Q1 2021 Globe Life Inc Earnings Call
Yes.
[music].
Yes.
Good day and welcome to the Globe Life, Inc. First quarter 2021 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, Frank So 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 2020, 10-K, and any subsequent forms 10-Q on file with the SEC.
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 Monique and good morning, everyone.
In the first quarter net income was $179 million for a day.
All of US sitting here today for sure compared to a $166 million or dollar ppt students per share a year ago.
Net operating income for the quarter was $160 million on $1.53 suits for sure.
A decrease of 12% for sure from a year ago.
On a GAAP reported basis return on equity as of March 34, She was eight six years.
Soon.
And book value per share was $75 and tenant sales.
Excluding unrealized gains.
Its maturities.
Return on equity was 11, 4%.
Book value per share was up 9% from $54 36 students.
In the life insurance operations premium revenue increased 9% from $708 million.
As we've noted before we will see improved persistency and premium cookies.
And so it would depend on doing it.
Like underwriting margin was $137 million ban on 24% from a year ago.
The decline in margin is due primarily to a $38 million on COVID-19 related claims.
For the year, we expect.
Revenue to grow around 7%.
And on the lottery mortgage growth four to six months.
And at the midpoint of our 2021 guidance.
We are spending approximately $50 million of Kobe quantities.
In health insurance premium revenue grew 5% to $294 million.
Is that from underwriting margin was up 14%.
$2 million.
The inquiry underwriting margin.
What I'm really became free persistency lower acquisition.
For the year, we expect free game ready to go on Quad two 6%.
And underwriting margin to grow 7% to 8%.
Before continuing I am pleased to note that this is the fourth quarter in company history.
On the premium revenue exceeded $1 billion.
Appreciate the efforts of our agents and are on flaws in achieving this milestone.
Continuing on the fourth quarter results administrative expenses were $66 million for the quarter for.
<unk>, 4% from a year ago.
As a percentage of premium administrative expenses were six 6% compared to 648% a year ago.
The full year, we expect administrative expenses to grow 7%.
And being around six 7% of premium.
We primarily to higher income.
Calls I T and information security costs.
Well there is a gradual increase in travel and facilities costs.
I will now turn the call over to Larry for his comments on the first quarter of marketing operations.
Thank you Harry we experienced strong vocals lifestyle. So on the first quarter and we continue to make progress in the areas that drive recruiting and sales activity.
I'll I'll discuss current trends at each distribution channel.
On American income life life premiums were up 11% to $335 million, while life underwriting margin was down 2% at $98 million.
The lower underwriting margin was primarily due to COVID-19 claims.
Net life sales were $70 million up 11%.
The increase in net life sales is primarily due to increased agent count.
The average producing agent count for the first quarter was 9918 up 30% from the year ago quarter and up 3% from the fourth quarter.
The producing agent count at the end of the first quarter was 10320 volume.
So the American income agency has adapted exceptionally well to the virtual environment and continues to generate positive momentum.
Liberty National life premiums were up 4% to $76 million, while life underwriting margin was down 48% to $10 million.
Well were underwriting margin is primarily due to COVID-19 claims.
What life sales grew 40% to $16 million on alcohol sales were $6 million down 2% from a year ago quarter.
The increase in net life sales is due to an increased agent count and improved agent productivity.
The average producing agent count for the first quarter was 2734 up 3% from the year ago quarter and up 1% from the fourth quarter.
On the agent count between Nashville, and as of quarter of 2727, who are encouraged by Liberty National's continued growth.
Okay.
At family Heritage Health premiums increased 8% to $83 million on health underwriting margin grew 12% to $22 million.
The increase from underwriting margin is primarily due to improved persistency.
And lower acquisition expense.
Health sales declined 4% to $16 million due primarily to a decline in agent productivity during the first quarter.
The average producing agent count for the first quarter was 1285.
<unk>, 5% from the year ago quarter on down 12% from the fourth quarter.
The Asia sales at the end of the quarter was 1235.
The drop in average range of cap from the fourth quarter is not unusual because from the heritage typically sees a decline in recruiting activity in the first quarter of the year.
We have seen an increase on recruiting activity and price.
The activity over the last several weeks.
This will continue going forward.
And our direct to consumer Division at Globe life life premiums were up 11% to $244 million.
Our life underwriting margin declined 78% to $9 million free.
Frank will further discuss the decline in underwriting margin and his comments.
Net life sales were $40 million up 22% from year ago quarter.
We continued to see strong consumer demand for basic life insurance protection across all channels of direct to consumer distribution from the first quarter.
Okay.
On the American General Agency health premiums increased 6% to $117 million and health underwriting margin increased 19% to $19 million.
Increase in underwriting margin was primarily due to improved persistency.
Our acquisition expenses.
Net health sales were $13 million down, 11% compared to the year ago quarter.
It's always difficult to predict the north American sales has to do with Medicare supplement marketplace is highly competitive.
They're still difficult to predict future activity in this uncertain environment.
I will now provide projections based on trends, we are seeing and knowledge of our business.
We expect the producing agent count for each agency at the end of 2021 to be in the following ranges.
American income, 7% to 17% growth.
Liberty National 1% to 16% growth.
Family Heritage, 1% to 9% growth.
Net life sales for the full year of 2021 are expected to be as follows.
American income life, an increase of 11% to 15%.
Liberty National and increase of 16% to 20%.
Direct to consumer a decrease of 5% to an increase of 5%.
Net health sales for the full year of 2021 are expected to be as follows.
So, but he Nashville and increase of 16% to 20%.
Family Heritage, an increase of 4% to 8%.
Not an American individual Medicare supplement a decrease of 3% to an increase from 7%.
I'll now turn the call back to Gary.
Thanks, Larry.
Excellent.
From which we define as net investment income was required interest still net policy liabilities and debt.
$61 million on 3% decline over the year ago quarter.
On a per share basis, reflecting the impact of our share repurchase program excess investment income grew 2%.
For the full year, we expect excess investment income to be flat.
But up to 3% per share basis.
That's the investment yield from the first quarter, we invested $299 million in investment grade fixed maturities.
Early in the industrial and financial sectors.
We invested at an average yield of 341% and average rate even day monitors on the average life of 44 years.
We also invested $61 million in limited partnerships that isn't because the credit instruments.
While these investments are expected to produce incremental additional yield they were in line with our conservative investment philosophy.
For the entire fixed maturity portfolio on the first quarter yield was five point people pursue their.
And then on 15 basis points from the first quarter of 2020.
The portfolio yield as of March 31st with Balsam thoughtful when people were pursuing.
Invested <expletive>ets were $18 $7 billion, including $17 $4 billion with fixed maturities at amortized cost.
Of the fixed maturities.
66 days on sort of breath with grade with an average weighted anybody monitors.
And below investment grade bonds, with our $802 million compared to $841 million a year in 2020.
The percentage of below investment grade bonds to fixed maturities is four 6%.
Excluding net unrealized gains from fixed maturity portfolio below investment grade bonds as a percentage of equity was 14%.
Overall, the total portfolio is rated at eight months compared to Triple B, plus a year ago.
Volume traded triple B or 56% on the fixed maturity portfolio compared to 55% in 2020.
While this ratio is in line with the overall volume it is high relative to our peers.
However, we have little or no exposure from a higher risk <expletive>ets, such as growth equities residue from Morgans.
C O loans and other <expletive>et backed securities.
He calls meeting Beth wrong, a key criteria and utilize from our investment process is that an issue or maintains the ability to supply multiple cycles.
We believe that the triple bead securities we acquire provide the best risk adjusted capital adjusted returns.
The large part of our ability to hold securities to maturity.
On this the fluctuations in interest rates or equity markets.
Lower interest rates continued to pressure investment income for 2021, the average fixed maturity limiter you <expletive>umed at the midpoint of our guidance with three 6% from full year.
While we would like to see higher interest rates going for blood blogs can thrive in a lower for longer interest rate environment.
Even though rates do not impact the gas or statutory balance sheets, what would be the current accounting rules.
We sell non interest sensitive protection products.
Unfortunately, the impact was only my price from our investment income with zoom on Windows as we expected to have an average turnover of less than three pursue through year.
Investment portfolio over the next five years.
Now I will turn the call over to Frank for his comments on capital.
Thanks, Gary.
First I want to spend a few minutes discussing our share repurchase program available liquidity and capital position.
The parent began the year with liquid <expletive>ets of $290 million.
In addition to these liquid <expletive>ets the parent company will generate excess cash flows in 2021.
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.
We anticipate our excess cash flow in 2021 will be in the range of 360 million to $370 million higher than previously indicated and reflective of our final 2020 distributable statutory earnings.
Thus, including the <expletive>ets on hand at the beginning of the year. We currently expect to have around $650 million to $660 million of <expletive>ets available to the parent during the year.
In the first quarter, the parent company repurchased 944000 shares of Globe Life, Inc. Common stock at a total cost of $90 million at an average share price of $95 47.
So far in April we have spent $13 million to repurchase 132000 shares at an average price of $99 18.
Thus for the full year through today, we have spent $103 million to purchase one 1 million shares at an average price of $95 92 sets.
Excluding the $103 million spent on repurchases. So far this year, we will have approximately $550 million to $560 million of <expletive>ets available to the parent for the remainder of 2021.
As I'll discuss in more detail on 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 still believe share repurchases provide the best return to our shareholders over other available alternatives. Thus.
Thus, we anticipate share repurchases will continue to be the primary use of the parents $360 million to $370 million of excess cash flow during the year. 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 expand our information technology and other operational capabilities.
As well as acquire new long duration <expletive>ets to fund our future cash needs.
Our goal is to maintain our capital at levels necessary to support our current ratings.
As noted on previous calls global life has a targeted consolidated company action level RBC ratio in the range of 300% to 320%.
At December 31, 2020 on a consolidated RBC ratio was 309%.
At this RBC ratio, our insurance subsidiaries have approximately $50 million of capital over the amount required at the low end of our consolidated RBC target of 300%.
This excess capital along with the $550 million to 560 billion of liquid <expletive>ets that we expect to be available at the parent provide.
Provides sufficient capital to fund future capital needs.
As we discussed on previous calls a primary driver of potential additional capital needs from the parent in 2021 relates to investment downgrades that increase required capital.
We estimate the potential impact on capital due to changes in our investment portfolio. We continue to model several scenarios and stress tests and our base case, we expect approximately $500 million of additional NTIC, one notch downgrades over the course of the year.
We do not anticipate any significant credit losses, although some credit losses would normally be expected from time to time.
With this amount of downgrades or insurance companies could require up to $70 million of capital to maintain the low end of our targeted RBC ratio of 300%.
In addition to the potential capital needed for further investment portfolio downgrades.
<unk> and the NTIC RBC factors relating to investments, commonly referred to as C. One factors.
Could create the need for additional capital for 2021.
At this time, we do not know what the final factors will be however, we believe the worst case scenario is that additional capital related to the new factors would not exceed $125 million to $150 million.
It is important to note that globe life statutory reserves are not negatively impacted by the low interest rate or the equity markets given our basic fixed protection products.
In the aggregate our statutory reserves are more than adequate under all cash flow testing scenarios.
Bottom line is that the parent company has ample liquidity to cover any additional capital that may be required and still have cash available to make our normal level of share repurchases.
Once we get once we are able to get comfortable that our investment downgrades have returned to normal levels.
And we are able to determine the amount of additional capital required to support the new C. One factors.
We will reevaluate our parent company retained <expletive>ets.
We will first determine the appropriate amount of liquid <expletive>ets it should be retained at the parent.
We will then determine the best use of any excess amounts that remain.
Depending on available alternatives, we would likely return such excess cash to our shareholders through additional share repurchases. At this time, we anticipate holding a higher level of liquid <expletive>ets through the end of this year.
At this time I'd like to provide a few comments related to the impact of COVID-19 on our first quarter results.
As noted by Gary total life underwriting margins declined in the quarter, primarily due to an estimated $38 million of COVID-19 debt claims incurred in the quarter.
This amount was actually slightly less than we anticipated for the quarter. The total Covid death benefits include approximately $20 million in Covid death benefits incurred in our direct to consumer division or approximately 8% of its first quarter premium income.
Approximately $8 million of Covid debt benefits incurred at Liberty National.
Over 10, 5% of its premium for the quarter.
And approximately $9 million at American income or two 7% of its first quarter premium.
It is important to note that the total COVID-19 benefits paid through March 31.
Only 71 claims comprising slightly over $600000 relates to policies sold since the beginning of March of 2020.
This is a very small percent of the roughly 2 million policies sold in 2020.
In addition to the Covid obligations incurred in the quarter. We also saw adverse developments and non COVID-19 claims related to both medical and nonmedical causes of death, primarily those related to heart and other circulatory conditions, Alzheimers and drug overdoses.
As a continuation of some adverse development that began to emerge last year.
While not directly a COVID-19 claim we believe the elevated deaths are related to the pandemic due to the difficulties. Many individuals have had an receiving timely health care as well as the adverse effects of isolation and stress.
Increases in non Covid deaths since the start of the pandemic have also been noted by the CDC and the National Center for Health Statistics for the U S population as a whole.
While we experienced higher obligations from non COVID-19 causes in each of our distributions the impact of these higher non COVID-19 deaths has been more evident in our direct to consumer channel, whose insureds more closely represent the broader middle income U S population than our other distributions.
In addition to Covid deaths, the adverse experience related to non Covid deaths also contributed to the lower underwriting margin in the quarter.
We anticipated a lower margin as a percentage of premium given the significant number of U S deaths expected in the quarter and since evidenced of the higher non COVID-19 deaths had started to emerge last year.
As with Covid. We currently believe this adverse claims experience will moderate over the remainder of the year.
And that the underwriting margin for the direct to consumer channel will be closer to 17% to 18% of premium in the second half of the year.
Finally, with respect to our earnings guidance for 2021.
While first quarter earnings were substantially lower than recent quarters due to higher COVID-19 and non COVID-19 policy obligations.
First quarter operating earnings per share were very close to our expectations. Since we fully anticipated 200000 COVID-19 deaths in the quarter.
We now believe we have seen the peak of Covid claims and anticipate a sharp drop off for the remainder of the year.
As noted last quarter at the midpoint of our guidance, we anticipated approximately 270000 U S. Covid deaths over the course of 2021.
We still believe that is a reasonable estimate with substantially all of the remaining deaths occurring in the second quarter.
As in prior quarters, we continue to estimate that we only incurred COVID-19 life claims of roughly $2 million for every 10000 U S deaths.
With respect to the higher obligations from non Covid causes of death. We believe these will also revert to more normal levels over the course of the year as disruptions in health care sees the economy recovers and people are able to social life again.
As compared to our previous guidance higher policy obligations from non Covid causes are expected to be offset by favorable health claims experience higher premium income and the favorable impact of share repurchases.
As such we are keeping the midpoint of our guidance for 2021 at $7 36.
While narrowing the overall range to $7 21 to $7 51 for.
For the year ended December 31 2021.
So my comments I will now turn the call back to Larry.
Thank you Frank.
Our comments, we will now open the call up for questions.
Sure.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment you can press star one to ask your questions.
Our first question comes from John Barnidge Piper Sandler.
Thank you.
Our direct to consumer sales guide her life conflict with what was put up in <unk> 'twenty. One can you add some color. There was there like a one time uplift last year that you don't think it's following through this year.
Well there was a onetime uplift if you look at last year.
Had a real increase in our sales percentages in Q2, three and four.
On Q1 is a fairly easy comparable because we were flat from the first quarter of last year and that was pre COVID-19. So while we had a 22% increase in sales in the first quarter against.
I guess I was comparable in Q2, three and four we think our guidance of negative five to plus 5%.
Is reasonable for 2021.
Okay, and then my follow up given your comment about substantially all the remaining COVID-19 testing in <unk> 'twenty one.
A way to give us a sense of what we've seen in the first half to what it might run rate from the quarter. Thank you.
Yeah.
Yes, I think so in the first quarter there was around 200000.
Covid deaths.
Right now we're anticipating.
<unk> 55, thousands COVID-19 deaths in the second quarter of the year and then about 15000 over the remainder of over the second half of the year.
Thank you very much.
Our next question comes from Jimmy Buhler.
JP Morgan.
Hi, good morning.
There's a big echo on the call its not on line line.
On on your comments on life margin ex Covid.
I think you're assuming in your guidance that they might stay elevated my question is more if you look beyond COVID-19.
Is it reasonable to <expletive>ume that some of these continue because I think he said people having difficulty getting care, obviously that improves our debt.
That goes away as hospitals on less burdens and stuff, but if that's related to opioids and stuff.
It's easier to get on them, but harder to get off so could that continue to be a drag.
For your results beyond the pandemic because of all the at least for a little bit.
Yes, Jimmy.
We're seeing while we're seeing some elevated in the opioids and some of the other on a non medical causes.
Really the more that we're seeing is on the medical side with.
With respect to whether it would be as I said, you know really hard and circulatory is really one of them that we've seen.
On the larger.
Increase over historical trends, if you will so I think that's what gives us a little bit more comfort debt, while we've seen some increases in multiple causes of death.
Including some of those from non medical as the as the medical and access to the medical procedures opens back up it has opened back up now for several months.
Out of will subside, and we'll be able to get back to more normal levels in those areas.
Okay.
The debt the medical.
The medical claims and frankly to talk about is this non COVID-19 piece over 80% of those arent medical claims.
The drugs alcohol would be lessened the firms.
And then on your sales obviously, we've seen a big step up in your sales and recruiting and sales.
Because it depends on making I think you've had an easier time recruiting because of the problems.
Services industry.
Do you think you'll retain the agents you've hired over the past year or if the economy opens up and things go back to normal debt you could actually see a lot of agent.
Agent departures and a big sort of decline in the agent count.
Not all the way back but many of these like what do you think about your ability to obtain a lot of agents that you've hired over the past year.
I think recruiting will continue to increase in Q2.
Q3, and Q4 of 2021.
A middle management growth last year, particularly on the American income I think what COVID-19.
When you see recruiting activity. Thanks, doubtful that most of the agents with return on the previous jobs.
Sure we recruit the underemployed, who were looking for a better opportunity.
And again, given our sales increases, particularly on American income we believe many of these agents want to stay with the company.
Also during 2018, and 19 and unemployment levels were extremely low or at historically low all three agencies continued to recruit.
We're producing regions.
Okay.
Okay, and then just lastly on your sales.
Sales being strong have you.
And I'm sure you've enacted and you've talked about this from the past as well as enacted processes to avoid adverse selection and depending on they can you talk about.
Better you've seen on what level of claims you've seen from policy you might have been sold over the past year end.
What some of the processes are to avoid adverse selection.
<unk>.
Yes, Jimmy we do take a look at.
Really do a lot of monitoring on the various policies that have been issued and especially on the direct to consumer but across all the different lines.
We're looking at is there a change in the number of applications.
By age are we seeing especially with respect to the pandemic, where we'd have a higher exposure to some of the higher ages, but really looking at.
Are we seeing any changes in the applications on the net issues.
No.
From before the pandemic and then what we're seeing in the last year. We're looking at are they trying to apply for a higher face amounts all the same changes in geographies, where maybe there has been a little bit more incidents.
We're really monitoring that and we're really seeing no no distribution shift toward older adults.
No we're not seeing really any significant change by state groupings and again, we're not seeing a shift to overall the higher face amount.
And then we've also done some limiting between marketing and as well as in our underwriting putting some limitations on the amount that they can.
Older individuals can purchase.
At American income there is some some limitations on some changes on some of the policies there for individuals over 60, so both through the underwriting in the marketing process doing some things to try to limit our exposure there and I think as we as we look at the.
No actual experience.
Again I mentioned in my.
My notes since the since for policies that have been issued since March one 2020, we've only seen 71 claims so far that totals about $600000.
And so that's.
And that's inclusive of American income and Liberty and all the different distribution. So it's a very small percentage of the overall policy and of course, the additional incremental.
Does it come at a very small incremental marketing costs. So we expected there to be a little bit of additional mortality, but it's more than paid for through this.
From profits on that business.
I'll add to that is an additional month of sales increases from direct to consumer across.
Across all channels of products the sales of the juvenile product okay.
I appreciate a higher rate than adult life insurance, but it gives us further confidence we're not exploration had a selection just the highest answer I was curious shortish maturity is at the older Ages.
Got it thank you.
If you found that your question has been answered you may remove yourself from the queue by pressing star two.
Yes.
Our next question comes from Eric B<expletive> on Thomas Research.
Hi, Thank you I guess.
On the life business I was hoping you could give a little bit more detail on your margin expectations by business line for the remainder of the year and then what would you think of as kind of a normalized underwriting margin target for the three main businesses.
Yeah.
On as we think about life as a whole and then I'll talk about some of the individual businesses we are.
We saw about 19% in the first quarter, we do see that gradually improving over the course of the year.
For the full year being somewhere around 25% for the.
For life as a whole.
And what we're really saying is that by the time, we get to that suddenly the non COVID-19 claims and and you know in addition to the non Covid claims we've had we've talked about some of the lapses and that has an impact on policy obligations as well it makes that a little bit higher.
And that again those will I think tendency, we think will tend to normalize over the course of the year at American income.
We anticipate that the margin for the full year will be closer to 32%.
For direct to consumer around 13%.
And for Liberty National around 21%.
So.
Again in each one of those lines, we see the overall underwriting margin improving over the course of the year.
Really by the anticipated by the fourth quarter that were able to get back to you.
Pretty close to normal margin percentages as a percentage of premium.
Got it and should we look at 2019 as being a pretty normal margin level to think about hopefully returning to in 2022.
That's what we're anticipating is when we think about it is about at those levels.
Thank you and then maybe on the health side can you just talk about any changes you're seeing in terms of benefits utilization and as you've seen.
Any pickup in activity is.
We've had on reopening and more people on getting vaccinated.
Yes, so far I mean, we are starting to see pretty normal levels of utilization both on especially on the med sub lines.
Debt, we're seeing pretty pretty normal levels of activity at this point in time.
Got it so the favorable margin is more the better persistency on lower amortization.
That's correct.
That's that's really a drag on most of them.
Okay. Thank you.
Our next question comes from Andrew <unk> Credit Suisse.
Hey, good morning, and thanks for the thoughtful.
Perhaps just around mortality wanted to drill down a little bit more.
I'm wondering how many policies.
Does.
Globe life have outstanding in the life insurance area I was doing some math around unfavorable claims and I guesstimate at something around.
350 to 400 policies above kind of what would have been normal so.
Second part of the questions that instead of day.
Some <expletive>essment and just how many policies do you have.
Imports from the life area.
Yes, I believe.
Hi.
Well I can say.
Scott Goodman from UBS.
I think we have.
Around 13 million policies in force.
Paul.
$13 million in force and.
So.
Would you have any type of standard deviation.
That you might apply to this day.
How far out of the normal range is this I mean is this.
Really unusual in first quarter from last year actually was modestly favorable price.
<unk> correctly.
Any way to kind of on other than the dollars now.
Oh unusual hoarseness.
And you were just talking about the general Covid claims or with respect.
I'm talking on non Covid on I'm, sorry, when I was estimating.
Close to 400 policies, that's non COVID-19 outside of the norm.
Yeah, I mean I.
I think it's I mean, it's a true.
It will tend to think about your claims activity and kind of growing overall with the size of the business I mean definitely what we've seen here over the last few quarters is a.
No.
If an increase in that activity, we just and I.
I don't have the percentage right top of my head on.
But it does not.
It comes from time to time, you'll see those fluctuations to where you will have that on occasion.
It is a little bit higher than what we would maybe have typically seen in some of the normal fluctuations.
But and we can see that in just some of our overall claim numbers, but.
It is not something that is.
Terribly on there.
Thats a way out of the.
The range is that you might see from time to time.
Yes.
And let me just one another five Bayou I mean.
If this were a trend moving shouldnt, we have seen that in the third quarter and fourth quarter as well.
It just it just seems like it's kind of come out of nowhere and could very well first am I thinking about that the right way.
Well I do think the timing of it corresponds here with the pandemic and that's where we're kind of looking at it is that it's really popped up here towards the end of we started seeing some of the claims emerging.
And as we get little bit more experience, obviously as you know we've always talked about there was two or three month lag from what we're really seeing on our claims data.
Being able to get back and see that in some of these.
Claims that were actually net we're saying that we're seeing.
You know what.
The deaths occur in late 2020.
But we're seeing.
And that's what gives us some indication that it's more of a.
Ah fluctuation relating to.
The overall pandemic.
You may recall that.
Kind of to your point.
Forget exactly the year 2016, or 2017, we went through a really short period, where we ended up having some higher non medical causes of death as well and then those tentative subside and dropped back down at periods of time so.
That will that will take place from from time to time.
Very helpful. And then just one last one on.
We can treat the competitor of yours did an acquisition of day.
Medicare insurance oriented.
Insurance company.
As I look at your direct to consumer operation.
Medicare supplement is tiny.
Tiny fraction of your life sales through that channel.
Our vertical day.
You might want to build out more.
Extensively is it something where you could sell on behalf of another carrier as opposed to.
<unk>.
<unk> life, providing the underwriting.
The channel directors tumors is currently groups sales in group sales are hard to predict from continuing to try and expand that channel in the past from cash to individuals' sales through our direct to consumer channel.
And we haven't been very successful with that we've had greater success, obviously with their interest in our operation.
From a branding efforts as you go forward shouldn't it works, we're exploring how to expand those direct to consumer health sales and particularly on Medicare supplement.
I don't think what other carriers to try and distribute on behalf of other carriers that would detract from our life sales on our agencies.
We will continue to restore.
Direct to consumer individual Medicare supplement sales.
Excellent. Thanks, so much.
Our next question comes from Ryan Krueger K B W.
Hey, good morning, I may have missed it did you disclose the amount of the dollar amount.
Non COVID-19 excess mortality that you saw in the first quarter and also your expectation.
Full year.
Yes for the first quarter flow roundabout $13 million higher than what we anticipated so roughly about 2% of premium just from that in the first quarter and for the full year, we anticipate.
Round.
$18 million more than what we had kind of anticipated initially.
Four.
Total inclusive.
For the entire year, including our expectations. If you will is it'll be about $50 million for the full year and it was about $25 million in the first quarter. So again about half of what we kind of anticipate of total.
Extra obligations, if you will will occur.
It occurred in the first quarter and so that's why I think in the first quarter you kind of look at it was probably a drag of about three 5% of premium.
Due to some.
On the tire obligations, and then about one 8% or so between one and a half at 2% is kind of what we expect now for the full year.
Got it thanks.
You mentioned that higher buyback was a partial offset to this can.
Can you give some updated commentary on your level of buybacks that you expect into that from 'twenty one.
Yeah, so at the midpoint of our guidance.
Again, we're looking at that excess cash flow on that $360 million to $370 million and so you know that.
It's kind of the level that we have.
We have around on that and then we.
Look at some different average prices over the over the course of the year.
But that is a little bit higher than where we were.
Back in January and kind of at the midpoint of our expectations were not as well.
Not quite that high.
For overall share repurchases and then actually on the first quarter, we were able to.
We purchased just a little bit more it's about wasn't yet, but it is actually a little bit lower price than what we had kind of built into the midpoint of our prior projections.
The benefit of that so we bought back a few more shares than what we had anticipated on that.
It just helps.
So we're getting the benefit of that over the course of the year as well.
Thanks, and then just the last one.
<unk>.
Are you still thinking that $50 million is your target for parent company.
Liquidity.
You get to the end of this year, you'll determine how much capital you might need downstream with updated key one factory.
Beyond that anything above $50 million it could be available for buybacks in 2022.
Yes, I think that's kind of over thinking on what again, we'll take a look at that in the situation.
Get closer to the end of the year, probably and little business comes more into focus.
But I think that's likely kind of that debt target that we'd be looking forward to retain.
Great. Thank you.
Sure.
Our next question comes from Tom Gallagher Evercore.
Hi, Yeah, just just a follow up to Brian's last question on.
Capital management plan, so the with the $550 million.
Total resources balance.
Route minus the 50 would imply $500 million.
I presume some of Thats going to be used for the balance of the year, there's timing issues with getting dividends out.
But realistically you're looking at using some meaningful portion of that for additional buybacks. I mean are we looking at.
I don't know an extra $2 million to $400 million of buybacks in 2022, where you're thinking about.
Staggering that out more when you think about capital deployment.
Yeah. So when you think about the 500 million $5 50, or what have you and as you kind of mentioned you're pulling on let's just say for 15.
With 504.
For the remainder of 2021, if our share buybacks.
Let's just say at the high end of.
That excess cash flow range of $3 70, we've already bought back 100, So you got about $2 70.
That's that's remaining for this year.
And then that's what we'll have to listen on that so that's really leaving about $230 million.
Remaining out there for various capital needs. So we'll see what type of capital needs, we have from tier one and how.
How the downgrades progress over the year now thats in excess clearly, where we are north of what we think would have would be necessary.
And so but depending on where that is Tom.
Tom I think depends upon if that's something that debt.
How much clarity we have if we ended up with.
A bigger chunk that we're able to return it probably would come back over a period of time and tail clearly into 2022.
I think we probably will be trying to do it.
Earlier than spread it out over the entire year, but I think we'd probably focus on returning it.
Sometime early in 2022 at the very end of 'twenty 2021, depending on how much there is.
Okay. That's that's helpful. And then just in terms of the.
The philosophy of $50 million holding company buffer I think you're on.
Annual interest expenses or over $80 million now and I think your common dividends over $80 million.
I guess standard industry practice seems to be holding one times coverage for interest in common dividends, which would be $160 million plus for you.
Is that not.
Is it the stability of your cash flows that would give you confidence to not not hold that much.
Just curious.
Why why you'd be able to hold a lot less than annual interest expense.
Expense.
Hum.
You got some.
The stability of cash flow.
If we have it.
The consistent.
For the year.
The $50 million.
We had.
Adjusted net level several years ago, and we've really had no issue.
This past year, we did raise some additional liquidity not nor on what's what.
What are your Covid world is going to be likely as it turns out.
We raised a lot more so on.
You know probably I don't think there's going to be 50 million, we'll evaluate that as we go on all but.
I don't think that we would see them do it.
As most of you are talking.
Yeah, and I would agree it really is when we look at having that comfort of having 350.
Million, plus or minus some each and every year and our excess cash flow. So after the payment of those interest and dividends that you mentioned.
It gives us great comfort as we go over that that will have the funds and that creates a new new pool of liquidity every year that we can access if we in fact needed.
Okay and then.
The final question just on <unk>.
Just want to make sure I understood. It the non COVID-19 sorry, the indirect Covid mortality you said it was.
Negative $13 million.
And <unk>.
Yes that was higher than what we had what we had kind of anticipated. So we had anticipated higher we had seen some of the trends at the end of the year and again, we anticipated the higher COVID-19 debt. So.
We.
Dissipated a decent amount of.
On the higher obligations in the first quarter, but we did see about $13 million more than what we had anticipated. Okay got it so that was relative to expectation, but if I say relative to returning to normal I was estimating like 20% to $25 million.
Net is that sound about right that does sound about right correct.
Okay. Thank you.
We have no further questions in the queue at this time.
Alright, Thank you for joining us. This morning, we'll talk to you again next quarter.
Yeah.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.