Horace Mann Educators Corporation

Good morning and welcome to the Horace Mann Educators Q1 2020 Investor Call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. Should you want to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Heather Wetzel, Vice President of Investor Relations. Please go ahead.

Thank you and good morning, everyone. Welcome to Horace Mann's discussion of our first quarter results. Yesterday, we issued earnings release and investor supplement. Copies are available on the investors page of our website along with our investor presentation, which was posted this morning. Marita Zoraitis, President and Chief Executive Officer, and Brett Conklin, Executive Vice President and Chief Financial Officer, will give the formal remarks on today's call. Before turning it over to Marita, I want to note that our presentation today includes forward-looking statements as defined in the Private Securities Litigation 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 news release and SEC filing. In our prepared remarks, we used some non-GAAP measures. Reconciliations of these measures to the most comparable GAAP measures are available in our news release. With that, I'll turn the call over to Marita.

Thanks, Heather. Good morning, everyone, and welcome to our call. As many of you know, this is Horace Mann's 75th year serving educators. We started in 1945 selling auto insurance to teachers. In the decades since, we have continually added more solutions to help educators protect what they have today and prepare for a successful tomorrow. At the heart of what we do is a deep appreciation and respect for the impact that educators have on our children and our communities. Today marks the end of the first virtual Teacher Appreciation Week. To show our support in 2020 from an appropriate social distance, we adjusted some of our annual appreciation events we traditionally host during the first week of May. For example, instead of hosting a lunch at a school, we're delivering lunch to teachers working from home. Instead of thanking teachers in person, we printed thank you teacher signs to spread across our communities. As we continue to live, work, and learn in evolving shelter and home environments to slow the spread of COVID-19, what is being asked of teachers at this moment is monumental. To provide meaningful online teaching virtually overnight, to balance the needs of students with varying degrees of stability at home, which can include lack of access to remote learning equipment, or even the Internet, all while keeping parents and students up to speed with what's happening on a daily basis. They are doing incredible work. I believe across the country there's now an even deeper appreciation for what educators do and just how vital they are to the growth and success of our communities. So while we always make it a point to thank teachers for the work they do, This week's activities have taken on a special significance and reinforced for us at Horace Mann why we're here. While our teachers are focused on preparing our children for the future, we believe they deserve someone to focus on theirs. Which brings us to the unprecedented challenges our country is facing because of COVID-19. Before I discuss our quarterly financial results and how we are thinking about the rest of 2020, I want to talk about what Horace Mann has done to support all of our stakeholder groups during these past two months. I'm especially proud of our company's nimble, efficient response to ensure we continue to serve our educator customers uninterrupted. Before most states had enacted stay-at-home orders in March, we had already begun to transition our employee base to a work-from-home environment to protect their health and ensure we could continue to meet agent and customer needs. Over a matter of weeks, we transitioned 95% of our workforce to remote working without disrupting service levels. We've also provided new resources to help employees personally. Our planning for return to office is equally deliberate, focusing on the same objectives. For our educator customers, we provided a 15% credit on two months' auto premium because they are driving less. For customers facing financial difficulties due to COVID-19, we are offering a payment grace period through June on auto, property, supplemental, and life insurance payments. We're also extending personal auto coverage to those delivering food, medicine, and other essential goods. We don't want to just tell our customers that we're here for them during this difficult time. We want to prove it through our actions. Further, to support our teachers in their professional capacity, we are providing resources for online lesson planning to educate students in a remote learning environment. To enable our agents to work more effectively in a virtual environment, we accelerated planned technology solutions, including video meeting software, enhanced e-signature capabilities, and dynamic online appointment setting tools. These upgrades make it easier for both agents and customers to conduct business online, including annual policy reviews where our agents address any new or additional coverage needs. Combined with existing agent tools, these capabilities have made it possible for our agents to pivot to a completely virtual model. To support the communities in which we live and work, we contributed $100,000 to Keep Kids Learning, a DonorsChoose initiative to help teachers get educational materials to students at home in the highest need areas. We've also provided funding to the Central Illinois Food Bank, to help keep kids fed during school closures. In addition, we contributed to the local United Way COVID-19 response fund and a small business relief fund for the Chamber of Commerce. Our long-term success will rely on continuing to keep the well-being of our customers, employees, agents, and the community at the forefront of our conversations and decisions about business strategy. As we navigate this unique environment, we are learning valuable lessons that we can apply even after we return to a more normal work and school routine. While the specific timeline for when the country can return to that more normal daily schedule is unclear, the Horace Mann business model remains unusually resilient for several reasons. Most importantly, educators are integral to the growth and success of our communities. As the country suffers from this pandemic, educators are still teaching, just now from home. In addition, the insurance and retirement solutions we provide to educators remain important to their financial well-being, regardless of whether they are teaching from school or home. Educators are generally more financially conservative by nature and in times of economic disruption, tend to prepare more, not less, for the unexpected. Protecting dependents and assets remain a priority. Of course, educators are experiencing the same changes to their day-to-day life as others, and they are immune from broader economic trends. Our first quarter results show some early impacts of the pandemic and related economic conditions. In particular, we are seeing fewer auto claims due to decreased driving. As I noted earlier, we responded with premium credits for our customers. Growth in new sales have slowed, particularly those generated from in-person events at schools. In March and April, schools canceled many in-person events as they coped with urgent COVID-19 challenges. We are seeing very early signs that school officials now have the bandwidth to work with us on new ways to give their teachers access to the financial solutions we provide. For example, Schools frequently asked our agents to present on-site financial wellness workshops, which cover topics such as managing student loan debt, state pension programs, classroom crowdfunding, and saving for retirement. Agents are now conducting these sessions as webinars with early signs of success. Turning briefly to the quarter, core earnings were up 25% over last year's first quarter, slightly ahead of what we had expected. Overall, our property and casualty performance was strong, and we also benefited from solid earnings from the new supplemental business. These were partially offset by lower net investment income. Generally, our results reflected the strategic actions we've taken in recent years. First, the comprehensive product distribution and infrastructure improvements we've made over the past five years to better serve educators. Second, the transformational actions we completed in 2019, including the acquisitions of NTA and BCG, as well as our legacy annuity reinsurance transaction. And third, recently completed profit improvement initiatives that met or exceeded our targets. For example, we achieved 6.6 points of improvement in the underlying auto loss ratio between 2017 and 2019, ahead of our five-point targets. and we're seeing lower expenses across our businesses due to exceeding last year's $15 million expense reduction target. Looking ahead, our full year core EPS guidance range remains at $2.55 to $2.75. Brett will go into details of first quarter results and the conservative approach we've used to look ahead, but we remain confident that we are well positioned for long-term profitable growth. Further, the transformative events of recent years have been supported by our ongoing thoughtful, conservative approach to capital management. We have been preparing for an economic downturn for some time, even if we didn't know what might cause it, and we have taken deliberate actions to position Horace Mann to maintain our financial strength. We've been increasing the quality of our investment portfolio since 2017. It is now A-plus rated with 95% of our core investment portfolio in investment-grade holdings that continue to hold their value. Despite market volatility, we ended the quarter with about $190 million in net unrealized gains. Our consistent financial strength combined with the strength of our multi-line business model and dedication to the educator market is what has made us successful for the past 75 years in business, and it's why we remain confident today that we are well-positioned to reach our long-term objectives of a double-digit return on equity while bringing our solutions to even more educators. Thank you, and with that, I'll turn the call over to Brett.