Q2 2020 CNO Financial Group Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the CNO Financial Group second quarter 2020 earnings Conference call.
This time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session to ask a question. During the fashion you want me to press Star one on your telephone if you require any further assistance. Please press star Zero I would now like became the conference over to your Speaker today, Jennifer Child, Vice President of Investor Relations. Please go ahead.
Thank you operator, good morning, and thank you for joining us on CNO financial group's second quarter 2020 links conference call. Today's presentation will include remarks from Gary There's plenty Chief Executive Officer, and Paul Mcdonough, Chief Financial Officer.
Following the presentation. We will also have several other business leaders available for the question and answer period. During this conference call, we will be referring to information contained in yesterday's press release, you can obtain the release by visiting the media section of our web site at CNO Inc. Dotcom. This mornings presentation is also avail.
Well in the Investor section of our website and was filed in a form 8-K yesterday.
I have to file our form 10-Q and posted on our website on or before August seven.
Let me remind you that any forward looking statements. We make today are subject to a number of factors, which may cause actual results to be materially different than those contemplated by the forward looking statement.
Today's presentation contains a number of non-GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures you'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix.
Other presentations, we will be making performance comparisons and unless otherwise specified any comparisons made we'll be referring to changes between second quarter 2019 in second quarter, 2020, and with that I'll turn the call over to Gary.
[noise] good morning, everyone. Thank you for joining us.
The country continues to face unprecedented challenges brought on by the coldest 19 pandemic.
The health crisis, and economic disruption caused by the virus are significant and as exacted real substantial human tool.
We continue to be grateful to those who worked tirelessly to contain the pandemic and provide a central services.
We keep in our thoughts and prayers those who have lost the loved one to this virus or are you able and recovery.
Well the shape of the economic recovery is uncertain, we remain focused on serving all of our stakeholders.
Last quarter, we took measures to protect our workforce.
At a time when many American workers are unemployed, we plugs that there will be no cobot related layoffs in 2020.
We introduced financial support programs for exclusive agents, who have seen their businesses disrupted.
We also added additional physical financial and mental wellbeing resources to eligible associates and their families.
In March we move 97% of our associates to work remotely.
By adapting quickly our customer service and agent support teams have been able to deliver consistent service with minimal disruption.
Our exclusive eight insurance agents continue to use virtual selling and digital tools to conduct quite consultations and make product recommendations to customers.
[noise] consumers, who wish to meet with an agent in person can request an appointment.
In person appointments are conducted in accordance with each state's physical distancing guidelines.
The majority of our associates and agents continue we'll continue to work remotely through at least mid September.
The cobot 19 environment evolves state by state because it's too early to projects beyond that.
As we discussed last quarter sparked by the implications of a pandemic, we'd beginning re examining the way in which we do business and accelerating our strategic plans in certain areas.
These include investments in technology.
Distribution enhancements and improvements to the way, we prospect and reach customers.
We're also re imagining on workplace, we have adapted extremely well to the next normal.
Successfully pivoted to a companywide remote working model.
As a result, we are rethinking our office footprint and remote technologies for the future in order to further <unk> support associate productivity and worked flexibility.
I'd like to now turn to the performance of our businesses.
I'm very pleased with our second quarter operating results, which demonstrate the resiliency of our business model, including strong premium collection.
The adaptability of our operations and the benefits of our diverse protection oriented portfolio.
[noise], we continue to operate from a position of strength in today's unprecedented conditions. Our sales have recovered from their April lows and continue to show steady improvement each month.
We're not seeing excessive lapse rates from our middle market customers.
[noise] product margins were robust and discretionary spending was strictly controlled.
Our capital and liquidity positions remain strong.
We ended the quarter with an RBC ratio of 405% good $208 million in cash at the holding company.
These levels are after returning $47 million to shareholder, including $30 million and stock buybacks.
Turning to slide four.
Operating earnings were up 4% and operating earnings per share were up 15%.
Excluding significant items operating earnings per share were down 10% of 43 cents as compared to 48 cents in the prior year period.
The decline was driven by a 21 cents impact from lower investment income not allocated to products, mostly within our alternatives portfolio.
Our second quarter strength was attributable largely to very strong product margins.
Expense discipline, and a lower share count due to share repurchases.
In a challenging quarter I was pleased to see that the benefits of our recent transformation continue to bear fruit.
For example in the consumer Division, we're moving forward with our integrated purchase experience, where consumers move seamlessly between telesales and exclusive agents.
This blend of virtual and local service resulted in higher conversion rates without any degradation to the direct to consumer business.
We expect to continue to reduce the barriers between our distribution channels as we advance towards a more fully integrated model.
I will speak more to this topic in our consumer Division update.
Turning to our growth growth scorecard on slide five.
Life sales were up nicely fueled by strong direct to consumer growth.
Health and long term care sales were down by double digits. As these products are typically sold in person through exclusive agents.
Overall insurance sales were down 19% this quarter as compared to growth of 4% in the second quarter of 29 <unk>.
Im sure its collected premiums were up 1%, largely reflecting strong persistency and cumulative growth over the past year in life health and long term care.
Consistent with industry wide performance annuity collected premiums were down 29% over the prior period.
We continue to have considerable flexibility to reduce crediting rates as market conditions warrant.
Understanding that our sales would be pressured we exercised continued pricing discipline during the second quarter.
Our ability to adjust crediting rates enables us to balance sales growth and profitability.
As has been the case, we will accept lower sales to ensure that we are putting business on our books that meets our return thresholds.
We noted in our press release that we had a favorable unlocking impact on our fixed index annuities from lowering our projected long term new money rates to a level 4%.
There are two key points about this unlocking impact that I want to know.
First the positive impact on annuities reflects our attention to continue optimizing the balance between maintaining spreads and providing value to our customers.
Second lower in future interest rates had no current earnings impact to our traditional life and health businesses, including LTC.
This is evidenced of the healthy margins, we have on these lines of business.
Paul will provide a more detailed explanation.
Annuity account balances were up 4% and client assets in our broker dealer were up 17%.
The number of broker dealer count was up 10% and the average account size was up 7%.
[laughter] fee revenue was up 31% to 20 million $21 million largely reflecting growth in third party revenues predominantly from Medicare advantage policies.
The increase in assets in our broker dealer and revenue growth from what benefits design.
Turning to our consumer business on slide six.
Cobot 19 crisis has underscored the crucial need for insurance products, among our consumer base.
Sales of more straightforward products, such as life insurance remains strong in the second quarter sales.
Sales of our more sophisticated products that historically relied on age on face to face agent meetings, including our suite of health products were more challenge.
Overall life sales within the consumer division were up 27% to $47 million.
Our direct to consumer life sales were up 52% year over year to a record $30 million.
The manner in which Thislife business was developed and fulfilled highlights the benefits of our recent transformation.
First the bulk of it originated from consumers, who contacted us wanting to make a direct purchase.
Second while most of these leads were worked by our total agents more and more of these prospects are being routed often within days to our exclusive field agents.
Our total agents are efficient and making its sale when a consumer is ready to act, whereas our field agents are able to make a local connection and form an ongoing relationship.
Once the consumer is ready to move forward, our field agents might complete the sale over the phone essentially acting as an extension of our tell agency.
Or they can follow up in person, which tends to lead to a more enduring relationship.
During the second quarter, roughly 15% of all field written policies came as a result of this program.
It is also resulted in higher overall lead conversion rates and lower marketing cost per application written.
Our ability to provide customers with this type of hybrid experience and integrated blend of virtual and local service is key to how we think about serving our market. It allows us to build deeper more meaningful relationships with our clients and establish a level of trust that is difficult to duplicate without feet on the street or local agents.
Turning to our health products.
Sales were down more than 70% in April but progressively improved over the course of the quarter as agents and customers became more comfortable with virtual appointments.
For the month of July health sales were flat and we expect this improvement to continue through the balance of the year.
Similar to what we're accomplishing with our life business in terms of providing consumers with an omni channel sales and service experience, we're implementing several initiatives on the health side.
First we are enabling our exclusive field agents to represent all CNO products, regardless of the underwriting entity.
This expansion began last year with our short term care products.
Second we launched a direct to consumer marketing program around our active care critical illness product.
This is a product that is underwritten by Washington National and historically was sold only by that segment.
It is now being marketed under the colonial Penn brand with leads being routed to bankers life stages.
Finally later this year, we plan to be more active in the direct marketing of our Medicare products.
Similar to how we manage life insurance leads we will leverage the entirety of our agent force to fulfill demand.
Overall agent retention remained relatively stable throughout the quarter, despite the difficult external conditions.
Recall that prior to the pandemic, we delivered seven consecutive quarters of growth in our producing agent college or agents, who have closed at sale during the month.
As a result of shelter in place in physical distancing restrictions early in the quarter are producing agent count was down 12%.
However, we have seen consistent improvement throughout the period.
By the end of June was down 6% and through July it was down only 2%.
Consistent with our experience in prior periods of job disruption, we expect the current environment to create a tailwind for our new agent recruiting efforts. However, as we highlighted last quarter in March and April our efforts to license new agents were stymied by the closure of state insurance licensing centers.
In most cases testing centers have fully reopened.
As a result, our recruiting efforts late in the second quarter and through July have improved significantly.
Turning to slide seven in our Worksite business.
As a reminder, our Worksite business began 2020 with significant momentum we were on track to deliver another double digit quarter before the pandemic setting.
Understandably employers quickly diverted their attention to covert 19 crisis response, they limited office visitation and in most cases closed offices altogether.
Severely pressured our worksite sales, which have historically relied heavily on face to face contact that the worksite.
As a result, worksite sales were down $9 million or 69%.
We responded to the shutdown by arming our agents with virtual sales tools and training. They are now actively engaging with existing employer groups and employees to drive incremental sales.
We did see continued strength within our smaller independent agent sales with good success in the postal market and other public administration entities. These sales were up 29%, although still relatively small.
Well new sales have been soft the profile of our existing employer groups has translated to very strong levels of employee persistency as a reminder, more than 70% of our covered employee base are employed by highly stable entities, including state and local governments.
Primary and secondary schools utilities and other service organizations that are less likely to face long term impacts from the pandemic.
Well benefit design or WBB, our benefits administration technology platform continued to perform well under these difficult circumstances with fee revenue up 1%.
The integration of WBB remains on track, including the anticipated launch of additional online enrollment capabilities in the fourth quarter.
As we highlighted last quarter, we expect a steeper path to recovery within the Worksite business.
Turning to slide eight as I mentioned, we returned $47 million to shareholders in the second quarter, including 30 million share buybacks to be clear, we had the capacity to purchase significantly more shares during the quarter.
We made a conscious and well consider decision to take a measured approach given the considerable economic uncertainty that still exists.
We believe that we will have the continued capacity to repurchase shares in the second half of the year, but intend to remain remain prudent as we carefully monitor the evolving circumstances.
Before I turn it over to Paul I'd like to make a few comments on the central's killings of George Floyd and too many others.
This grief and anger is echoed in communities across the world, including cities and CNO calls home.
As a company people are at the center of everything we do.
We stand firmly together in support of our colleagues and customers, who are Black African American and people of color.
At CNO, we take diversity equity and inclusion very seriously.
In 2018, we created a diversity equity and inclusion program to foster an encouraging more inclusive work environment.
In June of this year, we added a full time leader to support Cnos ongoing initiatives could develop an embedded these principles across our organization and advanced the important work of our diversity Council.
I want to take this opportunity to thank our CNO associates.
Led by our business resource groups in our diversity Council associates from leaders have engaged an important.
Honest dialogue.
On race in America in the workplace.
In recognition of the hard work and commitment to our associates CNO was named among the best imports for diversity in 2020 by Forbes magazine.
Well Im proud of the progress we made as an organization there's still much work to be done.
We had CNO hope to meaningfully contribute to real and lasting change.
And with that I'll turn it over to Paul.
Thanks area and good morning, everyone.
Ill begin by providing a bit more detail on our second quarter results and then share our outlook for the balance of the year.
Turning to the financial highlights on slide nine.
As Gary mentioned operating earnings per share were up 15%.
Fitting from two significant items, which I will describe in a moment.
And continued strong free cash flow funding share repurchases that reduced our share count by 10% year over year.
The first significant item was the impact of an actuarial unlocking exercise that we completed in the second quarter.
We normally make these sorts of adjustments in the fourth quarter.
But given market conditions and our outlook, we thought it was appropriate to do so in the second quarter of this year.
Specifically, we reduced our new money rate assumption to 4% for both initial and ultimate new money rates.
That compares to our previous assumption of 4% in 2020.
4.25% in 21, 4.5% in 22, and an average ultimate rate of 5.38%.
In addition, with lower new money rates, we assumed we will adjust the credited rates on our interest sensitive products to the extent allowable overtime in order to optimize the balance between the spread that we earn on those products and the value we provide to consumers.
The lower new money rate had an adverse impact on our annuities and interest sensitive life products.
In the amount of approximately $46 million.
The lower participation rates on our fixed index annuity had a favorable impact of about $92 million, reflecting lower future option costs.
Which lowers the reserve related to those costs, resulting in a net 46 million dollar favorable impact in the quarter from unlocking.
It's worth noting that the unlocking had no earnings impact in our traditional life health and long term care products as the impact on those products was absorbed by the healthy reserve margins in those businesses.
The second significant item in the quarter was $23.5 million increase in our liability for claims under the previously disclosed global resolution agreement that we entered into in November 2018.
Under this agreement of third party Auditor is acting on behalf of 41 states in the district of Columbia to identify unclaimed benefits from deceased Insureds and contract holders for benefits are payable pursuant to unclaimed property laws.
We received additional information from the third party auditor, we verified and process during the quarter, allowing us to more accurately estimated ultimate liability under this agreement.
Excluding these two significant items insurance margin and expenses improved versus the prior year, but investment income declined driven by the change in investment income from alternative investments and calls and Prepays driving an overall decline in operating income.
I will elaborate on insurance margin and investments in a moment regarding expenses.
Allocated expenses decreased by 7 million or 5% year over year, driven by the Ikea restructuring, we announced last fall as well as decreased travel and marketing related expenses.
Expenses not allocated to products, excluding the significant items decreased by 5 million or 25% driven by declines and legal and other corporate expense.
As we mentioned last quarter, we continue to reconsider our office footprint that business travel needs and expect to generate significant incremental cost savings in those areas over the next several years.
[laughter].
In the second half of this year as Gary mentioned, we're planning incremental investments to better position the company for the future.
These investments will put pressure on near term expenses.
We now expect expenses in the second half of 2020, excluding significant items to be flat relative to 2019 levels.
Operating return on equity excluding significant items was 10.5% through June 32020, compared to 10.9% in the prior year period, both on a trailing 12 month basis with the decrease driven primarily by a decline in net income from alternative investment.
Regarding non operating income market conditions in the quarter at a modest net favorable impact of $3 million or two cents per share.
Turning to slide 10, and our product level results.
We continue to benefit from a diverse product offering with each product contributing meaningfully to earnings.
In the second quarter total insurance margin, excluding significant items was up 10.4 million or 5% over the prior year period with growth in the annuity health and long term care lines offset by a decrease in the life margin.
Our life margin reflects a $14 million adverse mortality impact related to covert 19.
This is a bit higher than we had estimated in our previous outlook, reflecting higher you at that.
Largely offset by a smaller impact per day.
The adverse economic conditions created by covered 19 did not have materially impact in our life health in long term care premium collections during the second quarter.
Adjusting for state mandated extended last period.
Systems the rates in our health and long term care businesses were generally in line with normal expectations.
The extended Grace periods, however, prevented us from lapsing policies that would otherwise have lapsed, causing us to carry those reserves rather than release them.
This had an adverse impact on our supplemental health margins in particular.
We would expect this impact to reverse when these extended grace periods expire.
We did see some modestly favorable trends and persistency in our life and annuity businesses.
Which we attribute at least in part to customers desire to maintain protection oriented coverage and savings during these uncertain time.
Due to physical dispensing practices related to covert 19.
Consumers deferred medical end or long term care treatments.
As a result, we saw significant drop and paid claims in the second quarter in or how long term care business.
We expect some portion of this trend to reverse in the subsequent quarter as and when physical dispensing practices are relax.
Within our annuities business, we saw favorable mortality in our other annuities block, which translated to $10 million favorable impacts.
This was not covered related but instead resulted from a handful of determinations on large structured settlement policies.
While terminations on these large policies do occur from time to time, we would not expect similar impacts to recur each quarter.
Turning to slide 11 than our investment results.
Investment income allocated to products increased by 2 million or 1%, reflecting a 4% increase.
The net insurance liabilities.
Partially offset by a 16 basis point year over year decline in the average yield on those investments.
4.92%.
Sequentially, the average yield declined five basis points consistent with our prior guidance.
Investment income not allocated to products decreased year over year by $40.1 million driven by unfavorable results from alternative investments into 2020 period compared to gains in the 2019 period as well as lower call in prepayment income.
Recall that we record or alternative investments results on a quarter lag. So results recognized in the second quarter reflect market conditions from the first quarter when the S&P was down 20%.
We may see some improvement in the third quarter, reflecting equity market recovery in the second quarter.
Our new money rate of 4.49% was down nine basis points year over year and up three basis points sequentially.
This reflects $920 million and funds invested in assets with a single a average rating at an average duration 8.8 years.
Turning to slide 12, and an overview of our investment portfolio.
At quarter end, our invested assets for $26 billion up 6% year over year.
Approximately 96% of our fixed maturity portfolio is investment grade rated with an average rating a single layer.
Triple B allocation comprised 41% are investment grade holdings compared to 39% year ago.
The impact of ratings migration has not been significant we initially projected.
[laughter].
As you can see on page 24 of the appendix to our earnings presentation. We remain under invested in sectors generally considered to be high risk in the context of the pandemic, including energy Airlines gaming hotels, nonessential retail and restaurants.
Fine further detail on our investment portfolio in the appendix to our presentation.
Turning to slide 13.
We continue to generate strong free cash flow to the holding company in the second quarter with excess cash flow of $91 million, 114% of operating income this quarter.
This compares to 82 million in the prior period.
As Gary mentioned, we returned $47.4 million to shareholders in the quarter, including dividends at 17.4 million and share repurchases of 30 million.
And to reiterate even under our adverse case scenario, we expect to have the capacity to continue to repurchase a modest level of shares in the second half of 2020 should we believe conditions permit.
Turning to slide 14.
At quarter end, our consolidated RBC ratio was 405% down slightly from four away at year end 2019, and modestly above our targeted range of 375 400.
Our leverage ratio at 23.6% remains within our targeted range of 22 and a half to 25.
Our holdco liquidity of 208 million was comfortably above our target minimum of 100 150 million.
We also had over 300 million of operating company cash cash equivalents at quarter end.
As a reminder, we have an undrawn $250 million credit facility with a 100 million dollar accordion feature and have no debt maturities prior to 2025.
In January and best affirmed our investment grade rating and stable outlook.
More recently Fitch and S&P also affirmed our investment grade ratings and stable outlook, both in the context of various pandemic related stresses.
Turning to slide 15, and our outlook for the remainder of 2020.
You have any ongoing uncertainty related to how the covert 19 pandemic will play out.
And the continued economic impact it will have.
We continue to model a range of potential outcomes for our business.
The purpose of this exercise is not to predict certain outcomes, but to develop a range of potential outcomes and manage capital and liquidity in the context of more adverse outcomes within that range.
We most recently updated our model in early July applying based and adverse scenarios that are in alignment with certain rating agency assumptions and consistent with past financial crises.
The scenarios integrate assumptions about covert 19 infection rates and death rate.
With associated economic impacts, including the macroeconomic variables and investment impacts.
We then develop their own financial projections in the context of those broader underlying assumptions.
From a topline perspective, and our base case, we expect a continuation of the positive momentum we demonstrated in the second quarter.
As additional data points in July direct to consumer sales were up 41%.
Sumer life and health sales in total were up 20%.
Worksite life and health sales in total were down 52%.
And annuity sales were down 13%.
In our adverse case sales are certainly more challenged.
From a bottom line perspective in our base case earnings in the second half of the year are expected to be down compared to the prior year driven primarily by the expected net mortality impact of $130000 per 1000, U.S. covert 19 debt.
Expenses in total are expected to be flat to last year, despite accelerating investments to position the company better for the future.
Which is a sign of the effectiveness of our expense reduction work to date and our continued focus on managing expenses.
Investment income not allocated the product is also expected to be generally flat.
The base case is not necessarily our best estimate, but rather one end of the range of outcomes from our modeling.
There is certainly downside risks to this case represented by the adverse case in particular, but there is also.
Upside potential primarily with respect to the morbidity impacts of covert 19, which we have modeled as a neutral.
From a capital and liquidity perspective, even in the adverse case.
We expect to maintain our capital and liquidity targets.
Maintain our quarterly dividend to shareholders and have the capacity to continue modest levels and share repurchases.
And with that I'll turn it back to Gary.
Thanks, Paul looking at Slide 16 and 17.
Despite many recent encouraging data points, we still say significant uncertainty surrounding the future path of the pandemic and the ultimate economic recovery.
We recognize that cobot is creating a next normal that will permanently changed many aspects of everyday life and shape future consumer expectations.
The transformative steps, we've taken we're taking to meet.
Customers, when and where they want to purchase insurance is preparing us for tomorrow's changing environment.
We have proven we can successfully navigate change and serve all of our stakeholders from a position of strength.
We continue to benefit from the actions we've taken over the last several years to diversify our business.
Strengthen our balance sheet and manage risk in our investment portfolio.
This has positioned us well to whether a number of potential adverse scenarios.
We remain focused on supporting our customers associates and communities. We will continue to operate the enterprise prudently and compassion.
To everyone on the call into all our shareholders. Please stay healthy and please stay safe.
Thank you for your interest in and support of CNO Financial group.
We will now open it up for questions operator.
Thank you as a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press the pound rehash team. Please standby when we come pilots una roster.
Our first question comes from the line Randy Binner from B. Riley Your line is open.
Hey, good morning.
I just hasn't won on the assumption review, Paul I think you kind of outlined.
Yes, Oh, the J curve of.
Different return expectations in the investment portfolio.
Could you just review kind of where those are out over time and what the ultimate is and then kind of how that compares to the current new money return.
Sure.
Good morning, Danny.
So we changed our are both initial and ultimate new money rates.
Rate assumptions to 4%.
And that compares to the previous assumption of 4% in the current year for in a quarter next year and four and a half pinpoint okay do and so just for forever.
For forever, yes, as compared to.
The four important quarter point happened ultimate new money rate of 5.38% so very meaningful.
Decrease in the assumption.
And and so so you're kind of drop in drop in whole that 4.0% and then the whereas whereas the money getting put to work right now.
Yes, so the the new money rate in a in the current period was actually higher than 4%.
4.29% I believe.
And that was flat.
A couple of things number one in the early part of the quarter.
Early April there was still a fair amount of volatility that presented.
Attractive opportunities for someone who could be patient and opportunistic and that that fit our profile.
So Eric and his team we're able to.
Make purchases that at attractive valuations generating attractive yields, but if you look at the profile of what we invested in which is summarized on page 24 of the earnings call deck, you can see that it's its primarily in high quality investment grade.
Fitting nicely into our asset liability matching.
You know process.
And so we don't necessarily think that that that represents.
You know an opportunity in the second half.
ER or certainly going going forward excuse me I Misspoke guard, our new money rate in the quarter was not four to nine it was 449.
Okay. Thank you and then just one more I'm not life sales and kind of how that was supported by the that the structural transformation process.
I guess I heard that incoming leads helped drive the result, but can you can you flush that out a little bit more because the result was good but I guess I'm not entirely clear on on how the structural change.
Supported supported that result.
Sure Randy This is Gary Thanks for the question. So I guess I'll describe what we've done at a high level and you can tell me that addresses your concerns. So if you'll recall prior to the transformation. We really operated with three very separate businesses and there were areas of collaboration I don't want to make it sound like there were no areas, but but.
Certainly not to the extent we have now we have changed the way we hand off leads to our exclusive agent. So when a consumer sees a commercial and or some type something that interest time online or on TV or what have you and when they reach out to us either online or through the phone we historically.
We would handle it would that units when someone saw colonial Penn consumer those telesales agents would work on a lead for as long as 60 days before handing it off.
We've changed a number of our protocols as a result of the reorganization. So that those leads are being processed and and I guess analyzing more quickly to determine whether they're more appropriately suited to an exclusive agent and what we've seen is we've seen no degradation in the close rate of our telesales.
And we've seen an increase in the close rates from those in person sales by our exclusive agents.
And on all of that together brings down the average cost per lead because for the same marketing dollar we're seeing higher close rates.
And I believe in the script, we shared that 15% of the life sales with our exclusive agents came from these types of programs now I've just gloss over a lot of details and operational elements, but that's the high level explanation. So we're doing this faster we're doing more of it and we're doing it with greater efficacy than we've ever had before and.
Thats whats driving these results does that make sense Randy Yeah, I know that helps that helps so it's a lead sharing is more active being better managed and on the margin that that help make a difference in the quarter.
Yeah, and we're developing better and better paradigms to assess want to lead comes in how likely is this to be sold telesales business makes sense to hand off sooner rather than later in person agents and so on so as we do more and more of this our models are becoming more and more efficient so I would expect us to.
Getting better and better at it with every quarter.
Okay, that's great. Thanks.
And again that she'd like to ask a question that star one on your telephone keypad. Our next question comes from the line John Barnidge from Piper Sandler Your line is open.
Thanks is there way to dimension the growth in sales being from the direct to consumer channel versus maybe a realization by consumers because of code that they need insurance solutions for their financial planning.
[noise] John Thanks for the question I, just want to make sure I understand so you're saying.
Our consumers getting more interested in life insurance because of what's happening with cobot 19, and that's why the calling it more frequently is that what you're asking either that's what I'm trying to get out be especially because millennials are now starting to buy houses during their kids, which screenplay property by life insurance.
Yeah, I'm I'm going to look to Paul but also top of my hat I don't believe we segmented the data that way, where we precisely looked at incoming calls on asked them. If their interest is due to covert 19, I would tell you anecdotally the feedback we get particularly from our exclusive agents, who actually Walt and meet with some of these folks that that is most.
Certainly happening.
But I don't have hard data to give you.
But I do think it's it's a reasonable assumption to assume that some of this demand is coming because people are getting more in tune with the need for these types of protection products.
Okay no. The bulk helpful can particularly big event and it goes release in the you're talking about this next manageable and I know you're going to transfer you're trying to identify what that looks like.
But maybe can you talk about what percent of your employees worked in an office explore 'cause it hit and then maybe what you're thinking it could move to go forward. Thank you very much for others.
Yeah. Thanks, John So I want to make sure I answer this with a little bit in new site nuance. The way you asked a question you asked about our employees I want to remind you that part of the Seattle family includes independent agents, who technically not employed there independent contractors and they run their old businesses and those exclusive agents number somewhere around five.
5000 folks those 5000 folks have always because of the nature of their job worked a very significant balance between.
Being out of the office and in the office by definition, there out meeting with clients or prospective clients. So they're out quite frequently and they've always been working with this work from home and and work from office model. So for those 5000 folks I want to be clear again, we're not technically employees, but for those 5000 folks it's always been very high percentage.
And if anything that percentages moved up if I had to throw a dart I tell you somewhere between 70 and 80% have have worked with some kind of model like that and today, it's somewhere between 80 and 90% of those 5000 folks for the employees. So the way you asked the question technically the employees, we have about 3000 folks give or take and those 3000 employees.
Vast majority somewhere north of 90% have work from the office and issue. If you look at the script. What we shared is shortly after the pandemic hit we transitioned so that 97% of those folks are now working remotely and even today.
Several months. After this all started that number's roughly accurate of our 3000 employees.
No more than a couple hundred are coming into the office with any frequency. We expect that number to go up slightly meaning we expect more people to come into the office, but one of the areas we.
Identified for revisiting our model and really taking expense out of the organization is we don't expect to ever go back to where nearly 100% of our employees around the office. We just don't think it's going to be there at all.
Would guesstimating that we can reduce our real estate footprint by 50% or more so we see a very significant shift in this next normal John did that answer your question.
That was very helpful incident correctly, thank very much.
Oh.
Yeah, no further questions in queue I'd like to turn the call back over to Jennifer child for closing remarks.
Operator, thank you very much.
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I will conclude the call here. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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