Greetings, and welcome to Horace Mann Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host, Ryan Greenier, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Rob, and good morning, everyone. Welcome to Horace Mann’s discussion of our second quarter 2017 results. Yesterday we issued our earnings release and investor financial supplement. Copies are available on the Investors Page of our website. Our speakers today are Marita Zuraitis, President and Chief Executive Officer; and Bret Conklin, Executive Vice President and Chief Financial Officer. Bill Caldwell, Executive Vice President of Property and Casualty; and Matt Sharpe, Executive Vice President of Life and Retirement 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 measures. Reconciliations of these measures to the most comparable GAAP measures are available in the supplemental section of our press release. And now I’ll turn the call over to Marita Zuraitis.

Thanks, Ryan, and good morning everyone and welcome to our call. Last evening we reported second quarter operating income of $0.02 per share. This result reflects another quarter of elevated weather volatility for the entire P&C industry and does not reflect the underlying earnings power of our business. The convective storm activity we saw in Colorado, Texas, Minnesota and other areas of the Midwest created unprecedented levels of hail and wind damage. In fact, the Colorado storm has been estimated as the costliest hail event in the state's history. And while these storms clearly affected our bottom line, it also underscores why we are here. At Horace Mann we help educators protect what they have today and plan for a successful tomorrow. As a result of this significant amount of adverse weather in the quarter, we've delivered on that promise for thousands of customers. I'm confident that the significant efforts of our entire claims team continue to provide industry leading customer satisfaction. After all this is why we are in the P&C business to help educators put their lives back together after the unthinkable. That said, the earnings impact for the quarter was significant. The volatile weather impacted both our second quarter catastrophe losses, which were the second highest in our company's history, as well as non-cat weather impacting our underlying auto and property loss ratios. Given the significant weather related loss impacts, I think it's important to note that our prior year loss experience also contained heavier than normal weather related losses. But even with those impacts we still have a profitable book of property business that ended 2016 with a 90.1 combined ratio. This is a strong profitable result given the significant impact weather had on the entire industry last year. As a P&C insurer that writes [ph]…

Thanks, Marita. And good morning, everyone. Second quarter operating income of $0.02 per diluted share was $0.23 lower than the prior year quarter, with nearly all of the difference related to higher weather related losses in the P&C segment. As a result of the sizable weather impacts in the quarter, we have revised our annual earnings guidance to a $1.45 to a $1.65per diluted share. These revisions reflect the elevated catastrophe and non-catastrophe losses incurred in the first half of the year. Our estimates for weather related losses for the second half of the year remain consistent with historic averages, which are significantly less volatile than the first half of the year. We have updated key driver guidance as well. And I will provide more details as we cover each business segment. The P&C segment had an after tax loss of $13.9 in the quarter, compared to a loss of $4.5 million in the prior year quarter. On a reported basis, the combined ratio was 118.5 catastrophe losses of 20.2 points were 2.5 points higher than the prior year. The underlying loss ratio increased by nearly 5 points. The increase for both was related to adverse weather. The expense ratio declined modestly in the quarter largely related to the timing of non-capitalized systems modernization expenses, similar to last quarter prior accident your property reserves continued to develop favourably and accounted for all of the releases in the quarter. Within auto, we are seeing non-weather related loss trends stabilize. The underlying combined ratio for the first half of the year was 105.7, 0.5 higher than our full year 2016 result, despite the first half of 2017 having over 2 points of weather related losses. In a more normalized weather period, we would have expected to see improvement. While our profitability improvement…

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

Thank you. [Operator Instructions] Thank you. Our first question today is coming from the line of Chris Campbell. Please go ahead - with KBW. Please go ahead with your question.

Yes, hi. Good morning.

Good morning.

My first question is just if I'm looking at the sequential change in the auto loss ratio, that was about up from 590 bps, and if you just back out past [ph] that's 280 bps. So that gives you 310 bps delta? Now if non-cat weather was a similar 100, 200 bps headwind this quarter. I mean, how would it have - how bad [ph] would it have been excluding the auto rate actions that you've taken to this point?

So just to back up with the 105 to 7 that was about a half a point above our year end results. Our rate actions were planned for 8. We're now at 9.5, we’re at 11. I will say those rate actions are front loaded. So when you think about the 11%, 40% of that is in the last quarter. Those to go back and back out the rate actions, for the first half results would be difficult. But I will say that I like the progress that I'm seeing from a earned premium perspective. We're getting the rate that we want filed and approved and implemented. It's just a matter of translating that written premium into earned premium.

Yeah, and the only thing I'd say is what we said in the script, clearly when you back out cat and non-cat weather on a year-to-day basis we are on track for that one point improvement that we had talked about. Obviously, the weather impact for the first half of the year is nothing that you know, any one plan for.

Right. Now is it possible to get a breakdown of that targeted combined ratio by attrition losses, cats, non-cats weather and expenses for auto?

I mean, certainly we have all that data, we'll be glad to follow up with the specific detail we have it all.

Okay. Very, very helpful. And just one more question on auto, I'm sorry, go ahead.

I said no problem at all.

Okay. Is there any significance in the absence of any favourable auto development this quarter?

No, I think that’s - this is Bret, Chris. You know, as is typical, certainly the first half of this year we've only released - we had reserved releases on the property segment. You know, auto obviously we've had pressure there, as we talked about on the last call you know, we'll book it if we see it. But certainly we're weaving that into our price increases. But until we see the development you know, we're not booking anything.

I think it's also important to reiterate that what we have said consistently hasn't changed. We are conservative reservers [ph] We remain conservative preservers and we tend to pick well above the mid range of many of the models that we run in our reserving and that level of conservatism, hard way to say hasn't changed and won't change.

Thanks. That's very helpful. And then on the tax rate on the P&C net investment income is there anything special going on there? We know it’s obviously a little bit lower this quarter?

No and Chris, I think as you look out to the full year to obviously with the significant losses we took in the quarter, probably a more normalized rate that you'd probably want to use for your full year you know, for the consolidated basis might be in a range of more 20% to 22% effective rate. As you recall, last year our consolidated tax rate was about 26%. So I think you look to year end 2017, 20% to 22% would be the kind of range of effective tax rate you want to use.

Okay. And just one final one on the Life segment. What was driving the favourable mortality this quarter?

The mortality is, I can't point to any specific cause for the mortality, the favourable mortality is a similar trend that we saw over the last quarter. I mean, it's not - it's not anything specific to our book I don't think.

And still within the model actuarial range that we - that we model over the whole book.

Okay. Thanks. That's very helpful. Thanks for all the answers and best of luck in third quarter.

Thank you.

Thank you.

The next question is from the line of Robert Glasspiegel with Janney. Please proceed with your question.

Good morning, Horace Mann.

Hey, Bob.

Morning.

Is there something going on in auto beyond non-cat and cat, whether couple tax [ph] at this I mean, it was just unlucky what's driving the first half, you’re pushing rate harder than you thought you were going to push. So are you needing to price for something else? And put another way, yeah, your underlying is up a couple points year-over-year in the first half, but the second half comparisons are up against about 107-ish and underlying. And it seems like you're saying you can't do a 105 in the second half underlying which would be 106, 107 with cats. It seems like your second half underlying targets are pretty un-ambitious, given how much rates you're getting. So is there something else going on besides whether that's making you chase upstream on the auto?

Yeah, Bob. It’s Bill. You know, as we said in the script there's about 2.0 of weather related, excluding that we like the trends that we're seeing. We're seeing the earned rate impact come in. We're seeing it retain. We like the underwriting actions that we're taking. Our claims actions are holding. We’re seeing severities hold in the low single digit range. So the underlying trends I think are good. We're just overcoming about 2 points of weather activity in the first half of the year.

Why do you need to step up - I'm sorry.

Yeah, we do to - we do and we have stepped up our rate actions. We planned for 8% this year. We're forecasting now 11%, 40 percent of that is in the last quarter. So from an implemented to return to earned timeline that will really be a 2018 impact for that incremental rate. But certainly the 8% percent was aggressive and now we’re 11%, we’ll continue to identify, diagnose and react as we continue to see these adverse trends.

I guess, my question though is if you're - if you're on track X bad luck, why push rate further, why the need to push rate further?

Well, we don't expect that these loss - these activities - these weather activities won't continue. So when the when they do occur, we put them into analysis and they convert into the rate at some point.

Yes. Not to mention the fact that the weather's already occurred, it's there. When you look at the Consumer Price Index, when you look at all the data that we have as well as what we're seeing from competitors it seemed prudent to push that level of rate especially considering the retention that we have across our book. When you look at the rate that we push before the 68 [ph] We got it with very minimal impact on retention. And then you look across what we're hearing from our competitors in the States and it seems prudent to push that level of rate. You know, Bob, you know that you always look at the percentage of new business. You look at your retention and you look at your ability to push that rate and it's there. So it seems to make sense that we continue to push what's appropriate and you've got to pay for that whether it happened.

Yeah. And maybe the dovetail on that. You know, certainly as we told the street you know, our plan was to get a point improvement to arrive at 104, but certainly that is not our long-term combined ratio goal. So we've got to eat away at it. But as we've said before, we'd like the total P&C to be in the mid 90s, with auto probably in the high 90s and the property in the low 90s. So its - you know, our plan was 104, but that certainly is not the long-term plan.

Absolutely, right.

Let me try it one last try. You're getting more rate than you thought. Has your underlying second half assumption improved from where you went into the year?

Second half assumptions are in line with our plan. We’re assuming normal weather activity. It’s typically later in the third and fourth quarter. As you know Bob, fourth quarter is typically not a great quarter for our auto book. We expect that to be consistent with prior years. But nothing unusual about the back half…

But I'm saying there's more rate in the second half than you thought you were going to have...

Yes, but like we said…

So I would think that the underlying would be better - in better shape for the second half than you thought unless…

Like we said in the script Bob, that will have minimal effect and it'll take longer for those rate increases to earn in. Which is why we think you'll begin to see that emergence in the first couple of quarters of ‘18.

Okay I'll follow up online. I'm still a little confused. I'm sorry. On the expense ratio, have you changed your target for the year? You actually improved year-over-year through six months?

Yeah. Bob, this is Bret. We have not changed our target for the year at 27.5. I believe, June - June to June we're basically pretty much spot on 273 versus 273. So you know, we'll have some timing issues from quarter-to-quarter. But no, we're still targeting 27.5 for the full year.

And like I said in the script Bob, we'll continue to look for opportunities to tighten our belt you know, as third quarter like this you know, you do have a fair amount of losses. I think it's prudent for us to look for those places where we can you know, tighten our belt, be a little more conservative from an expense standpoint, but we're not changing any of our plans or targets.

Okay. Thank you very much.

Thanks, Bob.

Thanks.

[Operator Instructions] Thank you. I like to turn the floor back to Ryan for further remarks.

Thanks. And thank you all for joining us this morning on Horace Mann second quarter earnings call. If anyone does have any further questions don't hesitate to reach out to me or Kristi Niles. Thank you very much.

Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.