At this time I would like to welcome everyone to the Horace Mann Educators Corporation fourth quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (Operator Instructions). Thank you. It is now my pleasure to turn the floor over to your host, Dwayne Hallman, Senior Vice President of Finance. Sir, you may begin your conference.

Thank you. Good morning, everyone. Welcome to our fourth quarter 2007 Earnings Call. Yesterday after the market closed we released our earnings report including financial statements as well as supplemental business segment information. If you need a copy of the release it is available on our website under Investor Relations. Today we will cover our results for the fourth quarter in our prepared remarks. The following senior management members will make presentations today and as usual will be available for questions later in the conference call. Lou Lower, President and Chief Executive Officer; Pete Heckman, Executive Vice President and Chief Financial Officer; Doug Reynolds, Executive Vice President, Insurance Operations; Frank D'Ambra, Senior Vice President of Life & Annuity; and [Rich Schoenberg], Vice President of Sales. The following discussion may contain forward-looking statements regarding Horace Mann and its operations. Our actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements or made based on management's current expectations and beliefs as of the date and time of this call. For a discussion of the risk and uncertainties that could affect actual results, please refer to the company's public filings with the SEC and in the earnings press release issued yesterday. We undertake no obligation to publicly update or revise such forward-looking statements to reflect actual results or changes, assumptions or other factors that could affect these statements. As a reminder, this call is being recorded, and it is available live on our website. An Internet replay will be available on our website until March 6, 2008. Now I will turn the call over to Lou Lower for his comments.

Welcome everyone and thanks for joining us. Horace Mann delivered fourth quarter net income before realized capital gains and losses of $0.49 per share completing a solid year of profitability. At $1.91 per share for the full year, we delivered at the upper end of the guidance for the year and $0.07 per share above consensus expectations. Book value per share pre-FAS 115 grew 10% year-to-date closing at $16.47 and along with that all of our key financial ratios continued to strengthen. Focusing on the year in total, Property Casualty profitability was somewhat less than our expectations. Current accident year result were under pressure compared to 2006, led by frequency in Auto and Property, but offset somewhat by increasing investment income. We had significant growth in combined Life and Annuity income, relative to both prior year and our expectations, thanks to improved spreads in fixed annuities, contract fees and variable and favorable life mortality experienced. Those positives along with very disciplined expense control were the primary contributors to results exceeding the midpoint of our guidance range. We continue to be comfortable with the strength of Property Casualty reserves. While favorable development over the full year is comparable to prior year, we don’t anticipate the same level of favorable development in 2008. But having said that our yearend reserve position remains near the high end of the range, determined by independent evaluation. Elsewhere on the balance sheet, the investment portfolio was solid. As reported in the past we have relatively small exposure to subprime issues. We have evaluated the portfolio and have been both thorough and aggressive in terms of assessing other than temporary impairments, which resulted in a capital loss after tax of $3.6 million for the quarter or about $0.08 a share. While those capital losses are reflective of…

Thanks, Lou, and good morning. A good fourth quarter capped of another solid year for Horace Mann in 2007. Consolidated operating income of $0.49 per share, while somewhat below prior year was a bit better than we expected. Property and Casualty earnings were down in the quarter in spite of a higher level of favorable prior year's reserve development, due to increase catastrophes and pressure, primarily frequency driven on current accident year loss ratios. Partially offsetting the prior year comparison in P&C was a continuation of strong quarterly earnings results in our Annuity and Life segments. With income in both of those business once again above prior year and ahead of our expectations. Expanded investment margins in both segments, as well as positive growth in Annuity contract charges and favorable life mortality were the primary drivers. In terms of the investment portfolio, as Lou mentioned, we fairly evaluated our portfolio at December 31 and have been conservative we believe in terms of assessing other than temporary impairments, recording a pre-tax charge of $5.9 million for the quarter. The largest component of the charge related to the company's one and only sub-prime residential mortgage-backed security with an amortized cost of $4.9 million, which was impaired to a fair value of $1.1 million. The write-down was the result of our assessment that permanent impairment had occurred due to the deterioration of a significant portion of the underlying collateral and our expectation that not all of the contractual principal and interest would be paid. The remaining $2.1 million of the impairment charge in the quarter was attributable to non-mortgage related securities, primarily corporate high-yield bonds and preferred stocks, which we had plans to sell. Our exposure to Alt-A mortgage-backed securities as noted in the press release was approximately $8.4 million at December 31,…

Thanks Pete. Good morning. This morning, I will take you through what’s behind the combined ratio, a view of our overall book of business, our approach to retention, written premium, several core strategies and 2008 outlook. Total Property and Causality combined ratio for the quarter and for the year was 91.9, with the fourth quarter six points higher than a year ago. There were several major drivers of the quarterly variance. First, four points are due to catastrophe losses with losses of almost $6 million, the quarter was more than $5 million higher than a year ago. The California wildfire at $4.5 million is the largest Cat, but we also had three other events totaling $1.5 million. There was some help with favorable prior year reserve development of a little bit more than $5 million, which equated to 2.3 points in the quarter when compared to last year. Our underlying accident year combined ratio excluding catastrophes and prior year's reserve development was 91.4% in the quarter up 4.4 points over 2006. For the year, the combined ratio was up 4.3 points compared to full year 2006. Similarly the current accident year underlying combined ratio is up 3.3 points. Catastrophes are up almost a point and prior years reserve development essentially equal to prior year. Now looking at the combined by line. In the quarter, our Auto accident year combined ratio excluding catastrophes of 100.8%, was up almost 5 points and Property at 72.2% was up 9 points compared to prior year. In both lines claim frequency increased over prior year. We as many in the industry have experienced an increase in claim frequency for the first time in several years. Contributing factors in 2007 include adverse winter weather in key Midwest and Northeast states in both the first and fourth…

Thanks Doug. And good morning. As Lou and Pete both remarked, the Annuity and Life lines of business experienced significant income growth, relative to prior year and our expectations, as well as increases in total revenues. However, sales growth continues to be a challenge. Total annuity sales decreased by 17% in the fourth quarter and 10% for the full year. As we discussed in the third quarter earnings call, many school districts did place a moratorium on participant 403-B transfers industry wide, which impacted our fourth quarter and full year single-deposit and roll-over sales. This in combination with the anticipated decline in independent agent sales, resulting from our narrowing our focus to 403-B in qualified sales accounts for the annuity sales decline in 2007. However, total annuity deposits for the year grew by almost 4%, driven by an increase in recurring deposits, which is a key benefit of our 403-B market focus. Our total policy count continues to grow with cash value retention in the 91% to 92% range. Total annuity assets under management increased by nearly 4%, compared to a year ago. With fixed annuity assets increasing over 3% and variable annuity assets increasing 4.5%. Fourth quarter pretax income for the annuity segment was $5.9 million, up $2 million compared to prior year. Quarterly earnings benefited primarily from improved interest margins, increased contract charges and fees and a refinement in the guarantee minimum death benefit reserve of calculation that were reduced by an unfavorable change in DAC and VIF unlocking. For the year pretax income of $25.9 million reflected a significant $8 million increase over 2006, with the key drivers being improved interest margins and increased contract charges and fees. Looking to 2008, annuity pre-tax operating earnings, adjusted for the impact of DAC and VIF unlocking, are expected to…

Rich Schoenberg Thank you Frank, good morning to everyone. Today I'll focus on sales results, distribution and the traction we're gaining in the agency business model or ABM. So let me start by focusing on some positive initial results we're seeing with ABM. The Agency Business Model initiative continues to take hold among our agents, as we have faith in the model over the past five quarters. As a reminder ABM agents, conduct business from an outside professional office with license producers and/or support staff and employee embedded, documented reputable processes in their operations. This model, coupled with other key corporate initiatives designed to support ABM, will sustain our agents’ profitable growth of educator multiline business. So, after now 18 months where do we stand? We now have a 191 of our agents in an outside office with license producers. An 82% increase from the end of 2006. Agents now utilized 253 license producers representing an increase of 11% from just three months earlier and a 116% compared to a year ago. This now gives Horace Mann 1043 total points of distribution. Equally important, in 2007, we decreased the number of agents working out of their home by 19% to a group now numbering 305. We have supported our ABM initiative with additional training and support, the core of that support coming from our agency business school. This is a four day seminar that focuses on agents utilizing their base for operation license producers and designing or refining a business plan. Through December 196 agents or 25% of our current sales force have completed the agency business school. Of these agents more than 60% have implemented the model by securing commercial office space and utilizing license producers and/or support staff. But with that said, it takes time to fully embed…

Thanks Rick, and that concludes our prepared remarks, Tam if you would please move to the question answer session.

Thank you. (Operator Instructions) Your first question is coming from Rohan Pai with Banc of America. Please go ahead

Good morning and congratulations on the quarter. First question was on the reinsurance. I guess, first of all did the aggregate reinsurance contract of $21 million, did it come into play at all in limiting your Cat losses or was the $4 million California wildfire your gross and net loss.

This is Pete Heckman, the way we recorded the quarter was to not assume that the aggregate came in to play. Obviously that kicks in at $21 million of 2007 paid losses and we will likely exceed that number, and the entire cost of wildfires would have been covered by our catastrophe treaty. But the particular language in our aggregate treaty limited those events to PCS declared catastrophes and as you may have seen the PCS only declared the one fire, the [bush] fire as a catastrophe. So at this point we are not assuming recoveries, we will be pursuing those in the year, in the months ahead but we've booked the year rather conservatively in that regard.

Okay. And then could you remind us did your property Cat program renew at Jan 01.

Yes it did.

And could you give us the details for that please?

This is Doug Reynolds, the 2008 program, a couple of things, one is we raised our top end limit of coverage from a $130 million to a $150 million and I might point out that’s equal to about the one in 250 year event and over the last four years we've raised that each year from $80 million to $110 to $130 and now to the $150. We also have retained our attachment point at $25 million, which is the same as we had in 2007 and we purchased second and third event coverage, as well but, at an attachment of $15 million with no limit and industry-related storms, which is what we had in 2007. We've also eliminated the aggregate this year and really the reason behind it was we had some we had a very favorable program in the first two years. As we tried to renew it this year the cost and the attachment points grew quite a bit and we decided that that was not a good move for us to do, based on the price.

Sorry, a quick follow up and did you get any cost benefit for reducing your Florida exposures on your property catastrophe?

Yes we did based on the actions that we've taken we also have reduced our expected average annual loss in Florida substantially, due to the actions that we've taken over the last couple of years and what we have embedded in the contract for 2008 is that the pricing will be adjusted based on the activity that we'd taken in 2008 with the non renewal program.

Okay great. Then if I can ask just one more question I say. If you could elaborate on the Auto loss trends that you are seeing, I know you have cited the higher frequency and then you said it was weather related. Could there be anything else that’s causing the higher frequency or did you think that it was mostly just more severe weather? And also if you could just give us your thoughts on bodily injuries severity, I think a couple of other companies have cited higher lost trends in that line. Just want to know what you are seeing there?

Right. Couple of things, first on the frequency trend that we saw in 2007. As I indicated the weather in the Midwest and the Northeast definitely contributed to all of the increase in frequency in 2007. But additionally, some of the new business writing, as well as retention policy growth that we saw in some of the western states impacted that. Only that was distribution shift, just some of those states have a higher frequency than our countrywide average. So, the fact that they were making up a higher percentage of our total book resulted in a -- and put pressure on the frequency. So, those are really the two things that we saw occurring. We did not see anything else in any other segments of the book that would have pointed to really an issue that we would have to deal with. On the BI side, we’ve -- the frequency followed through a little bit and the BI side it was up a little bit, but on the severity side we have not seen -- we have seen some increase, which is basically inline with the CPI, but we have not seen anything on the severity side that would point to something that was greater than our expectations going into 2007.

Great. Thanks for the detailed answer.

Thank you. (Operator Instruction). You have a question coming from Rohan Pai with Banc of America Securities.

I sensed something while asking a question; I guess I’ll have to follow up. What was the price increases in Personal Auto that you were contemplating? I know you did mention that you maybe raising prices this year, but what kind of magnitude were you thinking?

Yeah, what we have -- and what we are anticipating is something in the 3% to 4% range in Auto and actually that would be the same as Property as well.

Okay, guys those were the only questions I had. Thank you.

Thank you.

Tam, this time if we have no more questions we'd like to thank everyone for participating today and look forward to visiting with you at the end of next quarter. Have a good day.

Thank you and this concludes today's Horace Mann Educators Corporation fourth quarter earnings conference call. You may now disconnect your lines, and have a pleasant afternoon.

: