Horace Mann Educators Corporation (HMN) Q4 2014 Earnings Report, Transcript and Summary

Greetings and welcome to the Horace Mann Q4 2014 Earnings Call. [Operator Instructions]. This conference is being recorded. It is now my pleasure to introduce your host for today, Mr. Ryan Greenier, VP of Investor Relations. Thank you sir, you may begin.

Thank you Watania, and good morning, everyone. Welcome to Horace Mann's discussion of our fourth quarter and full year 2014 results. Yesterday, we issued our earnings release and investor financial supplement. Copies are available on the Investor page of our website. Our speakers today are Marita Zuraitis, President and Chief Executive Officer; and Dwayne Hallman, Executive Vice President and Chief Financial Officer, Bill Caldwell, Senior Vice President of Property & Casualty, Matt Sharpe, Executive Vice President of Annuity and Life, and Steve Cardinal, Executive Vice President and Chief Marketing Officer are also available for the question-and-answer session that follows our prepared comments. Before turning it over to Marita, I want to note that our presentation today includes forward-looking statements as defined in the Private Securities Legislation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not guarantees of future performance. These forward-looking statements are based on management's current expectations, and we assume no obligation to update them. Actual results may differ materially due to a variety of factors, which are described in our press release and SEC filings. In our prepared remarks, we may use some non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures are available in the supplemental section of our press release. I'll now turn the call over to Marita Zuraitis.

Thanks, Ryan. Good morning, everyone, and welcome to our call. After yesterday's market close, Horace Mann reported fourth quarter operating income of $0.68 per share, a strong end to a very good year. The quarters P&C results were solid with a 91.9% combined ratio we did see an uptick in auto losses which is not out of line with Horace Mann’s historical fourth quarter results. Property results were favorable with a reported combined ratio of 69. Reserves continue to develop favorably through although at a lower level compared to prior year. Catastrophe activity in the quarter was relatively benign. Importantly auto policies in force continued to grow sequentially and were encouraged by the 13% increase in auto sales during the quarter. Annuity earnings reflected strong spread management and continued growth in assets under management, sales in the quarter increased more than 20% in part due to the success of our new fixed indexed annuity product. Life earnings reflected a more normalized level of a mortality cost and sales continued to grow. Looking at the full year 2014 operating income of $2.30 per share was another very strong result producing nearly 7% growth in book value per share excluding net unrealized gains on investments. P&C profitability continues to improve led by underlying improvement in auto. Within property we believe the actions we have taken to improve home owner’s profitability by reducing coastal exposures are largely complete. And by mid-year 2015, we will have fully eliminated our home owner’s property exposure in Florida. In addition we plan to introduce enhanced roof underwriting pricing and claims practices for certain policies in select markets, which will help reduce the impact of wind and hail exposure overtime. We achieved our rate plan of mid single digit increases in both auto and property and plan a similar level in 2015. Even with these rate actions retention remained high at 85% in auto and 88% in property which is a testament to the loyalty of our customer base and reflects the large proportion of our book that is cross sold. Turning to annuities, over the course of 2014, x DAC earnings grew by 9% supported by continued growth in assets under management as well as proactive crediting rate management. The investment portfolio continues to produce strong, risk adjusted returns despite the challenging interest rate environment. Life earnings were lower than previous year were in line with modeled mortality. In 2015 we are focused on achieving continued double digit growth in life sales, as they provide the building blocks for future earnings growth. In late 2015, we plan to launch our new index universal life product which will provide another lift in sales in 2016 and beyond. From a distribution perspective agent productivity improved in 2014 as we posted higher sales in all segments even with the agent count ending the year flat as planned. We continue to focus our future agent productivity improvements in 2015 but are also looking to increase sales from direct and independent agent channels. We are seeing success in our strategy to find more, win more and keep more educator households. In the second half of the year we clearly saw a merging offence in our auto business. As we roll out more sophisticated product refinements across more territories we are seeing higher quote volume which has led to a higher level of sales. This is driven by improved segmentation which better captures the characteristics of preferred educator households. Another benefit of this more sophisticated approach is the quicker identification of improvement opportunities in certain segments or geographies. For the full year, new P&C sales increased more than 3% to $96 million. As I said much of that increase emerged in the back half of the year and we have very strong momentum going into 2015. Importantly, we are pleased with the characteristics of the new business. These new customers tend to be preferred educator households and more and more educators are electing electronic funds transfer and payroll deduction which helps with retention. Continued growth in auto policies enforced during 2015 should result in our full year auto policy growth since 2007. 2014 Annuity sales were strong, growing more than 20% over the prior year. Our continued focus on positioning our agency force as the trusted advisor to educators as they plan for retirement was instrumental in driving the sustained growth we have seen in the annuity sales year-over-year. During 2014 more than 100,000 teachers, administrators and support personnel attended one of our state teacher retirement seminars. These informal sessions are just one example of how our agents are uniquely positioned and thought of as a member of the education community. In addition, the market reception to our new fixed indexed annuity product were strong, and we believe this new product is deepening our reach into educator households and we’re pleased to see the level of enthusiasm within our agency force. In total, new fixed indexed sales accounted for roughly one third of our total annuity sales. Looking ahead to 2015 we expect sales to continue to trend upward and we are focused on driving higher sales of our flexible premium products consistent with our educator household acquisition strategy. Sales momentum within the Life segment was also strong in 2014 up more than 30% on a full year basis. We expect life sales to continue at double digit pace in 2015 building on this year’s strong momentum and benefiting from continued field education efforts and cross-sell initiatives. We expect the profitability initiatives and continued focus on growing the top-line to drive solid increases in normalized operating earnings. Dwayne will take you through the details, but we expect 2015 operating income to be between $2.15 and $2.35 per share. Before we do that, let me talk about some of the capabilities we are building to accelerate the pace of educator household acquisition, while also driving deeper product penetration within households. These efforts are instrumental in building a best-in-class educator household acquisition strategy which will support our multiyear strategy to profitably grow our business. We have expanded our use of the third-party data and analytics. The amount of consumer data available today is considerably greater than what was available just a few years ago. We are beginning to harness the power of big data to improve our targeted marketing efforts around educator household acquisition, but also to refine our risk selection. This is a first step and what will be a multiyear strategy to identify the most efficient ways to target preferred educator households and to effectively convert those households into customers. Another find more strategy is to leverage our already strong relationship with DonorsChoose.org in select markets where we have the appetite to grow our business. We have a series of direct mail marketing campaigns as well as coordinated Donors Choose flash funding efforts. This combination is increasing brand awareness, improving school access and will ultimately help us grow our business. We know from past experience that every additional product we placed in an educator household supports our already strong retention and persistency levels. The quickest way to win and keep more and drive deeper penetration into households is the mine the existing customer base. We are focus on selling more products to existing customers. Nearly 20% of our customers currently purchase both the property casualty and annuity life product from us. While this cross-sell ratio is industry leading, we’re confident that we can drive it higher. Recent improvements in technology have positioned us to deliver a more seamless customer experience between the agency force and customer contact center. Now, when a new or existing customer contact us we can effectively overlay our educator household data to identify potential product needs for that customer and then through either an agent referral or a direct sale in the contact center we can fill those needs. These cross-sell initiatives are in the very early stages, but over time we expect the customer contact centers role in driving future sales growth to continue to evolve and expand. We are clearly encouraged by our sales momentum in the back half of 2014 and it is carrying us into 2015. As a result, we expect profitable sales growth in our all four lines of business in 2015, as we execute our strategy to find more win more and keep more educator household. The solid results in 2014 are a clear indication that we’re on the right track to achieve our goal of being a larger, more dominate player in the educator space. We entered 2015 into strong position to continue implementing our multiyear strategy to profitably grow our business. And with that, I’ll turn the call over to Dwayne.

Thanks, Marita and good morning everyone. Fourth quarter operating income of $0.68 per diluted share was another strong result reflecting solid performance in all three business segments. In P&C results included prior year’s reserve development and catastrophe losses that were more favorable than originally expected. Annuity results included a modest amount of unfavorable DAC unlocking versus the $0.03 of favorable unlocking in the prior year period. P&C after tax income of $16.2 million was $2.8 million lower than the prior year quarter. On a reported basis the combined ratio of 91.9 was a solid result, and reflected the typical fourth quarter loss seasonality in auto. That said, the auto loss ratio was higher this year as a result of elevated frequency in comp, collision and property damage compared to the prior year. In addition, we experience the lower level of favorable prior year reserve development. Fourth annuity income excluding DAC unlocking was $11.4 million, in line with prior year quarter as was life operating of $4.6 million. On a full year basis, operating income was $2.30 per share, another quality earnings year. Fully year P&C operating income was $46.9 million, a 6% improvement over the prior year. P&C results included a level of favorable prior year reserve development that was similar to 2013, which exceeded the assumptions in our earnings guidance. On an underlying basis, the combined ratio was in line with the prior year at 92.5. We did see a one point improvement in the underlying auto combined ratio as earn rate exceeded our loss cost trends. Property results reflected increased non-cat weather severities we mentioned earlier in the year. This trend resulted in a three-point, five-point increased in our underlying combined ratio which was still a respectable 96.5 points. Continued underwriting and rate actions, reinsurance cost reductions and our assumption of more normal non-cat weather should contribute to property margin improvement in 2015. Our full year expense ratio improved point three points to 27.4. In total the combined ratio of 96.1 is slightly better than the prior year. Reported annuity operating income for the full year improves slightly from the previous year. More volatile equity markets in 2014 resulted in $0.02 of negative DAC unlocking versus the $0.06 of favorable unlocking in the prior year. Excluding the impact of DAC unlocking and looking at the underlying earnings of our annuity business income increase 9% over the previous year to $46.1 million. Assets under management grew 6% in 2014 and ended the year at $5.7 billion. We continue to see healthy sales growth, up 22% over the prior year and stable persistency levels in excess of 94%. The net interest spread of 201 basis points ended the year modestly higher than the prior year and clearly above our initial plans. This is the result of proactive credit and rate management, solid investment portfolio performance and our ability to continue to find opportunities to put money to work at attractive, risk adjusted returns. In the life segment, full year operating earnings excluding DAC unlocking decline 15% to $17.4 million as a result of mortality that was consistent with our actuarial models. 2013 results included $0.07 of favorable mortality experience compared to our expectations. Adjusted for the differences in DAC unlocking and life mortality normalized consolidated operating earnings for full year of 2014 increased by 7%, a solid result that illustrates the continued earnings power of our annuity segment, the solid contributions from life as well as the improving possibility within the P&C segment. Our 2014 results generated 7% increase in book value per share excluding net unrealized gains on investments which ended the year at $25.38. These results contributed 11% five-year compounded growth in Horace Mann’s adjusted book value per share plus dividends through year-end 2014. In addition to strong book value growth, we believe paying a compelling dividend is an attractive differentiator to investors. As you may recall, we’ve raised our dividend by 18% at our March 2014 board meeting to $0.92 per share which was our sixth consecutive increase. During 2014, we’ve generated about $88 million of statutory operating income, while our RBC ratios aren’t final. We estimate that P&C is around 569% for the premium to surplus ratio of 1.26 and around 470% at the life company. As a result we have a healthy cushion of excess capital which will fund organic growth particularly in the life company, while maintaining our strong capital position. Looking ahead to 2015, our guidance for full year operating income is between $2.15 and $2.35 per share. The midpoint of which reflects continued earnings growth over 2014, after adjusting for DAC unlocking and favorable prior year reserve development. Our estimate reflects a small amount of margin expansion in P&C, modestly lower annuity earnings that reflect expected spread pressure and a slightly lower level of earnings from the life segment. Clearly the current interest rate environment is pressuring that investment income. While our investment portfolio produced favorable results in 2014, we expect portfolio yields to contract in 2015. Our investment philosophy remains unchanged. We look for attractive risk adjusted returns and are focused on maintaining a relatively conservative investment portfolio. In 2014 our annualized investment yield was 5.32%, a good result. But with the current interest rate environment challenges the yield is obviously under pressure. We expect interest rates to continue to remain low in 2015 and as a results, our guidance includes a 3.75% reinvestment rate assumption. Although the lower rate environment is generated sizeable prepayment activity over the last few years, we’re assuming a material declining such activity during 2015. As a result, we expect the annualized investment yield to decline about 20 basis points over the course of 2015. Although other factors could positively impact net investment income such as prepayment activity, the main driver would be a change in the reinvestment rate. We estimate that for every 25 basis points increase in the reinvestment rate, it generates about $0.02 of additional earnings per diluted share on an annual basis. Turning to our outlook on business segments, let’s talk with property and casualty. We expect written premium to grow between 3% and 4% which reflects continued rate increases and to a lesser extent higher auto sales. We expect retention to be relatively stable. Our mid single-digit rate actions as well continued product refinements should result in a one point improvement in the underlying loss ratio. This improvement is coming from property as continued underwriting and rate actions, reinsurance cost savings and an assumption of more normal non-cat weather contribute to a three point to five point improvement in the underlying combined ratio. In auto, we expect the underlying combined ratio to improve by fractions in loss ratio points reflecting continued product and underwriting enhancements as well as rate increases that are generally aligned with loss cost [ph] trend. Additionally, we’re assuming a six-point, five-point catastrophe load for 2015 and a modest amount of favorable reserve development. From an expense perspective infrastructure and technology initiatives will continue, and as a result we expect the P&C expense ratio to be in line with 2014. In total, we expect our reported combined ratio to be in the mid 90s similar to 2014 with improvement in the underlying loss ratio offset by more modest assumptions for favorable prior year reserve development. In our annuity segment we expect x DAC operating earnings to be slightly lower than full year 2014 earnings. While we’ve been successful and proactively managing crediting rates and sourcing new investments, the prolonged low rate environment is a clear headwind in 2015. Given our views on interest rates we anticipate spreads will grade down to the mid 180s till 2015. This assumption reflects the positive spread contribution of new business including continued success of the fixed indexed annuity product. Our life earnings assumptions reflect mortality consistent with actuarial models, net investment income pressure given our reinvestment rate assumptions and $1 million to $2 million of additional expenses related to our multiyear effort of continued infrastructure and technology investment. As a result we expect life segment earnings to be in the range of $15 million to $17 million, a bit lower than 2014. Overall the 2015 operating income guidance of $2.15 to $2.35 per share reflects continued earnings growth over normalized 2014 earnings even factoring in strategic reinvestments in our business as well as in challenging interest rate environment. We are on the right track to achieve continued profitability improvements in our P&C operations, while also growing policies in force. Our annuity asset gathering abilities are strong, with healthy sales and a solid persistency. And we have life back in our life business, demonstrated by the increase in the number of policies in force during 2014, the first annual increase since 1998. Like Marita said, we’re successfully executing initiatives aligned with our vision of being the preferred insurance and financial services provider to the nation’s educators. As we entered 2015 we are confident that our tailored products, trusted, knowledgeable distribution and a modern efficient infrastructure will result in growth in the number of educator households we serve, all of which supports our multiyear strategy to profitably grow our business. With that, I’ll turn it over to Ryan to start the Q&A

Thanks, Dwayne. Tanya, please open up the line to begin Q&A portion of the call.

Thank you. [Operator Instructions] Our first question comes from Bob Glasspiegel with Janney Capital. Please proceed with your question.

Good morning. I got few questions. Number one, how much do you think you’re going to save in reinsurance cost 2013 versus 2014?

2015 going into 2015 is roughly $2 million, Bob.

Okay. Access – my annual access capital calculation, how much do have at the parent and how much do you have with the subs based on where you want to be for rating purposes?

Bob, the way we calculated we just assume an RBC ratio say roughly 425 in the life company and 500 in the P&C, not that we would take it all the down to 425, but just for consistency purposes keep numbers level from year-to-year. Using those numbers, the combination of P&C and life have about $80 million of excess capital. And then we currently have just north of $20 million of cash at the holding company.

Okay. And dividend capabilities from the subs to the parent ahead of your share dividend announcement which we think in terms of how you’re going to you’re going want a dividend?

The dividend available without any regulatory pre-approval is roughly $82 million and that’s about 37 out of the life company and roughly 45 out of the P&C companies.

Any guess in how much you’re going to want a dividend up?

As far as plans, way we operate, we bring up enough dividends to fund the dividends in debt service and holding company expense. Over the last couple of years we’ve had opportunity to build up a low excess cash at the holding company or just in case scenario. So if you added those components you could roughly guess what the dividends would be minus any intercompany tax sharing agreements. And that’s would generally be split evenly between the life and P&C companies.

Okay. And no preliminary thoughts and what sort of dividend we should be looking for in March?

No, sir, that will occur at our March Board Meeting and will promptly announced.

Okay. Last question. Personal lines auto, you’ve given sort of a similar speech maybe to what Allstate saw that the frequency uptick in Allstate was sort of not clear on whether they are going immediately price for it or may have to price for it. So I guess question is, was this a left field to you, a blip, a trend and how you’re thinking about in terms of triggering your price increase needs for 2015 in auto?

Hey, Bob, it’s Bill Caldwell.

Hey, Bill.

Hey, how are you?

Doing great.

When we look back at prior fourth quarters we have the unfavorable comparison to 2013 which was an exceptional year for Horace Mann industry. But not surprising when we go back further and look our prior fourth quarters. That said, we’re committed to a defensive actions in all of our market. So we’re looking at as that data comes in we’re looking at discipline rate actions, again, mid single-digit for auto, tighten underwriting where appropriate in some markets. And what I like about this model is our agents are Progressive available too, so we’re able to maintain the household. There’s a risk out there where we’re not comfortable with that segment. We’re able to access Progressive and bring that risk back when we’re more comfortable with segmentation.

Yes. And this is Marita. What I’d add to that is, we’re pleased with the full year loss ratio in auto, and continued improvement albeit fractions of loss ratio points as we continue to say, the loss ratio is ahead of the industry, continues to improve on a full year basis. Also because of the fact that we have this homogeneous segment of customers of educators, we’re able to go back in and begin to unpack the fourth quarter. So Bill and his group have spent a fair amount of time looking at the historical fourth quarter being higher, not withstanding unfavorable comparison to a pretty decent 2013. But looking at that fourth quarter pattern and saying what it is about our educator customers that drive a higher loss ratio in the fourth quarter, and seeing what we can learn about that. So that maybe in the fourth quarter result we can even improve that further when we have the learnings, another benefit of having a very homogeneous place over the population. But overall the answer to that question is, the full year loss ratio is decent. And we’re happy with the result.

To sort of stay tune, is the answer on frequency?

Yes. I’d say, it could be a blip. We’re unpacking it. But on a full year basis we’re not – we’re not concerned and the trends are relatively benign.

Got you. Thank you.

Thanks, Bob.

Just one quick follow-up to provide you a benchmark to help with your model is that dividends that came out of the statutory companies during 2014 was roughly $46 million [ph].

Got you. Thank you.

Our next question comes from Sean Dargan with Macquarie. Please proceed with your question.

Thank you, and good morning. And thanks for kind of framing the earnings headwinds from lower interest rates. I think you just daggering [ph] your actuarial reserve assumption review. And so, I should take it from your RBC level that there were no reserve additions or any capital impacts from your outlook of lower interest rates?

That would be a correct assumption.

Okay. And just thinking of the mortality expectations based on your life outlook, you did have a string of pretty favorable years there and I just want to make sure that nothing changed in your outlook of mortality. Is there anything in pricing relative to tables that you think has maybe trended more negatively going forward?

Sean, this is Dwayne. Just the way I would think about it from an actuarial model as you look the trend line, we will have years that will be favorable to that trend line, and as you would expect you ultimately have to catch backup to the trend line. So we had two, three years in a row that were favorable. Couple of years ago, not so favorable and we’re kind of back on trend line, that’s we’re assuming. As far as our internal numbers,[Indiscernible] for that trend line that move more than plus or minus 5%, but given our size, $3 million, $4 million difference would obviously present a little knowledge. As far as into pricing mortality table changes or the business performing basically any different than we’d expected over a long period time with life business. I would say no.

Okay. Thanks. Just one last question, can you give us any color around your exposure to the energy sector in your investment portfolio?

Sure, I’ll be glad to. The energy sector makes up about 4.2% of our portfolio, so it such sort of $300 million and that position has as you would guess, a pretty sizeable unrealized gain associated with it. We have very minimum exposure to oil field services, oil and gas drilling. We do have a very, very small position relative to our portfolio and high yield of roughly $10 million or so, so not big numbers. Now we’ll see that if you follow us in the past we do tend to take pretty hard positions of certain events and this one is no different. We expressed our portfolio at oil prices significantly below the current levels and started doing that in the fourth quarter of last year. And actually they had several trades in the fourth quarter and actually continued some trades into the first quarter. So I think you’ll see by the time we get to the end of the first quarter that 4.2% will down a bit as well. But we were proactively modeling and reducing exposure of any names that we thought could come under stress of oil prices stayed low for a multi month or double-digit month in the 12 and 18-month period versus assuming this was only a three to six-month expectation.

Great. Thank you.

[Operator Instructions] our next question comes from Vincent DeAugustino with KBW. Please proceed with the question.

Hi. Good morning, everyone.

Hey, Vincent.

On the guidance, I’m just curious if you’re giving yourself much credit from some of recent ongoing P&C initiatives and here I’m particularly thinking auto. Or this is something that we should anticipate I guess in light of your conservative nature if some of that benefit won’t work at their way into your initial axing, your pick until there is some proof in the development that you pay claims?

Yes. Vincent, it’s early. I mean, I think we’re doing all the right things. We’re encouraged by the momentum in auto and some of the offense that we put in place in some of these better places to do business. We’re encouraged by the defense and some of the pieces of the underlying improvement we’re seeing in the defense. We’re convinced we can provide a nice broad price point for a decent sector of the educators on a state by state basis and we’re happy with the early signs that we’re seeing, but they’re early. So, the answer would be, we’re really pleased with the momentum. We love the uptick in the fourth quarter. We like where it’s coming from. We like the percentage of folks that are choosing electronic funds transfer. We like the productivity in the agency plan. We said from the beginning that we were going to step back and focus on the products, focus on the support of the distribution and focus on the technology and the customer contact center data needed to support the educators and we’re pulling on all three of those levers and its beginning to work and you’re starting to see it come through in the numbers. But this is early for us. We’re going to focus on the same things in 2015. And we believe that it’s going to continue to give us momentum in sales and continue to eat that fractions of ratio points in that auto line. On a full year basis you saw little bit of improvement come through. We expect that to continue as we look to 2015 quantifying it this early is difficult, but we’re pleased with both what we’re seeing on the offense as well as the defense. Its right where we hoped it would be.

Okay. Very good. And just a separate question entirely here. I believe you guys have a pretty tight definition of cats compared to some of your peers that maybe have dollars thresholds. And one of the topics that we all been kind of facing in the industry is just that non-cat and small cat weather has been a bigger. So in light of some of this small cat activity and then turning that with some of your micro concentration risk around whether you have a high performing agent or large school district. I’m just wondering if you shift to $1 threshold on your cat definitions might be more helpful in isolating trends between the core and obviously you pay claims on weather, so it’s still core, but at least showing like underlying trends versus some of that volatility around weather?

I’ll take the first part, Vincent. This is Dwayne. As far as our cat definition is, we’ve disclosed. We follow the PCS definitions. So if there’s a cat declared than that’s how we code it and that’s how our reinsurance contract respond as well. The thing about property business, for the most part outside a large fire losses et cetera, it is pretty much all about the weather, whether its cat or non-cat. And we’ll see to go to a dollar amount and others few companies that do that, there is one very, very large company in particular in the Chicago area that has a dollar threshold. And if we were to do something on a same relative basis, the dollar amount for us would be extremely low, I would probably say in the $100,000 to $200,000 level, so we would probably start moving into direction that all of our weather would basically be coded cat and we don’t think that’s necessarily appropriate. Then also from the non-cat weather, that is what gets into the normal flow of business, the pricing and has taken into account in our annual filings as where’s the cat is obviously treated a bit different on a longer term basis. But I’ll turn it over to Marita for the concentration in agent.

Yes. I mean, whether it’s no pun intended, whether its cat or non-cat weather, it’s still weather. And for us it is about other wind pricing and underwriting. So rather than spending a lot of time on the dissection of whether it’s a cat, whether it’s a kitty cat or whether it just short wind. We’re doing all the right things from an underwriting in pricing perspective whether its age of proof, whether ACV, whether its re-inspection programs from a property standpoint, I think we have opt our DNA in underwriting and pricing other wind. We’re going to continue more that as we push through 2015. But bringing underwriting in pricing sophistication to the property line, it’s going help there as well. We talked about it in the script, I’m sure you’ll hear more about it as we go through 2015. But we’re not spending a lot of time focusing on the categorization of whether it’s a cat or kitty cat, we’re focused on making sure that we’re doing the right things in our underwriting and pricing to make sure that we’re driving the best profitability that we can drive in the property segment and improving segmentation in pricing even in property so that we can attract a broad spectrum of educators including the more preferred educator clients.

Okay. Thank you for that. One I guess additional question, just around auto. You guys definitely had some comments here on the call this morning around that, on the loss cost side, obviously it’s very early. I guess from my standpoint it’s kind of silly for me to ask anything on January because it’s even earlier yet. But cheap gas is something that we’re watching, we’re hearing some comments, [indiscernible] call, yesterday they had mentioned that might be a potential cost to some of the frequency that they are seeing. Is there anything either in fourth quarter or like you said in January even though its early that makes you think that there is or is not any response in driving trends?

Hey, it’s Bill Caldwell. I just want to remind the folks that we have a homogeneous list of the market. So we’re not impacted by gas prices like the broad market would be. That said, we do continue to monitor. We use Carfax in the number of states for underwriting and pricing. So that gives us some idea of the educators driving and we really haven’t seen any uptick in annual mileage which would be the impact of lower gas prices. But we do continue to monitor and as it comes into our results we will price for that, but we just haven’t seen it yet.

Okay, Bill. If I could just – I guess relay on your experience here a little bit. Could there will be a situation where your educator might not be driving more, but there could be more vehicles on the road around them that would potentially increase frequency or it might impact you still. So I’m just wondering if that’s…?

The world around them could change and increase frequency, but again we’ll watch for that in data and respond to it. But I just haven’t seen evidence of that yet.

It’s a benefit for us to be into relative short lines of business both with your auto question as well as your property question. The good news is being in such short tail lines you can price for it when you see the trend and built it into the pricing. But I think this is – it’s an interesting topic for us. Again, I think Bill is right, we benefit from a group of people who don’t necessarily change the amount of time they are on the road because of who they are and what they do. But I do agree with you the world changes when there is more vehicles on the road and we’ve seen some of the improvements and trends coming out of an improved atmosphere with auto. This might be one of those that takes it the other way, but to Bill’s point, too early to tell for us, but we clearly think about it, watch it and look for in our trends as well.

Okay. Thank you very much. Thanks a lot.

Vincent.

Yes, sir.

This is Dwayne. Just little part of your question as far as the frequency, obviously is kind of final preparation of our guidance, we’ve been able to see what has been happening in January and it wouldn’t be anything outside of our expectations. And as far as the fourth quarter is concern to your question, this industry is a strange industry. And I would say, our October, November frequency was up, maybe not such as significant fall off to December. But the first two months of the quarter were a bit different than December.

Okay. Appreciate that. Thank you.

At this time, I’d like to turn the call back over to Mr. Ryan Greenier for final comment.

Well, Tanya, thanks. And thank you to all for joining us this morning on Horace Mann's fourth quarter earnings call. If there's any further questions please don't hesitate to reach out to me or Christie. Thanks.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time and have a great day.