Dwayne Hallman – SVP, Finance Lou Lower – President and CEO Pete Heckman – EVP and CFO Tom Wilkinson – EVP, Property and Casualty Brent Hamann – SVP, Annuity and Life Steve Cardinal – EVP and Chief Marketing Officer

Bob Glasspiegel – Langen McAlenney Steve [ph] – Langen McAlenney Craig Rothman – Millennium Partners

My name is Demitras and I will be your conference operator today. At this time, I would like to welcome everyone to the Horace Mann first 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 session. (Operator instructions) Thank you. Mr. Hallman, you may begin your conference.

Thank you and good morning everyone and welcome to our first quarter 2009 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’ll cover our results for the first quarter in our prepared remarks. 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; Tom Wilkinson, Executive Vice President, Property and Casualty; Brent Hamann, Senior Vice President, Annuity and Life; and Steve Cardinal, Executive Vice President, Marketing. The following discussion may contain forward-looking statement regarding Horace Mann and its anticipated or expected results of operations for 2009 or subsequent periods. Our actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements were made based on management’s current expectations and beliefs as of the date and time of this call. For a discussion of the risks and uncertainties that could 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 in assumptions or other factors that could affect these statements. Finally, this call is being recorded and is available live on our website. An Internet replay will be available on our website until June 1st, 2009. Now, I will turn the call over to Lou Lower for his comments.

Thanks, Dwayne. Good morning, everyone, and welcome to our call. Yesterday we reported first quarter net income before realized capital gains and losses of $0.35 per share, in line with consensus expectations. That $0.35 includes roughly $0.08 per share of cost related to claims office consolidation and distribution strategy initiatives. And as you will hear over the course of our description of the quarter, we continue to effectively navigate through a difficult financial and economic environment. We feel positive about the underlying fundamentals and profitability of our operations. Our financial foundation and key capital ratios remained healthy and consistent with our ratings and very importantly key elements of our growth strategies are taking hold despite national economic circumstances, which is most certainly encouraging for our future growth prospects. In property and casualty, both reported and underlying profit fundamentals are solid while the current accident year combined ratio excluding cats increased 2.5 points compared to last year’s first quarter. Our expense and LAE ratios reflect those claims office consolidation and marketing transition expenses, which represent about three points on our combined ratio. As you will hear from Tom during his report, we have further consolidated our claims offices from six to two, affording us the opportunity to better leverage the technology infrastructure that we’ve put in place over the past couple of years. The benefits we’ll be receiving going forward will be additional efficiency and claims expenses as well as further improvements in severity control. First quarter cost associated with claims consolidation represented roughly $0.05 per share. In terms of pay back, we are projecting that our LAE expense ratio will improve by roughly a half a point in 2010 with the added benefit of improved severity control, allowing us to continue to beat the industry fast track data. The marketing…

Thanks, Lou. Horace Mann posted solid results in the first quarter in spite of the continuing macroeconomic and financial market challenges. As Lou mentioned, the $0.35 per share of operating income, which included about $0.08 of expense items related to our claims and marketing strategic initiatives, was a bit better than we expected as the adverse impact of market performance on our variable annuity earnings was more than offset by favorable underlying P&C, investment income, and expense results. In terms of our investments, the performance of our $3.4 billion fixed maturity and equity securities portfolio remains strong with an overall quality rating of A+ and is well diversified across industries, investment types, and individual issuers. Net investment income was up 2% over prior year and slightly exceeded our expectations, both in total and by segment. With regard to investment gains and losses, we completed an opportunistic capital gains program during the first quarter that generated nearly $17 million in realized gains with minimal, if any, future investment income give up. We recorded an almost identical amount of investment impairments during the quarter, the largest component of which was a $12 million writedown of all of our below investment grade perpetual preferred stocks, including securities issued by ABN AMRO, Banc of America, Royal Bank of Scotland, and Bank of Ireland. The remaining $5 million of investment losses was recorded primarily in our high yield bond portfolio, split between writedowns of securities sold during the quarter and securities we no longer intend to hold until recovery occurs. The volatility in credit spreads and interest rates continued during the first three months of the year with the total fair value of our investments experiencing a modest decline from year-end. We’ve provided a supplemental exhibit at the end of our press release, packaged again…

Thanks, Pete, and good morning. This morning I will summarize key components of our combined ratio for the quarter, cover results by line, and discuss trends in our book of business. But before I get into the financial results, I would like to discuss another milestone reached by our claims organization. We completed our second claims field office consolidation at the end of the quarter. Our six regional claim officer were consolidate into two regional auto offices, one in Raleigh, North Carolina, and one in Dallas, Texas, and a National Property Office also housed in Dallas. This is another important step in the continuing development of our advanced claims environment (inaudible). The consolidation will help us gain efficiency in scale with the larger offices. At the same time, we’ll continue to retain local presence with our Company appraisers and Company claim vans in markets where we have built a base of P&C policies in force. Consolidation is possible thanks to our continued investments in technology. Our state-of-the-art claims workstation consists of a desktop that includes our claim administrative system complete with policies, procedures, and best practices all programmed for real-time application and monitoring. We also have a unique online, real-time customer satisfaction feedback group, which allows us to address customer concerns during the claim resolution process as they happen. And our workstation includes vendor interfaces, which improves the quality and timeliness of the claims process. Horace Mann’s investments in the claims department over the past six years have paid dividends. Our severity results trend better than the industry, our reserve position is very stable, our LAE ratio is trending down to the mid-9% range, and our customer satisfaction results continue to improve. In the future, we will continue to look for opportunity areas to further enhance our processes with a…

Thanks, Tom, and good morning, everyone. I will spend the next few minutes going over the results of the annuity and life segments. Our annuity sales were up significantly in the first quarter, driven primarily by our flexible premium sale through both Horace Mann and independent agents. Our successful efforts to retain table slots in the face of new IRS regulations are now translating into sales growth in 2009. These efforts, combined with the ongoing support of our agents’ activity resulted in our total annuity sales increasing by 50% in the first quarter compared to the prior year. Our recurring deposit business increased 99% for the quarter while our single premium rollover deposit business, including partner product sales increased by 30%. It is important to note that our recurring deposit business, while sales are up 99%, (inaudible) deposits are recognized as money as received coming in monthly over a full 12-month period. This levelized pattern of payments combined with a modest number of payroll slots have loss [ph] compared to prior year and the primary drivers of the new contract deposit decline that Lou referenced earlier. In the end, however, both sales and new contract deposits are exceeding our expectations. As we’ve discussed on previous calls, the new IRS regulations that took effect on January 1st of this year were supported by our efforts throughout 2007 and 2008. We deployed a number of strategies to solidify our market position and grow our business. These included numerous contact programs with our schools, distribution of compliance kits, a website to facilitate information exchange, and additional agent training. Despite our expectations that this transition could be disruptive, we are in a stronger position today and in fact are capitalizing on resulting shake-outs stemming from the new regulations. In many districts, we find ourselves…

Thanks, Brent, and good morning. Today, I will focus my remarks on four areas, one, the status of the migration of our agency force; two, continued success we are having in our marketplace; three, the growth plans for our distribution model; and four, sales results for the first quarter. So, let’s start with the migration of our agency force from the sales force that traditionally worked out of their homes to an agency force serving customers from outside offices. The foundation of our distribution strategy includes this transition as well as increasing the number of agents, increasing the number of licensed producers, and educating our agents on best practices and repeatable processes from our highly successful agency business school. During the quarter, we saw an increase in the number of agents moving to outside offices and increase in the number of licensed producers, and increase in total agents, continued productivity improvement from agents that have adopted our agency business school techniques, and the successful launch of the exclusive agent agreement. In the first quarter, we added 38 outside offices to bring the total number of agents in outside offices to 524. Last year we had 63% of agents in outside offices after the first quarter and now we are 78%. The number of agents that work in outside offices and have brought in a licensed producer have grown as well, from 309 to 334 during the first quarter. Additionally, we saw that 71 [ph] agents that migrated to the exclusive agent agreement showed early signs of success in the quarter, leveraging the new agent agreement by functioning as entrepreneurs. Our agents also continue to on-board licensed producers and now there are 412 licensed producers, a growth of 18 from year-end. From a staffing standpoint, we saw our agent count grow…

Thanks, Steve. And that concludes our prepared remarks. Demitras, if you can please move to the question-and-answer session. Bob Glasspiegel – Langen McAlenney: Good morning. I got an easy one and a tough one, I’ll start with the easy one. So, to what extent is the weakened economy and less driving activity factoring into results for ’09 and perhaps your pricing decisions?

Well I think we’ve seen the – now, we’ve had four quarters of declining frequencies, started last summer when – probably before the danger to the economy started, but when gas went to $4 a gallon. We’ve continued to stay with – we’ve continued to see pretty good frequency trend since then. Our first quarter this year was below first quarter prior year. We are reading it in that probably we won't have continued significant declines to prior year and the rest year though should have pretty favorable levels. In the short term, it’s not changing our pricing decision and our pricing philosophy. We still predict we’ll continue to take rate increases to match some of the severity increases and some of the overall CPI indicators that are still pointing up. Bob Glasspiegel – Langen McAlenney: Just trying to (inaudible) your answer though, it seems like there is – I mean Progressive and other auto companies are seeing less driving, less frequency, that was not in your – that was not fully factored into your earnings guidance, I wouldn’t think, for ’09.

Well, in our projections and in our guidance, we predicted pretty conservative frequency trends and we didn’t – we weren’t predicting frequency trends to shoot back up in 2009 after the positive 2008 we had. Bob Glasspiegel – Langen McAlenney: Okay. So, you factored in low driving in your earnings guidance for ’09?

Correct. Bob Glasspiegel – Langen McAlenney: Okay. My tougher question is when we think about the annuity business and which has been behind a lot of the sort of unrealized losses in the portfolio and we mark the sort of marks that this business has caused, you probably lost five to ten years of earnings in marks. I know we are hoping that these marks are not going to be realized, but at the end of the day when we think about – this is a business that generates returns, we do have to factor in that this business is – has put pressure on your overall capital, it’s resulted in your inability to be able to buy back stock, it would – appears to be in you minds I would think quite attractive levels. What’s the argument for staying in this business from a manufacturing point of view and taking the capital risks associated with the portfolio backing these products?

Bob, I just offer that we – the argument to stay in the business, if you assume that unrealized turns – fully turns into realized losses and that subsequent investments would do absolutely the same thing. I – we turn our tails and not be in the business, but the fact is that we don’t believe that’s the case, both with the current in-force portfolio nor future investments that we are putting on the books to support the new business that we are writing. Bob Glasspiegel – Langen McAlenney: But we do know that it’s kept you from being able to buy back stock – I mean we know that it’s put pressure on capital.

That’s well sure, absolutely. Bob Glasspiegel – Langen McAlenney: Whether or not these marks are right or wrong, the regulators, the rating agencies are treating the marks with some seriousness as are you clearly. So, how do we look at – what do we think the returns from this business over the last decade had been?

Including the marks, I – Bob Glasspiegel – Langen McAlenney: Well, just on a total economic return basis, however you think about the business.

Yes, if I thought about the two main businesses, I would think that long term historically that the property and casualty business is a business that’s in the mid-to-high teens and the life and annuity business like others who depending on the cycle high-single digits to low-double digits. But I think more than the return, if you think about what we are – how we show up for our customers from a marketing standpoint, our two main lines, lead lines that gives us access to the customer – to our customer base, are in fact annuity and auto. Annuity is very critical. It’s part of access to customers through 403(b) payroll slots. And we think relative to others that we’ve been extremely conservative in the design of the products that we have, how we – our manufacturing process, and how we distribute. So, I fully believe that we’ll see a full, substantial recovery on the unrealized, and that we’ll continue to be in that business, but on a continued very conservative basis. I don’t know, Pete, if you have – anything you’d like to add to that, but –

No, no, nothing further, Bob. It is a tough cycle we are in. Obviously the kinds of questions you are raising are ones that are not lost on us internally as well, but we continue to believe that over the long term, although as Lou laid out, returns in the life and annuity business are salt of the P&C business. The total package continues to make sense given our niche market emphasis.

This is Steve [ph], another question, seems like you can manufacture the products, and still achieve those – it seems like you can distribute the products and not manufacture them and still achieve the objective that you think require you to be in the business, but we’ll discuss this later. Thank you.

You bet.

(Operator instructions) We do have question on the line of Craig Rothman. Craig Rothman – Millennium Partners: Hey guys, good quarter. How did the level of statutory impairments compared to the $13.4 million of (inaudible)?

Essentially the same. Craig Rothman – Millennium Partners: Okay. And what did you say you impaired on the preferred side – the specific securities?

The specific securities, the total was $12 million and I think there were five securities in total, Royal Bank of Scotland, ABN AMRO, Banc of America, Bank of Ireland, and Northern Rock. Craig Rothman – Millennium Partners: Okay. Are those – and I assume bear day is still paying, right? Those all–

Yes, they are all. Yes, they area all paying, but they are perpetual preferreds, and below investment grade, which puts them in a very difficult accounting category to not deal with in terms of bringing them to market value. Craig Rothman – Millennium Partners: Okay. They perpetual. So, did you impair a good chunk of your perpetuals? How many you have left?

We have several left, but we impaired all of the below investment grade perpetuals. Craig Rothman – Millennium Partners: Got you, got you, okay. And then how shall we think about the claims and distribution initiatives. Shall we think about them as ongoing or are they going to be – is that more kind of one-time?

Yes, the eight-tenths in expense that we incurred in the first quarter are clearly front-ended for both of those initiatives. As Lou mentioned, there will be a penny or two here or there throughout the rest of the year in total, but the majority of those are – those initial expenses are behind us for both initiatives. Craig Rothman – Millennium Partners: Okay. And do you guys – do you write or target any specific combined ratio on auto?

Yes, we do. The combined ratio, low to mid-nineties. Craig Rothman – Millennium Partners: Low to mid nineties.

Yes. Craig Rothman – Millennium Partners: Okay. And what is your target RBC in the P&C subsidiary?

Well we don’t specifically target RBC. That’s just one of the factors that we look at. We generally try to look across all the rating agencies and navigate the waters of their various criteria. Probably the one we focus most closely on is the BCAR from A. M. Best, both stressed and unstressed, and like to keep that at or above 150 to 175. Craig Rothman – Millennium Partners: Okay. Where are you now on the BCAR?

We are in that range. Craig Rothman – Millennium Partners: Okay–

The high end of that range. Craig Rothman – Millennium Partners: High end, okay. Okay great, thanks a lot guys.

You bet.

We have a followup question from the line of Bob Glasspiegel. Bob Glasspiegel – Langen McAlenney: Back to a soft ball here, guys. Many break out in agent count this quarter as for as the uptick. Are we now in a position where we can look for agent growth. We’ve done culling and recruiting can take over?

This is Steve Cardinal. Yes, we are confident. We are excited about this quarter that first growth we’ve had in a couple of years for quarter (inaudible) growth and we see some good trends (inaudible) for this whole year. Bob Glasspiegel – Langen McAlenney: Okay. So, we should be up for the year then?

Yes. Bob Glasspiegel – Langen McAlenney: Okay. Thank you.

Thank you.

(Operator instructions) There are no further questions at this time.

Thank you, Demitras. We appreciate everyone participating on the call this morning. If you have any further questions, please feel free to give me a call. Have a good day.

This concludes today’s conference call. You may now disconnect.