Horace Mann Educators Corporation

The Horace Mann Educators First Quarter 2021 Investors Call. All participants will be in listen-only mode. If 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 that this event is being recorded. I'd like to turn the call over to Ms. 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 our 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. With us for Q&A, we have Matt Sharp on distribution, Mark DeRocher is on P&C. Tyson Sanders on supplemental, Mike Weckenbrock on life and retirement, and Ryan Greenier 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 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 FDC 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, and good morning, everyone. Before we start today, I want to welcome Tyson Sanders to our quarterly investor calls. Tyson has been a part of our supplemental team for seven years and has run day-to-day operations for the past year. He joined my senior team in March, and I know you'll appreciate his knowledge of the business. On to earnings. Last night, we reported Horace Mann's highest first quarter result ever with core EPS of $1.10. All four segments had higher year-over-year core earnings, with our property and casualty segment recording an 86.2% combined ratio, despite seven points of catastrophe losses. We saw encouraging signs of sales momentum in March, particularly in retirement, that continued into April. As many educators start their relationship with Horace Mann through retirement savings enrollment, this bodes well for future cross-sell opportunities. Brett will go through the results in detail, but the highlights of the quarter also included 21% growth in investment income for our managed portfolio and a 7.6% increase in book value, excluding unrealized gains. This strong start positions us to meet our full year 2021 core earnings guidance and demonstrates further progress towards our long-term goal of a sustainable double-digit return on equity. Our annualized core return on equity for the first quarter was nearly 13%, although pandemic-related policyholder behavior changes in the auto and supplemental lines added about two and a half points. We are committed to and confident in our ability to achieve a double-digit return on equity that extends into the post-vaccine world. We expect to see benefits in 2021 from the three drivers we are pushing to sustain ROE at our target level. First, benefiting from additional net investment income by increasing the allocation to alternative investments, which have a higher return profile. In the first quarter, annualized returns in our alternative portfolio were very strong at nearly 11%. primarily from private equity limited partnership investments. Considering the strong global economic outlook, we remain confident in continued strong contributions from this asset class. Second, expense management. Beyond the shorter-term pandemic-related expense reductions, we continue to realize savings from actions such as the full integration of the supplemental segment in 2020 as well as the benefits from continued infrastructure improvements. Third, cross-sell and new sales. We are seeing encouraging signs of sales growth bolstered by the rollout of COVID-19 vaccines across the country. Educators want help identifying strategies to plan for their futures. March was the highest month for annuity contract deposits in several years, and April was another strong month. March and April were good months for life sales with application submissions trending up. In auto, although written premiums are down compared to pre-pandemic first quarter of 2020, we are seeing signs of progress. We've been more aggressive in pricing for new business in several key profitable states, which has driven a jump in new business auto production. We're planning additional investments in new business in more states, where our profitability outlook supports those moves. In addition, March new unit counts in auto were higher than March of 2020. Just one month doesn't make a trend, but it's clear our agents are actively engaged. For supplemental, we expect to see growth later this year as educators complete their annual benefit enrollments. Ultimately, although the pandemic extended our transition to growth, We have used the time to strengthen our value proposition for educators, school districts, and their administrators. We were quick to acknowledge the new challenges educators were facing and focused on making interacting with us easier and more efficient by accelerating ease of doing business enhancements and virtual meeting capabilities. And although pandemic-related circumstances are limiting some typical sales activities, we are clearly seeing signs of momentum. For school district administrators, the pandemic accelerated their need for help addressing educator recruitment and retention. As we mentioned last quarter, we're currently partnering with school districts representing about 130,000 educator households to provide our student loan solutions online platform for their employees. This solution helps educators receive the public service loan forgiveness they deserve. along with other resources to help manage student loan debt. During the quarter, we completed the rollout of a new platform to the districts that use Horace Mann for Section 125 administration, improving service levels for districts and their staff. We believe many of these districts, which represent approximately 40,000 educators, will offer our supplemental products to their employees in the upcoming benefits enrollment period, These educators could have the opportunity to select our supplemental products on a tax-advantaged basis. This Section 125 model seamlessly integrates virtual and in-person consultation during the benefits enrollment process, enhancing our capabilities to help administrators address the challenges they face. We're also accelerating the build-out of our group supplemental products. just like we accelerated the integration of the supplemental agents. The rollout of vaccines means that many schools have now resumed in-person instruction, which is a good thing for districts, for educators, and for students. We're leveraging those opportunities as they develop, but hybrid learning environments, social distancing, and other precautions remain as pharmaceutical companies undertake clinical testing for vaccine efficacy in children. Turning to the agency force, as we've noted, in 2020 we focused on the integration of supplemental agents. This had the benefit of allowing us to fill uncovered territories with successful agents experienced in working with school district officials and educators. As the environment becomes more conducive to bringing new agents up to speed, we're turning to recruitment and the pipeline is filling. Overall, I am very pleased with how we used 2020 to prepare and where we are today, moving into the growth phase we've discussed over the past several years. We have the right products to meet educators' unique needs, knowledgeable, trusted distribution tailored to educator preferences, and modern, scalable infrastructure that is easy to do business with. Our evolving virtual sales tools bring important efficiency advantage and makes the opportunity to do business in person a bonus. Bringing all these pieces together position us well for making progress towards our goal of significantly larger educator market share. Before I turn the call over to Brett, I want to take a moment to recognize Teacher Appreciation Week. At Horace Mann, we are continually inspired by the dedication of our country's educators to their students, a respect that has only grown over the past year. Working across multiple, sometimes simultaneous, teaching settings, they remained focused on reaching and helping each and every student. As a member of our communities in the early days of the pandemic, we provided funding to help educators provide school supplies for their students at home. Recently, educators said communities and school districts could help them help students move forward by narrowing the focus on grade-level standards and de-emphasizing teaching to standardized testing, staffing with more paraprofessionals to provide targeted help, and expanding social-emotional learning resources to help students process the events of the past year. To address these needs in our headquarters location, the newly formed Horace Mann Educators Foundation made its first donation to implement a social-emotional learning program for use in all the elementary and middle school classes in the Springfield, Illinois Public School District. The Horseman Educators Foundation was formed last year and funded with an initial contribution of a million dollars. Its giving philosophy is based on the belief that educators are the experts in how to best help students succeed. The foundation's primary focus will be on needs identified as roadblocks by educators, schools, and districts. Our mission to take care of the educators who take care of our children has guided our company for the past 75 years. That mission will continue to be critical to our growth and success moving forward. Thank you. And with that, I'll turn the call over to Brett.