Q2 2021 CNO Financial Group Inc Earnings Call
Performed well as expected.
Our capital and liquidity remain conservatively positioned.
We ended the quarter with an RBC ratio of 409% and $336 million and cash at the holding company. While also returning $105 million to shareholders through a combination of share repurchases.
And dividends.
We continue to execute well against our strategic priorities, specifically successfully implementing our strategic transformation that we initiated in January of 2020.
Growing the business profitably.
Launching new products and services <unk>.
Expanding to the right to slightly.
And the younger wealthier consumers within the middle income market.
And deploying excess capital to its highest and best use.
Turning to slide 5 and our growth scorecard.
As was the case for 6 consecutive quarters prior to the pandemic all 5 of our scorecard metrics were up year over year.
Life sales remain strong.
Fueled by continued momentum in both our direct to consumer and exclusive field agent channels.
Overall health sales were up almost 90% over the prior period, which reflected the first full quarter of the pandemic when stay at home restrictions will first Institute.
Total collected.
Life and health premiums were up 1%. This reflects continued solid growth and life nap and persistency of our customer base offset as expected by lower Medicare supplement premiums.
Annuity collected premiums were up 42% year over year relative.
Relative to the second quarter of 2019 annuity collected.
And so we're up 1%.
Client assets and brokerage and advisory grew 33% year over year to $2.6 billion.
Fueled by new accounts, which were up 13% net client asset inflows and market value appreciation.
Sequentially client assets grew 8.
8%.
Fee revenue was up 50% year over year to $31 million, reflecting growth and third party sales.
Growth within our broker dealer and registered investment advisor.
And the inclusion of direct paths results.
Turning to our consumer division on slide 6.
We continue.
And premium cross channel sales program.
Our hybrid sales and service model, which blends virtual engagement with our local field ex exclusive field agents has led to significant improvements and lead conversion rates.
Customer acquisition costs.
And sales productivity.
Life and health sales were up 30.
And 2% over the prior period and 19% over the same period and 2019.
Life sales climbed 8% per the quarter to over $50 million, reflecting the sixth consecutive quarter of year over year growth.
Direct to consumer life sales were level with the record production and the prior period.
And to leverage life sales generated by our exclusive field agents were up 23% and comprised over 40% of our total life sales.
Leads from our direct to consumer business supported this growth.
Within our health product lines supplemental health and long term care sales saw healthy growth over both the second quarter of 2020 and the second quarter.
2019. These results benefited from initiatives that enable our products to be sold through multiple channels.
Our third party Medicare advantage policies sales were up 20% and the second quarter.
Medicare supplement sales remained challenged med sub sales were up modestly over the first quarter. However, as discussed in previous quarters.
<unk> our market is experiencing a secular shift away from Medicare supplement and towards Medicare advantage.
We continue to invest and both our Medicare supplement and Medicare advantage offerings to ensure we are well positioned to meet our customers' needs and preferences.
Consistent with the first quarter roughly 50.
50% of our consumer Division life and health sales were completed virtually.
Consumer selecting to engage virtually held steady even as communities, we opened and vaccination rates increase.
This is a profound change and how we connect with consumers and further validates the transformation we initiated in January of 2020.
It will continue to have significant implications for our business going forward and among other things. This change expands our agents' ability to interact with customers across a broader geographic area.
As I mentioned annuity collected premiums were up 42% as compared to the prior year and up 1% versus 2019.
The number of new annuity accounts grew 16% and the average annuity policy size rose 14%.
Our portfolio of index annuity products continues to be well received by our middle market consumers.
Our recently launched guaranteed lifetime income annuity plus was a key contributor to our second quarter.
Beauty sales growth.
Of course, we continue to maintain strict pricing discipline on our annuities to balance sales and growth sales growth and profitability.
Participation rates and other terms are reviewed regularly to reflect the current macro environment conditions.
Client assets and brokerage.
Brokerage and advisory grew 33% year over year and 8% sequentially.
The $2.6 billion and the second quarter.
Combined with our annuity account values, we now manage $12.7 billion of assets for our clients.
This has fundamentally shifted the relationship we have with our customer base. Unlike.
And you have insurance products, which can be transactional in nature investment products tend to create deeper and longer lasting customer relationships.
We continue to reap the benefits of the shift and the agent recruiting strategy that we initiated several years ago.
We now rely more heavily on targeted recruiting approaches including personal referrals.
<unk> and periodically resulted in fewer new agent recruits. However, the new agents, we appoint are more likely to succeed and stay with us over time.
Relative to the year ago period, our producing agent count increased 7%.
Sequentially, our producing agent count was down slightly but overall our agent force remains.
And stable.
Our securities licensed registered agent force was up 6%.
Improvements in agent productivity and became a more important driver of our sales growth and agent count in recent quarters, and we have significant runway for future growth.
Turning to slide 7.
And our Worksite Division.
Worksite sales were up sharply and the second quarter as compared to the year ago period, we expect to approach 2019 sales levels when access to workplaces improves.
Ongoing pilots and programs to target new employer groups offer new services and capture new business continue to progress.
Retention of our existing customers also remained strong with continued stable levels of employee persistency.
Our producing agent count was up 15% year over year, and and 7% sequentially.
Recall that we slowed our agent recruiting during the pandemic due to workplace restrictions.
As a result agent count remains down.
And by 40% from pre Covid levels.
To help boost recruitment and support a return to pre Covid production levels, we are rolling out a field agent referral program.
This program is designed similarly to our successful consumer Division program.
Relative to 2019 levels are veterans.
<unk> is up 7%.
Retention and productivity levels, among our veteran agents, who have been with us for more than 3 years remains very strong.
These agents have been the driving force behind our recent sales momentum and are expected to be instrumental and helping to rebuild our overall agent force.
Fee revenue generated from our business has more than doubled in the quarter due to the direct path acquisition.
Feedback has been strong surrounding the unique combination of products and services, we can now bring to the worksite market.
We are realizing early cross sales successes between web benefits design and direct path and the pipeline continues to grow.
Agents and with strong client retention and these businesses also generated double digit increases over both 2020 and 2019 and various metrics.
Turning to slide 8.
Our robust free cash flow enabled us to return $105 million to shareholders in the second quarter, including 87.
Our laws and share buybacks.
We also raised our dividend 8% in May.
The ninth consecutive annual increase.
Our capital allocation strategy remains unchanged, we intend to deploy 100% of our excess capital to its highest and best use over time.
While share repurchases form a critical component.
Part of our strategy organic and inorganic investments also play an important role.
And with that I'll turn it over to Paul.
Thanks, Gary and good morning, everyone.
Turning to the financial highlights on slide 9 operating earnings per share were up 20% year over year and up 60% exclude.
Significant items.
The results for the quarter reflect solid underlying insurance margins ongoing net favorable COVID-19 related impacts strong alternative investment performance and continued disciplined capital management.
Over the last 4 quarters, we have deployed 300.
$37 million of excess capital on share repurchases, reducing weighted average shares outstanding by 7%.
Return on equity improved 90 basis points and the 12 months ending June 32021, compared to the prior year period.
But some of expenses are allocated.
Products and not allocated to products, excluding significant items increased by about $6 million sequentially, driven by incentive compensation accrual adjustments related to earnings outperformance and the first half of the year.
The increase in expenses over the prior year period.
It also reflects lower agency management expenses and 2020 due to Covid related restrictions and the June 32020 conclusion of a transition services agreement related to the long term care reinsurance transaction completed in 2018.
In general our expenses continue.
<unk> to reflect both expense discipline and operational efficiency on the 1 hand and continued targeted growth investments on the other hand.
Turning to slide 10.
Insurance product margin and the second quarter was up $17 million or 8%.
Continue excluding significant items.
Net COVID-19 impacts were $21 million favorable in the quarter as compared to $6 million unfavorable and the prior year period.
Excluding COVID-19 impacts margins and the quarter remained solid and stable across the product portfolio.
And net favorable COVID-19 impacts in the quarter reflect continued favorable claims experience and our health care products, particularly impacting Medicare supplement and long term care due primarily to continued deferral of care.
This was partially offset by the unfavorable impact of Covid related mortality and our lifeblood.
And.
The favorable COVID-19 impact and the quarter exceeded our expectations as the outlook that we provided on our April earnings call assumed that health care claims would begin to normalize and the second quarter, including an initial spike in claims due to pent up demand that did not materialize and.
Product.
Regarding our annuity margin recall that in the second quarter of 2020, we saw favorable mortality and our and our other annuities block unrelated to COVID-19, which translated to $10 million of positive impacts as.
And as we noted at the time this.
Resulted from a handful of terminations on large structured settlement policies, which we expect from time to time and this block, but not on a regular basis.
[laughter].
Turning to slide 11.
Investment income allocated to products was essentially flat and the period.
And the court has growth and the net liabilities and related assets was mostly offset by a decline in yield.
Investment income not allocated to products, which is where the variable components of investment income flow through.
Increased $40 million, reflecting a solid gain and the current period.
And our alternative investment portfolio and a loss on that portfolio and the prior year period.
Recall that we report our alternative investments and a 1 quarter lag.
Our new money rate of 3.38% for the quarter was lower sequentially, reflecting a continuation.
And of our up and quality bias from the first quarter and.
And continued spread tightening and general partially offset by higher average underlying treasury rates and the second quarter versus the first quarter.
Our new investments comprised $1.1 billion of assets with an average rating of single a.
And and average duration of 16 years.
This higher level of new investment reflected reinvestment of maturing assets and a higher level of prepayment activity and the period.
Our new investments are summarized in more detail on slides 22, and 23 of the earnings presentation.
Turning to slide 12.
At quarter, and our invested assets totaled $28 billion up 8% year over year.
96% of our fixed maturity portfolio is investment grade rated with an average rating of single life.
This allocation to single a rated.
Weighted holdings is up 200 basis points sequentially.
The triple B allocation and comprised 39, 4% of our fixed income maturities down 140 basis points, both year over year and sequentially.
We are actively managing our triple b portfolio to optimum.
Optimizing our risk adjusted returns.
To the extent suitable and attractive opportunities develop.
We may over time and balance our recent up and quality bias with a modest increase and allocation to alternatives.
It backed securities closed for investment grade emerging market Securities.
Turning to slide 13.
We continued to generate strong free cash flow to the holding company and the second quarter with.
With excess cash flow of $114 million per 128% of operating income for the quarter.
And $432 million or 119%.
<unk> of operating income on a trailing 12 month basis.
Turning to slide 14.
Yeah.
At quarter, and our consolidated RBC ratio was 409%.
Which represents approximately $45 million of excess capital relative to the high end of our targeted.
Good range of $3.75 to 400 per cent.
Our holdco liquidity at quarter end, and it was $336 million, which represents a $186 million and excess capital relative to our target minimum hold co liquidity of $150 million.
Moving.
And to returning $105 million of capital to shareholders and the quarter, our excess capital grew by approximately $222 million from March 31 to June 30 of this year.
This primarily reflects the strength of our operating results and the quarter.
And the recent up and quality bias and our.
And as that portfolio.
Turning to slide 15.
While uncertainty related to Covid continues we believe it is very unlikely that any future COVID-19 scenario would cause our capital and liquidity to fall below our target levels.
That reason, we are no longer running.
And the formal adverse case scenario as we had been doing through the first quarter of this year and.
Instead, we are updating our single base case scenario or forecast with upside and downside risks to that forecast.
And our most recent forecast we expect a continuation of the sales momentum.
We've seen in the past 5 quarters.
We expect a modest net favorable COVID-19 related mortality and morbidity impact on our insurance product margin for the balance of 2021, and and modest net unfavorable impact in 2022.
This assumes that COVID-19 deaths do not worsen.
And the second half of this year and that health care claims begin to normalize after a brief spike beginning in the third quarter due to pent up demand from deferral of care.
When and if a spike actually occurs and when our health product claims actually normalize is highly uncertain.
So far we have seen some inter quarter volatility and our health claims during the pandemic, but nothing that has persisted long enough to establish a trend.
On the mortality side impacting our life products the number of Covid deaths, we will see for the next several quarters is also uncertain.
Given the recent rise and infections largely from the Delta variant and the potential for material impacts from additional variance.
Certainly 1 of the biggest risks to our forecast is how exactly COVID-19 will evolve from here.
But again, we believe however, it evolves it.
John's and earnings event for us favorable or unfavorable not the capital or liquidity of that.
Assuming no shift in interest rates, we expect net investment income allocated to product to remain relatively flat and this base forecast is growth and assets is offset by lower yields reflective of.
Represent lower interest rate environment, and are up and quality shift and asset allocation.
In general we expect alternative investments to revert to a mean annualized return of between 7% and 8% at some point and over the long term, but the actual results will certainly be more variable.
<unk> with likely more upside potential and downside in the near term given the current economic outlook.
We expect fee income to be modestly favorable to the prior year as we grow our third party med advantage distribution and improve the unit economics of that business.
<unk> and web.
Benefits design earnings and the inclusion of a direct path will also contribute to fee income.
We expect the sum of our quarterly allocated and not allocated expenses ex significant items for the balance of the year to be generally consistent with levels reported in the first quarter of this year.
Are allowing for some quarterly volatility.
And finally as Covid related uncertainty diminishes, which it certainly will at some point, we expect to manage our capital and liquidity closer to target levels, reducing our excess capital over time.
And with that I'll turn it back over to Gary.
Thank you Paul.
We are pleased with the healthy results, we've generated this quarter and and the first half of the year.
The strength of our diversified business model and the steady execution of our strategic priorities and organizational transformation underpinning that success.
The consumer division has met or exceeded pre pandemic performance.
And our Worksite division is making meaningful progress.
As we enter the second half of the year, we remain squarely focused on maintaining our growth momentum.
Building upon our competitive advantages and managing the business to optimize profitability cash flows and long term value for our shareholders.
We thank you for your support and interest and P&L. Please continue to take care of your health, including vaccinations for those that are eligible and stay.
Stay healthy and stay safe.
I'll now open it up for questions operator.
As a reminder, if you'd like to ask a question simply press star 1 on your telephone keypad.
And again that is star 1 to ask a question.
Our first question comes from the line of Colin Johnson and B Riley Securities.
Hey, Thanks. Good morning, Thanks for taking my question I'm, just first wondering given the deferral of care and contributed favorably and the quarter just like the fact that maybe coming into the quarter we.
We expected that to abate as things reopen further.
And the insight as to maybe why that might have been taking place you know why it would've been seeing a slower resumption of Kerr and then otherwise expected on the part of the consumer.
Got it thank you for the question.
The short answer.
And as we've got a bunch of theories I don't know that we have anything that I would point to is as being hard and fast, but I'm happy to share with you some of the areas we've heard and seen.
First as some consumers are still afraid to go back.
And to see their doctors.
Some consumers have conditions.
Have otherwise saw health care on.
But those conditions past.
Some of the consumers that would've gone to see doctors now they themselves and unfortunately passed.
There are a variety of other things that the short answer at least from my perspective, I haven't seen anything that says here's exactly what happened and we know that fewer people are seeking health care and our.
Health care claims results benefits as a result.
But I've seen more theories and then and I can tell you what to do with and in terms of what exactly is the underlying explanations.
Okay. Thanks, that's helpful.
And then kind of looking at new annualized premium and I think this is the second quarter.
And now that we're about half of the life and health and AP Digital do you think that that number presents maybe longer.
Longer term equilibrium percentage, so to speak where there might be more room to the upside with respect to that.
I think theres more and this is Gary I think.
And there's more room for the upside on that.
The 1 thing I want to be transparent about some of this depends on how you define it.
So, let's say you are sitting.
And some city and Iowa.
And you buy a policy from an agent who is also in Iowa.
Interaction takes place over a zoom call.
And you complete the paperwork via email.
And is there locally the agent is there to answer questions and happy to meet your kitchen table, but you happened to do all of it digitally.
And that particular product is completed as I described digitally but the next product and they sell they come to the city of your kitchen table.
Was that a digital relationship or what was that.
And and I share that with you because we're watching this evolve.
Much more quickly than we expected, but the bottom line for all of our shareholders, we expect and increasing number of interactions to take place virtually.
But not to the exclusion of that in person interaction.
At some level I want.
Our consumers to interact with our agents in person because that's 1 of our differentiating characteristics. That's 1 of the things that we can do that others cannot we can do both so I want consumers that want some of those but but the short answer is we expect that the number of digital interactions will continue to grow.
Got it.
And just as a follow on so as digital and the number of digital sales potentially rises do you think that could have any sort of positive.
Impact on operating expenses.
Digital sales versus 1 and person.
I think over time, it will overtime given agent.
I think you're able to increase their productivity they can cover a broader geographic area.
And so that should definitely help us.
I want to emphasize the overtime part because it's important to remember that in the near term, we're investing and certain technologies and training. So it'll take time for all this to work its way through Paul do you want to add anything that.
And it should be the only thing I'd say is that I think.
And credit position now where.
As we continue to grow the business.
And sustain that growth over time.
We will get better operating leverage from our expense base.
Which has the potential to grow.
Earnings and cash.
And and improve ROA.
Okay. Thank you that's helpful. Those are all my questions.
Your next question comes from the line of Humphrey Lee with Dowling and partners.
Good morning, and thank you for taking my questions.
Question for Paul.
And looking at the annuity earnings and margin.
Specifically for fixing that and.
Fixed index annuities.
And they were very strongly and the quarter I'm. Just wondering was there some sort of kind of market benefits of running through the numbers for this quarter and if so can you provide some color and some color in terms of what the normalized margin.
And it will be a fall of 40 F I E.
Sure Good morning Humphrey.
So the sequential improvement and and the annuities margin is as.
Reflective of market conditions, creating favorable option impacts.
So just to drill.
And at higher equities, lower treasuries and lower volatility created a situation where the value of the option assets increases and value more and the embedded derivative reserve.
And just to be clear this is really it's an accounting.
And.
And phenomenon. If you will we would expect that the favorable trends to moderate the trends between Q1 and Q2 to moderate depending on market conditions.
You know in terms of.
Longer term sort of run rate trends I would just point.
And to our disclosure.
Or over the last couple of years.
And I think if you if you look at that.
A noticeable sort of underlying run rate.
Okay got it.
And my second question is related to your fee revenue growth, which was very impressive.
Per cent year over year.
Can you provide some color in terms of what's the driver for that growth and how much was that was from adding direct path versus the growth of your kind of existing a fee based business.
Yes, the biggest.
Driver as direct path.
But we are also seeing growth and.
And the fee revenue related to <unk>.
Distribution and med advantage.
And from WP day.
So and so we think about like normally first quarter and fourth quarter tend to be a higher kind of fee revenue quarters and that used to be kind of a $30 million ish. So now because.
Because with the second quarter, and you kind of a $30 million now how should we be thinking about that seasonality.
I think you should continue to expect the seasonality will follow.
The annual enrollment period, which is skewed into Q3 Q4, because remember the med advantage policies, we sell during the annual enrollment period show up as fee income.
But so is the 30 million and counting now kind of that the new run rate going forward full account the the low seasonality quarters.
Yes, certainly.
Q2 of this year.
<unk> includes a full quarter of direct path W. D D and <unk>.
And and a distribution.
Yeah.
Okay got it thank you.
Yes.
Your next question comes from the line of fire with Autonomous research.
Hi, This is actually Eric bass.
First is do you have and estimate for the RBC ratio impact of adopting the nics.
If you see 1 factors and when you make any changes to your RBC target range as a result of this.
Good morning, Eric.
So the impact of the new C..1 factors as of June 30.
Pro forma all else equal is about 16 points on our RV.
<unk> knee, which translates to about $80 million of capital.
And some things that we could do and the investment portfolio and that sort of arbitrage is.
The.
And the new risk factors and that debt.
Improves the 16 basis points by a couple of points.
As as to how we think about it I think it is evolving.
And I've seen some speculation.
And the analyst community that some companies will simply reduce their target.
Rbcs.
We're in the process of doing some of net.
<unk> analysis with our own internal capital models.
2.
And drive how how we're thinking about it.
And I'd like to come back to this question on a future call as to whether we'll.
Reduce sort of formally reduce our target rbcs bite by some amount.
Either the entire sort of adjusted 16 or something less than that.
I think it'll be helpful too.
Continue our dialogue with the rating agencies to better understand how how they think about it so more and more to come on this but that's the pro forma.
All else.
And no impact.
Got it that's helpful. Thank you and then maybe moving kind of sales and earnings and your sales and obviously had a nice recovery and as you noted are back to pre pandemic levels at least and the consumer business are you now at a level of sales where the in force block is growing for most products and if.
So should this start to translate into faster organic earnings growth.
Yeah. So we're we're.
The in force block has been relatively flat looking backwards.
But I think.
I think we're now at a point.
With our expense.
Expense base.
And with our growth.
Sort of profile.
And as we continue to grow the business.
And and that's sustainable and and we certainly think that it is.
And we'll begin to get better operating leverage going forward.
Got it thank you.
Your next question comes from the line of John Barnidge with Piper Sandler.
Yeah.
Yes, thank you for the opportunity.
You're at $183 million and buybacks for the year, clearly a good cadence, but down linked quarter the stock declined.
Obviously, a little bit but can you think about can you talk about how you were thinking about capital return and a little bit more on the balance of the year.
Yeah sure John This is Gary thanks, Thanks for the question.
Give you some high level thoughts I'm going to call wants to share anymore details I'll, let them do that but I'll start us out.
So some of it is for those of you that have been long term participants.
This call some of it is going to be a repeat of what you've heard from me before in terms of my thought process.
But I would just remind you of a few factors number 1 we don't have any incentive to hold excess capital. If you look at our incentive comp plans and everything else, we have no incentive to hold excess capital.
We have historically at least since I've been in the chair and CEO.
Which I think I'm going on my 15th quarter, now 50, and particularly in quarter.
And I have declined to provide specific guidance, but instead talked about our capacity and then asked all of our shareholders and analysts to judge us by our actions not our words.
And during the time I've been CEO, we bought back stock every single quarter, except 1 and with the benefit of hindsight, everyone realize at the 1 quarter and.
It was to fund the LTC transaction.
And so again I ask you to judge us.
By our actions in other words.
In terms of where we are right now I think about this quarter in particular and even the first half of the year and a really simple way I really like where we're positioned in terms of our capital I like the fact that given.
And all the uncertainty with Covid and we're still conservatively positioned I.
I like the fact that despite that and we were able to invest and growth. We made some investments in terms of certain technologies and abilities as well as the direct acquisition and despite that both quarters of 2021, we were able to return a nice a nice amount of money $100 million and 87 million to our shareholders.
And the first quarter and second quarter as to the specific amounts and any given quarter.
1 other thing that factors into this analysis.
Is is how do we think about price.
Not surprisingly the members of management, we believe that the intrinsic value is well above the GAAP book value, but that doesn't change.
The reality that when we buy shares at 95% of book value say versus 80% of book value. The benefit is different I think our long term shareholders would prefer to see us buy more stock when it's at 80% of book and say at 95 per cent of book not because of any commentary on the belief and the company, but just because of the accounting treatment and how it benefits.
And so I think what you saw happen from Q1 to Q2.
And when the stocks trading lower we'll buy more when the stock is trading higher whereby lesson and I want to emphasize that's not a commentary on our view of the intrinsic value of the firm rather it's a simple recognition of the accounting treatment and the greater and the discount to book I E. The cheaper and the stock is the more.
And we'll buy.
And so I wouldn't read into that small delta of $13 million between Q1, and Q2 and anything meaningful it's nothing more than an acknowledgment and where the stock is trading.
Okay.
Okay and Thats fantastic.
And case, Paul wants to add and can Paul did you want to yeah, I think that captures it.
Okay.
Gotcha, Alright, and thanks, Gary and then the follow up.
Safe to say claims tailwind persisted to a greater level than initially expected can you talk about maybe how each month and the.
The quarter progressed, and how youre thinking about run rating Inc.
And the third quarter.
Yeah, John it's call I'd say broadly speaking there's been there's been some volatility from month to month over the course of the pandemic going back a year.
Going back more than a year now.
Within an individual product line, yeah, you might have a month, where it's up and and the next.
It's down.
But it's been relatively stable.
And there's certainly not been any.
Persistent trend.
Up towards more normal levels.
As we said and our outlook.
For.
For the third quarter and a row.
We think it's going to begin to trend up towards more normal levels. The next quarter.
And and we'll see.
I think that.
If our base case assumption holds that you don't we don't see another spike in mature.
Next month's bike and infections and deaths and.
And I think that's a reasonable expectation.
We do see another spike and infection and death.
Really not.
But it also doesn't necessarily mean that we'll have the same behavior by consumers that we've seen so far in other words.
There's a.
A possible scenario where.
Spike again, and you have the mortality impact.
Consumers say, you know what I need to get back to my Doctor's office and maybe begin doing that.
So I guess I'd just emphasize that.
How things actually evolve is very uncertain and.
And I wouldn't.
Pretend to know exactly what that May look like.
John This is Gary the only thing I'd add to that I I think.
Yeah.
What's you're hearing from us.
We don't know we've been surprised as Paul indicated for the third quarter and a role we thought plan to come back and they didn't.
So we simply don't know.
And we keep trying to send the signals and take a conservative position because we feel like that's our obligation to try and and.
And say Hey, we think it'll come back next quarter. The reality is especially now that we've been wrong for 3 and a row.
I don't I wouldn't even know how to give you odds its all all the likelihood is that it's actually going to come back. We just don't know, but we're trying.
<unk> Conservative and Mccann.
No that's helpful I get it it's like a ping pong ball, you'll have all these assumptions and they've been a day, it's going to land further on 1 side or the other based on an average so I appreciate that that's all for my questions and best of luck.
Thank you.
Your next question.
Your line of Ryan and then with K B W.
Hey, good morning.
I was hoping you could talk a little bit about recruiting trend.
And with some some of your peers have talked about Inc.
And some challenges in terms of recruiting due to tight labor conditions, but I know you've also been shifting.
And I should take from shifting some of the sources of your recruit so.
Hoping for some commentary there.
Yeah, Thanks, and thanks for the question Ryan.
And like I've been involved and a handful of other.
Groups, both within the insurance industry and other industries with other business leaders.
I don't know a CEO out there right now that's not worried about ability to get labor.
Every single CEO and I've talked to regardless of industry has expressed concerns over the tightness of the labor market and how difficult. It is to get help. So we are absolutely no exception in that regard.
1 could argue that some of that trend is even more difficult.
For us because remember our agents work on a commission basis, they eat what they kill if they don't sell anything they don't make money and now we have support programs and so on early on but those difficulties are absolutely hitting our business.
Frankly, we got very very Lucky a couple of years ago, we started to make a move to deemphasize.
Raw number of recruits and instead.
Try and focus on more targeted and recruiting with an idea that that would benefit our productivity and our tenure, even if we didn't grow the top line in terms of agent count quite as much. So we're staying consistent with that strategy I think that strategy is really good in this environment and again.
And just out of pure look we started a few years ago. So we're well into that we're going to stay on that path.
You'll see us continuing to emphasize productivity we of course do we need to grow agents, but but im less focused on that I'm more focused on productivity and tenure and if you look at our numbers you can see that on both of those metrics, we've done a pretty reasonable job.
And we will continue to do that but right now and we will continue to be challenged there's no question about it.
Got it and then can you comment at all on persistency trends, you've seen and the.
And the life and health business through the pandemic.
Yeah.
You know any benefits to persistency.
I guess, maybe particularly and the licenses.
And you've gone through the last.
A couple of years now.
Sure.
Hey, Ryan good morning.
The persistency really across our product portfolio through the pandemic has been relatively stable.
A little volatility here and there.
It has drive driven.
Some some pluses and minuses on the margin.
But by and large it's remained relatively consistent with.
Pre COVID-19 experience.
Great. Thank you.
Mhm.
At this time there are no.
There are other questions I'll turn the call back over to Jennifer Childe for closing remarks.
Thanks, very much for your participation and the call them and look forward to speaking with you again soon.
Thank you ladies and gentlemen, you may now disconnect.
Okay.
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