Q2 2020 Globe Life Inc Earnings Call
Thank you ladies and gentleman in your patience in holdings. Please continue to stay on the line.
Oh friendship again momentarily again, please continue to stay on the minus this conference will begin momentarily.
[music].
Good day and welcome to the glass incorporated second quarter 2020 earnings release Conference call.
Today's conference is being recorded.
At this time I would like to turn the conference over to Mike majors.
Yes, Vice President of administration and Investor Relations. Please go ahead Sir.
Thank you good morning, everyone.
Joining the call today, or Gary Coleman, and Larry Hutchison or co chief Executive officers.
Thanks to about a our chief financial Officer, and Brian Mitchell, Our General Counsel.
Another comment your answers to your questions may contain forward looking statements that are provided for general guidance purposes only.
Accordingly, please refer to the second quarter earnings release, we issued yesterday. Some of the comments may also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures.
I'll now turn the call over to Gary Coleman.
Thank you Mike good morning, everyone.
I'd like to scare <unk>.
Please with the company's transition to primarily workplace.
Well the code 90 pandemic continues to present challenges our agents.
Very good accounting.
Operations running smoothly.
In the second quarter.
Income was $163 million or Dollarssixty two suits for sure.
Compared to $187 million or Dollarssixty seven cents for sure your game.
Operating income for the quarter was $177 million or Dollarssixty five suits for sure.
Sure degrees <unk> from a year ago.
Well again from 40 basis return on equity was 9.4%.
For sure was $73 a 26 cents.
Excluding unrealized gains losses on fixed maturities.
Return on equity was 13.6% and didn't pay for sure the 10% to 50 $1.21 suits.
In life insurance operation is pretty <unk> increased 6% to $671 million and life underwriting margin was $162 million down 8% Samir again.
With respect to the premium revenue.
We've been very pleased to see the persistency in premium collections improved since due to the growing says.
However, the decline in margin is due primarily to approximately $22 million of incurred claims related to cope with 19.
Well the year, we expect like premium revenue to grow your thoughts we plan for soon and life underwriting margin to decline one degree person.
Merely due to the impact of cobras going to.
At the midpoint of guidance, we anticipate approximately $45 million encoded 19 claims for the full year.
Health insurance premium revenue grew 6% to $283 million and healthy margin was up 7% to $64 million.
For the year, we expect help frame revenues grew approximately 6%.
And don't underwriting margins grow 8% to 10%.
Administrative expenses were $62 million the corn.
For pursue some years ago.
For the full year, we expect administrations is today actually 5%.
I'll now turn the call over Larry for his comments on the second quarter marketing operations.
Thank you Gary I agree with Gary's comments regarding the company's response to the pandemic.
Agencies continue to adapt to virtual shows appointment shaving cream.
We see really that consumers are mark.
The awareness of the need for life.
Yeah.
Oh, no discuss current trends in each distribution channel.
At American income Wise life premiums were up 7%.
We had $39 million.
Life underwriting margin was down 4%.
$83 million.
Net life sales were $51 million down 16%.
Oh, while sales were down for the quarter, we have seen increases agent activity.
The rise in activity is not reflected in the second quarter sales.
Increase time for policies to be issue.
And changes in our underwriting procedures.
These changes designed to accommodate the personal shows crush.
Work around limitations that change there either.
Good to protect the company from adverse selection.
That's because you need to work through this or processing time will improve.
She is incorporated into full years.
Surprises like later in the call.
The average producing agent count for the second quarter.
She had or 93.
14% from a year ago order and 10% from the first quarter.
Resurgence.
The second quarter was 8590 show.
We continue to see initiative.
Hi, Paul Harris Teeter card.
Yes.
Oh, I'm, sorry for virtual shales recruiting.
Yeah, Liberty National why premiums were up 3% to $73 million.
Underwriting margin.
For Sachin $19 million.
Net life sales declined 20% to $11 million and net health sales were $4 million down 30% is going to your second quarter.
The average producing agent count for the second quarter.
2395.
5% from a year ago quarter.
And down 10% in the first quarter.
It's producing agent count Liberty National and as a quarter 2379.
We have seen an increase in individual sales worksite business is more challenging.
Persistency Worksite business is stronger than anticipated is more difficult to generate sales activity.
That being said.
I'd like to see improved sales throughout the rest of the here.
Switching to adapt to the Virtualized environment.
Actually gained momentum.
But isn't hurting opportunities currently available.
At family Heritage Health premiums increased 7% to $78 million health underwriting margins increased 5% $19 million.
So sales were down 20% to $14 million.
The average producing agent count for the second quarter was 1240 years.
15% from the here, who order and up 2% from the first quarter.
Producing agent count cutting into the core was 1224.
As I indicated on previous calls.
Listeners are very positive can do attitude and I'm confident they will continue to recruit and encourage agents to show.
And our direct to consumer division that worldwide.
Why premiums were up 8% to $235 million.
But life underwriting margin declined 20% to $28 million.
Right will further discuss the second quarter decline in memory immersion in his comments.
Net life sales were $49 million.
43% from a year ago quarter.
This is the largest sales quarter ever for direct to consumer.
Office in times of crisis highlights the need for basic life insurance protection and this is proven true was a pandemic.
Application activity sales were up across all direct to consumer channels.
Capabilities to build over the last several years allow showcases consumers online.
Have positioned us to capitalize on the opportunity.
Hi, My favorite protections are working families.
The United American General Agency health premiums increased 10% to $113 million.
Our margins increased 6% to $15 million and health sales were $12 million down, 20% compared with a year ago quarter.
Well, we are seeing improving individual Medicare supplement results over the last several weeks is always difficult to predict sales in this competitive marketplace.
Group Medicare shales are more volatile and are generally heavily weighted towards again as a year.
Well, there's still difficult to predict sales activity in this uncertain environment I will now provide for your projections based on knowledge of our business and the current trends we are seeing.
We expect to producing agent count for each agency is ending 2020 to begin the following ranges.
American income <unk>.
8550.
<unk> 8850.
Liberty National 2402 3100.
Family Heritage 1200 to 1004 Henry.
Net life sales for the full year 2020 are expected to be as follows.
Second income wise.
Class two an increase.
Yeah.
Liberty National.
<unk> decreased 8%.
An increase of 4%.
Direct to consumer.
An increase of 19%.
An increase of 23%.
Net health sales for fiscal year 2020 are expected to be as follows Liberty national.
Decrease of 14% to a decrease of 2%.
Family Heritage decreased 5% to an increase of 3%.
The United American individual Medicare separately.
They decreased 30% to flat.
Well now turn the call back of Harry.
Thanks, Larry.
Excess investment income, which we defined as net investment income that's required interest on that policy liabilities and debt.
$61 million at 5% decrease or with your core.
On a per share basis, reflecting the impact of our share repurchase program.
Excess investment income declined 2%.
But full year, we expect excess investment income in dollars to be down about 4% and be flat on a per share basis.
Now regarding investment yield in the second quarter, we invested $351 million in investment grade fixed maturities, primarily in the financial municipal and industrial sectors.
We invested at an average yield of 4.37 soon and average rating of BBB minus at an average life 23 years.
For the entire portfolio second quarter yield was 5.38% down 12 basis points from the yield in the second quarter 2019.
As of June 30, the portfolio yield was approximately 5.36%.
Invested assets or $18.2 billion, including $16.7 billion, a fixed maturities at amortized cost.
Oh, the fixed maturities.
<unk> point $9 billion or investment grade with an average writing a minus and below investment grade bonds or $772 million.
Year to $740 million at March 31st and the percentage of below investment grade bonds to fixed maturities is 4.6% compared to <unk>, 0.5% at March 31st.
Overall, the table portfolios write a triple B plus same as a year ago.
And we have net unrealized gains in the fixed maturity portfolio of $3 billion.
Bonds rated triple B or 56 pursuit fixed maturity portfolio.
Well this ratio was in line with yield bond market. It is hard relative to our peers.
However.
We have little or no exposure to higher risk assets. So she derivatives equities residential mortgages seal lows and other asset backed securities.
We believe that to Triple B Securities that we acquired provides the best risk adjusted and capital administered returns.
Due in large part to our unique ability hold securities to maturity.
Regardless of fluctuations in interest rates for equity markets.
He calls me a best along a key criteria and utilizing our best you process.
Has the ability of an issuer to survive multiple cycles.
This is particularly true in the energy sector.
Our energy portfolio is well.
First about across sub sectors and issuers.
It is heavily weighted towards issuers their lives vulnerable to depressed commodity prices.
As we discussed on our last call approximately 57% <unk> energy portfolio isn't isn't a midstream sector and 34% is the the exploration and production.
Less than 10% of our energy holdings are in oilfield service refinery in driller suckers.
The composition of Rice energy portfolio was essentially unchanged during the second quarter.
Is it fair value increased by approximately $320 million.
Well, we have no intent to increase our holdings in this sector, we're comfortable with our current energy holdings.
Finally, lower interest rates continue to pressure investment.
At the midpoint of our guidance, we're assuming an average new money rate of around 3.3% to 3.4% to the second half a year.
For the full year.
I would translate to an average new money rate of 3.76% compared to 4.47% for 2019.
Well, we would like to see our interest rates going forward low blood cancer drugs going to lower for longer interest rate environment.
Extended low interest rates will not impact the gap or statutory balance sheets under the current accounting rules since we sell non intrusive protection products.
Fortunately the impact of lower.
Definitely come is somewhat limited as we expect to have an average turnover of less than 2% for a year or investment portfolio for the next five years.
Now I'll turn the call them right for his comments on capital and liquidity.
Thanks, Gary first I want to spend a few minutes discussing the available liquidity and capital position at the parent company.
The parent ended the second quarter with liquid assets of approximately $635 million.
This amount is higher than normal do do year to date share repurchases of $139 million being less than the $280 million of excess cash flows available to the parents through June.
The $150 million, increasing commercial paper borrowings taken to enhance our liquidity position and.
The receipt of three the 300 million dollar term loan issued by members of our bank line.
The company did not repurchased any shares in the second quarter.
In addition to these liquid assets the parent company will still generate additional excess cash flow during the remainder of 2020.
Parent company's excess cash flow as we define it results primarily from the dividends received by the parents from its subsidiaries less the interest paid on debt and the dividends paid to globalize shareholders.
Keeping our common dividend rate at its current level for the remainder of this year.
We anticipate the parent company's excess cash flow for the remainder of the year to me in the range of 95 million to $105 million.
The us, including the roughly $635 million of liquid assets available at the end of the second quarter. We expect the parent company to have around $730 million to $740 million available during the remainder of this year.
I will discuss in a little more detail in just a few moments, but we believe this amount of available assets is more than necessary to support the targeted capital levels within our insurance operations.
Given that the parents still has ready access to the commercial paper market.
Ability to issue if necessary commercial paper through the government's new commercial paper funding facility.
And the ability to issue long term debt in the public debt markets, we have substantial flexibility over the remainder of the year.
Now regarding liquidity and capital levels at our insurance subsidiaries.
In the current environment, we have been keenly focused on liquidity and capital within our insurance operations.
With respect to liquidity, our insurance company operating cash flows continued to be very strong.
General, while we do expect higher coven related like claim payments over the course of the year. These higher claims are expected to be largely offset by higher premium collections and the lower health claim payments.
We do not see any issues with their ability to find all remaining dividends payable to the parent through the remainder of 2020, and we anticipate our insurance operations will generate enough excess cash flows to acquire over $650 million have invested assets to fund future policy obligations.
Now with respect to capital.
As discussed on previous calls global life targets, a consolidated company action level RBC ratio in the range of 300% to 320%.
At December 31st 2019, our consolidated RBC ratio was 318% near the high point of our range.
Taking into account the downgrades and credit losses that have occurred through the ended the second quarter. We estimate this ratio has declined slightly to approximately 312%.
At an RBC ratio, 312%, our insurance subsidiaries have approximately $60 million of capital over the amount required at the low end of our consolidated RBC target of 300%.
This excess capital along with a $730 million to $740 million of liquid assets that we expect to be available at the parent provide nearly $800 million of assets available to fund future capital needs.
As we discussed on the last call. The primary drivers of additional capital needs from the parent are lower statutory income to covert 19 related factors.
Lower statutory income due to investment portfolio default or other credit losses.
And investment downgrades that increase required capital.
At this time, we anticipate that our 2020 statutory income before any realized gains or losses will be approximately the same as 2019.
Thus, we believe our capital needs will be largely dictated by the amount of downgrades and future credit losses on our investments.
Estimate the potential impact of these items.
We have modeled several scenarios it take into account consensus views on the economic impact of the recession.
Strength and timing of the eventual recovery.
And a bottoms up application of such views on the particular holdings and our investment portfolio.
We have also analyzed transition and default rates as published by Moodys and evaluated the impact to our RBC ratios should we experienced the same transition in default rates as were experienced in 2001 in 2002.
As well as from 2008 to 2010.
Under these various scenarios, we estimate our RBC ratios would be reduced from year end 2019 levels in the range of 35 to 60 points over one or two years.
Requiring an additional $100 million to $230 million of capital to maintain a 300% RBC ratio.
Our base case assumes $60 million in total after tax credit losses.
Plus over $2.3 billion of downgrades to our fixed maturity portfolio.
Through the second quarter, we have experienced $31 million in losses, and $860 million of downgrades, mostly from category any I see one to any I see too.
The range of potential capital needs, it's consistent with the range indicated on our last call and as well below the amount of liquidity available at the parent company.
It is important to note to globalize statutory reserves are not negatively impacted by the low interest rates or the equity markets given our basic fix protection products.
Furthermore, the current interest rates do not have any impact on our statutory reserves given the strong underwriting margin in our products.
The aggregate.
Our statutory reserves are more than adequate under all cash flow testing scenarios.
Given the level of liquidity available, what our parent company versus the potential capital that may be needed with our insurance companies.
Anticipate being in a position to restart our share repurchase program during the third quarter at levels consistent with those expected at the beginning of the year.
At this time I'd like to provide a few comments relating to the impact of coven 19 on our second quarter results.
As noted by Larry life underwriting margins declined at both American income and direct to consumer during the quarter.
These declines were primarily due to higher coven 19 policy obligations.
During the quarter, we estimate that American income incurred an additional $7 million related to covert claims and the direct to consumer incurred an additional $11 million.
Absent these additional losses American incomes underwriting margin would've been 32.7% or premium for the quarter and would have grown by 4%.
In the direct to consumer distribution add since the estimated policy obligations due to coated their underwriting margin would have been 16.8% of premium for the quarter and would have grown by 3%.
In total for our life operations, we estimate that our total incurred losses from covert deaths in the second quarter were $22 million.
Absent these additional losses, our total life underwriting margin would've been approximately 27.4% or premium up 4.9% over the year ago quarter.
Finally, with respect to our earnings guidance for 2020.
We are projecting net operating income per share will be in the range of $6, an 80 cents to $7 enforce says for the year ended December 31st 2020.
$6, a 92 cents midpoint of this guidance reflects a two cents increase over the midpoint of our previous guidance of $6 a 90 cents.
The two sent increase at the midpoint is primarily attributable to lower borrowing cost associated with our short term debt.
As Gary previously noted at the midpoint of our guidance, we now expect our life premiums to grow in 2020 by around 5% and our total health premiums to grow by 6%.
Both higher than indicated our previous guidance.
Our total premium income as anticipated to be approximately 5% higher than 2019 levels.
Our last call we indicated the midpoint of our guidance assumed approximately $25 million of additional claims related to covert 19 on an assumption of around 80000 desks.
That was based on some early assessments of infections death rates and the ages impacted.
Since the first quarter more granular data regarding infection and projected deaths in various geographies has become available.
In addition, better projection models are available that project debt by state.
We have utilize these models along with our experience to date and apply them to our mix of business by state and the attained age is of our policyholders to refine our estimate.
We now estimate that in 2020, we will incur a cold and related life claims of approximately $2 million for every 10000 U.S. desks.
At the midpoint of our guidance, we estimate approximately $45 million of Kobin related life claims for the full year 2020.
These additional life claims are expected to reduce our 2020 earnings per share by approximately 33 cents on an after tax basis.
With respect to our health claims due to lower than expected utilization rates. We now estimate that our supplemental health benefits will be approximately $8 million lower than what we expected at the beginning of the year.
Taking into account the higher coated life obligations, we expect to life underwriting margin for 2020 as a percentage of premium to be approximately 26.1% at our midpoint down from the 27.4% expected on our last call.
Absent the higher policy obligations, the life underwriting margin percentage would be similar to the percentage for the full year 2019.
The health underwriting margin as a percentage of premium for 2022, an increase to approximately 23.2%.
Those are my comments I will now turn the call back to Larry. Thank you Frank as always our comments, we want to open the call up for questions.
If you would like to ask a question. He May press star one on your telephone keypad.
If you are using AI speakerphone. Please ensure you meet function is turned off to allow your signals to reach our equipment. If at any point. It was like turn make yourself from the King you May proceed started.
Again, Please press star one to ask a question.
We will take our first question some aircraft.
Well the Thomas research.
Hi, Thank you, hoping you could provide a bit more detail on the health results this quarter and I never just gave some detail, but he could give little bit more on how much impact you did see from direct cobot related claims and how much benefit you saw from lower normal course activity and am I correct from your comments that you're assuming.
The lower levels of utilization continue through the second half at the year.
Hi, Eric we [noise], we experienced about $900000 causes intact and second quarter now that will grow was towards the end the year, we're expecting to be closer to.
$8 million a pause it on the run remainder of the year.
Excluding I'm, excluding the 900000, so for the <unk> for the second quarter.
Or policy obligation.
It's been up slightly and but that's offset a little bit by the fact, we had done a lower non for commissions and amortization.
So.
Again, it had the yeah, Chris will impact in this quarter, we'll see more as we go through the remainder of the year.
Got it and that's an 8 million dollar net benefit so offsetting any higher claims and with the better utilization.
Right.
Okay. Thank you and then.
On the buyback just to make sure I'm thinking of it correctly when you say resuming to the level that you would have expected at the beginning of the year does that mean that for 2020 overall you expect to get to the same level that you had anticipated coming into the year and realizing you did more in the in the first quarter of the year, there would be sort of.
Normal run rate in Threeq and Fourq you.
Yeah, Eric we anticipate starting with repurchased 12, it's probably that 90 to 100 million dollar per quarter range, That's where you know at the beginning of the year, we would have thought.
Yeah, we'd be on kind of on a per quarter basis, and then following our historical practice.
We would our repurchases normally occur over time and somewhat ratable over the course of the quarter and then <unk> remember that we'd be under no mandate you know to spend any specified amounts that really gives us the flexibility to slow it down if economic conditions, where did deteriorate over the course of the of the remainder of the year.
Or if.
Everything.
Looks good if you will by the end of the year in and the economy is not is performing basically as consensus with indicated.
You know we do think ultimately that are the total level of repurchases by the ended the year should be pretty close to what we had thought somewhere in that $375 million to $385 million of excess cash flow.
That we would have for 2020, given that we've already spent $140 million enough in the first quarter, we could see us if everything works out that we'd be at that 200 not to exceed that 240 million dollar level.
Got it thank you very much.
Thank you we will take our next question from Ryan Krueger of Kate B.W.
Hi, Thanks, good morning.
In terms of your short term debt I guess that at what point would you give it given how low.
Right right sorry spreads at this point I will point would you consider issuing long term debt.
And repaying some of the short term debt for more permanent capital solution [laughter].
Yeah, Hi, Ryan Yes. It is it's a good question Ed and the debt capital markets really are very favorable, but right now and obviously rates.
I have come down significantly.
Over the last couple of months, we have been in quite a few conversations with several of our bankers and assuming that the market conditions do.
Continue to be favorable we will be considering issuing some long term senior debt here in the third quarter.
Or at least you know.
Relatively soon and then we would anticipate using the proceeds of that too.
Refinance that 300 million dollar term loan that we did take out earlier in the year.
Got it thanks.
[noise] and then I guess on just on a on.
On the direct consumer business, given given the level of growth you're experiencing at this point what would you expect any I'm curious any positive from a somewhat scale standpoint, if that if that continues to grow at this level.
But that's a question is.
I'd ask it this way for direct to consumer business.
Our marketing costs are mostly fixed.
Oh, great sales or greater as always planned generally provide additional margin [laughter].
You should help offset the higher mortality costs.
Got it thank you.
Yes.
Thank you we will take or next question from John Barnidge as type or same right.
Yeah, Hi, what percent of Insureds went through a job loss during the quarter.
I don't think we have that information available to say what percentage.
Sure sure we know is to.
Our persistency was actually better than expected.
During the quarter.
The other thing I would add to that is that it was you know as Larry said, we've actually seen fewer fewer claims and greater persistency, which you know in our minds kind of reiterate.
You know kind of view of the importance of life insurance to to our policy holders, but we also saw the situation where our policyholders we're accelerating their premiums so rather than seeing higher lapses and we've actually seen acceleration of premiums people paying a little bit ahead of time.
You know on their policies.
Okay, and then my follow up.
Given the challenges being seen in Texas with cold, but right now can you remind me what percent of your enforce likes businesses in that state.
Oh.
I don't think I have that in front me.
We have to get back with you on that one.
Alright, great. Thanks.
Thank you.
We'll take our next question from Tom Gallagher Evercore.
Thanks, how how protecting against a sequential adverse development.
Like shelves and the direct to consumer business during the pandemic I know a number of other company.
Admitted bleed or more selling to the fluent market for daves.
Pretty dramatically slowed sales deliberately so just curious how you're thinking about that I know you mentioned, there's been some changes to underwriting.
And then I guess, just a related question of that.
It looks like the majority of cold related impacts.
Were felt in that segment or have you looked at whether any of the recent sales had had been the cause of the the near term mortality or is it more old older policies.
This is Larry we monitor the incoming insurance applications.
Indications or change in the risk profile.
As far as current includes things like age a matter of insurance and geography at this point, we've not seen a material change and the Roche risk profile, we're very comfortable with the sales today and we still have the ability to put other marketing or any limitations in place should we observed changes in the coming applications that could have an.
Negative effect on our profitability.
And Tom but as far as the cobot claims there they're not no policies are issued in 2020 <unk> very low issued in 2009 tune. The claims it really been spread out through policies issued and prior to 2009, two fairly evenly throughout the years, but it hadn't come from them either.
2019 or 20.
Got you and what what or.
You mentioned you implemented underwriting changes and he can you elaborate a bit is as to what what you've changed on the underwriting side.
On a direct to consumer.
We've limited as a matter of insurance and the operators.
So discontinued some add on insurance and the second raises.
In.
Additionally, we have temporarily stopped fisher and policies they applicants with certain underlying health conditions. So thats three of the Pacific items, we've taken steps in our underwriting process.
Okay. Thanks, and then.
20 to 22 million of adverse coded mortality in the quarter that you highlighted can you can you quantify how much of that was claims received versus I'd be an art.
[noise], Yeah, what happened.
Yep.
Isn't that I'm, sorry, guys out of the 22 million Yeah, we've paid roughly $10 million to $10.5 million that has been paid in a in actual cash.
Okay. Thank you.
Thank you.
As a reminder, if he would like to ask a question you May press Star one now.
We'll take our next question from Andrew quicker when its credit Suisse [laughter].
Hey, good morning.
I wanted to ask first about the.
Direct to consumer sales outlook, I think you're guiding to 19% to 23% three year.
After a a 43% or order that you had year over year.
So why not go a little bit higher on that sales growth outlook.
Well if you remember in the first quarter, we were basically flat with 43%.
This quarter.
That's because look at our different channels. When we think sales would be of across all channels in the third and fourth quarter.
Yes, I think the sales increases will be is robust and the third and fourth quarters. They were in the second quarter.
Got it got it got it Okay, and then you know with the helped utilization and it looks like the margins were pretty stable year over year, which you know and your guidance seems to imply that utilization, even get slow or where is.
I guess can say.
At the utilization might pick up just given that the second quarter or you know policyholders probably couldn't get to the doctor's office. They may have had issues filing claims. So why why might you think that the a underwriting margin and health I should improve as we go through the balance of the year.
Well Tom [noise].
Oh sitting.
Do you.
Didn't it will give some toga claims is and the mens business, we've seen increasing claims there.
<unk>, Yeah, we noted that last year in 2019.
We we have requested rate increases will go hard claims continued leased up through the first quarter.
This year and and we haven't yet gotten the full benefit right increases so.
The combination those two things has caused us to see increasing the policy obligations on the bed subsystems and that's offsetting a little bit of the favorable we're going to come to code.
Well still have a slight benefit but it wont be it won't be the pool code into it.
I see I see and then maybe.
With regard to.
Your guidance since Sixeighty to seven old school.
Hi, you've really narrowed in the ban the midpoint is slightly higher.
You know it did the quarter with great I mean, just so much stability in so many different places.
You know, what's giving you that confidence to to narrow the band so much on on the guidance.
Yeah, we really just do you know it feel much better about the where the the impact of the Kobin related claims might be we're able to do just.
Better job modeling to where we have a a decent sense of where that will will turn out for us. So.
You know as we we do think about the the range you know we kinda typically have a 10 set or so range. You know this time of the on this particular call kind of historically, how we are expanding its greater than what we typically have just because of some of the uncertainty around the ultimate covered life claims, but at this point it.
Time of the year, new money rates on our investments you don't have that much impact on the overall GAAP earnings.
Out of a total sales between now and them does not have is as significantly impact. So our primary there variable really is.
Around what happens with our children claims at this point in time.
Got it.
Maybe is drilling one last question recruiting going forward you you mentioned on the call that you're seeing a lot of high quality recruits you know what are you thinking as we kind of get into the back half of the year. I mean can we see the kind of equipment increases that you saw in that first quarter.
[noise] huh.
Year to date recruiting American income, it's up about 17%.
And what's really driving that is the not just the unemployment the underemployed, you're never people are unemployed or if it becomes a better opportunity.
Sure the second half of the here I think we'll have a strong recruiting.
And all three agencies the development of [laughter].
Virtual recruiting.
There's really another impetus weve developed commercial recruiting is tricked into recruiting process.
And all three agencies, because we can reach more people.
But are interested in a clearer and the virtual certainly it's been a positive because it or appeals to more people because they have more flexibility on when they said appointment should make presentations.
The second half the here, we'll have strong recruiting just like the second quarter.
Excellent. Thank you so much.
Thank you as a reminder, if he would like to ask a question you May Press Star one now they will take our next question from to make you aware of JP Morgan.
Hi, Good morning, I had a question first on field through the agency channels can you talk about what.
Positive quarter sort of progress so at American income Liberty and family Heritage as well like did you see an improvement in their sales as you went through the second quarter, where they feel these stable throughout the course.
And we saw real improvement as we work through the quarter because if we ended the quarter.
Really for all age or something that's new wages for all ages or make the transition for in person sales to virtual sales.
Yes that was easiest at American income [laughter], because they so individual products in urban areas. He was if you didn't or non union ways.
The transition there and a virtual sales necessary training, having further quickly.
Liberty National family Heritage.
They don't have the same resources, there at least where she tricia, they're more and the presentation of in progression.
It's a little slower process, but by the.
Last two weeks of the second quarter, which I submitted business roughly equal to what it was for the same period of time in 2019.
Yeah, and then on direct response on much of a benefit do you think you're getting from people just seeing home and not being sort of comfortable meeting with an agent and seeing high response rates horses, maybe more of a sustainable change and response rates and sales trends in that business.
Well the Botanic really increased awareness of the for life insurance.
And the increases across all four channels. It it really we could immediately meet at noon need because there were constrained by having a train agents or change Rivershore investment we've made over the last several years.
Tristan the Internet and our inbound phone call center.
It's really paid off because they immediately we are going to meet the increased demand for life insurance.
And then just lastly, it doesn't seem like the M. best and Doug.
Action last week on the downgrades, having an impact on how you're thinking about capital but.
Do you see that impacting either your business in anyway.
Or has that gone into your thinking in terms of capital deployment.
Yeah, Jim is it really hasn't too much we really don't think that will have.
That much effect on our overall marketing efforts just given the kind of the nature of our products and then as you kind of mentioned it really won't have an impact on cost to capital at all so we're not.
Well I would rather have had it not happen, we really don't see it having a meaningful impact our business.
Thank you [noise].
[noise] fix it.
One thing I'd like to follow up on Toms question regarding amount of exposure to the state of Texas.
Just come across that we're about 75% of our total face amount.
Of our policies in force our within the state of Texas.
That's very high company at American income, Texas is less important than some other stage.
Overall, I agree with that but Texas I believe is the largest state for director Shirley.
Don't have a breakdown by company.
Thank you I saw a reminder, if you have a question you May press star one.
At this time, we have nice persons in Q.
All right [noise].
[noise]. Thank you, ladies and gentlemen for your participation in today's call you may now disconnect.
[music].