Horace Mann Educators Corp (HMN) 2012 Q2 法說會逐字稿

Good morning. My name is Nan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Horace Mann Second Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. (Operator Instructions) Thank you. Mr. Ryan Greenier, you may begin your conference.

Thank you and good morning, everyone. Welcome to our second quarter 2012 earnings conference call. Yesterday, we issued our earnings release, including financial statements, as well as supplemental business segment information. If you need a copy of the release, it is available on the investor's page of our website.

This morning, the following members of our management team will provide prepared remarks and will be available for Q&A. Pete Heckman, President and Chief Executive Officer, Dwayne Hallman, Executive Vice President and Chief Financial Officer, Tom Wilkinson, Executive Vice President Property and Casualty, Matt Sharpe, Executive Vice President Annuity and Life, and Steve Cardinal, who is our Executive Vice President of Marketing.

The following discussion may contain forward-looking statements and its anticipated results or expected results of operations. Our actual results may differ materially from those projections in the 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 risks and uncertainties that could affect actual results, please refer to the Company's SEC filings and the earnings release issued yesterday.

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. In our prepared remarks, we may use some financial measures that are not derived from generally accepted financial measures or GAAP. Definitions and reconciliations of these measures to the comparable GAAP measures are available on the investor's page of our website.

Before we turn the call over to Pete Heckman for his comments, please note this call is being recorded, and will be available on our website for replay until August 3rd, 2012, and Pete, you may begin.

Good morning, everyone, and welcome to our call. Before commenting on the quarter, I'd like to welcome Ryan Greenier, who opened this morning's call, to Horace Mann. Ryan joined us recently from the Hartford as Vice President Investor Relations, and he'll be a regular participant on our calls going forward. I know several of you have already had a chance to speak with him, and will join me in welcoming Ryan to the Horace Mann team.

After yesterday's market closed, Horace Mann reported second-quarter operating income of $0.16 per share, which was $0.55 better than last year. While the largest contributor to that improvement was a lower level of P&C catastrophe losses, I am pleased to report that we achieved underlying earnings growth, once again, across all three segments of our multi-line insurance platform during the period.

In P&C, our property insurance underwriting results benefited from a lower level of catastrophe and Florida sinkhole losses in the quarter, which helped offset an increase in the underlying auto loss ratio, and in our financial services business segments, the earnings gains were driven primarily by increased annuity interest margins and improved life mortality.

Before the management team provides more detail on our financial and business segment operating results, I'd like to offer my perspective on how we're doing through the first half of the year relative to our five key performance priorities for 2012.

Our first priority is to increase the productivity and size of our agency force. From a new business production standpoint, the strong sales momentum from the last two quarters of 2011 has carried over into this year, with double-digit increases compared to prior year in both the first and second quarters across all product lines, and while we lost several lower-producing agents this quarter, the number of exclusive agencies continues to grow, and we do expect to achieve a modest increase in the total agency count for the full year.

The second priority is to reverse the negative growth trends in our auto line. We are pleased with auto and new business production over the last twelve months. It remains strong in the current quarter, and is well ahead of prior-year through the first half of 2012.

In addition, our retention ratio continued to trend favorably in the quarter, and is also comfortably above the prior year. As a result, it would appear that our decline in auto policies and force has stabilized.

Meanwhile, as I've said before, we are committed to profitable growth in our auto business, and with our underlying combined ratio remaining above 100 in the second quarter, we're targeting a higher level of rate action in the second half of the year in order to maintain an acceptable growth profit balance.

Our third priority is to continue to focus on property profitability and maintain the favorable underlying margins we achieved at the end of 2011. While the underlying property combined ratios in both the first and second quarters of 2012 were well below prior-year, we did experience higher than expected levels of non-cat weather and fire losses in both periods, and will be continuing our pricing underwriting and claims initiatives in this line.

The fourth priority is to build upon the positive results we've achieved over the last few years in our retirement annuity business. In the second quarter, we saw a continuation of double-digit sales growth, high single-digit growth in assets under management, high and increasing levels of persistency and positive fund flows.

Those results, coupled with a 7% increase in reported income and a double-digit increase in underlying earnings, are clear evidence of continued strong and balanced performance in this business segment.

And finally, our fifth performance priority is to achieve double-digit growth in sales of Horace Mann-manufactured life products, with a strategic objective of growing our underwritten mortality-based business over the long term.

While this will be an ongoing, multifaceted process that builds over time, we're very pleased with the 49% increase in proprietary life product sales we generated in the second quarter, on top of the 24% growth recorded in the first three months of the year.

So, all-in-all, in spite of the near record level of industry-wide catastrophe losses, we feel good about the second quarter. We're very pleased with the first half of the year, and we have positive expectations for the remainder of 2012 and beyond.

Now, let me turn it over to Dwayne for some additional commentary on our financial results and outlook.

Thanks, Pete, and good morning. Horace Mann reported second quarter operating income of $0.16 per share, which was $0.55 per share ahead of prior year. The improvement was primarily driven by a decrease in Property and Casualty catastrophe losses and, to a lesser extent, more favorable prior-year's reserve development, expanded annuity and investment margin, and lower mortality cost in the life segment.

Year-to-date operating earnings per share of $0.80 were $0.64 higher than the first half of last year. Lower P&C catastrophe losses accounted for $0.44 of the increase. The remaining $0.20 improvement was largely due to a higher level of favorable P&C prior-year's reserve development, primarily in auto liability, as well as favorable interest margins in our annuity business.

Although catastrophe losses were down $26 million pre-tax compared to last year, we recorded $29.2 million catastrophe losses in the quarter, consistent with the range on our July 19th pre-announcement.

On a year-to-date basis, catastrophe losses were $35 million, a decrease of $28 million compared to last year. While the year-to-date catastrophe losses were below prior year, they significantly exceeded our expected losses, and as a result, we reduced our full-year EPS guidance range by $0.25.

As announced, we now estimate full-year 2012 net income, before realized investment gains and losses, of between $1.55 and $1.75 per share. Importantly, for the first half of 2012, operating results, excluding catastrophes, were generally consistent with our original earnings expectation.

The underlying book value per share, excluding net unrealized gains, increased 1% sequentially and 10% over prior year, with a relatively stable but challenging credit market, including continued low treasury yields and tight spreads, the net unrealized gains were $549 million at the end of June, up $108 million from year-end 2011, driving reported book value to $29.06 per share, up 6% sequentially, and 29% year-over-year.

Pre-tax net investment income was up 6.4% in the quarter versus prior year, down from an increase of 7.4% recorded in the first quarter. Looking forward, we would expect the quarter-over-quarter growth percentages to continue to moderate due to the low interest rate environment.

For the six months, the 10% increase in annuity segment investment income primarily reflects growth in the portfolio, as well as a decrease in average cash and short-term balances. The combination of these items and the management of annuity crediting rates, resulted in a 14% increase in the net interest margin over prior year. Our fixed annuity spread was 211 BPs year-to-date, up 8 BPs from prior year, which was slightly favorable to our expectations.

Looking forward, we would expect a modest decrease in spreads over the remainder of the year, consistent with our full-year 2012 earnings guidance.

The year-to-date decline in Property and Casualty segment investment income reflects the cash outflows over the last 12 to 15 months due to the high level of catastrophe losses and a slightly lower portfolio yield.

We recorded net realized investment gains of $10 million pre-tax for the quarter, with no impairment writedown. The current quarter did include some continued rebalancing, reflecting a slight bias towards shortening the duration in the annuity portfolio.

In spite of the catastrophe losses in the quarter, our capital and liquidity positions remain favorable relative to our capital management targets and rating levels, both at the insurance company, subsidiary, and holding company levels.

While our statutory results will not be finalized for a few more days, we estimate the 6/30 life RBC ratio to be approximately 490%, and the P&C equivalent to be roughly 525%. Both ratios are comparable to year-end 2011 levels.

Recognizing our continued capital strength, we bought back just over 500,000 shares during the quarter at an average price of $17.05, for a total of $8.6 million. Under the program, we have repurchased 860,000 shares, and have remaining authorization of $36 million.

Our repurchase program is purely opportunistic in nature, and considers price-to-book ratio, trading volumes, current-year actual results and macro-economic factors.

And finally, as Pete mentioned, Ryan is now leading our investor relations activities. Please feel free to reach out to Ryan with any questions or other requests you may have in the future. His contact information is included in the press release issued yesterday.

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. Today, I'll summarize our Property and Casualty profitability and growth results for the second quarter and for the first half of 2012.

Weather, again, impacted P&C profitability in the second quarter. Consistent with our pre-announcement, we incurred $29.2 million of cat losses in the quarter. While not as bad as last year, this was the second-highest level of cat losses for the second quarter in our history.

The most severe of the 13 cats this quarter were in the upper-Midwest and Mid-Atlantic regions, where we have above-average penetration in the educator market. As a result, our total P&C combined ratio was 112.8% in the quarter, which included 21.5 points of cat losses.

Looking at the auto line, our combined ratio was 101.2% in the quarter. Hail-related catastrophes were unusually high, and contributed to $3 million for 3.4 points of auto cat. Offsetting the cats was 3.8 points of favorable prior years' reserve development.

Consistent with others in the industry, we are seeing increases in our underlying auto loss costs. Recently, we have experienced increased physical damage severities, as increases in used car values, repair costs and total loss estimates are pressuring loss costs.

Through six months, our auto combined ratio was 100%. As a result, in the second half of 2012, we are increasing rate action and expanding underwriting programs to improve profitability results to our targeted range.

Turning to property, our combined ratio was 135% in the quarter, with $26 million, or 57 points of cat [lines]. Our underlying combined ratio, excluding cats and the impact of prior-year development, was 80.6%, more than 8 points better than last year. For the first six months, our underlying combined ratio was about 79%, also about 8 points better than last year.

Our underlying results continue to improve, despite incurring a little more non-cat weather and non-cat fire losses than we had expected. We will continue to refine our underwriting program and increase rate actions to achieve our targeted profitability level.

Now, for a look at our topline results. Total P&C written premium was up slightly in the second quarter, with auto down .2%, and property up over 2%. Year-to-date total P&C premium was essentially even with the prior year.

As mentioned in our release, we had a strong first half for both true new auto and property sales, with increases above last year of 35% and 18%, respectively. At the same time, the quality of both our new business and our in-force book has remained strong.

The percent of our book that is educator, cross-sold and in the preferred underwriting tiers continues to increase. Over 73% of our auto policies and over 80% of our property policies are cross-sold, with at least one additional Horace Mann policy.

Additionally, over 22% of both P&C lines are tri-lined, with at least two additional Horace Mann policies, at least one of which is an annuity or life policy.

Our policyholder retention is also improving, as we continue to increase the number of customers utilizing automatic payment plans like school payroll and EFT.

So, in summary, underwriting results excluding cats in the quarter were mixed. We had continued improvement in our property results with auto experiencing pressures in physical damage severity.

We are confident that our targeted rate actions in the second half of the year will result in incremental margin improvement over time, and from a topline perspective, total written premium and PIF declines appear to have stabilized.

Retention ratios and new sales continue to improve, particularly in the auto line, setting the stage for future business growth.

Now I'll turn it over to Matt for his commentary on Annuity and Life results.

Thanks, Tom, and good morning. I'll spend the next few minutes going over the profitability and growth results for the Annuity and Life segment.

Starting with the earnings for our annuity segment, we continue to see solid increases in account values and margins. Fixed account values increased 11% compared to a year ago, and the associated net interest margin earned improved 14% and 16% compared to last year's second quarter and first half, respectively, reflecting on ongoing management of both the investment portfolio and crediting rates.

The resulting net interest spread was 211 basis points on an annualized basis for the first half, an increase of 8 basis points compared to prior year.

Driven primarily by market performance and net transfers, the variable account balances decreased 2% over the prior year.

Our annuity liabilities remain extremely stable as positive net-fund flows continued in the quarter and total account value persistency of 94.7% over the last 12 months improved nearly 1 percentage point compared to the prior year.

Weak market performance during the second quarter had a negative impact on both the valuation of deferred policy-acquisition costs, and the level of guaranteed minimum death benefit reserves, and was the main driver of the $1.8 million negative impact from DAC unlocking. For the first half of 2012, there was a $0.8 million positive impact from DAC unlocking.

Annuity pre-tax income for the second quarter was $11.8 million, representing an increase of $0.8 million over the prior year. Compared to the first half of 2011, annuity segment pre-tax income increased $5.5 million primarily due to strong growth in the net interest margin.

Excluding the valuation of deferred policy-acquisition costs and the change in the GMDB reserve, the underlying pre-tax income increased 16% for the quarter and 19% for the first six months compared with prior year.

Our total annuity sales increased 15% and 12% in the second quarter and first half respectively, driven by single-premium and rollover business. Total contract deposits received for the quarter and first half were comparable to last year.

Turning to the life segment, pre-tax income for the quarter was $9.6 million, an increase of $0.5 million over prior year. For the first half, pre-tax income of $17.7 million increased $2 million primarily due to improved mortality costs.

Life premium and contract deposits, which consist only of Horace Mann products, were comparable to last year in the second quarter and up 1% compared to the first half of 2011.

Sales of Horace Mann-manufactured life products increased 49% for the quarter and 37% for the first half. Life persistency for the quarter remained consistently strong at 95.5%.

In closing, it was another solid quarter for both Annuity and Life sales, and a continuation of strong, underlying earnings for both segments, and with that, let me turn it over to Steve for his comments on distribution and sales.

Thanks, Matt, and good morning. As Pete mentioned, sales momentum continued to be robust, with double-digit increases across all lines of business.

These results are driven by increased productivity, as well as the expansion of our exclusive agency force. In addition, the marketing and training programs we introduced at the beginning of last year continue to resonate.

As of quarter end, the total agency count of 712 is 20 below the same time last year. This decline is largely driven by the terminations of our lowest-producing agents. On the total decline, it's important to note that our exclusive agency count increased by 62 compared to a year ago.

Expansion of our exclusive agencies remains a priority, and we have a strong group of new agency appointments starting in the third quarter. As a result, we anticipate an increase in the number of total agencies this year.

Now, let's move on to sales performance. Our true new auto unit sales, which represent business from new Horace Mann Auto customers, increased 32% for the quarter compared to the same period last year, and 35% to the first half of 2011.

Our total auto units, which include add-cars, increased 16% for the quarter and 18% for the first half. We expect to maintain elevated levels of sales during the second half of the year, however, we expect the percent variance will moderate in the coming quarters as the positive trend in increasing auto sales began in the third quarter of 2011. And similar to auto, property sales increased 23% compared to the second quarter of 2011, and 18% compared to the first half.

Taking a look at annuity, sales were once again strong, up 15% in the quarter compared to the same period last year, and 12% compared to the first half. The quarterly increase is comprised of a 16% increase in single-premium and retirement rollover sale, and a 12% increase in flex sales. By the way, single-premium rollover sales have been strong for several quarters.

And finally, Horace Mann Life sales also increased in the second quarter compared to last year, increasing over 40% compared to last year's second quarter and over 30% on a year-to-date basis.

We believe that the marketing programs we introduced in 2011 continue to support the elevated sales and productivity gain. We built on the success of the retirement seminars and have dramatically increased the number we've conducted this year.

Additionally, the cause-related marketing effort with DonorsChoose.org continues to generate positive interaction within our target market, and as I mentioned back in February, we are working more closely with school districts to offer our benefit programs, including flexible benefit programs and payroll slots for annuity, auto and life, and, of course, when agents are involved in offering these additional services, they are more successful.

All of these efforts have helped build momentum and helped contribute to what has been, so far, a successful sales year. To wrap it up, we are pleased with our sales results as we look forward to the second half of the year. We are confident in the success of our marketing and recruiting programs, and are optimistic they will continue to generate sales results.

Thank you, and now back to Ryan.

Thanks, Steve. That concludes our prepared remarks. Nan, please open the call for questions.

Thank you. (Operator Instructions) We'll pause for just a moment to compile the Q&A roster. We have a question from Bob Glasspiegel with Langen McAlenney.

I was wondering if we could get, like, a -- drill into auto a little bit deeper, and what I'm interested in is what's really going on in that segment. I mean, you're over 100% underlying, you're deteriorating by 2 to 3 points, you mentioned a few trends. I'd be interested in whether there's anything different on BI severity that you're seeing, and in light of where you are, should you really be growing that line of business at all, and how comfortable are you that the recent growth in the last year hasn't contributed to the decline in the results.

Hi, Bob, this is Tom Wilkinson. The first part of your question about the underlying trends, last quarter we had talked a little bit about an increase in BI losses and it was predominantly, well, it was injury losses, and it was primarily frequency-driven, severities had started the year pretty well.

We had mentioned that due to our size and volatility we often -- we could get spikes in results, and we saw a return to some pretty good injury results in the second quarter. While the frequency remained high, it wasn't as high as it was in the first quarter. We were encouraged by some favorable results on the BI severity side to kind of offset some of the increases that we saw in frequency.

In -- so in -- other than injury, we mentioned some of the recent trends that we're seeing on the physical damage severity side. We're hearing that others are seeing the same thing. We had a great first quarter, or we had a good first quarter in physical damage, and then the second damage wasn't as good, so that's a relatively recent trend.

Continuing on to some of your questions, we feel really good about the quality of the new business that we're writing, we feel really good about the quality of our book of business in total. I had mentioned that most of the business we write, almost 75% of auto is really a multi-line sale, and 80% of property is, so we're really kind of a multi-line -- we have a pretty good multi-line book of business that generally has a more favorable retention experience over time, as well as better loss costs in the segment. So, we feel pretty good about the quality there.

We do -- we are running higher than what our aspirational target is of an auto combined ratio in the high 90s. We feel that we are kind of teeing up some additional rate actions in the second half of the year, a little bit higher rate actions.

We took -- in the first half of the year, we took 20 rate increases, and we took rate increases in 20 states, and we're looking forward to earning that -- more fully earning that in the second half of the year, as well as having the -- having 25 additional auto rate increases effective in the second half of the year, averaging about 6% on a file basis, and 18 of those 25 are already -- they are filed, approved and effective and ready to go, so they will be in some time in the third quarter as opposed to waiting until the fourth quarter. So, we'll earn a little bit of that in the fourth quarter, and for sure we'll earn all of it rolling forward into 2013.

We have a couple challenging states in auto. The targeted rate increase program is putting more rates into those states. There are a few states in the southeastern parts of the country where the loss trends are less favorable than they are elsewhere. A couple of those states are getting their second rate increase of the year here coming up in the second half of the year.

So, we feel pretty good. We do have some rate actions that we've got teed up. We've got some underwriting programs coming down the pike, we see rate actions picking up in the industry, we don't think it's going to impact new business and retention as much as it might if we weren't seeing the competitors doing this.

We have had pretty good experience over the last couple of years on the property side of the house, cleaning that up with some targeted rate changes and some increased underwriting programs, and we're kind of modeling these auto initiatives after that, so we feel pretty good about the success of that, and then we'll get our combined ratios down below 100 into the high-90s, which is our targeted range in a matter of time.

So, you're saying you're okay having your foot on the gas pedal at 101% underlying through a couple of quarters because the 101% isn't right, or you'd care to -- or would you disagree with my characterization of having your foot on the gas pedal?

Well, Bob, I think -- this is Pete -- we're not comfortable with 101% or whatever underlying on a long-term basis. We think we've got actions in place, like Tom mentioned, primarily around pricing in the second half of the year that's designed to address that.

So, we don't expect the 101% to persist. We feel good about the new business growth, as Tom said. There's nothing in the new business we put on in the last 12 months that gives us any indication that it's anything other than very high quality.

So, we think we can push rates a little bit more without giving up the growth trends that we've seen, at least on a material basis, because we believe our agents are engaged, we've got some good programs involving them in the whole rate-making process, and we also are beginning to see competitors taking the rates that are going to be comparable with what we're doing.

Okay, thank you. I'll go back in the queue.

Thanks, Bob.

(Operator Instructions) You have a question from Frank Lee with KBW.

Hi, guys. Thanks for taking my question. Noticed the property and expense ratio ticked up a bit in the quarter. Just wanted to know if there was anything unusual there.

Good morning. This is Dwayne Hallman. As far as the expense ratio for P&C in the quarter, was above last year, but that's driven by a couple of items. One, on expenses, commission expense, we do expect that and have expected that to increase as we roll out our exclusive agent program, so that accounts for about a point over prior year, but it is right on our expectation, and consistent with our commentary on a call last quarter that we would expect that to be up a half a point to three quarters of a point on a full-year basis.

The other component as far as just in the quarter relates to some accruals related to benefits. Prior year had a slight decrease in the current quarter. This year, the quarter, just based on the timing of accruals, it has actually increased, so a little bit of an apple and orange happening on the quarter, but on a year-to-date basis, for P&C, the total expense ratio was right on our expectations.

So, just a little bit of noise in the quarter as far as timing, but on a year-to-date basis, and what we would expect from the year, still is consistent with our expectation.

Okay, great, and you also mentioned the cats in the quarter were from Upper Midwest and Atlantic regions. Were there any particular states that were hit particularly -- or I guess where you were seeing larger losses in?

Yes, we had a couple, Frank, we had -- in the beginning of the quarter, it was wind and hail, and it was both Dakotas and Minnesota, and we've got pretty good penetration in those particular markets, and then at the very end of the quarter, the last week of the quarter, the storm that started in the Midwest and ended in the Carolinas did the most damage, for us, in the Carolinas, and similar to the Upper Midwest, we've got pretty good penetration in both those two states.

Okay, great, that's all I have, thank you.

And there are no further questions at this time. I'm sorry. You do have a follow-up question from Bob Glasspiegel.

I didn't want to let you guys get off that easy. Agent growth, you're slipping through the first half, but you're saying you can grow in total, and I recognize your exclusive -- you're growing in the group that you want to grow, but why did you slip in the first half? IS there seasonality to that, and what gives you confidence that the second half will be better?

Hey, Bob, Steve Cardinal.

Hey, Steve.

Hey, hello, thanks for the question. Yes, we do have some volatility between quarters. Generally, in the first half of the year, we generally see a downtick as people finish out their full year. We ended up with kind of analyzing our performance and worked through some of those conversations in the first half of the year.

So, we've seen some volatility within that, and in the second half of the year -- we're up 62 EAs for the full year but only a couple this past quarter. We already have our visibility into third quarter, the first few months of staffing count, and we can see that our appointment -- we've got a really great group in right now and in files that we're looking at, so we anticipate that we'll be kind of finishing our EA count over 600 this year, and we expect -- we finished 745 total agency count last year. We feel optimistic that we'll be finishing above that number as we look towards the year-end.

We generally see termination activity slow down in the second half and appointment activity increase, and we're looking at pretty positive -- all of our leading indicators right now towards that going into the second half of the year.

Now that we've got your exclusives over 80% of total, does that mean you're sort of in the eight inning of a transition?

Yeah, I think that -- we are very much closing in on the transition. We've got some really great employee agents that are still operating in our model, and we value them, but the EA transition, we look at that as pretty well complete. We'll get through this year, and we'll have four years in on our EA model. We'll be able to track and see kind of how our first group of EAs have done, and we see them doing better than our old employee model as we've brought them on, and each year subsequent to then, we've improved kind of the retention ratio and the success of them.

So, we feel really great about the position of the agency force, and this year we have spent a lot of time on productivity, over the last year and a half really on some of the marketing programs that focus directly on our market, and directly on our niche, and it seems to be resonating very well with our exclusive agent programs.

So, we're really optimistic about the way it's positioned looking forward.

Great. One last question. Dwayne, I think you gave sensitivity a couple calls ago to what the 2% interest rate world would do 2012, 2013 earnings, and I don't know if you've revisited that with the rates -- the ten-year at above 40, but any general guidance on how we should think about lower rates in earnings sensitivity?

Sure, Bob. I don't believe I ran a 2% scenario, but that might be coming into the target range of some. Yes, in the past, we have talked about -- I think we use an example of rates moving down to roughly 3.75% or so as far as re-investment rate is concerned --

Bob, I was talking about the ten-year treasury, but maybe I was wrong. 3.75%?

That wasn't really related to treasury because (inaudible) spreads have fluctuated as well, so the way we looked at it was really on a reinvestment rate with -- the portfolio has to turn according to some expectation.

But somewhat -- a way you could think about it is that for each, say, 25 BPs that you change the reinvestment rate by, for us, before any annuity crediting rate management, the EPS impact would be about $0.04. $0.03, $0.04 per share.

Okay, and how much -- where are you on the new-money rates versus where you went into the year?

For the last quarter, the reinvestment rate was between 3.75% and 4$.

Right, and where did you start the year?

About 4.25% to 4.5%.

Okay, that's helpful. I appreciate it.

Sure.

(Operator Instructions) And there are no further questions.

Okay, thank you for joining us on our second quarter earnings call this morning. We appreciate your interest and support of Horace Mann. Feel free to contact me with any follow-up questions, 217-788-5738. Thanks, and have a nice day.

Ladies and gentlemen, this concludes today's conference call, you may now disconnect.