Good morning, my name is Kristal 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 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 second 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 second quarter in our prepared remarks and then be available for questions. I’m here today with the following management members. 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 prepared remarks and responses to questions during today's presentation may contain forward-looking statements 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 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, changes or 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 August 28th, 2009. Now, I'm pleased to turn the call over to Lou Lower for his comments.

Thanks, Dwayne. Good morning, all, and welcome to our call. In my opening remarks today, I'm going to take things in a somewhat different order than is our normal practice given some fairly significant positive changes to our balance sheet. Though the financial markets have stabilized and begun to improve, the confidence that we've had and expressed to you in the past calls relative to the quality of our investment portfolio has been substantiated by the early stages of a return to normalcy in the financial markets. As the tone of the credit markets has improved of late and spreads have narrowed, we've experienced meaningful improvement in our unrealized capital loss position with reported book value per share increasing 26% sequentially to $14.34. At the same time, book value per share excluding FAS 115 is actually a little bit better than it was a year ago, prior to the meltdown in the financial markets that commenced in September. In addition to that favorable development on the capital front, we continue to be comfortable with all of our key balance sheet ratios including RBC levels, all of which are consistent with our ratings, which have now been reaffirmed by all three primary rating agencies. As we await further improvement from the financial markets and our already improved unrealized loss position, we have the intent and full capability to hold our invested assets to recovery and maturity. The structure of the annuity liabilities, which is associated with most of the taxable fixed income portfolio, is very stable, and continues to demonstrate strong and continuing improvements and persistency, while ongoing operations are producing positive bonds flow. That said, we have been opportunistically repositioning the investment portfolio in the interest of reducing individual issuer concentration risk. As you'll hear from Pete, we've been able…

Thanks, Lou. The second quarter was a positive one for Horace Mann in spite of the unfavorable impact of catastrophe and non-catastrophe weather on our P&C property results, which generated the entire operating income shortfall relative to both our expectations and the analysts' consensus. As you'll hear from Tom and Brent in a moment, earnings in the auto, annuity, and life lines of business were comparable to or slightly better than prior year and well ahead of our expectations. Investment income was a bit better than we anticipated as well. We remain comfortable with our current full-year 2009 operating income guidance range of $1.45 to $1.65 per share. Similar to the first six months of the year, we anticipate our property results will be under some pressure in the second half but expect the other segments of our business to continue to outperform. We will of course provide another update on our year-end outlook during next quarter's earnings report with the added benefit of having most of the hurricane season behind us. But as Lou mentioned, the headline story in the quarter was the improvement that occurred in the credit and equity markets and the resulting positive impact on our investment portfolio and book value as some degree of normalcy finally returned to the financial environment. The performance of our $3.7 billion investment portfolio remained strong with an overall quality rating of A plus and is well diversified across industries, investment types, and individual issuers. Pretax net investment income was up 5.5% over prior year for the quarter and as I mentioned, slightly exceeded our expectations, both in total and by segment. With regard to realized investment gains and losses, we extended the opportunistic security sales program that we initiated in March when the recovery in the markets began into…

Thanks, Steve and good morning. This morning I will summarize the key components of our combined ratio and growth trends for both the second quarter and the first half of 2009. The total P&C combined ratio for the second quarter was 103.8% compared to $106.7% a year ago. The weather again impacted our quarterly results both cat and non-cat. A total of 12 storms reached catastrophe status in the quarter, totaling $15 million with one mid-June storm lasting nine days and impacting 13 states across the Midwest, Mid-Atlantic, and Southeast. While not as costly as last year's $22 million second quarter catastrophe total, this quarter's cat costs were about 70% higher than our second quarter historical average. Favorable prior-year reserve re-estimates of $2.1 million was $300,000 less than 2008. For the underlying combined ratio, excluding cats and prior-year reserve re-estimates was 94.3%, 2.4 points higher than last year's second quarter of 91.9%. Out total P&C first half combined ratio was 99.2%, 1 point below prior year. Our six months catastrophe costs totaled $20 million, $8 million lower than prior year. And favorable prior-year reserve re-estimates of $5.5 million were $400,000 more than 2008. Last quarter, we discussed the financial impact of our claims consolidation and marketing distribution initiatives on our results. These initiatives represented an addition of $4.4 million in expenses. The impact on the second quarter, as expected, was substantially lower at $200,000. So year-to-date, we have incurred $3.4 million or 1.2% of premium related to our claims department reorganization and $1.2 million or one half of 1% of premium for expenses related to our distribution initiative. On a year-to-date, underlying accident year combined ratio, excluding cat and expense initiative, was 92.3%, six-tenths above the first half of 2008. Breaking down our results between auto and property, in the…

Thanks, Tom and good morning, everyone. I'll spend the next few minutes going over the results of our annuity and life segment. As we mentioned earlier, our annuity sales saw healthy increases again in the second quarter, following on our solid first quarter performance. Sales increases in the second quarter were driven primarily by our single premium sales through both Horace Mann and independent agents, although our flexible premium sales also showed substantial increases. We continue to see benefits of becoming a stronger player subsequent to the industry shakeup post the new IRS regulations which took effect at the beginning of 2009. Our recurring deposit business increased 32% for the quarter and 68% for the first half as compared to prior year, while our single premium rollover deposit business, including our partner product sales, increased 54% for the quarter and 44% for the half year, respectively. Independent agents made significant contributions to the increase in single premium sales this quarter and also brought in a higher level of recurring deposit business in the first half of 2008. These strong sales were also the major contributor to increasing annuity contract deposit receipts in the quarter. Total annuity premiums and deposits increased 23% for the quarter, and 8% year-to-date. As we discussed in last quarter call, both sales and new contract deposits are exceeding our expectations. In many school districts we find ourselves among a more selective list of approved providers, which is leading to growth in our customer base. And there are indications that resetting of the competitive landscape will continue, although at a more moderate pace throughout 2009. We feel we are positioned to capitalize on any such opportunities as they arrive. With regard to financial results, total annuity assets under management declined 5.5% compared to prior year, primarily due…

Thanks, Brent and good morning. Today, I'll discuss three key areas of sales and marketing. First, the continued success of our agent migration including the increase in exclusive agencies. Second, the success in growing our sales force. And third, our sales results. As background, we traditionally offered insurance through agents working out of their homes. We've spent the last several years building programs and training our agents to migrate outside offices with support staff to enable them to grow their book of business more rapidly and serve our educator customer base in a more professional manner. The exclusive [ph] agents showed productivity gains over agents that continue to work from their home. This year, we offered top-rated producers the opportunity to work as exclusive agents with a new sales agreement. Additionally, we started recruiting agents with a new exclusive agent agreement and added a more deliberate and thorough new agent education platform. We are encouraged by the number of agents who accepted the new exclusive agent agreement and who are now operating as exclusive independent business owners. And we are encouraged by the early results of attracting and retaining high quality candidates that sell our products. During the quarter, we increased the number of agents moving to outside offices, the number of licensed producers and total agents. We did this while improving the productivity of agents who adopted our agency business school technique. In addition, we continue the successful implementation of our exclusive agent agreement. As evidence of the successful migration of agents into our business model, the number of agents who work in outside offices and hired a licensed producer grew from 334 to 378 during the second quarter. Agents opened a total of 22 additional outside offices during the quarter, bringing net total to 546. Horace Mann now…

Thanks, Steve. And that concludes our prepared remarks. So Kristal, if you can please move to the question-and-answer session, we'd appreciate it.

(Operator instructions). And we'll pause for just a moment to compile the Q&A roster. We have a question in queue that comes from the line of Bob Glasspiegel with Langen McAlenney. Bob Glasspiegel – Langen McAlenney: Good morning, everyone. If you execute your plan, how many quarters you think it is before you could consider share repurchase as an option?

Bob, that's a very difficult question to answer because we don’t have a perfect crystal ball about what the future is going to bring. Obviously, just on a pure theoretical or mathematical calculation, we do have excess capital today above and beyond what we might have to hold to support our ratings, but I just think it's so important given the uncertainty in today's markets to hold what I would call contingency capital or cushion capital for unforeseen events that – I think we need to let the future play out a little bit here. We obviously from – you can tell from our comments, we are very positive. As the markets have indicated, our belief in the creditworthiness of our investment holdings and we are very comfortable with them, but we just want to give the current situation a chance to firm up a little more, improve a little further, before we even go through that process. So I would love to provide you with an answer of an exact time when we might do that. We obviously consider it, and clearly believe that today's stock valuations are – in their depressed state are very attractive, but I think we need to keep our powder dry just to be prepared for anything that might come our way. Bob Glasspiegel – Langen McAlenney: The conundrum is when you feel better and the rating agencies feel better and the world feels better, your stock will be a lot higher and it won’t be as effective of a tool to increase asset value. That's an observation, not a question. With the rally in sort of distressed assets, is there any sort of desire, ability, to sort of re-risk the portfolio and take some losses and maybe get yourself to the position where the rating agencies will feel more comfortable?

We continue to look at that, Bob. Again, we remain somewhat cautious on the environment. We are encouraged with the improvement since March. And we have realized gains as I mentioned and have done that to de-risk the portfolio by way of reducing sector and issuer concentrations. So we certainly are taking some steps along those lines and we will continue to look for opportunities as well. Yes, I think if there is – if it makes sense to take some losses and reduce risk, we will consider that. We certainly have room at this point to do such a thing. Bob Glasspiegel – Langen McAlenney: You talked about – you talked about the rate increases you are targeting would seem pretty aggressive in homeowners and auto, to a lesser extent. How much do rates have to go up, some of the economy normalized – how much would rates have to go up before you would be comfortable growing units?

Well, I think if we – we are targeting 7% to 8% on the property side and part of – most of that is to address the issues we have with our own results and our own book, but we are also monitoring the competition, Bob, and we are seeing rate increases to the same level across the country at some of our key markets as well. Bob Glasspiegel – Langen McAlenney: So what about auto?

Auto? Auto, the competition is also taking rate increases. Bob Glasspiegel – Langen McAlenney: No, I mean how much would you need rates to go up before you would want to grow units?

Yes. Probably, consistent with our current plans, 3%, 4% on a consistent basis. We are comfortable on auto, fairly comfortable with the profit position we are in. And we are targeting to improve it a little bit, but we are feeling pretty good shape there. Bob Glasspiegel – Langen McAlenney: Okay, thank you.

(Operator instructions). And at this time, there are no questions in queue.

Thank you, Kristal. And thank you for participating in our call this morning. If you have any further questions, please feel free to contact me. Have a good day.

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