Last night, we reported second quarter core earnings of $1.02, our highest second quarter result ever.
As previously announced, this led us to raise our full-year core earnings per share guidance to a range of $3.50 to $3.70 with an expected return on equity above 10%.
In recent years, we invested in upgrading our section 125 benefits administration program, which enable school districts to offer voluntary worksite plans, benefits including our individual supplemental products are provided or introduced through the school district, but paid for by individual educators.
With this addition, Horace Mann will now have complementary distribution capabilities in each of the ways the country's $6.5 million public K-12 educators receive insurance solutions, dramatically increasing our addressable market.
In terms of scope, Horace Mann has at least one educator household located in 75% of the roughly 12,000 K-12 school districts in our market footprint.
When we bought NTA, we added approximately 120,000 educator households.
With the acquisition of Madison National, we gain a solid base in this growth segment as they serve 1200 districts that provide employer paid and sponsored products to about 350,000 educators.
There's some overlap between Horace Mann's presence and those of NTA and Madison National, but each of the transactions has clearly added to our market share and with the Madison National transaction, our total addressable market expands to include a portion of the $160 billion that school districts spend annually on employer paid benefits, a market sector that has grown more than 30% over the past five years.
As we look at ways in which Maddison National aligns with our business strategy from a product perspective, Madison National bring 60 years of experience designing and underwriting a portfolio of group products.
We have already signed a long-term distribution agreement with National Insurance Services, an employee benefit brokerage subsidiary of Assured Partners that has been a key distribution partner for Madison National for nearly 40 years.
Our product development team has been leveraging and NTA's 50 plus years of success in supplemental market to accelerate filings for group products customized for educators such as cancer and hospitalization.
In 2022, we expect Madison national to add 50 basis points of ROE with upside potential in future years.
We believe most schools will avoid a return to a hybrid or remote environment, notably, nearly 90% of educators are vaccinated against COVID-19, a far higher rate than the general population.
Second quarter core earnings per share was $1.02, up 52% over last year and our third consecutive record quarter.
Six-month core earnings per share was $2.12, more than halfway to the increased full year earnings per share guidance of $3.50 to $3.70.
When we raised earnings per share guidance, we also raised our expectation for 2021 core return on equity to greater than 10% for the year.
Core return on equity for the second quarter was 11.7% and it was 12.1% for the 12 months up from 9% for the prior 12 months.
In 2020, Madison National had net premiums of approximately $108 million and statutory income of approximately $14 million.
Madison National's premium have grown in the mid-single digits over the past five years with the trailing five-year loss ratio below 50%.
The transaction also will deliver about 50 points of ROE improvement in the first 12 months after closing.
In Property Casualty, core earnings for the quarter were up about $8 million or 70.8% due to the strong contribution from net investment income, which was driven by the returns in the alternatives portfolio.
Due to a higher underlying loss ratio, underwriting income was down by about $6 million despite significantly lower catastrophe losses and an improved expense ratio that reflected our continued focus on expense optimization.
Premiums for the quarter were $156 million with new business volume remaining below historical levels as we work through the impact of the pandemic on sales.
In line with our July 1 announcement, cat losses for the quarter were $17.5 million, contributing 11.3 points to the combined ratio, significantly below last year and below what we anticipated when the year started.
The 17 events designated as cat in the second quarter were generally less severe and not as widespread as the 20 declared cat events in last year's second quarter.
Our revised full-year 2021 guidance reflects our assumption that second half cat losses will be between $20 million and $25 million, which is unchanged from what we guided to at the beginning of the year and is in line with the 10-year average for second half cat losses.
Even as miles driven ramps back up, through the first six months of 2021, our underwriting discipline is key to why we are reporting an underlying auto loss ratio below the 70.6% we reported for full year 2019, however, because of the inflationary component of the increase in loss costs over 2020.
Finally, we released $4.2 million dollars in prior period reserves during the second quarter with approximately $3 million from 2019 in prior auto liability.
With our six-month combined ratio at 92.7%, we are still on track to achieve a full-year combined ratio in line with our longer-term target of 95% to 96%.
Our updated guidance for 2021 core earnings of $66 million to $70 million reflects the strong contribution of net investment income in the first half.
Turning to Supplemental, the segment contributed $31.6 million in premiums and $12 million dollars to core earnings.
Supplemental sales were $1.2 million in the second quarter, up from both this year's first quarter and the year ago period.
Premium persistency remains above 90%, a testament to the value educators place on these coverages with about 282,000 policies in force.
Our revised outlook for Supplemental's 2021 core earnings of $41 to $43 million reflects a higher contribution from net investment income.
We now expect a full year 2021 pre-tax profit margin better than our longer-term target of mid 20%.
Core earnings more than doubled from last year to $5 million as mortality costs returned to within actuarial expectations, total benefits and expenses returned to targeted levels and net investment income rose 26.9% Nevertheless, because of the higher mortality costs in the first quarter, we've modestly lowered our outlook for full year 2021 Life segment core earnings to the range of $14 million to $16 million.
For the Retirement segment, second quarter core earnings ex-DAC unlocking were up 88.3% reflecting the strong net interest margin.
DAC unlocking was favorable by about $200,000 compared with $3.7 million in last year's second quarter.
The net interest spread improved 79 basis points over last year's second quarter to 265 bps in part due to strong returns on the alternatives portfolio.
Annuity contract deposits were ahead of last year's second quarter by 15.6% with the June beating out March, the previous record as the highest month for deposit for several years.
Based on the strong results through the first half, we increased our full-year 2021 outlook for Retirement core earnings ex-DAC unlocking to the range of $43 to $45 million.
Turning to investments, total net investment income on the managed portfolio was up almost 50% to $84.1 million with total net investment income up 35.8%.
We expect to reach our targeted 15% allocation to alternative investments within the next two years and expect this diversified portfolio to generate high single-digit annual returns on average over time.
The fixed income portfolio had a yield of 4.3% in the second quarter compared with 4.39% a year ago.
The core new money rate was 3.35% in the second quarter and based on current market conditions, we continue to anticipate a core new money rate of about 3% for the year.
Our updated guidance reflects the higher assumption for total net investment income of $385 million to $405 million including approximately $100 million of accreted investment income on the deposit asset on reinsurance.
This expectation for investment income is captured in the segment by segment outlook I've summarized and in our core earnings per share guidance range of $3.50 to $3.70.
Further, after the transaction, Horace Mann should generate more than $50 million in excess capital annually, assuming normalized property and casualty results.
Beyond growth initiatives, our capital generation provides scope for repurchase, as well as maintaining our track record of annual increases in our cash dividend, which is currently generating yield slightly above 3%.

Summary:
Last night, we reported second quarter core earnings of $1.02, our highest second quarter result ever.
As previously announced, this led us to raise our full-year core earnings per share guidance to a range of $3.50 to $3.70 with an expected return on equity above 10%.