Horace Mann Educators Corporation

Good morning and welcome to the Horseman Educators Fourth Quarter and Year-End 2020 Investors Call. All participants will be in 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. Please note, this event is being recorded. I would now like to turn the conference over to Heather Wetzel, Vice President of IR. Please go ahead.

Thank you, and good morning, everyone. Welcome to Horace Mann's discussion of our full year and fourth quarter results. Yesterday, we issued earnings release and investor supplement. Copies are available on the investor 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. With us for the Q&A, we have Matt Sharp on distribution, Mark DeRochers on P&C, and Wade Rubenstein on supplemental, Mike Weckenbrock on life and retirement, and Ryan Green here on investments. 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 filings. 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. I'll now turn the call over to Marita.

Thanks, Heather. Good morning, everyone. Last night, we reported fourth quarter core earnings of $1.13 per diluted share, a significant increase over prior year. This contributed to full-year 2020 core earnings of $3.40 per diluted share, more than 50% higher than the prior year, and our highest annual core earnings ever. Core return on equity was 10.5%, up from 7.3% in 2019. In 2020, we were not alone in facing difficult challenges. COVID-19, a record number of catastrophe events, and a sustained low interest rate environment. The fact that in this environment our company not only survived but thrived underscores the strength of Horace Mann's mission and strategies, the dedication of our employees and agents to support our customers, and the importance of the solutions we provide to help educators protect what they have today and prepare for a successful tomorrow. We are seeing the tangible benefits of a multi-year strategic plan to better serve the education market by enhancing our product offerings, strengthening our distribution, and modernizing our infrastructure. Because of this strong foundation, we were able to stay focused on our mission and use 2020 to make progress in accelerating the integration of key transactions, including making major strides toward full integration of our supplemental segment. Horace Mann has been successful for 75 years because our business is centered around the relationships we have with the education community. We understand the issues that educators are facing, and we provide solutions. Our business model evolves in tandem with the changing educational environment. So while we certainly couldn't have predicted that a global pandemic would reshape the way schools function for almost a year, Our structure is flexible enough to address new needs of educators in school districts as they rise. 2020 was a particularly tough year for educators, students, and their families alike. Educators are worried that the difficult combination of in-person and virtual learning environments, with little time for them to prepare for changes or lean on established best practices, will mean students fall behind academically. Students without a stable home environment already at a disadvantage may fall even further behind. To try to address these concerns, educators are overwhelmingly working more. In a November Horseman Research Survey, 77% said they are putting in more hours than a year ago. At the same time, educators are working to balance this reality with concerns for their own health and finances. Although educators have had more job security relative to some other professions during the pandemic, their families are collectively feeling the financial impact. In the November study, 64% of educators told Horace Mann that they have put less in or stopped paying into non-retirement savings due to COVID-19, and only 34% were confident that their employer benefits would cover unplanned time off for a health issue. In 2020, delivering on our promise to educators meant addressing these concerns and supporting them both personally and professionally in this new work environment. As the COVID-19 pandemic began closing schools across the country in the spring, we accelerated adoption of technology solutions that made it easier for agents and educators to work together online. This included transitioning programs like our financial wellness seminars to a webinar format, utilizing the same technology many educators are using for teaching. We also partnered with curriculum providers to get educators additional remote learning resources. As we shared at the time, we also proactively supported educators, our communities, and employees as they faced pandemic-related challenges outside of classrooms. In addition, we rolled out the next generation of our student loan solutions program, which helps educators receive the public service loan forgiveness they deserve, along with other resources to help manage student loan debt through online accounts. We provide these accounts for free for every public school educator nationwide. In 2020 alone, we helped put educators on the path to $100 million in student loan forgiveness. Recently, we launched a virtual speaker series featuring nationally known speakers presenting on topics curated specifically for an educator audience. Some events were designed to educate, like a session on financial security with Gene Chatzky of the Today Show, while others were meant to inspire, like a session with Adam Welcome, fellow for the National Association of Elementary School Principals in the Center for Innovative Leadership. As a company we learned a lot in 2020. We tested a number of new virtual approaches and virtual events that may not have been pursued in a typical year. The ones that worked well will be integrated in our playbook going forward. In a post-vaccine environment, these will be valuable tools to complement in-school and in-person activities. Brett will break down the details of our performance and outlook later in the call. but we are guiding to 2021 core earnings per share in the range of $3 to $3.20 and a return on equity in the range of nine to nine and a half. This reflects continued progress on our strategic initiatives and keeps us on track to our long-term goal of sustainable double-digit ROE. It also reflects that 2020 results included several items that added to core EPS that will not repeat in 2021. including the effect of policyholder behavior changes due to COVID-19, the 8.7 million campfire subrogation recovery, and lower corporate expenses due to the pandemic. Put more simply, our strategic initiatives drove about one-third of the improvement in 2020 over 2019, essentially tracking with our original guidance, which would itself have been a record. We will continue to live and work in a largely pre-vaccine environment during the first part of 2021, but expect to see momentum returning later in the year. We are focused on leveraging the strategic enhancements we've made over the past several years to optimally position ourselves for growth. For example, we plan to leverage our new PNC administration system rollout in states where we have the strongest prospects for growth. The Guidewire system, offers substantial benefits in the ability to implement insights into customer segmentation in our pricing structure. In addition, by accelerating the integration of supplemental agents during 2020, we were able to fill uncovered territories with successful agents experienced in working with school district officials and educators. These agents now have the opportunity to provide auto, property, life and retirement products to their customers. Even more importantly, it aligns our entire agency force well ahead of our original schedule. We expect to benefit from this alignment as we enter the post-pandemic environment. An upgrade in our Section 125 benefits platform also provides potential for growth. School districts can use the Section 125 platform to provide different types of voluntary benefits to employees in their district, such as retirement savings, supplemental insurance products, or pre-tax withholdings for medical expenses. We recently moved to a unified Section 125 enrollment technology platform for horseman offerings and are currently migrating existing school districts to the new platform. As part of the migration process, we are making our supplemental products available in a number of districts where we already have a strong relationship providing retirement and other products. Additionally, we continue to test and develop other channels of communication and distribution to serve educators, including web, social media, inside sales and direct marketing. This omni-channel approach strives to integrate with and leverage the strong foundation provided by the agency force with the goal of meeting the customer where they are and making Horseman as easy to do business with as possible. Before I turn the call over to Brett, I want to take a moment to touch on another topic that is just as integral to who we are as a company, our commitment to diversity, equity, and inclusion. We haven't always called it that, but recognizing, respecting, and appreciating differences has always been a part of how our company operates. Like the educators we serve, we are a diverse group and we are dedicated to continually assessing and improving our inclusive culture so that Horseman continues to be a great place to work for all. In 2020, we took a number of steps to enhance our diversity, equity, and inclusion efforts, including establishing an employee DEI council to help guide company initiatives and identify areas for improvement. In addition, we began to roll out unconscious bias training to all company leaders, starting with the board of directors, senior staff, and DEI council members, I'm pleased to report that for the third year in a row, Horace Mann has been named to the Bloomberg Gender Equality Index, which recognizes corporate commitment to transparency in gender reporting and advancing women's equality. Only 380 companies worldwide are included in the reference index, which measures gender equality across five pillars, female leadership and talent pipeline, equal pay and gender pay parity, inclusive culture, sexual harassment policies, and pro-women brand. I firmly believe that Horace Mann's commitment to offering an inclusive work environment, one where diversity of thought is highly valued and individual differences are recognized, respected, and appreciated, continues to be an important factor in our company's success. 2020 was a remarkable year in many ways. And we continue to advance the strategic plan for Horace Mann on all fronts. Thank you. And with that, I'll turn the call over to Brett.