Q4 2020 Globe Life Inc Earnings Call
And Dan and welcome to the Globe life.
Inc, fourth quarter, 'twenty and 'twenty earnings release Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mike Majors Executive Vice President Administration and Investor Relations. Please go ahead Sir.
Thank you and good morning, everyone. Joining the call today are Gary Coleman, and Larry Hutchison, our co chief Executive officers.
And the Botha, our Chief Financial Officer, and Brian Mitchell, Our General Counsel.
Some of our comments or answers to your questions may contain forward looking statements that are provided for general guidance purposes only.
Accordingly, please refer to our earnings release, our 2019 and 10-K and any subsequent forms 10-Q on file with the SEC.
Some of our 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 and good morning, everyone.
I would like to open by saying that and this COVID-19 environment. The company continues to conduct business effectively and our operations are running efficiently.
And fourth quarter, net income was $204 million or $1 93 per share.
$187 million on $1 69 per share a year ago.
Net operating income for the quarter was $184 million.
Our dollar 74 sales per share a.
They procure increase of 2% from a year ago.
On a GAAP reported basis return.
And on the equity was 945% and book value per share was $83 and 19 suits.
Excluding unrealized gains and losses on fixed maturities and return on equity was 13, 5% and.
The value per share grew 10% to $53 and 12 suits.
And our life insurance operations.
Premium revenue increased 7% to $678 million.
As noted before we are seeing improved persistency and premium collections since the onset of the crisis.
Life underwriting margin was $164 million down, 8% and from a year ago.
The decline in margin is due primarily to approximately $27 million and Covid claims.
And 2021, we expect both life premium revenue and underwriting margins and gross 6% to 7%.
At the midpoint of our guidance, we anticipate approximately $52 million of Covid claims.
Health insurance premium grew 5% to $290 million and health underwriting margin was up 18% to $72 million.
The inquiries and underwriting margin was primarily due to the improved persistency and.
And lower acquisition expenses.
In 2021, we expect both health premium revenue and underwriting margin to grow around 6%.
Administrative expenses were $63 million for the quarter up 3% from a year ago.
As a percentage of premium and administrative expenses were $6 five per cent compared to six 7% a year ago.
And 2021, we expect and administrative expenses to grow 7%, 8% and be around $6 seven per cent of premium.
Due primarily to higher pension cost.
Our I T and information security calls.
And a gradual increase and travel and facilities cost.
I will now turn the call over to Larry for his comments on the fourth quarter marketing operations.
Thank you Gary and.
I am optimistic as I look ahead, I believe we will emerge from the pandemic stronger than before.
A result of the adjustments we have made during the crisis, we now have more ways to generate sales and recruiting activity. They.
And the ability to recruit agents and sell to customers, both virtually and in person and the future will enhance our ability to generate sales growth.
Looking back at fourth quarter, and we were pleased with the results as we continue to see strong growth and sales and agent count.
I will now discuss trends and each distribution channel.
At American income life premiums were up 10%.
$327 million and life underwriting margin was up 7% to $105 million net life sales were $71 million up 20% the.
The increase and net life sales is primarily due to increased agent count.
The average producing agent count for the fourth quarter was 9642.
<unk> 26 per share from the year ago quarter, and up 4% from the third quarter.
The producing agent count at the end of the fourth quarter was 9664.
We continue to see significant recruiting opportunity due to current economic conditions, and our ability to recruit both virtually and and person.
And Liberty National life premiums were up 3% to $74 million, while life underwriting margin was down 26% to $14 million sales.
The lower underwriting margin is primarily due to COVID-19 claims.
Net life sales increased 24 per share at $218 million on net health sales were $7 million down one per share from the year ago quarter sales.
Increase and net life sales is due to increased agent count.
Adoption of virtual sales message and and increased ability to conduct worksite sales activities.
The average producing agent count for the fourth quarter was 2000 and 705.
Seven per share from the year ago quarter, and up 6% from the third quarter.
<unk> agent count at Liberty National and as of quarter at 2770, and we're encouraged by Liberty National's continued growth and ability to adapt to the current environment.
And family Heritage Health premiums increased 8% to $82 million and health underwriting margin increased 17% to $22 million increase and underwriting margin is primarily due to improved persistency and lower acquisition expenses net.
Health sales were up 17% to $21 million the increase and net health sales is primarily due to increased agent count.
The average producing agent count for the fourth quarter was 1000, and 452 up 18 per share from a year ago quarter and up six per shop from the third quarter the.
And the producing agent count at the end of the quarter was 1000 and 463.
Family Heritage continues to generate recruited all sales and I'll let him.
Yes.
And our direct to consumer Division and Globe life life premiums were up 7% to $224 million on life underwriting margin declined 42% to $23 million per.
<unk> will further discuss the decline and underwriting margin and his comments.
Net life sales were $39 million up 32 per share from the year ago quarter.
We continued to see strong consumer demand and basic life insurance protection across all channels of the direct to consumer distribution.
At United American General Agency Health premiums increased 7% to $116 million and health underwriting margin increased from 21% to $19 million the increase in underwriting and margin is primarily due to increased premiums and improved persistency.
They have health sales were $22 million down <unk> 30 per share compared to the year ago quarter.
Always difficult to predict and outerwear sales as the Medicare supplement marketplace is highly competitive.
Although it is difficult to predict sales activity on this environment I will now provide projections based on knowledge of our business and current trends.
We expect the producing agent count for each agency at the end of 2021 to be and the following ranges.
American income.
3% to 14% growth.
Liberty National and 1% to 16% growth.
Family Heritage, 1% to 9% growth.
Yeah.
Net life sales trends are expected to be as follows.
Erika and income life for the full year of 2021 and increase of 9% to an increase of 13%.
Liberty National for the full year of 2021 and.
And increase of seven per share it to an increase of 11 per share.
Direct to consumer for the full year 2021, a decrease of 5% to an increase of 5%.
Net health sales trends are expected to be as follows.
Liberty National for the full year of 2021 and increase of seven per set to an increase of 11 per share.
Family Heritage for the full year 2021.
And increase of five per share it to an increase of nine per set.
United American individual Medicare supplement for the full year 2021, a decrease of three per share at two an increase of 7%.
I will now turn the call back to Gary.
Thanks, Larry.
Excess investment income, which we define as net investment income that's required interest on that policy liabilities and debt.
With $61 million, a 2% decrease over the year ago quarter.
On a per share basis, reflecting the impact of our share repurchase program.
Excess investment income was up 2%.
For the year excess investment income and dollars declined five per se.
And on a per share basis was down 1%.
In 2021, we expect excess investment income to be flat, but up 1% to 3% on a per share basis.
And the fourth quarter, we invested $359 million and investment grade fixed maturities, primarily and in municipal and financial sectors.
We invested at an average yield of 3.54% and average rating a day.
And and average life of 26 years.
While we continue to invest primarily and fixed maturities and 17% of our total investment and acquisitions in 2020 were and other long term investments.
Primarily limited partnerships investing and credit instruments.
These investments are expected to generate incremental additional yield while still being in line with our conservative investment philosophy.
For the entire fixed maturity portfolio, the fourth quarter yield was 542, 9% down 12 basis points from the fourth quarter of 2019.
And as of December 31st and the portfolio yield was approximately 5.28 per se.
Invested assets were $18 $4 billion, including $17.2 billion of fixed maturities and amortized cost.
Oh, the fixed maturities $16 4 billion are investment grade with an average rating of eight miles and.
And below investment grade bonds are $841 million compared to $840 million at September 30th.
The percentage of below investment grade bonds and fixed maturities is four 9%.
Excluding net unrealized gains on the fixed maturity portfolio, the low investment grade bonds as a percentage of the equity is 15%.
Overall, the total portfolio is rated a minus same as a year ago.
Bonds rated triple B or 55 per cent of the fixed maturity portfolio. The same as at the end of 2000 and I T.
While this ratio is in line with the overall ball and market. It is high relative to our peers.
However, we have little or no exposure to higher risk assets, such as derivatives equities residential mortgages clo's and other asset backed securities.
Because we invest long a key criteria and utilized and our investment process and set of issuer must have the ability to supply multiple cycles.
We believe that the Triple B securities that we acquired from.
Probably the best risk adjusted.
And capital judgment or cartons, and due large part to our unique ability to hold securities to maturity, regardless of fluctuations and interest rates or equity markets.
Finally, and lower interest rates continued to pressure investment income where to date on 'twenty one at the midpoint of our guidance, we assume an average yield rate on new fixed maturity investments of around 3.55%.
Well, we would like to see higher interest rates going forward book, while I can't drive and a lower for longer interest rate environment.
Extended low interest rates will not impact the GAAP or statutory balance sheets under the current accounting rules since we sell non interest is the protection products.
Fortunately the impact of lower new money rates and on our investment income is somewhat limited as we expect to have an average turnover of less than 2% per year.
Our investment portfolio over the next five years.
Now I will turn the call over to Frank 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.
The chip the parent began the year with liquid assets of $45 million.
In addition to these liquid assets the parent company generated excess cash flows and 2020 of $388 million compared to $374 million and 2019.
The parent company's excess cash flow as we define it results primarily from the dividends received by the parent from its subsidiaries less the interest paid on debt and the dividends paid to globe life shareholders.
And that's including the assets on hand at the beginning of the year, we had $433 million of excess cash flow available to the parent during the year.
And the fourth quarter the parent the company purchased one 4 million shares of Globe Life, Inc. Common stock.
At a total cost of $123 million with an average share price of $88.55.
For the full year, we spent $380 million of parent company cash to acquire four 5 million shares at an average share price of $85 and 24 sets.
As noted on our last call the parent ended the third quarter with $435 million and liquid assets.
As just noted the parent used $123 million of cash for share repurchases in the fourth quarter and in addition, the parent reduced its commercial paper holdings by $25 million during the quarter.
The parent ended the fourth quarter with liquid assets of approximately $290 million.
Looking forward the parent will continue to generate excess cash flow and 2021.
While the 2000 and 'twenty statutory earnings have not yet been finalized we expect our excess cash flow and 2021 to be and the range of $330 million to $360 million.
Thus, including the assets on hand, and January 1st we currently expect to have around $620 million to $650 million of cash and liquid assets available to the parent and.
2021.
As I'll discuss in more detail and just a few moments this amount is more than necessary to support the targeted capital levels within our insurance operations and maintain a share repurchase program.
As noted on previous calls we will use our cash as efficiently as possible. We currently believe share repurchases provide the best return to our shareholders versus other available alternatives.
Thus, we anticipate share repurchases will continue to be a primary use of the parent's excess cash flows.
It should be noted that the cash received by the parent company from our insurance operations is after they have made substantial investments during the year to issue new insurance policies to expand our information technology and other operational capabilities as well as to acquired new long duration assets to fund future cash needs.
Now capital levels at our insurance subsidiaries.
Our goal is to maintain our capital at levels necessary to support our current ratings as noted on previous calls Globe life has targeted a consolidated company action level RBC ratio and.
And the range of 300 per cent to 320% for 2020.
Although we have not finalized our 2000 twenty's statutory financial statements, we anticipate that our consolidated RBC ratio for 2000, and 'twenty will be at the midpoint of this range, reflecting additional capital contributions of $20 million to $30 million.
For 2000, and 'twenty, one and we intend to maintain the same targeted RBC range.
As discussed on previous calls a primary driver of potential future capital needs from the parent is the adverse capital effect. During this economic downturn from either downgrades that increase required capital.
Our investment credit losses that reduced statutory income and thus total capital.
To estimate the potential impact on capital due to changes in our investment portfolio. We continue to model several scenarios that take into account consensus views on the economic impact of the recession.
The strength and timing of the eventual recovery and a bottoms up application of such views on the particular holdings and our portfolio as well as other stress tests.
We now estimate that our insurance companies will require $35 million to $140 million of additional capital over the course of this credit event to maintain the minimum 300 per cent RBC ratio of our stated target range.
This amount is lower than our previous estimate.
And our base case, we expect less and $20 million and after tax credit losses, and approximately $700 million of additional downgrades over the next 12 to 18 months.
And our worst case scenario, we increased the expected downgrades to approximate $2 billion over that same time period.
Regardless of whether the need is $35 million or $140 million of capital or something in between the parent company has ample liquidity to cover the amount required.
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.
Furthermore, the current interest rates do not have any impact on our statutory reserves given the strong underwriting margins and our products and the aggregate our statutory reserves are more than adequate under all cash flow testing scenarios.
As noted by Gary total life underwriting margin declined by 8% during the quarter.
These lower margins were primarily due to an estimated $27 million of COVID-19 related policy obligations incurred in the quarter $11 million more than we had anticipated on our last call due to 65000 more COVID-19 deaths across the U S and the fourth quarter than projected.
During the quarter direct to consumer incurred an additional $13 million and Covid claims and Liberty national incurred an additional $6 million.
Absent these additional losses direct to consumers underwriting margin would've been 16% of premium for the quarter.
And the Liberty National distribution absent the estimated policy obligations due to COVID-19, they're underwriting margin would've been 27% of premium for the quarter.
For the full year 2020, our total incurred COVID-19 policy obligations across our life operations, where price my $67 million.
Absent these additional losses, our total life underwriting margin would've been slightly below 28% of premium comparable to 2019.
With respect to our health operations total health claims were approximately $7 million lower than what we expected at the beginning of the year due to COVID-19.
Finally, with respect to our earnings guidance for 2021.
We are projecting net operating income per share will be and the range of $7.16 to $7 56 assets for the year ended December 31 2021.
The $7 36 midpoint is lower than the midpoint of our previous guidance at $7 55.
Primarily due to higher anticipated COVID-19 death benefits on.
On our last call. Our midpoint included an estimate of $32 million and Covid life claims relating to approximately 160000 U S deaths.
The midpoint of our guidance now estimate approximately $52 million of Covid life claims on projections of around 270000 U S deaths. The vast majority of which are expected to occur and the first quarter of 2021.
We continue to estimate that we will incur COVID-19 life claims of roughly $2 million per every 10000 U S deaths.
Obviously, the amount of death benefits paid due to COVID-19, and 2021 will depend on many factors, including the effectiveness of the various vaccines and the speed at which the highest risk segments of our population get vaccinated with.
And the larger.
The larger than normal range for our guidance reflects this additional uncertainty.
Those are my comments on there and now I'll turn the call back to Larry.
Thank you and Frac those are our comments, we will now open the call up for questions.
Alright.
Please go ahead.
Sure.
And your time.
Thank you.
Yes.
Make sure your mute function is turned on.
No.
Right.
And once again that is star one.
And like to ask a question.
And our first question.
Brian.
W.
Hi, good morning.
If I take your updated co bid guidance. It looks like there may have been a small amount of reduction to the EPS expectation outside of Covid can you provide any detail on on what was what any additional drivers beyond just COVID-19 mortality.
Sure. Yeah, we have we are expecting a you know a higher average share price.
And in 2021, and what we had anticipated back in October just reflecting on.
Our higher trading.
Right now so it did have a reduction and the overall effect of the buyback you know maybe six to seven and ultimately and then probably a three or four cents better underwriting.
Ultimately really at American income and and Liberty, just a little bit better slightly better than what we maybe anticipated back in October.
Got it and then.
Thanks, and can you on the buyback can you provide any thoughts on your your expectations for buyback levels and in 2021 and you obviously have.
Some excess cash at the parent company, but any any thoughts there.
Yeah, Ryan right now, we anticipate just using whatever excess cash flow that.
And that we generate at the parent company for the level of buyback, so again and that $340 million to $370 million range somewhere in there.
As far as the excess cash that's sitting there at the at the parent company for right now.
Hold on to that to make sure of what levels.
And you know of additional capital that we might need and and as.
And as we work our way through the year, then we'll see if if we're able to redeploy those and some other fashion.
Thanks, and then just had one last quick one.
Life Persistency has.
Generally been favorable and what where it was favorable in 2020.
It looked like some of that reverse in the fourth quarter and direct to consumer.
Curious, what what youre expecting for persistency and in 'twenty and 'twenty one.
A wrong word interim the midpoint of our guy and as we.
Assumed at the persistency over.
Over the year would eventually get back to a prior to 2020.
And that so.
Well, we're going on what we saw on the fourth quarter EBIT and the direct to consumer is that the persistence and it wasn't quite as good as it was in the second or third quarter, but still it was better than what it had been historically.
Yeah, we're just I don't think.
And never has.
A pandemic like this I don't.
We're just not sure.
And.
Whether whether or when the loans.
Will return back to that prior historical levels, but as far as our guide as we see that as we get towards the end of 2021 and it'll be back to more what it was 2019 embraer.
Got it thank you.
Okay.
Well take our next question from Andrew <unk> with <unk>.
Got it.
Hey, good morning.
And I used the first question I'm looking at the life underwriting margins and.
As a percentage of premiums in.
And direct to consumer it fell 860 basis points to 10, 1%, but then when we look at American income and only fell 90 basis points to 32, 1%.
So I'm just kind of you know I think I have a sense of the answer but I'd I'd like a little more color on what might be driving the disparity between these two channels.
And and I think did you say well and Liberty National.
Has a little bit more exposure to some of the higher populations within their overall book of business. When you look at than have been American income American income generally.
And ensures a little younger a portion of the population has less exposure to on let's say those portions of the populations that are being most impacted right. Now. So just proportionately. They are liberty national is seeing a and just a higher impact overall from the COVID-19.
I can't and direct to consumer as well.
Yeah, and direct to consumer is a little bit more of you know there the nature of their simplified underwriting, especially as compared to American income American income has a little bit more underwriting process is being done and the field, whereas with direct to consumer and Theyre simplified underwriting we anticipate a higher mortality.
<unk>, we've always priced in and and and you'll have higher mortality experience and direct to consumer. They also have <unk> as a percentage of their in force a little bit older popular or they do have an older population net American income, it's not quite as a little bit less than what Liberty National has.
Overall for our book of business, it's about 4%.
Our policies in force are relate to Insureds that are 70 year old and 70 years old and above at American at direct to consumer that's closer to 5% and and Liberty National just a little bit higher than that and American income is about 3.5% or so.
I see that makes sense and and everything seems on track So and then.
And I think about the sales trends.
You know nothing short of phenomenal there.
You know what.
Christine I, just just curious some color around the margins what percentage of sales would you say and your exclusive producer channels, what percentage being done virtually versus face to face.
Ryan we don't keep.
The data because all of our applications referenced electronically.
The only and distinguish I would estimate at this point and time.
The 80 per share everything American income.
Sales are still virtual.
It would be a watch flush a percentage and the other two agencies.
And the reason, we don't capture that data as you go forward is a little less important as.
As we look at you know clothing rates, we look at activity, that's really a better measure what sales will be so it's really it comes down and consumer preference.
But will show you the virtually or in person depending on what the cause short prefers as a sales channel.
She has she makes sense and then just again, maybe a little color.
Around statistics or metrics were.
Just demand for protection based products are there any metrics out there where you're seeing that that tick up I know earlier, you said that you expect persistent he'll kind of revert back to where we bar and night 2019, do you think demand will come down as well.
Well I think we do expect to do regional life insurance demand from pandemic levels.
However, we think the way I should be greater and pre Covid later levels.
And that's because.
I think that the shelves will benefit from the continued to increase awareness of the importance of life insurance and of course, there's the possibility of future pandemics.
Well currently the various for the end of the current pandemic.
I think we'll share a consumer preference for digital express, which will help our direct to consumer.
On the agencies a decrease in demand and I think it would be offset by our ability to shoveled virtually and in person and the growth and the agencies, both the agents and middle management.
And also generate additional sales and should go forward.
Andrew I'd like I mentioned.
And Rob mentioned that we had assumed it lapses would go back to historical value.
Here, but I'll do on reaffirmed.
And just not sure because we haven't been through this.
And the pandemic like this before it will it could be that the because of the impact from so many people and somebody paying loans and this might be but it turns out that the persistence improvements. We've seen continue for a period of time, but just to be conservative we assume that they would go back to the historical average as Bobby is this year.
Okay.
Yeah.
That's helpful. Thanks, a lot.
And we will now take our next question comes from Eric.
With autonomous research.
Hi, Thank you and thanks for your guidance is for health premiums and underwriting income to both grow 6% to 7% in 'twenty and 'twenty, one which implies flat margins I think before you had expected the margin to come down a little bit given some of the benefits of lower claims in 2020, sorry are you changing that view at all and.
And do you expect some of the benefits to continue into 'twenty and 'twenty one.
Well, Eric I think we expect that from a policy obligation standpoint.
And we'll probably be around the same and 41 as we were in 2020.
But what we're seeing is because the improved persistency, we're seeing a lower acquisition cost lower amortization and we.
We we went from Nike and pursuit of premium and 2019% to 18% and we're thinking it could be a little bit less and 18%. This coming year. So that's that's helping and keeping up that margin.
Yeah, and that got it and so overall, if I hadn't been and the 24 to 25 per cent range again is that what you're expecting.
Yes, it should be I think at the midpoint of our guidance is just right around 24%.
Got it. Thank you and then and I was just hoping you could maybe give a little bit more color on the long term investments that you talked about the limited partnerships and I was hoping you could provide a little bit more detail on what these are the credit profile and how they're treated in terms of required capital and the accounting for investment income.
Sure Yeah. Most of these are.
Our long term.
Limited partnerships that primarily invest in credit related investments.
Some of them are have participation and mortgages.
And that are very short term.
Short term mortgages that are made like three years and duration and and have yes.
You know very good loans to.
Youll ratios.
Ultimately these are designed to be kicking out investment income on a periodic basis.
As well as.
And you'll have the potential for a long term gains if you will long term target rates on the quarterly distributions generally on on most of these are you know range from 5% to 6% and you ultimately have maybe a long term return prospects of 8% to 10% and really that's the difference.
Between those quarterly distributions that we obtained from these partnerships and then some of those long term returns are what flow through ultimately its capital gains.
The flow through of realized gains and losses over time, but the majority of those are.
And the nature of that there's also some other opportunistic credit.
Partnerships that we've had on for on our books for a while.
But we continue to look at some of those types of generally credit related structured type partnerships that are and get us into a little bit different type of exposure on the credit side than the normal fixed but corporate fixed maturities.
Got it thanks that's helpful.
Should we expect a little bit more volatility quarter to quarter in terms of the investment income from those and is there a higher assumed capital charge as well.
Yeah, there is a higher capital charge and so we take that into account when we're taking a look into that and evaluated and the the benefits of getting into that type of and investment versus the fixed maturity.
Given the higher yields that they have right now it is you know it's worth a higher capital charge.
It is a little bit from a risk perspective, there are definitely.
Bora and risked and I'm going to say you know kind of the general alternatives are especially those that might be a little bit more equity based hedge fund type.
Partnerships.
And the structure of these let's getting some type of a quarterly.
Quarterly distribution from them from a statutory income and then we've got a steady stream of predictable streams still of income that's receivable from these particular partnerships are long term and on the balance sheet. There is some volatility.
And the value of those on a quarter to quarter basis.
Got it thank you.
Thanks.
And well now take our next question from.
John.
And with Hyperscale.
Thank you very much.
And with the increased level of Covid desk kind of embedded and revised guidance.
Can you talk about the corresponding claims tailwind offset we should be thinking about from lower utilization and health.
Yeah on the health side right now for 2020, we really see a utilization.
<unk> really coming back to a pretty normal levels, especially from the on med subtype business where.
Where we did see some benefits.
From lower utilization in 2020, we've really seen the trends towards the end of the year to get back to a pretty normal and utilization and right. Now we're anticipating that same type of utilization of 2021, and we're really.
Not on the health side expecting any really any substantial benefits or cost.
You will associated with that.
And.
That answered the question.
Yes, no and it did thank you.
Maybe related to that can you talk about maybe.
Hello, Madison do you feel that could long term offer some claims savings for the health business.
I'm not sure I understood the question.
And if telemedicine and becomes a more permanent part of hotels.
And people using Medicare supplemental products and their claims utilization rates could maybe secular and really decline possibly.
Yeah, potentially I, you know I don't know all of the.
I do not think that we built into that and into any type of our guidance but.
It does seem plausible that that could potentially have some some cost savings and the long term.
Thank you very much for your answers.
And we will now take our next question from Jamie.
P market.
Hi, Good morning, So first I just had a question on.
Your sales and you've obviously seen very good growth across all of your channel do you think there's some adverse selection going on as well and what are some of the things that youre doing.
To potentially prevent that and.
And if you have any statistics on claims that you might've seen on policies that you've written since our since the onset of the pandemic.
Jimmy I'll touch on the kind of the the last part of that especially you know I mean, and we do continue to really monitor.
And you know the sales, especially on the direct to consumer side and you know looking at and you are we think changes in the average age of new applications and the amounts that are being.
Requested and are they coming from higher risk geographies and looking at those are always seen changes and those type of data from demographics and we're not we are not seeing any significant really changes and those over the course of the year. So we do and and workforce. We've limited our you know.
And some of our exposure, especially to the higher age segments of the population so and you know.
And we've taken steps through the marketing and underwriting efforts to try to protect ourselves there.
And with respect to the claims that we paid so far we've paid a 28 claims through the you know in 2020 on policies that were issued after three one with a total face amount of about $178000.
And considering that we issued about close to 2 million policy during.
During the year.
And a pretty small number that we had about a 3800, a little less and 3800 claims and total AR and the.
A year that we've actually paid of course, there maybe some of those that are and the process that.
And that's still getting there and the process, but we're seeing you know about 85 per cent of our claims are a bit above age 60 and above so we're still really seeing and in those high risk it's consistent with what we're seeing <unk>.
Consistent to where one would think that and those focused and those highest levels are and then you know almost 70% of our clients are from policies being issued in 2010 or before and 97 or before 2019. So we're seeing a pretty good distribution from over the hill.
On the sales side of the company is monitoring and Korea sales levels to be sure and I selection and there's lot of occurring.
Haven't experienced a significant shift and product mix.
And age location on the new sales.
Because if you look on direct to consumer it's interesting.
The sales increases across all channels. However, the juvenile sales have actually increased at a higher rates and adult life insurance and I guess just from further confidence there because high assessment I'm just curious on those from mortality has been at the older Ages.
Yeah, and then do you have any better insight into sort of the impact of changes in accounting for long duration contracts going into effect and a couple of years.
Yeah, I really don't have anything new from what we talked about on the last call. We do continue to work through that it'll be something I think over the you know the and.
And maybe the latter part of this year that will have a little bit more information to really share on that.
And just lastly on net.
And you talk about your agent recruiting and retention. It's obviously benefited I think from a softer labor market and the services area.
And if.
Assuming COVID-19 vaccines are successful and can you sort of get the normal later this year and everything opens up do you think.
You could suffer in terms of retention as some of these guys have left other industries and come to your gum.
Sales agents or to leave or what are your views on your retention, if we sort of get to normalcy agent retention.
Oh well.
And like always actually it could affect growth recruiting and retention.
I did point out that in terms of low unemployment, we have been able to recruit successfully.
Really focus on the underemployed not just the unemployed.
And you're correct on unemployment does have a greater effect on retention and they're on recruiting because there's greater work Harper counties, and we think the ability to recruit both virtually and in person and the shell virtually and first and had been person.
Well it has struggled to grow the agencies and I think retention will be.
And historical levels and should go forward.
Okay. Thanks.
And well take our next question, Tom Gallagher with Evercore.
Good morning.
Question on.
Direct to consumer.
And you said.
And I think I got this right, excluding COVID-19 losses, the margin was 16% and the quarter.
And that's that.
And that's a bit lower than it's been trending.
On a normalized basis I guess full year last year was 18%.
<unk> last year was 19% or are you expecting lower margins to persist and that business into 2021.
Yeah, Tom we did see and the fourth quarter, a little pick up and some of the non Covid claims.
And it really especially and the some areas and we've seen in the press homicides and deaths due to drug overdose, whether that'd be drug or alcohol related type accidents.
You know with some of kind of attributed if you will to some of those indirect no COVID-19 related.
You know destined and trends and and in fact, they are up over about 24% are those types of claims over the fourth quarter of 2019.
And that was about.
2% of the premium.
And the fourth quarter now, we do anticipate those staying a little bit elevated levels into 2021. So overall you know we're expecting you know margins for full year of 2021 to be in that 12% to 16% range.
You know probably three points of that is.
Due to due to Covid and.
And you probably got another one or 2% that are just due to.
You know what we think are some of these higher other causes of death that are kind of a byproduct of the COVID-19 environment.
And that we think will subside over time and won't stick with us for the long term, but right now were where you are including some of that and the two into 'twenty one.
Excluding the impact of Covid next year.
Oh, the direct Covid claims, it's still going to be somewhere and it'll be the 16th and 17% room.
Got it got it yes, sure fell a little bit lower.
And and any just given.
Kevin.
Given that expectation any any consideration or region or re price are you still very comfortable with that level of margin and from an overall return standpoint.
Okay.
Well, we always look at possibly on the repricing, but I think what we and looking out.
And where are we giving guidance through 2021, but I think our feeling is is that when we get past.
No.
Do you know that the amount of Covid claims and we'll get past 2021 rule, we think will get closer back to that 18 per cent range that we work on.
And you know prior to 2020.
Okay and then.
And just on your on the excess cash you expect.
For 2021, I guess, it's about 30 to 40 million lower versus your 2020 figure is that is that all just due to the expectation of credit crashed and credit losses or is there anything else.
Connecting that.
Well, yes, that's predominantly.
The credit losses that we actually had in 2020, which impacted statutory income in 2020, and therefore, the dividends that are available to the holding company and 2021, and then there's probably another $10 million or so we're kind of seeing and just looking at some of the other cash flows.
And that's a holding company has it that looks like they may be a be a little bit lower a and 2021 versus 'twenty.
Okay. Thank you.
It appears there are no further telephone questions I'd like to turn the conference back over to our presenters for any additional or closing remarks.
Alright. Thank you for joining us. This morning, those are our comments and we'll talk to you again next quarter.
And once again that does conclude today's conference. We thank you all for your participation.
Yeah.
Yes.
Thank you Jim.
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Yes.
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