Good morning. My name is Kee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Horace Mann Educators Corporation second quarter earnings conference 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. Sir, you may begin your conference.

Good morning, everyone. Welcome to our second quarter 2008 earnings conference 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 second quarter in our prepared remarks. The following 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; and Rick Schulenburg, 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 are made based on management’s current expectations and beliefs as of the date and time of this call. For discussions 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 and assumptions, or other factors that could affect these statements. As a reminder, this call is being recorded and is available live on our website. An Internet reply will be available on our website until September 1, 2008. Now I will turn the call over to Lou Lower for his comments.

Thank you, Dwayne. And good morning everyone and thanks for participating on our call. As we reported after the market closed yesterday, Horace Mann reported net income before realized net capital losses of $0.23 per share for the second quarter, $0.30 per share less than prior year, with $0.28 of that adverse variance attributable to the catastrophes, which we had pre-announced. At $22 million, those cats were the worst in the company's history for the second quarter. Notwithstanding the loss to the company, our claims employees are hard at work doing their usual superb job of restoring the lives of our customers who suffered personally during the season of abnormally high number of tornadoes and other damaging weather events. We also, but as expected, had less in the way of favorable prior-year reserve developments, accounting for about $0.04 per share of negative variance to prior year. Despite those factors, we are encouraged by the underlying fundamentals relative to our expectations, given where we are in the underwriting cycle and the current state of the financial markets. Year-to-date our P&C loss ratio ex cats and ex prior year development is only a point over prior year, with most of that deterioration coming from non-cat weather losses in the property line. Similarly our combined Life and Annuity earnings are ahead of last year in spite of the adverse impact of the bear market on our variable annuity business. Given our actual cat experience in the first half and allowing for normal second half catastrophes plus no improvement in the financial markets, we’ve revised our full year guidance for operating EPS to a range of $1.30 to $1.45. And as noted in our press release, that range anticipates a $0.05 per share charge for consolidation of our claims organization. And as you are…

Thanks, Lou, and good morning. As Lou has mentioned, Horace Mann’s second quarter operating EPS variance to prior year can essentially be attributed to a significantly higher level of catastrophe losses and a smaller amount of favorable prior year’s P&C reserve development. The latter was generally consistent with our expectations, the former of course was not. The remaining relatively small negative prior year variance in P&C was due primarily to a higher level of non-cat weather losses in our property line. This was more than offset by higher annuity and life segment earnings or increase fixed annuity and life investment spreads along with lower mortality, more than offset the adverse financial – or the adverse impact of the financial markets on our variable annuity fees and DAC unlocking. For the first half of the year, operating EPS of $0.61 fell short of our expectations primarily due to two factors; cats and the impact of the financial markets on our annuity business. Those factors in turn are the primary drivers of our revised full year earnings guidance. The midpoint of our updated guidance range of $1.30 to $1.45 is consistent with the current consensus and reflects three primary components of variance relative to our prior guidance range midpoint. First, approximately $0.30 due to increased level of catastrophe losses, which simply reflects the excess level of cats in the first six months; about $0.07 in reduced annuity earnings due to market performance, which we assume will be flat for the remainder of the year; and approximately $0.05 of current year expenses related to our 2008 and 2009 P&C claims office consolidation initiative. Other than those items, we expect our underlying profitability to be consistent overall with our initial expectations. Turning to investments. Net investment income was up approximately 4% over prior year…

Thanks, Pete, and good morning. This morning I’ll cover both property and casualty results as well as annuity and life. As Lou and Pete have already indicated, catastrophes were the big start for the second quarter earnings results. And as you have seen in our release, the weather, both catastrophe and non-catastrophe, impacted our financial results, resulting in 106.7 total property and casualty combined ratio for the quarter, up over 17 points from second quarter 2007. Catastrophes in the quarter totaled over 22 million, up 17 million over the prior year and approximately five times our expected level for the second quarter. Total catastrophe cost represented 16.6% of earned premium, up almost 13 points over last year. This second quarter strong activity, mainly wind and tornadoes, was the highest second quarter in our history. Also in the quarter we had favorable prior year reserves re-estimates of $2.4 million or 1.8% of premium, which was 2.4 points lower than prior year. Our underlying combined ratio, excluding catastrophes and the effect of prior year re-estimates, was 91.9% in the quarter, 2.3 points higher than last year and up one-half of a point sequentially compared to first quarter. Year-to-date total property and casualty combined ratio was 100.2%, up 10.9 points over the first half of 2007. Catastrophe costs account for 7.7 points of the increase and the difference in prior year reserve re-estimates contribute 2.3 points for that increase. Our first half underlying accident year combined ratio, excluding catastrophes, was 91.7%, and nine-tenths of a point higher than last year. Excluding catastrophes, this quarter's auto accident year combined ratio of 95.9% was up 1.2 points over prior year, while property closed with an accident year combined ratio of 83.1%, an increase of 7.3 points when compared to the second quarter of last year.…

Thanks, Doug, and good morning to everyone. Today I’ll focus on the momentum we continued to build with the agency business model initiative, the changes in our agent status relative to the model and the quarter and year-to-date sales results. Results of our agents working in the Agency Business Model or ABM had been very encouraging. ABM agents have gone through our agency business school and have adopted or in the process of adopting documented repeatable processes in their operations that include conducting business in outside offices with licensed producers and other support staff. We continue to grow the number of agents operating in outside offices with licensed producers while decreasing the number of agents working out of their home. We have also had additional agency business schools with now nearly 30% of our existing agents having completed this four-day business seminar. On average, ABM agents are collectively outperforming all other agents in all core lines, especially in our two lead lines, true new auto sales and flexible annuity sales. These lines serve as a barometer of our success with the ABM initiative. Overall, our agents average true new auto productivity increase by approximately 6% for the second quarter over 2007, driven predominantly by our ABM agents. Their average true new auto productivity has increased approximately 9% in the second quarter. Flexible annuity average productivity was up around 9% for the second quarter and 15% for the year. And again, our ABM agents have the most influence on this increase. Their average flexible annuity sales increased by approximately 10% in the second quarter and 22% for the year. In fact, productivity has increased with the ABM agents in the second quarter and true new sales, property sales and flexible annuity sales in a 9% to 10% range. One last point.…

Thank you, Rick. And that concludes our prepared remarks. Kee, if you would please move to the question-and-answer session.

(Operator instructions) Your first question comes from Robert Glasspiegel of Langen McAlenney. Robert Glasspiegel – Langen McAlenney: The cat losses in this quarter, you did a good job of explaining that you have been reducing your coastal exposure and that we shouldn’t be nervous that this is representative of a trend that may unfold prospectively. But with your property growing pretty continuously better than your auto over the last several quarters, but perhaps the question might be, are you thinking about stepping up your reinsurance purchases, particularly given the pricing has started to come down?

Thanks, Bob. This is Doug Reynolds. Every year we really go through a process of looking at our total reinsurance package and different opportunities and try and balance that against the last potential, our exposure that we have to – not only in hurricanes but others. And as we see opportunities, we obviously would take advantage of those. Reducing that, even though there has been a lot of activity this year in the, let’s call it, the middle of the country, the pricing opportunity is there for us to really keep pace with those over a period of time. Obviously if this year becomes the norm, then we will have to take a look at some different opportunities. But right now we really look at the entire package for opportunities to mitigate our risk at reasonable cost. Robert Glasspiegel – Langen McAlenney: Okay. And switching gears, just on the auto side, your numbers and your checks sort of were not as positive about gas prices and frequency as Hartford and Progressive to date have been – why do you think you are not seeing any frequency positives yet? Is it the book that you are shown into perhaps or–?

Yes. I would say that we’ve started to see some of the frequency benefits, but it has trailed a few of the other companies. And I do believe that it’s really targeted at our niche, which the educator, which we have such a large percentage of the book, over 80%. That is out there driving every day and they really don’t have an option to change some of those patterns, whether it’s the school or to other activities and events that are going on with the schools. So I think we typically have seen us trail maybe some of the general market trends in that regard, but we are seeing that. Robert Glasspiegel – Langen McAlenney: So your guidance doesn’t factor any frequency deltas post the first five months? Let’s say – I guess June was one we already started to see it.

No, we are not – not specifically towards that. We would have to really see that for just a little bit longer to really ascertain if that’s something that we should be reading into our year-end projections as well as, as we move into 2009. Robert Glasspiegel – Langen McAlenney: And last question. Excess capital position is apparent [ph]. I mean, if the stocks stayed at these levels, how much repurchase would you be capable of doing that you thought that was your best option?

Yes, Bob, this is Pete Heckman. We continue to have I guess what I would call a modest level of excess capital available following the 75 million repurchase that we did over the last eight months. At this point in time, especially with the hurricane season approach and such, we are probably going to keep our powder dry. But your point is well taken. The stock price is a pretty attractive one for a buyback scenario. Robert Glasspiegel – Langen McAlenney: Okay. You are saying that – actually cat season, how much – I mean, what your forecast is? I mean, how much excess capital are you generating in the second half?

Well, it’s – let’s just say it’s a modest amount, certainly nothing in the order of magnitude that we utilized in the last several months. Robert Glasspiegel – Langen McAlenney: Okay. Thank you very much.

Your next question comes from Dan Farrell of Fox-Pitt Kelton. Dan Farrell – Fox-Pitt Kelton: Hi, good morning.

Good morning. Dan Farrell – Fox-Pitt Kelton: First thing, if you happen to have the statutory equity for the life companies at the end of the second quarter?

The statutory numbers are still preliminary. I can give you a ballpark and don’t hold me to it, but – Dan Farrell – Fox-Pitt Kelton: Okay.

It’s about $280 million, including ABR, so adjusted capital and surplus is about in the $280 million range. Dan Farrell – Fox-Pitt Kelton: Okay, great. And then can you just talk a little bit more about your Asian force and Asian cap? You gave a lot of detail in the commentary, but do you feel you are getting to an inflection point in agent count now? When do you think you get that and start to see the growth come through?

This is Rick Schulenburg. Dan, obviously we hope our agents distribution will begin to grow. With that said, we are going to hold firm on our strategy and that’s really putting resources into those agents who were capable of going into ABM. And really putting a firm stand on our hiring standards and identifying agents who are able to come and join our company, grow their business with business plans. And those agents who are unable to migrate over having performance plans in place, and this is not the bright for them. We are willing to go with the people that will grow their business and help us capture the education market. Dan Farrell – Fox-Pitt Kelton: Okay. And I apologize if I missed this. But what percentage of the agents have now been sort of migrated to the new operating platform?

We have today over 200 agents who are in the platform and we are seeing increases. But obviously as we make increases, the future increases are going to come from those new hires that we identify. We still have some of our agents in our agent rings who are identifying and hoping to get to that – to the ability to move to an outside office, invest in their business. So we have a couple more schools that will at least progress this year progress this year. And we will try to bring people through and help them get into that model.

And Dan, I think the other thing on the agent count component and Rick talked about this is the growth that we are getting with the licensed producers. So the overall point of this distribution, we do see growth in that. That’s really one of the things that one of the key drivers as we look to make the agents stronger and expand in the various markets. Dan Farrell – Fox-Pitt Kelton: Okay, great. Thanks guys.

Your next question comes from Rohan Pai of Banc of America Securities. Rohan Pai – Banc of America Securities: Hi, good morning. The first question has to do with the personal auto line. The accident year combined ratio, I guess, ex cap is 99.9. Was there any non-cat weather in that number?

On the auto? Rohan Pai – Banc of America Securities: On the auto, yes, have impacted one way or the other?

Probably not. I mean, nothing that we really saw that would have pointed to any of the coverages, for example, cars being flooded or hail damage to the vehicles that if anything that would really typically be out of the ordinary or would have that much of an impact. Rohan Pai – Banc of America Securities: And your guidance, just to check I guess, it's for improvement year-over-year, right, in the underlying combined ratio for the auto book, given business mix, shifts and things?

No, for 2008 we are expecting the auto combined ratio accident year to increase. So that was built into our target combined ratios. As we start to take the rate activity in the second half of the year, we would expect to be able to move that – either flatten or move that in the direction. But in 2008, based on the results that we are seeing, we would expect that accident year combined ratio to increase. Rohan Pai – Banc of America Securities: Okay. And in terms of your forecast, when you are taking the rate, what kind of loss trends are you forecasting? Are you assuming improvement in frequencies?

At this point, we have not put that into our loss trends for the auto changes. If that starts to show up, then obviously we will. But I would say that our loss trend estimates we try not to be – to move them too far one way or another and be either overly conservative or overly aggressive with the trends, but to actually see them show up in our results before we would move them into our loss trend. Rohan Pai – Banc of America Securities: Okay. And I think in the first quarter you’ve said that in terms of the ABM migration, you are slowing down the process to focus on agents that had gone through the school. Is there any update on that? I mean, is that still the case or are you starting to again focus on getting people through?

Again, this is Rick Schulenburg. We are actually doing both. We have had an additional couple of schools for those agents capable and new schools and we have a couple more as we go through the year. But we have continued to focus on those agents who have gone through the agency business school and into the model itself. So we started conducting a second school that reinforces all (inaudible) some of our agents, almost two years since they've gone through the initial time. So it’s a retooling and helping them really refine. And we’ve started to conduct our schools for their licensed producers, which is a real – as Doug said, that’s a real key for us, giving them the skills and helping those licensed producers begin to sell and have an impact on both our results as well as their agents’ results. Rohan Pai – Banc of America Securities: Okay, great, And I guess the final question is for Pete, in the net realized losses in this quarter, I guess to what level have you written the two CDOs that you had, like what percent of cost is it now?

Well, the pricing, one was I believe around 28 or so, and one was in the mid-40s. Rohan Pai – Banc of America Securities: Okay. Okay, great. Those are the questions I have. Thank you.

Thank you.

(Operator instructions) Your next question comes from Robert Rodriguez of First Pacific Advisors. Robert Rodriguez – First Pacific Advisors: Yes. Could you please quantify for me when you were talking about the pressures from the 403 transition exactly what the revenue level were you talking about? And secondly, like – I’m familiar with that transition, exactly what are the issues that you or the industry are facing there, and why will this be better next year? Well, I will go on with the later part of your question first. The 403(b) market, basically IRS issued regulation that require the schools to have plan documents and accountability for how the money is moved or invested. It’s very much – very similar to the 401(k) marketplace in regards to that. And as a result, all the schools in the district regard to changes to implement and comply with those regulations. And as a result, there is a number of schools that put in, really stopped the ability for their employees to transfer monies from company to another until they have their plan documents filed. So that’s why you see some of the single premium numbers down substantially more than the flow premium. Secondly, as schools are dealing with that, we’ve been working with them to really develop the plan documents and be able to administer the programs fully. So that’s – it’s sort of just put the market in a little bit of a turmoil and we feel that as we move into 2009, because the schools will have to have complied to keep their plans in place, we will know a little bit more about what’s going to happen in that marketplace in the next year. And also as a part of this is that, because of that turmoil, we’ll also see that withdrawals are down in the industry as well, which sometimes is the generator for new business for other companies. Robert Rodriguez – First Pacific Advisors: In terms of quantifying the magnitude of what this revenue decline was in dollars?

Just to – I think I’ve got something on that, but –

Well, we are looking at how far the single premium sales were down compared to prior year. Let me just emphasize that the slowdown in withdrawal in the single premium sales and the improvement in persistency is industry-wide. It’s not just a Horace Mann phenomenon, as everyone is being impacted with fewer rollovers in the schools. Once the plan documents are in place and things are kind of back to normal January 1 of this year, then you would expect withdrawals and single premium sales to return to their normal levels across the industry.

And I’ve indicated in the comments that we’ve done about 15% or so on a year-to-date basis for the single qualified, which is approximately 7 million to 8 million. Robert Rodriguez – First Pacific Advisors: All right. And then second question here, in terms of the investment portfolio, you gave good granularity there. But in light of a transaction that recently occurred at Merrill Lynch, did you have anything that would be analogous to that? And secondly, are there any other issues like this in the portfolio? This is something I asked last year.

In terms of the transaction, you mean Merrill selling off some of their–? Robert Rodriguez – First Pacific Advisors: I don’t know if you'd call it a sale, of $0.22 on a dollar, but financing 75% and getting 5.5% cash and being retaining – being at risk. I’m not sure that really qualifies as a sale.

Right, I agree. And the answer is, no, we did nothing like that and have no plans to. Robert Rodriguez – First Pacific Advisors: Okay. Thank you very much.

There appears to be no questions at this time. I will now like to turn the floor back over to your host for any closing comments.

Thank you everyone and we certainly appreciate the fact that you’ve participated on our call this morning. We look forward visiting with you at the end of the third quarter. Thank you and have a good day.

Thank you. This concludes today’s Horace Mann Educator Corporation conference call. You may now disconnect.