1, 2002, highly compensated employees were limited to 6%
participant contributions and 3% Company matching contributions. However,
effective January 1, 2002, with the adoption of the Company's "safe harbor"
contribution, highly compensated employees may contribute up to 20% of eligible
compensation.
8
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
1. General Plan Information (continued)
Participant Accounts and Benefits
Each participant's account is credited with the participant's contribution, the
Company's matching contribution, and an allocation of Plan investment earnings.
The benefit to which a given participant is entitled is the benefit that can be
provided from that participant's vested account. A participant subaccount is
maintained in each of the investment funds in which a participant chooses to
invest. There were 2,160 and 2,367 participants at December 31, 2001 and 2000,
respectively. At December 31, 2001 and 2000, the number of participants'
subaccounts in the respective investment funds were as follows:
2001 2000
---------------------
Separate Account -Horace Mann Mutual Funds
Equity Fund 1,234 1,467
Balanced Fund 841 944
Small Cap Growth Fund 956 1,205
Socially Responsible Fund 689 822
International Equity Fund 793 1,005
Income Fund 221 181
Short-Term Investment Fund 100 92
Other Mutual Funds
Wilshire Large Company
Growth Portfolio 335 380
Wilshire 5000 Index Portfolio 391 312
T Rowe Price Small Cap Value Fund 190 -
Fidelity VIP Mid Cap Growth Portfolio 185 -
Strong Opportunity Fund II 153 -
Fidelity VIP Growth Portfolio 169 -
T Rowe Price Small Cap Stock Fund 167 -
Putnam VT Vista Fund 110 -
Davis Value Portfolio 76 -
J.P. Morgan U.S. Disciplined Equity Portfolio 58 -
Fidelity VIP Overseas Portfolio 56 -
Horace Mann Fixed Fund 1,214 1,233
HMEC Common Stock Fund 914 1,017
9
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
1. General Plan Information (continued)
Trust Agreement
All plan assets are held in trust by The Northern Trust Quantitative Advisors,
Inc. The assets of the Plan are deposited in participant-directed investments:
any of seven Horace Mann Mutual Fund Options available within the Horace Mann
Life Insurance Company (HMLIC) Separate Account, the Wilshire Large Company
Growth Portfolio and the Wilshire 5000 Index portfolio (collectively the
Wilshire Funds), the Fidelity VIP Mid Cap Growth Portfolio, the Fidelity VIP
Growth Portfolio, the Fidelity VIP Overseas Portfolio (collectively the
"Fidelity Funds"), T Rowe Price Small Cap Stock Fund and the T Rowe Price Small
Cap Value Fund, the Davis Value Portfolio, the Strong Opportunity Fund II, the
J.P. Morgan U.S. Disciplined Equity Portfolio, the Putnam VT Vista Fund, a group
annuity contract with HMLIC, or the HMEC Common Stock Fund.
Effective July 1, 2000, Northern Trust Qualitative Advisors, Inc. began
performing the Plan administration. Prior to July 1, 2000, the Company performed
all administrative services for the Plan.
Transfers and Withdrawals
Effective July 1, 2000, participants may transfer all or a portion of their
account balance between the various investment funds on a daily basis.
Participant withdrawals (as allowed under the Plan) are permitted on a weekly
basis. Previously, transfers and withdrawals were permitted on a monthly basis.
Termination
Although it has not expressed any intent to do so, the Company has the right to
terminate the Plan at any time, subject to the provisions of ERISA. In the event
of Plan termination, participants become fully vested in the Company's matching
contributions and related investment earnings.
Reclassifications
Certain amounts in the 2000 financial statements have been reclassified to
conform with the 2001 presentation.
10
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
2. Investments
Mutual Funds
A separate account has been established by HMLIC for the purpose of separately
investing Plan assets in one or more of seven mutual funds, (Equity Fund,
Balanced Fund, Small Cap Growth Fund, Socially Responsible Fund, International
Equity Fund, Income Fund, and Short-Term Investment Fund). In addition, the Plan
provides eleven additional mutual fund options for participants, the Wilshire
Funds, the Fidelity Funds, T Rowe Price Small Cap Stock Fund and the T Rowe
Price Small Cap Value Fund, the Davis Value Portfolio, the Strong Opportunity
Fund II, the J.P. Morgan U.S. Disciplined Equity Portfolio, and the Putnam VT
Vista Fund.
The investments in mutual funds are valued at quoted market prices, which
represent the net asset values of shares held by the Plan at year-end. The
investments of the underlying mutual funds are primarily common stocks, U.S.
government and corporate bonds, and short-term commercial paper. The common
stocks and bonds are presented at fair value, based on quoted market prices, and
the short-term commercial paper is presented at cost, which approximates fair
value.
The following presents investments that represent 5 percent or more of the
Plan's net assets:
December 31,
2001 2000
-----------------------------------
Equity Fund $15,559,955 $17,561,721
Balanced Fund 9,535,942 10,338,363
Small Cap Growth Fund 4,948,649 8,171,669
HMLIC group annuity contract 36,447,269 35,701,798
Horace Mann Educators Corporation common stock 10,279,600 11,038,924
During 2001, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value by
$3,661,841 as follows:
Net Realized and Unrealized
Depreciation in Fair Value of
Investments
-----------------------------
Mutual funds $(3,493,605)
Common stock (168,236)
-----------------------------
Total $(3,661,841)
=============================
11
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
2. Investments (continued)
Total annual returns for each of the mutual funds were as follows:
Annual Investment Returns
-------------------------------------------------------------------
Period ended
1 Year December 31, 2001
-------------------------------------------------------------------
2001 2000 5 year 10 year
-------------------------------------------------------------------
Separate Account - Horace
Mann Mutual Funds:
Equity Fund (5.41)% (4.64)% 2.11% 8.61%
Balanced Fund 0.12 0.93 4.01 7.83
Small Cap Growth Fund (30.70) (10.84) - -
Socially Responsible Fund (8.47) 8.79 - -
International Equity Fund (27.29) (17.51) - -
Income Fund 7.53 8.89 5.32 5.04
Short-Term Investment Fund 3.86 5.81 3.83 3.22
Other Mutual Funds
Wilshire Large Company
Growth Portfolio (16.62) (15.59) - -
Wilshire 5000 Index Portfolio (11.50) (10.10) - -
T Rowe Price Small Cap Value Fund (21.84) - - -
Fidelity VIP Mid Cap Growth
Portfolio (3.49) - - -
Strong Opportunity Fund II (3.92) - - -
Fidelity VIP Growth Portfolio (17.85) - - -
T Rowe Price Small Cap Stock
Fund 6.60 - - -
Putnam VT Vista Fund (33.53) - - -
Davis Value Portfolio (10.38) - - -
J.P. Morgan U.S. Disciplined
Equity Portfolio (11.92) - - -
Fidelity VIP Overseas Portfolio (21.15) - - -
12
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
2. Investments (continued)
The composition of the underlying investments in each of the mutual funds at
December 31, 2001 and 2000, was as follows:
2001 2000
------------------
Equity Fund:
Common and preferred stock 99% 99%
Cash and short-term investments 1 1
Balanced Fund:
Equity Fund 62 47
Income Fund 38 53
Small Cap Growth Fund:
Common stock 96 94
Cash and short-term investments 4 6
Socially Responsible Fund:
Common and preferred stock 97 99
Cash and short-term investments 3 1
International Equity Fund:
Common and preferred stock 95 91
Cash and short-term investments 5 9
Income Fund:
U.S. and foreign government and agency obligations 62 66
Corporate bonds/notes 38 34
Short-Term Investment Fund:
U.S. and foreign government and agency obligations 92 99
Cash and short-term investments 8 1
Wilshire Large Company Growth Portfolio:
Common and preferred stocks 100 100
Wilshire 5000 Index Portfolio:
Common and preferred stocks 100 100
13
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
2. Investments (continued)
2001 2000
------------------
T Rowe Price Small Cap Value Fund:
Common and preferred stocks 100% -
Fidelity VIP Mid Cap Portfolio:
Common and preferred stocks 100 -
Strong Opportunity Fund II:
Common and preferred stocks 100 -
Fidelity VIP Growth Portfolio:
Common and preferred stocks 100 -
T Rowe Price Small Cap Stock Fund:
Common and preferred stocks 100 -
Putnam VT Vista Fund:
Common and preferred stocks 97 -
Short-term investments 3 -
Davis Value Portfolio:
Common and preferred stocks 100 -
J.P. Morgan U.S. Disciplined Equity Portfolio:
Common and preferred stocks 100 -
Fidelity VIP Overseas Portfolio
Common and preferred stocks 100 -
Group Annuity Contract
Plan participants may invest in a fixed interest rate group annuity contract
with HMLIC (Fixed Fund). Plan assets invested in this contract are guaranteed by
HMLIC and, as a result, are presented in the financial statements at contract
value. Contract value represents contributions made under the contract, plus
interest at the contract rate, less withdrawals by participants. The fair value
of the group annuity contract is approximately equal to contract value.
14
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
2. Investments (continued)
The actual credited interest rate on the group annuity contract was 5.25% and
6.25% for the years ended December 31, 2001 and 2000, respectively.
The minimum guaranteed annual interest rate per the group annuity contract is
4.5%. The actual credited interest rate may be reset by HMLIC with 30 days
advance notice, but is generally changed once at the beginning of each Plan
year. Beginning January 1, 2002, the actual crediting rate was continued at
5.25%.
HMEC Common Stock Fund
The Plan's HMEC Common Stock Fund at December 31, 2001 and 2000, consisted of a
pooled investment in 484,430 shares and 565,995 shares, respectively, of HMEC
common stock, which is traded on the New York Stock Exchange under the symbol
HMN. This investment is presented in the financial statements at fair value with
a quoted market price of $21.22 and $21.37 per share, respectively.
Total annual returns for investments in the HMEC Common Stock Fund were as
follows:
Annual Investment Returns
-----------------------------------------------
1 Year Since inception
------------------------------
2001 2000 (November 1991)
------------------------------ ---------------
1.5% 11.8% 10.4%
3. Administrative Expenses
Beginning July 1, 2000, the Plan pays for its own administrative fees (.22%).
All investment fees have been included in the quarterly performance gains or
losses reported for individual Plan investments.
15
Horace Mann Supplemental Retirement and Savings Plan
Notes to Financial Statements (continued)
3. Administrative Expenses (continued)
Prior to July 1, 2000, the Company paid all administrative costs for the
operation of the Plan and related trust, which consist primarily of trustee,
audit, and legal fees. The investment results of the separate account are net of
investment and operating expenses charged by HMLIC and the Separate Account -
Horace Mann Mutual Funds. Minimal brokerage and commission fees for the purchase
of HMEC common stock are paid directly by the Trustee from the HMEC Common Stock
Fund.
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated May 17, 1994, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code"), and therefore, the related trust is
exempt from taxation. On February 28, 2002, the Plan was amended and restated to
conform with the plan changes effective January 1, 2002, the series of tax acts
collectively referred to as "GUST" and the Economic Growth and Tax Relief
Reconciliation Act (EGTRRA), and submitted to the IRS for favorable
determination. Once qualified, the Plan is required to operate in conformity
with the Code to maintain its qualification. The Plan administrator believes the
Plan is being operated in compliance with the applicable requirements of the
Code and, therefore, believes that the Plan is qualified and the related trust
is tax exempt.
16
Supplemental Schedule
Horace Mann Supplemental Retirement and Savings Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001
Number
of Shares Contract or
or Units Description of Investment Cost Fair Value
------------------------------------------------------------------------------------------------------
Separate Account - Horace Mann
Mutual Funds*:
777,077 Equity Fund $17,600,819 $ 15,559,955
539,571 Balanced Fund 9,682,487 9,535,942
400,182 Small Cap Growth Fund 6,317,724 4,948,649
254,385 Socially Responsible Fund 3,352,958 3,542,738
261,861 International Equity Fund 3,742,703 2,787,244
42,957 Income Fund 582,556 623,386
20,652 Short-Term Investment Fund 221,582 227,286
-------------------------------
Total separate account - Horace Mann
Mutual Funds 41,500,829 37,225,200
Other mutual Funds:
Wilshire Large Company Growth
61,631 Portfolio 3,411,087 1,911,181
208,986 Wilshire 5000 Index Portfolio 2,044,034 1,950,051
42,327 T Rowe Price Small Cap Value Fund 988,572 1,088,579
36,552 Fidelity VIP Mid Cap Portfolio 687,618 717,137
23,547 Strong Opportunity Fund II 616,789 626,478
16,666 Fidelity VIP Growth Portfolio 618,663 597,641
17,462 T Rowe Price Small Cap Stock Fund 458,153 495,651
24,416 Putnam VT Vista Fund 329,717 318,109
29,618 Davis Value Portfolio 308,629 297,434
J.P. Morgan U.S. Disciplined Equity
11,106 Portfolio 150,379 146,394
5,574 Fidelity VIP Overseas Portfolio 105,084 87,847
-------------------------------
Total other mutual funds 9,718,725 8,236,502
N/A HMLIC Group Annuity Contract* 36,447,269 36,447,269
Horace Mann Educators Corporation
484,430 Common Stock* 9,372,748 10,279,600
-------------------------------
$97,039,571 $92,188,571
===============================
*Represents a party in interest
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Pension
Plan Committee of the Horace Mann Supplemental Retirement and Savings Plan has
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date 28 June 2002 HORACE MANN SUPPLEMENTAL RETIREMENT
----------------- AND SAVINGS PLAN
/s/ Kathryn E. Karr
-------------------
Kathryn E. Karr
Plan Administrator
Vice President,
Corporate Benefits Administration
18
EXHIBITS
23. Consent of Independent Auditors
19