Q2 2021 Globe Life Inc Earnings Call
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[noise] Good day and welcome to <unk> second quarter 2021 earnings release Conference call.
Today's conference is being reported 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, Larry Hutchison, our co chief Executive officers thinks about it our chief Financial Officer, and Brian Mitchell, Our General Counsel.
And that they'll keep 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 subsequent forms and key on file with the SEC.
And the other comments may also contain non-GAAP measures. Please see our earnings release and website.
And the lease term and reconciliation to GAAP measures and now I'll turn the call over to Gary Coleman.
Thank you, Mike and good morning, everyone.
And the second quarter getting paid and $300 million on a dollar amount in Q2 for sure.
And then in $73 million or dollar city Tusa that's for sure.
Net operating income for the quarter was $193 million.
A dollar range for sure.
And the increase of 12% per share from the year again.
On a GAAP reported basis return on equity as of June 38, non core general proceeding up to the first half a year and non U.
And with 7% and second quarter.
Book value per share was $83 and picky on soup.
Excluding unrealized gains and losses the pitch securities.
And on the equity was 12, 4% from unfortunate year and 13, 5% from second quarter.
In addition book value per share grew 90% to $55 and 66 students.
And our life insurance operations.
Revenue increased 9% and Dear day quarter to 700 million.
And then the dollars.
And maybe before we have seen the green pursuits and premium collections since the onset depending on demand.
Life mood, right and margin was $150 per cent from year ago.
The decrease in margin is due primarily to the higher premium.
And then the amortization related to the agreed persistency.
For the year, we expect life premium revenue growth between 8% to 9%.
And then driving margin growth guidance.
6%.
With health insurance premium revenue grew 4% to $296 million and.
Health underwriting margin was up 16% to $74 million.
The increase and underwriting margin was primarily due to improved claims experience and persistency.
For the year, we expect low premium rate need to growth to 4 and 5%.
And underwriting margin growth around 9%.
Administrative expenses were $68 million per quarter or 3% from a year ago.
As a percentage of premium and <unk>.
<unk> expenses were 6.6% from.
Average of $6.5 per cent a year again.
For the full year net.
Administrative expenses rose 8.9%.
And be around 6.7% of premium.
Due primarily to increased <unk> and information security costs.
Higher pension expense and.
And will increase and travel and facilities.
Gross.
I will now turn the call over to Larry for his comments on the second quarter of marketing and operations.
Thank you Bill.
We experienced strong sales growth from the second quarter.
True to make progress on agent recruiting and Illinois.
Average scores coach growth.
Distribution channel.
At American income life life premiums were up 18% over the year ago quarter.
$348 million.
On the other molecules up 16% to and other than $8 million on hold.
On the revenue margin was primarily due to improved persistency.
And higher sales from recent quarters and.
And the second quarter of 2020, so there's really limited due to the launch of Covid.
Second quarter, and 2021 net life sales were $73 million.
42%.
The increase on net life sales is primarily due to increased agent count and.
On productivity.
The average producing agent flow into the second quarter was 10478 up 25% from the year ago quarter and up.
And 6% from the first quarter with.
And the physician agent plant and a good second quarter with 10400 ships.
And most of them from agency continues to generate positive momentum.
But there wasn't a national life premiums were up 6% over the year ago quarter and <unk>.
$78 million.
Our life underwriting margin was down 16% to $16 million.
Requirement and margin was due primarily to higher policy obligations.
Net life sales increased 67% to $18 million and therefore.
Sales were $6 million up 52% from a year ago quarter.
And primarily from increased agent count and increased agent productivity.
The average producing agent count for the second quarter was 2700 <unk>.
And we will go on.
And 1% from the first quarter.
The producing free cash.
And as of quarter of 2007.
We continue to get inquiries for Liberty National deposits.
And the third and shoal premiums increased 9% and movement quarter to $85 million and.
And while the margin increased 18% to $22 million.
And inclusive of other margin due primarily to improved claims experience and it.
Persistency.
Total sales were up 41% to $19 million.
2 increased agent productivity.
The average producing agent count for the second quarter was $1 from 220.
And 2% from the year ago quarter and.
And 1 follow up from the first quarter.
The producing agent count at the end of the quarter with 1171.
The agency emphasize and agent productivity during the first half of the year.
The focus is shifting more towards including for the remainder of the year.
And let the consumer division and globalize life premiums were up 6% over the year ago quarter to $249 million and why.
Our funding levels and margin increased 22% to $44 million.
The increase in margin was due primarily to improved persistency.
Net life sales were $42 million down 14% from your growth quarter.
This decline was expected due to the extraordinary level of sales activities and the second quarter and cashew.
And so with Covid.
While sales declined from a year ago and were pleased with this quarter's sales activity.
It was 23% power and the second quarter of 2000 and my true.
On the medical and General agency premiums.
Premiums increased 3% over the year ago quarter to $116 million.
Underwriting margin and increased 16% to $18 million.
The increase in margin was due to improved loss ratios on before.
On the amortization.
Net sales were $12 million up 1% compared to the yields on a quarter.
It's somewhat difficult to predict sales activity in this uncertain environment.
And lots of our projections based on trends, we're seeing and knowledge of our business.
We expect the producing agent count for each agency at the end of 2021 to be on the phone launches.
American income life.
Moving to 6% growth.
With international.
128% growth.
And there's others.
The decline of 1.2 million per cent.
Net life sales for the full year 2021 are expected to be as follows.
American income life.
The increase of 13% to 17%.
With international and <unk>.
And increase of 26% to 32%.
And what the consumer.
The decrease of 10%.
And with health sales for the full year 2021 ex specificity has problems with.
And with international and increase of 12% to 18%.
And those mortgage net increase of 4.8%.
And a lot of American individual Medicare supplement a decrease of 1% to an increase from 6% 2 and increasing 9%.
I'll now turn the call back to growth.
And we know in terms of the vessels operations and <unk>.
Adjusted income, which we define as net investment income on those required 8% net policy liabilities and debt was.
And the $60 million, a 2% decline from year ago quarter.
On a per share basis, reflecting the impact of our share repurchase program excess investment income.
2%.
And full year and rates.
Excess investment income to decline, 1% to 2%.
But to grow around 2% or per share basis.
And the second quarter, we invested $116 million and investment grade fixed maturities.
Primarily and the financial unit.
Food and industrial sectors.
The Investor day on average you have a 3.69% and <unk>.
Average range and.
And and average life of 35 years.
We also invested 73 and $8 and limited partnerships debt invest in credit and instruments.
These investments are expected to produce incremental yield and Oregon.
In line with our Conservative investment philosophy.
And the entire fixed maturity portfolio, the second quarter yields and slightly with 3.4%.
Down 14 basis points from the second quarter 2020.
As of June 30 reported.
Total Europe.
On slide 2.3%.
And thats, the assets of $19.1 billion, including $17.5 billion and fixed maturities and amortized cost.
On the fixed maturities.
$16.7 billion are investment grade with an average weighted blade models and below investment grade bonds are similar and $64 million compared to $810 million and at the first quarter.
The percentage of below investment grade bonds and fixed maturities is $4.4 per se.
Excluding net unrealized gains on the fixed maturity portfolio and.
The lower investment grade bonds as a percentage of the equity.
14%.
Overall, the total portfolio is rated $8 compared to triple B, plus a year ago.
Consistent with recent years bonds rated triple B or <unk> 55 per cent and take security portfolio.
While this ratio is in line with the overall bond market and it is high relative to peers.
However.
We have low or no exposure to higher risk assets, such as bridges equities midweek and mortgages.
Loans and other asset backed securities.
He calls me and pass along a key criteria and utilize non investment processes is the issuer must have the ability to provide multiple cycles.
We believe that the triple B securities that we acquire provide the best risk adjusted capital adjusted returns.
And as large parts of our unique ability to hold securities to maturity there.
And always some fluctuations in interest rates or equity markets.
Net interest rates continued to pressure that's net income at the midpoint of our guidance, we're assuming an average week 90 range around 345% from fixed maturities for the remainder of 2021.
While we would like to see her.
And going forward and worldwide can thrive and a longer lower for longer interest rate environment.
Extended low interest rates will not impact the GAAP or statutory balance sheets and required accounting rules since we sell non ecosystem projects and projects.
Fortunately the impact and lower new money rates of our investment income is somewhat limited as we expect net.
Average turnover adolescent and 3% per year and our investment portfolio over the next 5 years.
Now I will turn the call them and try and produce Congress on capital and liquidity.
Thanks, Gary.
First I wanted to spend a few minutes discussing our share repurchase program available liquidity and capital position.
The parent ended the second quarter with liquid assets of approximately $545 million.
It's a non is higher than last quarter because in June the company issued a 40 year.
<unk> hundred $25 million junior subordinated notes with a coupon rate of 415% net.
And net proceeds were $317 million.
On July 15th the company and utilize the proceeds to call on $300 million 6.1 and 2.5% junior subordinated notes due 2052.
The remaining proceeds will be used for general purposes.
And in addition to these liquid assets.
Parent company will generate excess cash flow during the remainder of 2021.
The parent company's excess cash flow as we define it.
It's primarily from the dividends received by the parent from its subsidiary.
Less the interest paid on debt and the dividends paid to our shareholders.
And we anticipate the parent company's excess cash flow for the full year to be approximately $365 million.
Of which approximately $185 million and will be generated from the second half of 2021.
And the second quarter and the company repurchased 1.2 million share of Globe Life, Inc. Common stock.
And a total cost of $123 million and add.
Average share price of $101 and <unk>.
The total debt was higher than anticipated as we took advantage of the sharp drop in share price and to another quarter and accelerated approximately $30 million of purchases from the second half of the year to repurchase shares at an average price of guidance $5 and systems and standards.
So far in July.
$32 million to repurchase 343000 shares at an average price of $90 and 81.
Adjusted full year during the day, we have spent approximately $246 million to purchase 2.25 million shares on an average price of $97 and 96 items.
Taking into account the liquid assets of $545 million that move and second quarter.
Plus approximately $185 million of excess cash flow that we are expected to generate and the second half of the year.
Less than $32 million spent on share repurchases and July and the 300 million debt.
Our junior subordinated note.
We will have approximately $400 million of that.
And thats available on the apparent for the remainder of the year.
And as I'll discuss in more detail and just a few moments, we believe with demand and more than necessary to support the targeted capital levels within our insurance operations and maintain a share repurchase program for the remainder of the year.
As noted on previous calls, we will use our cash as efficiently as possible.
I believe and share repurchases provide the best return or yield to our shareholders over other available alternatives.
We anticipate share repurchases will continue to be a primary use and parents and excess cash flow.
It should be noted that the cash received by the parent company and from our insurance subsidiaries.
After they have made substantial investments during the year to issue new insurance policies and expand the information technology and other operational capabilities.
As well as acquired new long duration assets to fund future cash needs.
As we progress through the remainder of the year.
We'll continue to evaluate our available liquidity.
With more liquidity is available then needed from.
Portion of the excess could be returned to shareholders before the end of the year.
However, at this time the midpoint of our earnings guidance only reflects approximately $120 million and share repurchases over the remainder of the year.
Our goal is to maintain our capital levels necessary to support our current ratings.
As noted on previous calls globalized has targeted a consolidated company action level RBC ratio and the range of 300% to 320% and.
At December 31, 2020, our consolidated RBC ratio was 309%.
Thanks, 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%.
And this excess capital along.
Along with adjusted $400 million of illiquid assets, and we expect to be available per pad provides sufficient liquidity to fund future capital needs.
As we discussed on previous calls the primary drivers and potential additional capital needs from the parent company and 2021 relate to investment downgrades and changes to the NDA at the RBC factors related to investments, commonly referred to as seaborne and factors.
The estimate the potential impact on capital due to changes and our investment portfolio. We continue to model several scenarios and stress tests.
And our base case.
Dissipate approximately $370 million of additional NTIC, 1 notch downgrade and.
In addition, we anticipate full adoption by the any of the new moving depending on <unk> factors for 2021.
Combined our base case assumes approximately $105 million of additional capital will be needed at our insurance subsidiaries to offset the adverse impact from the new factors and additional downgrades and adult and order to maintain the midpoint of our consolidated RBC target.
Bottom line 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 on share repurchases.
As previously noted we will continue to evaluate the best use of any excess cash that could remain and will consider returning a portion of any excess to shareholders before the end of the year.
Should be able to provide more guidance on that and our call next quarter.
At this time I would like to provide a few comments related to the impact of COVID-19 on second quarter results.
And the first half of 2021, the company has reported approximately $49 million ex COVID-19.
Total debt claims.
Food and $11 million and the second quarter.
And the $11 million incurred at $10 million less debt incurred in the year ago quarter and in line with our expectations for the quarter.
The total Covid death benefits and the second quarter included $4.6 million incurred in our direct to consumer division or 2% average second quarter premium income.
$1.5 million incurred at Liberty National.
And 2% of its premium per quarter.
And $3.5 million at American income from <unk>.
On percent of the second quarter from them.
At the midpoint of our guidance and we anticipate approximately 20000.
To 30000, additional COVID-19 deaths to occur over the remainder of 2021.
And with prior quarters, we continue to estimate, but we want to have COVID-19 life claim of roughly $2 million. So every 10000 net debt.
And.
We are estimating a range of Covid death claim and $53 million to $55 million per the year substantially unchanged from our previous guidance.
Finally, with respect to our earnings guidance for 2021 and the.
The second quarter, our premium persistency continued to be very favorable and was better than we anticipated leading to greater premium.
Higher policy obligations and lower amortization as a percent of premium.
At this time, we now expect loss rates to continue at lower than pre pandemic levels throughout the remainder of 2021.
Moving to higher premium and underwriting income growth and our life segment.
We also increased the underwriting income and on health segment to reflect the favorable health claims experience and so on.
And the second quarter.
Finally, the impact of our lower share price.
And a greater impact from our share repurchases and results and fewer diluted shares.
As such we have increased the midpoint of our guidance from $7.36.
With $7.44.
With an overall range of $7.34 expense.
And to $7.54.
For the year ended December 31, and 2021.
And my comments I will now turn the call back to Larry.
Thank you Frank those are our comments, we will now open the call up for questions.
Thank you.
If you'd like to ask a question. Please signal by pressing star 1 on your telephone keypad.
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Again press Star 1 to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
Yeah.
And we will take our first question from Andrew <unk> with credit Suisse.
And good morning, everyone.
And maybe you could quantify.
Si.
And indirect COVID-19 claims during Q2 'twenty 1.
Do you still anticipate total and indirect claims and.
A 25 million from Q2, 'twenty, 1 and 2 the yearend.
Okay.
Improvements.
And with this.
With respect to the second quarter.
We've had.
Anticipated around $15 million per quarter down from.
The $25 million that we saw in the first quarter.
We now estimate that they work ultra do actually $22 million of excess obligations or around 3% of premium and the second quarter versus about $7 million higher than what we thought.
This increase was mostly due to the better persistency this team.
And remember the better persistency and requires us to keep more reserves on the book.
And in fact audit and $22 million.
And so far obligations that we had in the quarter about 60% was on $14 million.
From the lower losses and then.
And about $8 million relates to other higher and non COVID-19 claim activity.
The actual claims around the medical and Nonmedical book.
Largely in line with what we anticipated so again.
The higher the $7 million hiding and kind of 5 year related to the better persistency.
For the full year net.
We now anticipate that these excess policy obligations and probably be around $70 million.
About 2.4% of premium and Thats up from roughly $50 million and kind of talked about last quarter.
2.4% of premium.
And Doug you talked about 1.5% of that will relate to higher reserves due to the lower lapses and about.
9%.
The higher non COVID-19 and the claim activity.
And again most of the free.
It's about $20 million per day.
And you talked about last quarter relates to the impact of the lower lapses and the reserve that was required and the team on the policy.
The good life and we had anticipated.
That makes a lot of sense. Thank you and then just my follow up within the book.
On to consumer channel.
Curious about interim and.
On costs, which were previously decided to growing more quickly and is that still the case this quarter and conclude with globe life exploring new direct to consumer channel partners for growth as well.
And I think there maybe possibly continue.
So on marketing strategy basically for channels and direct to consumer.
And Bob Houghton College, and commensurate maybe you touched on rail.
I think we're seeing a gradual shift and with residential share.
And try it.
Electronics channel is growing and most quickly.
And the Internet.
It shows and unfortunate horizontal and related concerns and real growth attendants from using analytics and testing and to increase our circulation.
And their volumes.
Traffic on the Internet.
Yes.
Thank you.
Thank you and what.
Our next question from John Barnidge with Piper Sandler.
Great. Thank you and can you maybe talk about how your strength through the strength and life sales.
Does it seem to be more based on the strong agent growth over the last year with maybe those agents.
It may be selling to their closest networks or more around paying debt raise awareness.
<unk> life, I'm really just trying to dimension.
The strength that we've seen as a whole quarter and thank you.
And as your life insurers with like a growth of distribution channel.
And which account is really important component and natural rubber.
And at American income I think the primary driver.
On the exchange growth and continue to be the Asia growth and 25% and in Virginia.
Quarter over quarter.
On the national storage from here.
And Q2.
And Worksite sales were up 75% compared to the second quarter 2 pounds from 2 countries.
And she works on channels and actually.
The growth.
True.
On a sequentially.
And there is to return and 1 person enrollments and the addition of issuing impairments with return on site sales from Worksite.
And that is helping us internationally.
And moving national intend on hitting both.
This year the growth is coming from productivity.
The greater percentage of regions from submitting business and then.
And all 3 agencies and since the agency and experience and should be and we have premium written premium and also increase should we be really different drivers.
And different mentioned term loans.
Distribution.
Okay and then my follow up question. This.
And this is related to the indirect COVID-19 question, but last quarter, you talked about increased debt to despair from like overdose, and suicides, b and 20%, 80% being delayed and carriers like all timers and.
Cardiac can you maybe talk about what youre seeing there a little bit and your expectations going forward. Thank you.
Yeah, when you deal with it and at the total kind of in the midst of that about 80%. So it's really relates to the medical.
On the side versus some of the non medical colleges.
Okay.
For.
For the year.
And we probably anticipated.
We'll continue to see those at elevated levels, even though we do anticipate those to be trending down.
And over the course of the year.
And access to healthcare and.
All of that and that kind of going through.
Thanks for the for the full year.
The anticipated with price.
Excess claims if you will notice that and $28 million or roughly 9.1% and premium.
And you do answers.
Thank you and we'll take our next question from Ryan Krueger with K B W.
Hi, good morning.
I guess first I had a follow up on debt.
The persistency impact.
So you talked about 1.5%.
Increased to your policy benefit ratio from here and there can you.
Can you.
Comment on how much of a positive impact would be occurring with Mb.
And basically in line and the other half.
But for that.
Yes.
On the amortization side.
It's a little bit less and 1% so it doesn't totally offset the increase and policy obligations, but it is large reserves.
Got it.
And then I guess it and we're there.
And I could be to a day.
Excluding.
Thank you.
And some of your guidance per year and agent count at American income.
Suggests.
I think from debt.
Declines agents from.
And where we're at.
Now I guess.
And a little more color on that and you've seen any negative impact from from labor market conditions on your ability to recruit new agents.
Sure.
And I think from clients on and family Heritage.
And then Scott.
From references and action.
From.
Yes, it was very very huge.
I think American income you had.
And what I guess.
The range of 3% to 6% moving.
National brands and 1 that we.
Okay.
We think it will be down from 9 to negative 1 from China.
So from an improvement of almost every week and growing agent count and challenged through the end of 2021 comes from.
Remember a year ago, and the remaining unemployed and more importantly, 120 crews and.
Any redistribution.
And we should reduce from any workers and weigh on shrimp and everything.
And these figures and the opposition and should help warning signs from those businesses.
The dramatic increase and more proppant per stage on John Lynch Sharpie on producing agents and growth will slow and short on.
However, as your color in terms of enrollment growth levels.
And we'll see continued growth and our agent count and in line with our historical levels.
As mentioned indicators.
And regional growth as revenue growth and middle management.
And when you look at the average.
Net income recognized from 7% increase and middle management.
From Q2, and internationally and a 6% increase and middle management.
And have a heritage of a 13% increase and middle management and support.
And as many managers.
And margins are improving and training within the company and 1.
The strength and agent count growth and so I'm just curious on the process and we don't expect to see positive growth quarter to quarter.
Moving on year over year loans.
Cash flow usage.
And the producing agent count and change and she is 1 of the craft that day.
Okay.
American income proportionate 90 per share.
And a 12% of from Norwegian and international However.
And there is no gas as an example of international from 2016 to 17.
And with 19% agency loans and next year 2000.
The next 2 and 2 of which as soon as you reach and tuna.
And that's probably 23% and next June and business.
And which is it takes time to development and management.
Moving to new growth into 2000 and keep those regions.
And on the long explanation.
And as for the range.
And with growth Division.
Provision expense.
And there's going to be and stewardship.
And thanks for that color.
Thank you and we will.
Our next question from Tom Gallagher with Evercore.
Yeah.
Good morning.
Just a question on persist and see pick.
<expletive> I heard you say, you know to better protect and see is more likely to be permanent.
And if that's true.
That would bode well for future premium growth and life insurance clearly.
And with the 8% to 9% Youre doing next year.
Assuming you continue to have good precession fee and.
Charles trends remain within a reasonable range.
Do you think for 2022, we'd be looking at.
And.
<unk> growth above your historic range is for premium growth for life insurance may be closer to it.
6 or 7% at least even if it's down a bit on how do you see that.
And those dynamics playing out.
So I think you're I don't know about what percentage is going to be on route.
And the next call, we'll give some guidance on 2000.
Yes, I would anticipate and we continue to have growth rates that are higher than pre pandemic levels.
And the 1 thing I would like to add on that a business that's on.
Good morning, and Florida, we think that the better persistency is permanent.
We do think that it's been a WAF throughout the end of 2021, so we do see it.
Continuing at the favorable levels.
We'll be able to give a little bit more insight I think next call and when we really kind of dig and a 2022, where we really think the persistency levels are going to go but I think we'll be able to get some better.
Views on where we think that persistency and grow in 2022.
Definitely encouraged with the continued.
And the high levels of persistency this year and that should help.
As I said that net below that.
Premium growth.
And the foreseeable.
[noise] foreseeable future.
Okay and the.
Just on that on the Covid mortality impact I guess, the direct 1 share forecasting 20 to 30, K and mortality over the rest of the year at 54 cash youre showing about double that amount suggest just curious how you're deriving youre asking that staff.
Yeah, we did take a tour.
And the accounts.
Several different sources that are out there on <unk> is 1 of those it.
It is probably.
Looking at what they were having probably good week ago, just as we've been kind of need to apply some of the forecast and they've got.
Verticals and look at those trends, which are what they are looking at by state and applying that to our in force.
To do quite a bit of work there.
To come up with our estimates of what that impact is.
I do understand and and some of the last few days.
We have increased our estimates now and clearly if that higher number of U S debt is in fact realized.
We would end up being more at the lower end of our range.
Okay.
And kind of look at it if we ended up.
Averaging let's just.
Say 250000 debt with 250 deaths per day from that.
Over the course of the remainder of the year debt.
And around 45.
And that sort of your point around and stuff.
And 2 times and what we've put.
And our midpoint.
About an extra <unk> 10 impact overall, so that would still be within our range and so I think thats up a little wider range that we have kind of normally if you will also take into consideration and some of that.
So changes on.
And where that might go it's pretty pretty hard to tell right now exactly what the debt levels are going to be.
Got you and then just 1 last if I could fit it and so the 105 million of the combined impact from Q1.
The C factor changes plus expected ratings downgrades and can you can you isolate how much of the $105 million and specifically from the <unk> factor changes.
And it was about $75 million from <unk> 1.
Probably you know absent the seaborne probably about a 15 point reduction if you will and our RBC ratio just in and of itself.
Around $75 million.
Got you. Thank you.
Thank you and we'll take our next question from Erik bass with Autonomous research.
Hi, Thank you and maybe to start with a follow up on Tom's question on sort of Covid mortality.
Are you seeing any changes at all and <unk>.
Difference between kind of the insured population versus the general population on.
<unk> and rates and as vaccination status something you are able to ask about on and policy applications.
Right now we're not seeing.
<unk>.
As we look and I think that sensitivity generally around $2 million of claims per 10000 debt, that's really seem to be holding pretty well.
And clearly.
With the higher vaccinations and specialty older Ages.
That is.
Continuing to.
That helps.
So we're if you worked on with overall death rates so.
And we do.
And as we look at our overall and for US we don't have any.
Great exposure to any 1 particular range, it's pretty well spread out from.
And from <unk>.
<unk> and through age 50.
Roughly work and any 10 year period of time and it's about the same percentage of our overall portfolio and then it kind of really goes down and should get total range 16 range.
And in fact so.
And I feel like we're overexposed and do.
Any 1 particular, even if net.
Vaccinated and on vaccinated condition.
Got it and then.
Moving on.
On the health side.
And the favorable claims this quarter or was that just a continuation of lower benefits utilization and if that's the case how are you thinking about that trend into the second half of the year from.
Mesh Sop and and other health products.
But not on the mid.
It is largely more utilization on mobile really seeing there.
We're seeing on it.
Higher utilization than we had in 2020 and really even a higher utilization in 2019, but it is lower than what you would expect from a trend perspective, so it's still running a little bit favorable.
And if it were 19 levels were and and would expect from a from a normal trend perspective.
On the accident and and our cancer blocks that we really have it and let's say and Liberty and American income.
It's more of a and Pearl it's not so much of the utilization of services as a new system and curl on claims and that's what we're just seeing more from this favorable.
And currently at this point in time, and that's really helped.
With the lower.
Policy obligations.
And those particular lines as well as to some degree at family Heritage.
Thank you and then 1 last follow up just on net subs do you have any exposure to potential cost pressures from the new Alzheimer's treatment, which I believe it's covered under Medicare part D and.
And of that fall under net suffer wasn't it.
Yes.
And there would be potentially some exposure but.
Ultimately, we do have that included and are.
Guidance.
Okay. Thank you.
Thank you and again, if you would like to ask a question. Please press star 1 we'll take our next question from Jimmy <unk> with Jpmorgan.
Hi, So first just a question on your direct response margins, obviously, they're pretty weak last quarter. They improved this quarter other than just the impact of Covid.
Do you feel that this was a normal quarter overall or were there any sort of and sort of positive or negative puts and takes that you're thinking about long term margins and direct response to this life on the life side.
Yes, Jimmy on his heart.
And.
Other changes loans.
You can see that we had lower amortization.
For the quarter and.
And.
During the second quarter, we had adjusted our average rate is actually as rates.
Throughout all our distribution systems, and we've seen a bigger impact and aggressive response.
Lowering debt amortization rate.
And a 2% low to pursue versus 45%.
For the second quarter of last year.
And that's been on it.
Continue through the year.
We should be at around 43% premium for amortization and direct response versus over 25% of last year.
The reason for that reduced amortization is.
On Tuesday, as long as we increase sales.
And then on also the reported persistency, both first year and renewal.
And direct response.
The high sales and we had last year.
And we're.
Excuse me and acquisition cost.
So the acquisition costs per policy and glass or lower.
And parents doing so.
And we've lost EAC that we're putting on the books.
So the combination of higher sales and lower acquisition costs per policy closer and the improved persists do any more premium revenue.
Since we amortize.
EAC over the premium revenue and over over the life and policies have you got a higher premium revenues.
And as a result, and lower amortization and pursue it.
And we should begin to see debt.
And maybe this year.
And then next year would it be set based on what are your views on pyxis and <unk> for 2022.
Yes.
Yes.
And then on retention.
And I guess, given the improved labor market, especially on the services industry.
It probably book.
And the ability to true people, but how do you think about how it affects your ability to retain and DH and steady have hired over the past 2 years.
<unk> added a lot of agents and.
And do you see any sort of impact on your <unk>.
And detention.
As the economy continued strength.
And what the range on inflation probably on that.
And the Hong Kong.
Cash on hands on course over the last 2 years and at some level.
And in 2021.
Sure.
And as such smartphone volume.
And from a sequential growth there.
And so on the 20 American and commissioning and better agent retention.
And internationally attainment.
Cash and as well as an unchanged.
2019 with volume.
You're talking about retention.
And I think doing a job opportunities obviously right now so I think terminations and maybe even slightly through the end of the year.
And on Wechat.
With that and improving the increase.
And from things as normal.
And I think they will.
Cash flow and normal recruiting range, particularly in 2020 true.
And then typically and it didn't get done near D C and pick up and their productivity should any reason to assume debt the increase and agents over the past year. So low.
Non translate to sort of continue momentum on sales and.
Regardless of what happens with recruiting or are there other factors that might slow down sales.
Okay.
And if you repeat that question connections and they might be coming on.
Yes.
And you've added about a bit and silver.
Overcapacity.
Over the past year, and regardless of what happens with recruiting I would've assumed debt.
The higher number of agents would result in.
Strong sales, obviously the growth rates very low comps and stuff, but the absolute level of sales should be higher than they used to be pre pandemic and just given the increased number of agents and especially as the agents get more and more tenured and their productivity increases, but as debt now.
Correct assumption or are there other factors debt.
And thinking about as Youre looking at your sales over the next 2 years.
Thank you for taking the question and citizens assumptions.
The biggest driver.
And we're just going to be the accretion number of agents and.
Provision range account is going to grow.
And the guidance, we've given for the drivers productivity and actually productivity is a little bit lower.
And we're on the income kitchen, and 'twenty, 1 versus Q2, 'twenty and that's because of the increase in Asia and new agents from what Youre putting on.
Trajectory.
And.
And so on agent growth from try and nitrogen and 'twenty tranches from.
'twenty 1.
And the agencies loans.
Agents.
And she is the training industry became more general agents and shooting and things, particularly you saw on and family Heritage.
Q2 volume recruiting and Josh.
Cash quarterly revenues and productivity.
And so on increase in wholesale and retail.
These loans.
From 'twenty 1.
Sequentially and also had a 25% increase assessments from Asia and renewable quarter.
First with a total cumulative.
And as we age patients most recruiting.
Moving on and agents and productivity assumption.
Assumption on productivity and appreciating the deviation.
If you normalize that and agents and much more productive.
Okay. Thank you.
Thank you.
And that concludes today's question and answer session I will now turn the call back to Mike majors for closing remarks.
Alright. Thank you for joining us. This morning, those are our comments and we'll talk to you again next quarter.
Thank you ladies and gentlemen. This concludes today's call. We thank you for your participation you may now disconnect.
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