Horace Mann Educators Corp (HMN) 2011 Q1 法說會逐字稿

Good morning. My name is Tabitha, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Horace Mann first quarter 2011 earnings conference call. (Operator Instructions).

Thank you. Mr. Nelson, you may begin your conference.

Thank you, and good morning, everyone, and welcome to Horace Mann's first quarter 2011 earnings conference call. Yesterday, we released our earnings report including financial statements as well as supplemental business segment information. If you need a copy of this press release, it is available on the investors page of our website.

This morning, we will cover our results for the first quarter in our prepared remarks. The following management members will make presentations today and be available for questions later on the call, Pete Heckman, President and Chief Executive Officer, Dwayne Hallman, Executive Vice President and Chief Financial Officer, Tom Wilkinson, Executive Vice President Property and Casualty, Brent Hamann, Senior Vice President Annuity and Life, and Steve Cardinal, Executive Vice President, Marketing.

As a reminder, the following discussion may contain forward-looking statements regarding Horace Mann and its anticipated or expected results of operation. Our actual results may differ materially from those projected in these forward-looking statements. These forward-looking statements are made based on management's current expectations and beliefs as of the date and time of this call.

For a discussion of the risks and uncertainties that could affect actual results, please refer to the Company's public filings with the SEC. We undertake no obligation to publicly update or revise such forward-looking statements to reflect actual results or changes in assumptions or other factors that could affect these statements.

Also, in our prepared remarks or responses to questions, we may make mention of non-GAAP financial measures. Reconciliations of such non-GAAP financial measures are available on the investors page of our website. Finally, this call is being recorded, and an Internet replay will be available on our website until May 25th, 2011.

Now, I will turn the call over to Pete Heckman for his comments.

Thanks, Todd. Good morning, everyone, and welcome to our call. At yesterday's market close, Horace Mann reported operating income which excludes net realized investment gains and losses of $0.53 per share for the first quarter.

This result exceeded our expectations and was well above consensus estimates. It also was $0.05 better than the first quarter of last year in spite of higher cap losses and a lower level of favorable P&C reserve development in the current quarter.

March 31st reported book value per share of $22.63, increased 14% over prior year. Excluding FAS 115, our book value grew 9% year-over-year and 3% sequentially.

As a structure for my remarks today, I thought it might make sense to refer back to last quarter's call, where I identified the four key objectives Horace Mann will be focusing on in 2011 and comment on progress made in the first quarter relative to those objectives which were, number 1, continue to expand our agency force while increasing agency productivity and income.

Two, implement state-specific action plans to address and turn around the new business and retention trends in the auto line, the results of which we expect to see taking hold in the second half of the year. Number three, sustain the positive growth and profit results we have achieved over the last 18 months in our annuity line, and four, improve the profitability of our property line to an acceptable level by the fourth quarter of this year.

So, starting with the agency force, with the first quarter historically being a period when accounts have, more often than not, declined, we increased the number of Horace Mann agencies by 6 to 747. Agent retention, particularly for newer agents, is improved versus prior years, and generally consistent with our expectations.

In terms of agency productivity, we saw double-digit increases in financial services sales in the first quarter compared to prior year. The growth in annuity production was a continuation of the positive trends we have had in this line of business over the last several months. The increase in new life sales, on the other hand, was an encouraging development int he quarter in that we saw an expanded number of agents selling Horace Mann and third-party vendor life products.

We attribute that, in part, to the recent training we have offered to all of our EBM agents, and we are hopeful that this increased participation level will continue.

In contrast to financial services, we continued to experience softness in P&C new business productivity in the first quarter. This primarily reflects the aggressive rate actions we took in 2010 coupled with the highly-competitive auto insurance marketplace, and is generally consistent with what we expected to see in the first part of the year.

In the auto line, we began to implement pricing underwriting and marketing initiatives on a state-by-state basis in March, and will continue to roll out those programs over the next several months, but as we've mentioned previously, we wouldn't expect to see a noticeable impact on auto new business or retention trends until the latter part of this year.

The good news here is the continuation of very favorable and better-than-expected auto underwriting results in the first quarter, so we still have plenty of runway available to support the investments we're making in this line to improve our sales and retention trends.

With regard to the annuity segment, the first quarter saw a continuation of the positive results that began to emerge 18 months or so ago across virtually all dimensions of the business. Sales, contract deposits, assets under management, investment margins and contract charges and fees were all up considerably in the quarter compared to prior year, with positive fund flows and cash value persistency remaining at very strong levels.

Lastly, relative to our objective to improve underlying property profitability, we remain on-pace to reach our target of achieving acceptable profit margins by the fourth quarter of this year.

The first quarter was consistent with our expectations, notwithstanding the elevated level of catastrophe losses. The accident year property-loss ratio, ex-caps, was under 60%, and 3 points better than prior year, driven in part by the aggressive rate actions we have taken over the last 15 months continuing to build into earned premium.

Sinkhole losses declined for the second consecutive quarter as our Florida non-renewable program moved closer to its August completion date, at which time we will have only about 6000 property policies in the state, and non in the most sinkhole-prone counties.

So, all in all, it was a very good start to the year, both relative to our key priorities and in total. We are encouraged, but, of course, it is just one quarter. We've still got a lot in front of us, including spring and late summer weather, and we'll know more about where the year is headed when we're back together three months from now.

Now, before turning it over to Dwayne, I wanted to acknowledge another piece of good news that we received last week, the upgrade of our life company's financial strength rating by AM Best from A minus to A. As I've mentioned on prior calls, it's at least part of what we've been working toward and expecting for a while.

It represents further confirmation of the financial strength of our annuity and life businesses, and validates both the strength of our franchise and the trust that our educator customers place in their Horace Mann agents and in their company to protect and help grow their retirement assets and ensure that death benefits are available for their loved ones.

And, as we continue to execute on our plans, we're cautiously optimistic that our P&C ratings will follow the life companies in the not-too-distant future. So, with that, let me turn it over to Dwayne for some further elaboration on our financial results.

Thanks, Pete, and good morning, everyone. Horace Mann reported first-quarter operating income at $0.53 per share, which was $0.05 per share ahead of prior year, the difference primarily driven by improved personal auto results, and spread-widening in the annuity segment. Current quarter earnings were above our expectation and analyst consensus in total, in spite of an even higher level of catastrophes this year, and, as Pete mentioned, favorable prior-year's reserve development was slightly less than the first quarter of 2010.

The underlying book value per share, excluding unrealized gains, increased 2.8% sequentially and 9.2% over the prior year. With the relative stabilization in the credit markets, our net unrealized gains were approximately $180 million at the end of March, consistent with year-end 2010, driving reported book value to $22.63 per share, up 14% compared to year-ago.

We realized net investment gains of approximately $5.8 million pre-tax in the quarter with no impairment writedowns. Net unrealized gain or loss balances remain consistent across all asset classes compared to year-end. As we have stated in the past, we are confident in the quality of our investment portfolio, but continue to remain conservative in today's environment.

Pre-tax net investment income was up 7% in the quarter versus the prior year, growth that was consistent with our expectations, both in total and by segment, with the annuity segment being the primary beneficiary.

The increase has been driven by our efforts to reduce excess cash and short-term balances over the last three to four quarters, and picking up a fair amount of incremental yield in the process. Looking forward, we would expect the quarter-over-quarter growth percentages to moderate due to more comparable cash and short-term balances and the continued low interest-rate environment.

Turning to operations, our auto line is performing better than our expectations, with the first quarter loss and LAE ratio almost 5 points below prior-year. An improvement in the loss and LAE ratio was driven by both frequency improvements and increases in exposure-based earned premium as a result of the rate increases implemented last year. Also benefiting current-period earnings was favorable reserve development at $2.7 million for the quarter, concentrated primarily in our auto liability lines. The auto development was consistent with the prior year.

Our property line also performed in line with our expectation, excluding catastrophes and prior-year reserve development, with the current-quarter loss and LAE ratio three points below prior year. The improvement was driven by an increase in earned premium of 2.5%, despite a [PIF] reduction of about 5% compared to a year ago.

The decline in PIF is being driven our aggressive exposure-reduction activity, primarily those underway in the state of Florida, which remain on plan. Although we are pleased with improvement in the underlying performance, the property line continued to be impacted by a high level of catastrophic weather and sinkhole losses in the quarter. In regards to catastrophe losses, we recorded a total of $7.8 million of losses in the quarter in the property line, which was approximately $1 million higher than the first quarter of last year.

The current quarter catastrophe losses were due primarily to a number of catastrophic storms occurring in the Midwest and Southeast regions of the United States. The number of natural catastrophes impacting our industry in the first quarter was unusually high compared to historical data, and it appears that elevated levels may be continuing into the month of April.

In regards to the April storm activity and its impact on Horace Mann, we are in the process of assessing our exposure from the event, but as you would expect, it's too early to estimate ultimate losses at this time. That being said, I would like to point out that the second quarter has historically been the highest-catastrophe loss quarter for us absent any hurricane, citing the last two years where hurricane losses have estimated $15 million to $16 million pre-tax.

Sinkhole losses excluding LAE impacted the first quarter by $4.7 million, $1.2 million higher than prior year, but less than last year's third and fourth-quarter impacts of $6.9 million and $5.2 million, respectively. Although the first-quarter impact was consistent with our expectations, we are encouraged by not only the continued sequential decline in the calendar quarter impact, but more importantly, the decline in reported claim counts for the last three accident quarters.

Looking ahead to the second quarter, we still expect elevated sinkhole losses totaling between $3 million and $4 million, and then marginally-- then materially falling off in the third and fourth quarter.

The annuity segment performed better than prior-year, generating an earnings increase of 19% for the quarter, benefiting from higher interest margins and growth and account values along with fee income. The increased level of investment income has enabled us to realize a 15% increase in the earned margin from last year, with an interest spread of 202 BPs in the first quarter, up 6 BPs from the full-year 2010.

Our life segment earnings were slightly less than the first quarter of 2010 due to higher mortality costs, but given our size, we do experience mortality volatility from quarter to quarter, so the variance is not unusual.

So, to sum up the quarter, we're encouraged by the start of 2011, improving auto results, a decrease in the level of sinkhole losses, strong annuity and life results and overall reported results that are clearly in line with our expectations.

And now, to review the current results and trends in our P&C business, let me turn it over to Tom Wilkinson.

Thanks, Dwayne, and good morning. This morning, I'll discuss Property & Casualty profitability and growth results for the first quarter. Total P&C had a solid, improving and profitable first quarter, even with higher cap costs and a lower level of favorable prior-year reserve re-estimates.

Our total P&C combined ratio for the quarter was 95%, 1.4 points better than last year's first quarter. We had rough weather in the quarter, incurring $8 million in cap costs, and also saw increased non-cap weather losses. This was the second-highest first quarter cap loss in our history, behind only the Northridge earthquake in 1994.

Favorable prior-year reserve re-estimates of $2.7 million were $1.8 million less than last year, so our total P&C underlying combined ratio, excluding both caps and prior-year's impact was 91.2%, 3.5 points better than prior year.

Our auto combined ratio in the quarter was 91.5%, 3.7 points lower than last year. Excluding caps and prior year's reserve impacts, the underlying current accident year combined ratio was 94.2%, 3.9 points better than last year. Favorable loss cost trends across all coverages, led by bodily injury frequency improvements, contributed to the improved combined ratio.

For property we posted a combined ratio of 102%. When excluding cap and the impact of prior-year reserve re-estimates, the underlying current accident year combined ratio was 84.6%, 3 points better than last year.

In the quarter, significant increases in non-cap weather losses were offset by favorable fire loss experience. We are seeing the improvements from our property profitability programs implemented last year. As discussed in previous calls, we have significantly increased underwriting inspection, new claim loss and expense savings programs, and we are planning to take over 7% in rate actions this year after taking approximately 10% last year.

As of today, we are less than four months away from completion of our current Florida non-renewal program that began last year. So far, we have non-renewed over 7000 of the identified 9600 property policies. Upon completion of this program, we will have eliminated our exposure in the sinkhole-prone counties.

The first quarter sinkhole loss of $4.7 million was a reduction of $0.5 million last quarter, and was in line with our expectations. These sinkhole losses represented about 10 points on the current period's combined ratio.

As a reminder, this Florida program also includes policy reductions along the coast which will also further reduce our Florida hurricane exposure. By the end of the year, our total Florida property policy count is expected to be below 6000, down from about 21,000 in 2007.

Now to look at our topline results. Unit growth has been a challenge due to recent rate actions coupled with the current economic conditions, our internal property actions regarding Florida and other coastal markets and the highly competitive auto insurance marketplace, which has impacted both new business and policyholder retention.

Compared to 12 months ago, our total policy count was down about 5% in each line. Written premium was down 1.4% for auto, and down 0.5% for property as our topline revenue trends were favorably impacted by increases in average premium per policy.

With our improved profitability trend, we are in a position to invest in profitable auto growth initiatives. Our auto growth strategy includes state and market-specific initiatives that combine pricing, underwriting, product and marketing programs targeting new business growth opportunities.

The initiatives are tailored to local market conditions, and are being implemented on a state-by-state basis, with the first few states starting last month and continuing through the remainder of the year. In addition to the emphasis on new business, our auto growth strategy also focuses on improving policyholder retention.

A major initiative is to increase the number of electronic or e-customers. We are targeting an increase in policyholders paying their premiums electronically either via electronic funds transferred from their checking account or payroll deducted directly from their school paycheck.

In addition, we are introducing an electronic delivery option for policyholder communications and documents for our auto customers this summer. We expect these electronic improvements to make it easier for our customers to do business with us, and when combined with reduced rate actions, should have a favorable impact on retention trends in the second half of the year.

In summary, we're off to a good start for 2011, with a solid, profitable first quarter. We are looking forward to the completion of our current Florida property non-renewal program in the third quarter and to focusing on our auto growth strategy the rest of the year.

Now, I would like to turn it over to Brent to cover Annuity and Life results.

Thanks, Tom, and good morning, everyone. I'll spend the next few minutes going over the profitability and growth results for the Annuity and Life segments. As noted in our release and by Pete in his remarks, the first quarter of 2011 continued to demonstrate the strong underlying earnings trends which have taken hold for our Annuity and Life business.

In addition, we continued to see robust sales growth of our annuity products and renewed sales growth for our life insurance lines. Focusing first on earnings for the annuity segment, we again saw healthy increases in both account values and margins. Fixed account values increased 10% as compared to a year ago, and the associated net interest margin improved 15% compared to the same period, reflecting the combined impact of investment portfolio yields and crediting-rate actions.

The resulting net interest spread with 202 basis points for the quarter, an increase of 12 basis points compared to the level achieved by the first quarter of 2010. Variable account balances increased 11% as compared to the prior-year quarter end, with associated M&E fee income up notably compared to prior years. Combined fixed and variable account balances now exceed $4.2 billion.

Our annuity liabilities continue to be very stable, with net fund flow again positive in the first quarter. Our total 12-month account value persistency of 94% is comparable to prior-year. We continue to maintain a very conservative product risk profile in total, and specifically have minimal equity market guarantee exposure on our variable annuity product line.

94% of our enforced variable account value has either a simple return-of-premium death benefit or no death benefit guarantee at all. Improved market performance had a positive impact on the valuation of deferred policy-acquisition costs for the quarter at levels comparable with the prior year's quarter.

Combining all of these factors, annuity pre-tax income increased $1.9 million in the quarter, a 17% increase as compared to the prior-year results. As Pete will comment in his remarks, annuity sales increased for both our single-premium and flexible-premium products in the first quarter, and those sales once again contributed to strong growth in our total annuity contract deposits received. In total, annuity deposit receipts increased 10% in the quarter over the prior year, driven by our single-premium and rollover business.

Turning now to our life segment, pre-tax income for the quarter declined 10%, primarily due to higher mortality costs, which more than offset growth in investment income. Life premiums and contract deposits which consist only of Horace Mann products were down 2% for the quarter as compared to prior year.

Our consistently strong life persistency increased slightly as compared to prior year, to 95.2%. However, the headline for our life insurance segment this quarter is sales growth. Combined sales of our Horace Mann and third-party vendor products increased 37% in the quarter as compared to prior year. Several factors have contributed to this growth, including a recent training focus on life insurance and financial services as part of our AVM model, new sales support tools launched within the past few quarters, as well as strong sales of third-party vendor products.

It's clear our agents are making effective use of these tools to drive improving life sales levels. We plan additional expansion of our Horace Mann life insurance product line in the third quarter of 2011, along with associated training and support services in order to further enhance our life sales potential.

So, in closing, we are encouraged by the strong performance in both our annuity and life insurance businesses. We have improved the operating fundamentals for each business, and expect that the performance for each will be further enhanced as we gain sales momentum, and with that, let me turn it over to Steve for his comments on distribution and sales.

Thanks, Brent, and good morning. Today I'll focus on our agency force sales results and the impact of our new marketing programs. Let me start with some headlines.

The first quarter had some continuing themes from last year. Our total agency count continued to increase, strong annuity sales continued, and P&C sales continued to lag, and in a reversal from recent experience, life sales increased compared to a year ago.

As you saw on the press release, the agency force continues to grow since the creation of the exclusive-agent agreement in 2009. The combined count, exclusive agencies and employee agents, increased to 747, a gain of 6 compared to 2010 year-end.

In the first quarter, agency numbers were driven by both an increase in new appointments and a decrease in terminations compared to the same period last year. The improved retention of agents appointed in the EA model is most encouraging, especially when compared to agents historically hired in the employee model.

As Tom mentioned, our educator customer base has been affected by the economy. That combined with a highly competitive P&C rate environment has dealt a negative impact to our P&C sales. With that said, here are the sales results for the quarter, beginning with property and casualty.

Total auto sales units for the quarter decreased 6% compared to prior year, and our true new units decreased 14% for the quarter. It's a similar story with property this quarter, as sales units decreased 12% compared to a year ago.

As I stated last quarter, and as Tom just mentioned, marketing and P&C are working together on a state-by-state auto growth strategy. The early data for the first few states launched late in the first quarter is encouraging, and we anticipate seeing beneficial results as additional states are rolled out.

The annuity story continues to be a strong one, with sales up 22% of the quarter compared to first-quarter 2010. Within that growth, our flexible annuity sales were up 2% from 2010 first quarter, and our single-premium and retirement rollover sales registered a 27% increase over last year.

As I mentioned in my headlines, the life insurance side reversed recent trends with a 37% increase compared to a year ago, including growth in sales of both Horace Mann and third-party vendor products. Based on these results and additional training in the first half of the year, we continue to be excited and encouraged about the growth prospects in our annuity and now our life businesses.

As I mentioned in our last call, in the first quarter, we introduced several strategic marketing initiatives designed to support our agencies and bolster the agents' brand in the local marketplace.

As these programs were introduced, we also initiated one of the most aggressive training campaigns in our history. By all appearances, the initiatives are making a positive and immediate impact, as evidenced by the growth in our annuity and life insurance sales, and we believe that training will support our agents in driving sales increases in all lines of business, especially when we introduce more of the state-specific auto growth initiatives in the markets where we have identified opportunities.

Let me provide some specifics about our training campaign. The foundation for the training calls for leveraging the knowledge and experience of our agents and positioning them as local specialists in the state teacher retirement systems. As I said, we know from past experience that agents who utilize seminars in their regular marketing programs are generally more successful in all lines of business.

Just in the normal course, roughly 400 seminars were conducted in 2010. Now, with the right emphasis and training, agents conducted over 700 seminars across the country in the first quarter alone. We believe these seminars have had a positive impact on sales, and we plan to continue this core marketing strategy going forward.

We also train agents on ways to increase educator awareness of and participation in donorschoose.org, which is an online not-for-profit that works to drive dollars into the classroom. This effort was supported by a matching grant Horace Mann made to the organization.

The partnership has proven effective in introducing our agents to new schools and allowing them to introduce themselves to new administrators and teachers within those schools, as well as their existing client schools, helping to cement new agent relationships.

As a result of this program, we supported over 1700 classroom projects in the first quarter, making a positive impact in over 137,000 students through our Double Your Impact grant.

To sum it up, we're excited about the positive impact this program is making on our agents' relationships with their schools, the teachers' ability to enhance their classroom offerings, and the fact that we're helping to make a difference for so many children.

In addition to the two programs mentions, we partnered with the American College, an institution that specializes in financial education for securities, banking and insurance professionals to support insurance-specific training for our agents and to encourage them to embrace the professional designation available to sales professionals in the insurance-- in the financial services industry.

Last year, about 25 agents completed courses from the American college, and through a unique Horace Mann training initiative, about 100 agents completed a course in the first quarter of this year.

This is important to us because industry education is the cornerstone of a stable, highly professional sales force, and to sum it up, we are encouraged by the continuing positive trends of our annuity and sales increases, and the increase in our life insurance sales. Also, we are confident that state-by-state auto growth initiatives, combined with our new training and marketing programs will pay off with increased sales in our property and casualty business as we move throughout the year. Thank you, and now back to Todd.

Thank you, and that concludes our prepared remarks. Tabitha, please move to the question and answer session.

(Operator Instructions). Your first question comes from the line of Bob Glasspiegel with Langen McAlenney.

Just wondering if you guys could remind me what your [RBC] ratios and capitals at the parent is currently. Do you know the quarter?

Sure, Glass. This is Dwayne. On the life company, at the end of the quarter, our estimated RBC is about 507, which is consistent with year-end. On the [PNC] of total companies, it's roughly 528, which is up about 20, 25 points over year-end.

And capital at the parent?

As far as--

Cash.

Cash at the parent? Roughly $25 million or so.

Okay. Pete, remind me what you have to do to get to your-- what your ROE goals are, the timing of getting there and where capital management has to fit in to execute your plan?

Yes, Bob. As we've said in the past, we believe that our business is certainly capable, in this environment, of obtaining ROEs in the 12% to 14% range. The majority of that is driven by the PNC combined ratio, so as we get down to our long-term target into the 93%, 95% range, which I think we can do, although it's hard to tell where the competitive environment is going with auto in the next couple of three years, that will be the biggest driver of that ROE.

Capital management could have a modest impact on the ROE growth to that level, but, again, the biggest driver is going to be the PNC combined ratio and continued good spreads in the annuity line.

Well, hopefully the Board was as excited with the AM Best statement of the Company's capital strength as you were.

They were.

Thank you.

You bet.

Your next question comes from the line of Paul Sarran with Macquarie.

Hi, good morning. Just to follow up on that, can you update on how you view your capital position? Just, in other words, what you see as appropriate target level or what you see as excess or redundant capital at this point?

Sure. As we discussed relative to AM Best, we-- and they certainly acknowledged strong capitalization, particularly in the life side of the business, on PNC, as you know, we moved some capital from life over to the PNC companies at the end of the year to further strengthen our PNC position, and that certainly was of some value in driving the life company upgrade and the holding company upgrade.

We are optimistic that if we deliver our plans and meet our goals at the end of this year, we'll be able to position ourselves for a discussion at our next annual ratings review in January with AM Best to discuss PNC companies upgrade.

So, we really never have viewed the PNC subs as a significant source of any excess capital, and probably, in light of our desire to get the PNC companies upgraded, will not be looking to the PNC organizations as any source of excess capital, but as between a 500 and 510 life company RBC, we do have excess capital there relative to our ratings.

I guess the way I might come about it is, in terms of RBC, every 50 points of RBC is worth about $30 million to $35 million in capital, so if we would be capable of running, say, a 450 RBC, I'm not sure we couldn't go a little lower and still support our ratings, but may not be, necessarily, that comfortable immediately going there.

So, that might be a source of $30 million to $35 million, and we do have a little cash at the holding company. On the other hand, we have a short-term debt issue of $38 million outstanding, so I kind of view those as more or less offsetting each other, and the life company would probably be expected to generate additional excess capital through 2011, maybe, in the, say, $15 million to $20 million range.

So, I guess I would ballpark potential excess capital at the end of this year, somewhere in the $50 million to $70 million range, something like that.

Okay, and then on auto, I don't know if you mentioned it, but what's the average rate change that you're targeting this year?

Yes, Paul, we didn't mention it, but we're shooting for low single-digits on the auto rate change.

Okay, and then what-- what do you expect that to have-- what kind of impact do you expect that to have on combined ratio, in, like, say, over the next year?

Well, we're looking at an auto combined ratio this year mid-90s, mid-to-high 90s, maybe slight improvement going out a couple of years.

Okay. Let's see, and a question on annuities as well. What are you targeting in terms of new business spread?

Our targets are-- it would depend on the product type, Paul. Obviously we have, as you know, a large legacy block where we're obviously maximizing our spread, but on new products that are for sale, probably in the 200 to 230 range, depending on the product type.

Okay, and then have you been adjusting crediting rates on the [enforce] at all?

Yes, we have, and those are some of the renewal rate actions that have impacted this quarter.

Okay, and then lastly on annuities, can you remind us how much of the book is the legacy annuity book at this point?

That's roughly 1.--

Well, Paul, this is Dwayne. In total, it's about 68%, 69% of our total book as far as annuities that are at the 4.5%, 4% guaranteed levels.

And that's as a percent of total fixed annuities, or total annuities overall?

The total fixed annuities.

Okay, and then just one last question. Can you break out the life sales growth by Horace Mann products versus third party products?

Yes, the Horace Mann sales growth was 11% and the third party vendor sales was-- because of a couple of large dump-ins, it was actually up over 50%, so there we have UO products, where we had a couple of large sales that moved some of those numbers-- the percentage increase.

Okay, thanks.

(Operator Instructions). At this time, there are no questions. Presenters, do you have any closing remarks?

Sure, thanks, Tabitha. Thank you all for presenting on our conference call this morning. If you have any further questions, please feel free to contact me directly at 217-788-5738. Thanks again.

Have a good day, everyone.

This concludes today's conference call. You may now disconnect.