Q3 2020 Globe Life Inc Earnings Call
Good day and welcome to the Global IB Inc.'s third quarter 2020 earnings release Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mr., Mike Majors Executive Vice President Administration and Investor Relations. Please go ahead Sir.
Thank you good morning, everyone. Joining the call today are Gary Coleman, and Larry Hutchison, our co Chief Executive officers, Frank Svoboda, Our Chief Financial Officer, and Brian Mitchell, Our General Counsel.
Never comments or answers to your questions may contain forward looking statements that are provided for general guidance purposes only occur.
Accordingly, please refer to the third quarter earnings release, we issued yesterday, along with our 2019 10-K and any subsequent forms 10-Q on file with the FCC.
Never 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 will now turn the call over to Gary Coleman.
Thank you Mike good morning, everyone.
First of all we got to the country continues to think that we can go to <unk>.
Operations or what gets you.
In the third quarter net income was $199 million or dollar certainly suits suits for sure compared to $202 $4.82 for sure year ago.
Operating income for those.
And $88 million.
Dollarss it suits for sure.
They procure increase of 1% year ago.
On a GAAP basis.
Common equity was 9.4%.
For sure what $77.60.
Moving on to Alaska.
Sure.
Return on equity was 13.6% and goodbye for sure grew 10%.
$52 31 soon.
In our life insurance operations premium revenue increased 7% to $654 billion.
One life underwriting margin was $171 million down 6% one year ago.
With respect to revenue.
We've been pleased to see persistency remains working to improve.
Since year instead of the clients.
I wish there was a decline in margins is due primarily to approximately $18 billion incurred claims related to closed at 92.
For the year.
Thanks, a lot.
Revenue to grow approximately 6% on Paul.
While life underwriting margin is expected to decline to 3%.
Generally due to the impact it but we've not seen corn.
At the midpoint of our guidance, we anticipate approximately $56 million.
19 claims for the full year.
In health insurance premium revenue grew 7% for 288 news.
No underwriting margin was up 40% certainly bring that resolved.
Yes, the increase in underwriting margin, primarily due to lower search results.
For the year, we expect they'll bring in revenue grew close to 6%.
Underwriting margin to grow 11% to 12%.
Administrative expenses were $63 million.
Oh poor person from year ago.
As a percentage of premium administrative expenses were 6.6% compared to 6.7% a year ago.
For the full year, we expect administrative expenses to grow around 5%.
I'll now turn the call over to Larry for his comments.
Third quarter marketing operations.
Thank you Gary.
We're pleased with the third quarter shales Dragich Schirmer sales grew across all channels and the agencies have adapted to virtual sales appointment Shan recruiting.
Thriving in this environment. Additionally.
Additionally, patient licensing center show opened were conducting some in person sales in certain situations.
I will now discuss current trends at each distribution channel.
At American income life premiums were up 9% to $319 million.
Life underwriting margin was flat at $100 million net life sales were $68 million up.
14% the increase in net life sales is primarily due to increased agent count.
The average producing agent count for the third quarter was 9288 up 23% from the year ago quarter up 11% from the second quarter.
The producing agent count at the end of the third quarter was 9583.
We continue to see a significant pool of candidates in part due to current unemployment levels.
What do you national life premiums were up 3% to $74 million.
Underlying margin was down 21% to $15 million.
The lower underwriting margin is primarily due to higher claims related to cold at night chain.
Net life sales increased 2% to $14 million net health sales were $6 million down 2% from the year ago quarter.
The average producing agent count for the third quarter was 2551 up 6% from a year ago quarter and up 7% from the second quarter.
The producing agent count at Liberty National ended the quarter at 2574.
We have seen continued adoption of virtual [noise] recruiting as shown practices all show the relaxation of certain local restrictions has allowed agents to be able to return to some and person presentations. In addition to virtual message.
This environment has also provided abundant recruiting opportunities supporting continued agent growth for the future.
At family Heritage Health premiums increased 8% to $80 million and health.
And health underwriting margin increased 19% to $22 million.
The increase in another one in margin is primarily due to a decrease in claims related to covert night chain Nick.
Net health sales were up 11% to $19 million the increase in net health sales is primarily due to increased agent count.
The average producing agent count for the third quarter was 1371 up.
21% from the year ago quarter, and up 10% from the second quarter corporate.
You are producing agent count at the end as the quarter was 1469.
We are pleased with the results for family Heritage. That's just Asia continues to successfully adapt to this environment.
Our direct to consumer Division accruals life life premiums were up 8% to $228 million.
Well life underwriting margin declined 17% to $34 million.
Frank will further discuss the third quarter to quite I never I think marching in his comments.
Life sales were $44 million up 50% from the year ago quarter.
As we said on the last call times of crisis highlights the need for basic life insurance protection.
This is proven true with a pandemic.
Application activity and sales were up across all direct to consumer channels.
At United American General Agency Health premiums increased 11% to $114 million.
While health underwriting margin increased 27% to eight.
$10 million.
The increase in underwriting margin is primarily due to [noise].
To lower acquisition costs, net health sales were $13 million down, 19% compared to the year ago quarter.
It's always difficult to predict sales trend is highly competitive marketplace.
Group Medicare shales are even more volatile energy family friendly weighted towards the end of the here.
Although it is still difficult to predict sales activity in this uncertain environment.
Now I'll provide projections based on knowledge of our business and current trends.
We expect the producing agent count for each agency at the end of 2020 to be in the following ranges American.
American income 9102 9400.
Liberty National 2700 to 2900 family Heritage 1330 to 1530.
Net life sales are expected to be as follows.
American income for the full year 2020.
An increase of 3% to an increase of 7%.
For the full year 2021, an increase of 4% to an increase of 12%.
Liberty National for the full year 2020, a day.
A decrease of 2% to an increase of 2%.
For the full year 2021 and.
An increase of 3% to an increase of 9%.
Direct to consumer.
For the full year 2020 and.
An increase of 32% two an increase of 36%.
For the full year 2021, a day.
Decrease of 6% to an increase of 10%.
That helps sales are expected to be as follows its a pretty national for the full year 2023, a decrease of 2% to an increase of 2%.
For the full year 2021.
Increase of 3% to an increase of 9%.
Family Heritage for the full year 2020.
Increase of 3% to an increase of 9%.
For the full year 2021.
An increase of 2% to an increase of 10%.
You know one American individual Medicare supplement for the full year 2020.
A decrease of 25% to flat.
The full year 2021, a decrease of 1% to an increase of 7%.
Now I'll turn the call back to Gary.
Thanks, Larry.
Excess investment income, which we define as good because it didn't come less required interest on that policy liabilities and debt.
It was $59 million, an 8% decrease over the year ago core.
[noise] per share basis, reflecting the impact of our share repurchase program excess investment income declined 5%.
For the full year, we expect.
Net income in dollars to be down about 5% and down about 1% on a per share basis.
That's right that's the usual in the third quarter, we invested $343 million in investment grade fixed maturities primarily.
Early in the news.
That's true financial sectors.
We invested at an average yield of three point before pursuing never.
An average rating.
And an average life between nine years.
For the entire portfolio.
Third quarter yield was 5.31%.
Down 16 basis going through the yields in the third quarter of 2042.
As of September 30.
No yield was approximately 5.2%.
Invested assets were $18.2 billion, including $16.9 billion 60 to read it Amortizes call.
Well go Citic Securities 16 billion or investment grade with an average rating of a minor.
And below investment grade bonds or $840 million compared to $762 million at June 30.
Percentage of below investment grade bonds to fixed maturities is 5.0%.
There are 4.6% at June 30.
Excluding net unrealized gains in the fixed maturity portfolio.
Low investment grade bonds as a percent equity stake.
The brick soon.
Overall, the total portfolio is rated triple b, plus or minus a year ago.
We had net unrealized gain <unk> portfolio of about $3.4 billion.
Bonds rated triple b or 55% of the fixed maturity portfolio.
Same as at the end of 2000.
Well this ratio was in line with the overall phone market. It is hard relative to your peers.
However, we have no exposure to higher risk assets its revenue.
What is this award is closed.
Lowes and other asset backed securities.
We believe that this group will be secured we wore provides the best risk adjusted.
Adjusted returns due in large part from <unk> Securities.
Securities maturity, regardless of fluctuations in interest rates for equity markets.
Because we invest long he brought here in Houston or best response. It is an issue for most of the ability to supply multiple swine.
This is particularly true in the energy sector.
Our energy portfolio was sports right.
All subsectors and issue.
And issuers.
Hi, this is heavily weighted to your loved one of them.
First commodity price.
As we have discussed previously.
Approximately 50 cents move our portfolio that was in the midstream sector.
34%.
She is in production.
99% of our home.
<unk> it was buying or sick.
We have no exposure to drilling.
The composition of Rice energy portfolio was essentially unchanged during the quarter.
The fair value increase approximately $53 million.
Well, we have no intent to increase our holdings in this sector, we are comfortable with our <unk> energy holdings.
Finally.
Lower interest rates continued <unk> investment income.
At the midpoint of our done we're assuming an average new money rate of around 3.4% in the fourth quarter.
And a weighted average of around 3.5.
2021.
That's easy money rights.
Can you you little portfolio to be around 5.33%.
For full year 2020.
5.22%.
<unk> 21.
Well, we would like to see aren't rejoicing for worldwide can thrive in a lower for longer interest rate environment.
Extended low interest rates in the <unk> impact the gap or statutory balance sheet under the current accounting [laughter].
So long its just.
Two products.
Unfortunately, the impact of lower waste in our investment income it's done what do we expect to have an average turnover of less than 2% per year in our investment portfolio over 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 our share repurchase program available liquidity and capital position.
In August the company resumed its share repurchase program.
In the third quarter, we spent $118 million to buy 1.4 million globalized shares at an average price of $81.79.
That's for the full year through the end of the third quarter. We have spent $257 million of parent company cash to acquire more than 3 million shares at an average price of $83.74.
The parent ended the third quarter with liquid assets of approximately $435 million. This.
This amount is higher than normal due to share repurchases through September of $257 million being less than the $360 million of excess cash flow available to the parent through September and a $300 million net increase you know borrowed funds since December 31st.
In addition to these liquid assets the parent company will still generate additional excess cash flow during the remainder of 2020 bips.
The parent company has 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 companys excess cash flow for the fourth quarter to be approximately $20 million.
Thus, including the $435 million of liquid assets available at the end of the third quarter. We expect the parent company to have around $455 million available for the remainder of the year.
As I'll discuss in more detail in just a few moments we believe the $455 million in liquid assets is more than necessary to support the targeted capital levels within our insurance operations and maintain the share repurchase program.
As previously noted during the quarter the company issued a 10 year $400 million senior notes with a yield of 2.17%.
The proceeds of this long term debt offering.
Along with other cash at the holding company were used during the quarter to reduce our short term indebtedness by over $550 million and to more normal levels.
In addition, we successfully negotiated a new $750 million credit facility with our banks that last through August of 2023.
Now regarding liquidity and capital levels at our insurance subsidiaries.
As we continue to navigate this current environment, we are keenly focused on liquidity and capital with our insurance operations with rich.
With respect to liquidity Orange.
Our insurance company operating cash flows continue to be very strong.
General, while we do expect tire Kobin related life claim payments over the course of the year. The tire claims are expected to be largely offset by higher premium collections and lower health claim payments.
We do not see any issues with the ability to insurance companies to fund all remaining dividends payable to the parent during the remainder of 2020.
Now with respect to capital.
As previously discussed.
On our earlier calls globe 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 only the downgrades and credit losses that have occurred through the end of the third quarter. We estimate this ratio would have declined to approximately 310%.
At an RBC ratio of 310% our insurance subsidiaries have approximately $50 million of capital over the amount required at the low end of our consolidated targeting a 300%.
This excess capital along with the $455 million of liquid assets, we expect to be available at the parent provide over $500 million of assets available to fund future capital needs.
As we discussed on the last call. The primary drivers of additional capital needs for the parent or lower statutory income due to COVID-19 related factors.
Lower statutory income due to investment portfolio defaults 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 and losses will be approximately $20 million to $40 million lower than 2019.
Estimate the potential impact of arc capital on our capital losses, and downgrades within our investment portfolio.
We have modeled several scenarios that take into account the consensus views on the economic impact of the recession. This.
The strength and timing of the eventual recovery and.
And a bottoms up applications such views on the particular holdings in our investment portfolio.
We have also analyze transition and default rates as published by Moodys and evaluated the impact to our RBC ratios should we experienced the same transition and default rates as we experienced in 2001 in 2002.
As well as from 2008 to 2010.
Taking into account. These various models, we now estimate our RBC ratios would be reduced from year end 2019 levels in the range of 30 to 55 point.
Requiring an additional 75 million to $200 million of capital to maintain a 300% RBC ratio.
It should be noted that not all of this additional capital will be required by the end of 2020.
As a portion of these defaults and downgrades are expected to occur after the end of this year.
Even if all this capital was needed currently the amount needed is well below the amount of liquidity available at the parent company.
Our base case assumes $60 million in total after tax credit losses, plus approximately 2.1 billion of downgrades to our fixed maturity portfolio.
Through the third quarter, we have experienced approximately $40 million in losses for statutory reporting purposes, and $960 million of downgrades, mostly from category any I see one or two any I seem to.
It is important to note that globe life statutory reserves are not negatively impacted by the low interest rates or the equity markets given our basic fixed protection products given this.
Given the strong underwriting margin in our products our statutory reserves are more than adequate and are all cash flow testing scenarios.
At this time I'd like to provide a few comments related to the impact of COVID-19 on our third quarter results.
As noted by Larry Life insurance underwriting margins decline at both our direct to consumer and Liberty national distributions during the quarter.
These declines were primarily due to higher Cove in 19 policy obligations.
During the quarter, we estimate that direct to consumer incurred an additional $10 million related to covert claims and the liberty national incurred an additional $4 million.
Absent these additional losses direct to consumers underwriting margin would have been 19.5% of premium for the quarter and would have grown by approximately 8%.
In the Liberty National distribution absent the estimated policy obligations due to covert their underwriting margin would have been 25% or premium for the quarter and flat versus the year ago quarter.
In total for our life operations, we estimate that our total incurred losses from covert deaths were approximately $18 million in the third quarter and $40 million year to date.
Absent these additional losses, our total life underwriting margin would have been approximately 28% of premium and up 4% over the year ago quarter.
Finally, with respect to our earnings guidance for 2020 and 2021.
We are projecting net operating income per share will be in the range of $6.84 to $7 for the year ended December 31st 2020.
The $6, a 92 cents midpoint, it's consistent with prior quarters guidance. It's all this.
As I'll discuss in a moment, we do expect tire life policy obligations in 2020 than previously anticipated due to higher projected cold related deaths in the U.S.
However, at the midpoint of our guidance, we expect a higher life claims to be offset by higher premiums lower expenses and higher share repurchases than previously anticipated.
On our last call we indicated the midpoint of our guidance assumed approximately $45 million of claims related to cope in 19 on an assumption of around 225000 deaths.
We continue to estimate that we will incur cobrand related life claims of approximately $2 million for every 10000 U.S. death.
However, at the midpoint of our guidance, we now estimate approximately $56 million of Cobiz life claims for the full year 2020, reflecting an expectation of approximately 280000 cold related deaths in the United States higher than previously anticipated.
With respect to our health claims we estimate that our supplemental health benefits for all of 2020 will be approximately $7 million lower than what we expected at the beginning of the year due to coated.
Similar to our estimate on the last call.
Taking into account the higher coated life obligations, we expect the life underwriting margin for 2020 as a percentage of premium to be approximately 25.6% at our midpoint.
Absent the higher coping related 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 the full year 2020 should increase to approximately 23.8%.
For 2021, we're projecting net operating income per share will be in the range of $7.30 to $7.80.
The $7.55 midpoint is a 9% increase from the 2020 midpoint we.
We are anticipating covert related life claims in 2021 of approximately $32 million at the midpoint of our guidance with no significant benefit expected from lower health claims.
Obviously, the amount of cold related claims in 2021 will depend on many factors, including the development of effective therapies and vaccines.
The larger than normal range for our guidance reflects this additional uncertainty.
Those are my comments I will now turn the call back to Larry Thank you.
Thank you Frank it's always our comments, we will now open the call up for questions.
Thank you and if you would like to ask a question we signaled by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to a laggard signal to reach our equipment.
In the press Star one last question.
We'll pause for just a moment to allow everyone an opportunity to signal.
And our first question will come from Andrew. Please go ahead, Sir [laughter] Hey.
Good morning.
I wanted to start with the question on.
On your sales outlook.
Kind of looking at the.
Hi.
Hmm.
Well.
Yeah.
[laughter] picks up.
You know Rob.
35%, so I mean.
Maybe a little more color on on slide 21 should should actually be quite strong based on these guidance numbers, you've given a you know I I baby.
Got hurt.
[laughter].
So much.
Oh.
Numbers.
Really.
Personally I apologize your thought it wasn't the clearest path.
I asked the question I think you asked.
Hey, why are we perfect and maybe sales are quite as strong at 21 is 26 I was I guess, what's your question.
More more around the lines of just know that there are very strong in 21, you know he might you both in the age.
Both from the agencies and direct to consumer and what are the qualities that are enabling that it looks like.
You know recruiting it was very strong this year that probably saying well and you talked a little on the call about virtual.
Gotcha. So I was just like a little more clarity.
Thank you for your question as you followed up in fact here is why was the sales mix was 20 and 21.
Yeah, <unk> direct to consumer first.
Direct to consumer.
I think it is not likely or has a 50% rate experienced in the third quarter going forward.
However, we do expect this level of increased sales at least the remainder of 2020 to life.
Like kind of the first quarter of 2021, that's really.
It's really based on the increased demand, we're seeing for basic life insurance protection.
The last three quarters of 2021, I think sales growth the more challenging given our sales increases in 2020.
With respect to the.
Three agencies again, we see that demand for both.
For both life and health insurance.
The strong when we say because we.
Yes, the condemn it continuing through 2021, it is midyear to the full year.
Actually we did have a positive impact on sales.
Certainly with the agency.
As it improves their sales and recruiting can be there.
Can be a challenge your independent make if see restrictions come back in place forever.
Can offset some of those challenges to our user group of recruiting and sales.
Sure.
Okay, you know in terms of adverse selection.
In this environment.
You know you saw a pick up in Ah you know what the pressure on the underwriting watching naturally from from Coke at 19 in both direct to consumer E.
No fee income.
Right.
Could you talk a little bit.
Okay.
Business, you really safe.
Equal or March she surprising what.
What youve done from the vantage point to putting controls in place to prevent adverse selection and oh by the way.
Our names that you mentioned I think you said 10 million the cold really wacky consumer.
1 million in Queens.
Hmm portion of those claims might come from.
You know business written from April one.
Hey, Matt.
All right I'll answer the first part of your question, which is you are in process will have Frank address the second part the questions, which was the actual experience.
Well for the time being starting then and really marks we limit.
We limited the Mexican face amounts will issue the older Ages.
Sufficient additional coverage through existing policyholders of older Ages.
Also temporarily start fishing policy Africa's with certain conditions the same.
At the same time, our underwriting and our actual departments are studies that business on a weekly basis, but we haven't seen any shift that.
Business either by geography.
The demographics by say demographics age groups.
I think it's consistent because of product mix, we don't think theres adverse selection that's occurring those are additional steps we've taken to we take additional steps. We saw some development Frank you want to answer the rest of his question I'd, probably add one thing is we've actually seen an increase in the amount of applications with respect to the juvenile block do we.
Having those older ages and as we know that most susceptible to claims for Covance.
Or at the older age isn't in fact about 85% of our claims are actually in an age of 60 and above and when we look at our in force as a whole you know we only have about 4% of our in force is over age 70, and and you know rod, 12% as age 60 or above.
And would we.
Right now is as we look at our at the claims that we've incurred about 98% of those have been issued before 2019 and with respect to policies issued since March 1st we have paid eight claims through.
Through October 17, totaling about $42000. So we have not seen a you know.
Any any kind of significant claims on any policy that we've been.
Been writing sense.
Really since the first of the year I will say that as we the distribution of claims is really pretty well throughout our entire blocks and add probably about two thirds roughly two thirds of our claims are coming from policies that were issued in 2010 or or earlier.
And so they've really.
A lot of them are obviously in our older older policies.
Older It's very helpful.
Very helpful. Thank you.
Thank you. Our next question comes from Jean Yves, who Lahr. Please go ahead.
Hi, Good morning, first I had a question on your expense ratios in both the life and health businesses, they were lower than in the past and I wanted to get an idea on.
[noise], whether its persistency or something else, that's driving that and what your outlook is for expense ratios in the.
In the next few quarters.
Give me the the primary reason for the reduced expenses it increased persistency. So I was just.
Certainly true in the log side on the health side.
It's true, but oh, the U.S. Julie we also.
It's a matter of rate increases year over year, which also helps drive the expense front for you to do.
I think for the.
For the year.
On the life side.
Looking at him.
The amortization.
Being just slightly lower.
Then what we had last year it will be more pronounced health side.
There will be more to 88% of freedom works and so my came sort of premium in terms of advertising last year.
And then on persistency there were concerns earlier this year that with the weaker economy, you might see a little bit of a drop off in reality, it's actually gotten slightly better.
What's your view on sort of the reason for that and are you still concerned [laughter].
About a drop off in persistency, if the economy gets weaker and bring it this year next year.
Well I think that.
Possibility that a it is.
The economy works is that we do see that but we haven't seen it yet we've we've actually seen are we talking about an improvement because.
And we think that's due in large part because why we're also seeing ourselves people recognize this pandemic the need for life insurance.
That's why more borrowing and then people that has caused this war for making sure. They keep that policy in force book.
It is we've seen improvement in our premium collections.
The <unk>, we've seen a reduction of delinquent free movies Oh.
You know so it's it's been positive at this point.
We expect it to continue into next year, because we fully intend to do so at the forefront of the people saw.
Okay, and then just lastly on <unk>, how are you thinking in terms of taking advantage of the lower stock price then potentially front ending some of the buybacks versus the need to sort of preserve capital given the risk of a deterioration in credit.
Yeah, Jimmy I was I would say you know for the remainder of this year.
We are comfortable in being able to utilize all of our excess cash flows.
For the the buybacks or the remainder of the year, which would kind of really point to somewhere in that $120 million to $125 million.
You know to get us up to 380 for the year and that would again be a price me what we have for excess cash flows will take a look to see you know as we as we get close to the end of the year you know what happens.
What happens with the stock price what happens with the economy, how comfortable we feel with our investment portfolio I will certainly can you know, we'll consider that a if we accelerate some from 2021, perhaps but right now I would say that are you know we'd anticipate just.
Just a really nice continuing on to utilize our excess cash flows through the remainder of the year.
Okay. Thank you.
Thank you and our next question comes from John Moran. Please go ahead.
Thank you how many deaths does the $32 million. Unlike claims assuming 2020 guidance as I imagine there is probably no assumption for improved therapeutics embedded in that.
Yeah, we and we're using that kind of that same rule of thumb for that 2 million you know for about every 10000, new ADESA. So that kind of have a range what kind of estimating 100 to 220000 deaths and kind of at that midpoint around 160, So that 32 would kind of relate to it.
Around 160000 deaths in the year and really what that kind of.
You know so.
I suppose is that we continue to have that the average daily deaths continue to decline and that trend.
Continues over time, just but it does.
Continue on into the second and even into the third quarter of the year.
Okay, and then my follow up.
Curious why there's no assumed health benefit in 2021 cents, there's an assumed kobin life impact I ask that because I can see how there could be a secular decline in Medicare supplemental claims utilization given general concern over infectious disease that wasn't present in the U.S. previously.
Yeah, I think from what we see at this point in time is that we really don't we anticipate the utilization, especially around the non med sup claims getting but really back to normal or not seeing expecting any kind of a catch up sales people for mis procedures, but but I think without the substandard closures.
Of clinics and such that we would anticipate just kind of really getting back to more normal levels of both.
Med sup type claims and appointments as well as traditions.
Traditional medical services.
Thank you very much.
Our next question comes from Erik Bass. Please go ahead.
Hi, Thank you maybe just to follow up on John's question on the health business. What are you assuming for an underwriting margin in 2021, and you had mentioned some lower acquisition costs. So is that something that you would expect to continue into next year.
Yeah for the are you talking about just on the med.
On the med sup business or the health business as a whole.
Health business as a whole just kind of what.
Level of underwriting margin, you're assuming a percentage wise [laughter] yeah.
To me actually be relatively close and kind of in the same range in that 23% to 24% range for all of 2021.
Okay. Thank you and then [noise].
I apologize if I missed it but did you give us the outlook for premiums that you're assuming for both life and health in terms of the year over year growth and your 21 guidance.
Yeah, we're looking at.
At the midpoint of the kinds of things looking at about a 6% increase in life premiums and a little over 7% increase in held for you [laughter].
Thank you and then if I could just squeeze in one more just some recruiting I know historically, you've talked about seeing sort of a stair step pattern when you.
And bring in a lot of new agents, and then kind of the agent count tends to flatten out a little bit is that what you would expect going into 21 at this point to or how should we think about that.
I don't expect to be a stair step process will take will have an increased agent count Uh huh.
Oh, Hi, Thomas helped recruiting.
We've also had a.
Yeah. Real addition, middle income Middle Management American income.
About 22% year to date.
And middle managers really.
Structural for much of the recruiting it takes place.
The 22% increase in Middle management ethical she is translating into 2021.
Also version recruiting because a lot of should reach or a greater than her passion courage.
Finally in 2018 2019.
Second income and approximately 15, new <unk> agency owners. These additional officers contributor to the increase in Asia she'll haulage typically to be a stair step process.
I personally have increases in 2021.
Got it thank you [laughter].
Thank you and our next question comes from Ryan Krueger. Please go ahead Sir.
Hi, Good morning for 2021 could you provide on your margin outlook for the in percentage terms for the life insurance business and then if you have it what it would be if you excluded your assumption for co bid claims next year.
Yeah, Ryan for the <unk>.
For the total life margin, we expect it to be around 26%.
In a b and we it would be around 27, 27.1% is what we'd anticipate without the coated benefits.
Benefits in there.
Got it and in the midpoint of your your your EPS guidance at 755 that that includes a $32 million of Kobe claims so it would be kind of.
When he almost at 25 cents higher if you did not projected Cobra claims.
That is correct. It does the midpoint includes 32 million.
Thanks, and then just one last one I think you provided the yield assumption, but what are your.
What are your expectations for excess investment income growth in dollars for 2021.
[noise] [noise] right [noise] excuse me one at the midpoint of our.
And so for 21.
We expect excess investment income to be flat.
[noise], we'll have them pretty.
Pretty good investment income.
That's going to be offset by the additional interest on the New York policy liabilities. So virtually all come from a dollar standpoint, it'd be flat from a per share student boards that will be up.
Somewhere around three or 4%.
[laughter].
Got it thank you very much.
Thank you. Our next question comes from Tom Gallagher. Please go ahead.
Hi, just a follow up on how persistency that favorable persistency in the lower DAC amortization this quarter.
Are you assuming that benefit will fully continue into 2021, where it should we assume some faded that benefit.
Well I think we we assume it's going to be through.
2021, yeah.
Ah, but over overtime would probably see it revert back more to normal true and that's been taken into consideration.
Got you and what any any.
Any particular views as to what's driving that improved persistency Jade.
Baroness over [laughter] <unk> need for help in churn sure any views as to what's been driving that.
[laughter].
Yeah, I think Rick I think you hit on it I think it's it's similar to what we're working on the life insurance side as well as the need for the insurance.
Got it and then you know just a question on the new badge be long Ltd, I accounting changes any sense for when you would expect to disclose expected impacts.
And any any if you're able to provide any any kind of broader ranges on GAAP earnings. Your book value that you would expect us to be.
To be impacted from it.
Yeah, you know I would guess that you know weve looked at either toward the end of 2021 or yes, we get about this time next year that I would hope that we would start to build and get some maybe some club preliminary indications of it obviously, we're still working through.
Putting the systems in place and getting our estimates and looking at the impacts of what the new accounting guidance would ultimately be.
With coded you know some of the activities that we had been done in that area got put to the side a little bit. So it's not progressing that maybe as quickly as it might have been otherwise, but all the FASB did extend that out a year.
But I would say again, whether it be a towards into next year at the beginning of 2022.
We should really get some guidance on that.
Okay. Thanks.
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Okay. Thank you for joining us. This morning, those are our comments and we'll talk to you again next quarter.
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