Q4 2021 Globe Life Inc Earnings Call
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Ladies and gentlemen, you're currently on hold for today's conference call. At this time are attending today's audience, sometimes to be underway. Shortly thank you for your patience and please remain on the line.
[music].
Ladies and gentlemen, you are currently on hold for today's conference call at this time, where southern states audience and plan to be underway. Shortly thank you for your patience and please remain on the line.
[music].
Good day and welcome to the first quarter 2021 earnings release Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Mike Majors Executive Vice President of 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, Frank So both.
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 guidance purposes only.
Accordingly, please refer to our earnings release, 2020, 10-K, and any subsequent forms 10-Q on file with the SEC.
Some of our comments May also contain non-GAAP measures. Please see our earnings release and website for discussion of these.
And reconciliations to GAAP measures.
Now I'll turn the call over to Gary Coleman.
Thank you, Mike and good morning, everyone.
In the fourth quarter net income was $178 million or $1 76 per share compared to $204 million or $1 93 per share a year ago.
Net operating income for the quarter was $172 million or $1 72 per share a decline of 2% per share from a year ago.
On a GAAP reported basis return on equity was eight 8% and book value per share is $85 97.
Excluding unrealized gains and losses on fixed maturities.
Return on equity was 12, 3% and book value per share was $58 50 up 10% from a year ago.
In our life.
In our life insurance operations.
We continue to see improved persistency compared to pre pandemic levels.
In the fourth quarter premium revenue increased 8% from a year ago.
$733 million.
Life underwriting margin was $146 million down 11% from a year ago the.
The decline in margin is due primarily to higher COVID-19 related claims, which Frank will discuss further in his comments.
In 2022, we expect life premium revenue to grow 6% to 7%.
And at the midpoint of our guidance, we expect underwriting margin to grow around 29%.
Due primarily to an expected decline in Covid claims.
And health insurance premium revenue grew 8% over the year ago quarter to $313 million and health underwriting margin was up 12% to $81 million.
The increase in underwriting margin is primarily due to increased premium and improved claims experience.
In 2022, we expect health premium revenue to grow 6% to 7%.
And underwriting margin to grow around 3%.
Administrative expenses were $70 million for the quarter up 11% from a year ago.
As a percentage of premium administrative expenses were six 7% compared to six 5% a year ago.
For the year administrative expenses were six 6% of premium same as last year.
In 2022, we expect administrative expenses to grow 9% to 10% and be around six 8% of premium due primarily to higher IP and.
And information security calls.
Employee cost.
Gradual increase in travel and facilities costs and the addition of globe life benefits.
I will now turn the call over to Larry for his comments on the fourth quarter marketing operations.
Thank you Gary I will now discuss each distribution channel.
At American income life premiums were up 11% over the year ago quarter to $364 million and life underwriting margin was down 3% to $102 million.
The higher premium is primarily due to improved persistency and higher sales in recent quarters.
In the fourth quarter of 2020 21.
<unk> sales were $74 million up 4%.
The increase in net life sales is due to increased productivity.
The average producing agent count for the fourth quarter was 9530 down 1% from the year ago quarter and down 4% from the third quarter.
The producing agent count at the end of the fourth quarter was 9450 chain.
At Liberty National Life premiums were up 7% over the year ago quarter to $79 million.
Life underwriting margin was down 12% to $12 million.
A decline in underwriting margin was caused by higher claims expense.
Net life sales increased 4% to $19 million and net health sales were $8 million up 7% from the year ago quarter due to increased agent productivity.
The average producing agent count for the fourth quarter pushed 2724 up 1% from the year ago quarter up 1% compared to the third quarter.
The producing agent count at Liberty National ended the quarter at 2804.
The 4% sales growth may not appear dramatic we're very pleased with the ability of both Liberty and American income agencies to build on the significant increases we saw a year ago.
Fourth quarter sales for 2021, Liberty and American income are higher than the fourth quarter of 2009 chain by approximately 29% and 25% respectively.
At family Heritage Health premiums increased 8% over the year ago quarter to $89 million and health underwriting margin increased 16% to $25 million.
Increase in operating margin is due to the increased premium and improved claims experience net.
Net health sales were down 13% to $18 million due to a lower agent count.
The average producing agent count for the fourth quarter was 1100 guided tour down 18% from the year ago quarter.
4% from the third quarter.
The producing agent count at the end of the quarter was 1157.
We will continue to focus on sales and recruiting.
The heritage of 2022.
And our direct to consumer division growth life life premiums were up 6% over the year ago quarter to $237 million, while life underwriting margin declined 47% to $12 million Frank will further discuss the decline in underwriting margin in his comments.
Net life sales were $34 million.
Down 14% from the year ago quarter we.
We expected the sales decline due to the high level of sales growth experienced in the fourth quarter of 2020.
Although sales declined from the fourth quarter of 2020.
We're so pleased with this quarter's sales results as it was 13% higher than the <unk>.
Fourth quarter 2000 black chain.
At United American General Agency Health premiums increased 12% over the year ago quarter to $130 million and health underwriting margin increased 7% to $20 million to increase the underwriting margin as a result of increased premium.
Net health sales were $27 million up 19% compared to the year ago quarter.
It is difficult to predict sales activity in this uncertain environment.
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 2022 to be at the following ranges.
American income an increase of 328%.
Liberty National and increase of 3% to 18%.
Family Heritage, an increase of 12% to 30%.
Net life sales for the full year 2022 are expected to be as follows.
American income an increase of 2% to 10%.
Liberty National and increase of 8% to 16%.
Direct to consumer a decrease of 6% to an increase of 4%.
Net health sales for the full year of 2022 are expected to be as follows.
International an increase of 7% to 15%.
Family Heritage had increase of 3% to 11%.
United American individual Medicare supplement a decrease of 1%.
So an increase of 7%.
I will now turn the call back to Gary.
Thanks, Larry.
I'll turn to the investment operations.
Excess investment income, which we define as net investment income less required interest on net policy liabilities and debt.
It was $59 million down 4% from a year ago.
On a per share basis, reflecting the impact of our share repurchase program excess investment income was flat.
For the year excess investment income in dollars declined 2%, but on a per share basis was up 1%.
In 2022, we expect excess investment income to decline around 3%.
But to grow around 1% on a per share basis.
As to investment yield in the fourth quarter, we invested $271 million in investment grade fixed maturities.
Primarily in the municipal industrial and financial sectors. We.
We invested at an average yield of 349% an average rating of a plus and an average life of 31 years.
We also invested $45 million in limited partnerships that have debt like characteristics. These.
These investments are expected to produce additional yield and are in line with our conservative investment philosophy.
For the entire fixed maturity portfolio, the fourth quarter yield was five 7%.
Down 12 basis points from the fourth quarter of 2020.
As of December 31, the portfolio yield was 517%.
Invested assets are $19 $2 billion, including $17 8 billion of fixed maturities at amortized cost.
Other fixed maturities $17 1 billion are investment grade with an average rating of AA minus and below investment grade bonds are $702 million.
$841 million a year ago.
The percentage of below investment grade bonds to fixed maturities is three 9%.
Excluding net unrealized gains in the fixed maturity portfolio below investment grade bonds, as a percentage of equity or 12%.
Overall the portfolio. The total portfolio is rated a minus same as yours logo.
Bonds rated triple b or 54% of the fixed maturity portfolio.
While this ratio is in line with the overall bond market. It is high relative to our peers.
However, we have little or no exposure to higher risk assets, such as derivatives equities residential mortgages.
Oh, Lowes and other asset backed securities.
Because we invest wall a key criteria utilized in our investment process is that an issue or most of the ability to survive multiple cycles.
We believe that the triple B securities that we acquire provide the best risk adjusted capital adjusted returns.
And thats due in large part to our unique ability to hold securities to maturity.
<unk>, some fluctuations in interest rates or equity markets.
For the full year 2022 at the midpoint of our guidance we.
We expect to invest approximately $900 million in fixed maturities at an average yield rate of around three 9% and.
And approximately $200 million and limited partnership investments.
With that like characteristically at an average rate of around 7%.
We are encouraged by the prospect of higher interest rates, our new money rates will have a positive impact on operating income by driving up net investment income.
We are not concerned about potential unrealized losses that are interest rate driven.
Since we would not expect to realize them.
We have the intent and more importantly, the ability to hold our investments to maturity.
In addition, our life products at fixed benefits, they're not interested.
While we would clearly benefit from higher interest rates global I can continue to thrive in an extended low interest rate environment.
Now I will turn the call over to Frank for his comments on capital and liquidity.
Thanks Gerry.
First I want to spend a few minutes discussing our share repurchase program.
Available liquidity and capital position.
In the fourth quarter the company repurchased one 6 million shares of Globe Life, Inc. Common stock at a total cost of $145 million.
The average share price of $90 and 97.
The parent ended the fourth quarter with liquid assets of approximately $119 million.
For the full year, we spent approximately $455 million to purchased four 8 million shares.
At an average share price of $95 11.
<unk>.
The total amount spent on repurchases included $85 million from excess liquidity at the parent.
To date in 2022, we have repurchased 230000 shares for $23 million at an average price of $101 17.
In 2021, the parents had approximately $450 million of excess cash flows available to return to be returned to shareholders.
Of this amount $80 million was paid to shareholders in the form of dividends.
$370 million returned through share repurchases.
Including our total share repurchases and shareholder dividends the company returned $535 million to its shareholders in 2021.
For 2022.
While 2021 statutory financials had not been finalized.
We expect around $465 million to $470 million in cash flow to be available to the parent before the payment of interest on its debt and dividends to its shareholders.
After payments of interest on its debt the parents should have around $380 million to $385 million available to return to its shareholders either in the form of dividends or through share repurchases.
This amount is lower than 2021, primarily due to higher COVID-19 life losses incurred in 2021.
The nearly 15% growth in our exclusive agency sales.
Both of which resulted in lower statutory income in 2021 and.
And thats lower dividends to the parent in 2022, then will received in 2021.
Obviously, while the increase in sales creates a drag to the parents cash flows in the short term. They will result in higher operating cash flows in the future.
As noted on previous calls, we will use our cash as efficiently as possible.
We still believe that share repurchases provide the best return or yield to our shareholders over other available alternatives.
Thus, we anticipate share repurchases will continue to be a primary use of the parent's excess cash flows after the payment of shareholder dividends.
As previously noted we had approximately $119 million of liquid assets at the end of the year as compared to the $50 million to $60 million of liquid assets, we have historically targeted.
We currently expect that approximately $25 million to $30 million of this amount will be needed for additional insurance company capital in 2022.
We will continue to evaluate the potential impact of the pandemic on our capital needs.
And should there be excess liquidity, we anticipate the company will return such excess to the shareholders in 2022.
In our earnings guidance, we anticipate between 325 and $350 million of share repurchases will have occurred during the year.
With regard to our capital levels at our insurance subsidiaries.
Our goal is to maintain our capital at levels necessary to support our current ratings.
Global life targets, a consolidated company action level RBC ratio in the range of 300% to 320%.
For 2021 since our statutory financial statements are not yet finalized our consolidated RBC ratio is not yet known however, we anticipate the final 2020, what RBC ratio will be near the midpoint of this range.
Thanks.
At this time I'd like to provide a few comments related to the impact of COVID-19 on fourth quarter results.
For the year the company incurred approximately $140 million of Covid life claims.
Including $58 million in the fourth quarter.
The claims incurred in the fourth quarter were approximately $23 million higher than anticipated primarily due to elevated levels of COVID-19 deaths in both the third and fourth quarters likely due to the impact of the Delta variance.
The center for disease control and prevention or CDC reported that approximately 115000 U S deaths occurred due to COVID-19 in the fourth quarter of <unk>.
A little higher than the 100000 projected on our last call.
In addition, after the end of last quarter and based on actual death certificates received by the agency. The CDC revised their estimate of third quarter deaths upward by approximately 28000.
Indicating the impact of the Delta variant in the third quarter was worse than they originally reported.
This is consistent with the adverse claims development, we experienced related to the third quarter the impact of which is included in our fourth quarter results.
Based on data. We currently have available we now estimate COVID-19 losses on deaths occurring in the third quarter were at the rate of $3 9 million per 10000 U S deaths and approximately $3 $7 million per 10000 U S deaths are occurring in the fourth quarter.
This is at the higher end of the range previously provided.
For the full year 2021, our losses averaged approximately $3 million per 10000 U S deaths.
The fourth quarter Covid life claims include approximately $27 million in claims occurred in our direct to consumer Division.
Or 11, 5% of its fourth quarter premium income.
Approximately $10 million at Liberty National.
12, 9% of its premium for the quarter.
And approximately $16 million at American income.
Or four 5% of its fourth quarter premium.
To date, we have experienced low levels of Covid claims on policies sold since the start of the pandemic.
Last majority roughly 68% of Covid claim counts come from policies issued more than 10 years ago.
And approximately 3% for policies issued in 2020 and 2021.
For business issued since March of 2020, we paid 394 Covid life claims with the total amount paid a $5 $2 million.
The 394 claims comprise only 0.0% to 1% of the nearly 4 million policies issued by global life during that time.
As noted on past calls in addition to Covid losses, we continue to experience higher policy obligations from lower policy lapses.
And non COVID-19 causes of death.
The increase from non Covid causes of death are primarily medical related including deaths due to heart and circulatory issues and neurological disorders.
The losses, we are seeing continued to be elevated over 2019 levels due at least in part we believe to the pandemic and the existence of either delayed or unavailable health care.
In the fourth quarter the policy obligations related to the non COVID-19 causes of death and favorable lapses were in line with projections at approximately $16 million.
For the full year, we incurred approximately $78 million an excess policy obligations.
With about $46 million of those related to higher reserves due to lower policy lapses and $32 million related to non COVID-19 clients.
With respect to our earnings guidance for 2022.
We are projecting net operating income per share.
We'll be in the range of $8 to $8 50 for the year ended December 31 2022.
The $8 25 midpoint is lower than the midpoint of our previous guidance of $8 35.
Primarily due to higher non COVID-19 policy obligations related to better expected persistency and.
And health underwriting income being slightly lower than previously anticipated.
We continue to evaluate data available from multiple sources.
Including the IH Emmy and CDC to estimate total U S deaths due to COVID-19 and to estimate the impact of those deaths on our in force book.
For 2022, we estimate that we'll incur COVID-19 life claims at the rate of 3 million to $4 million per 10000 U S COVID-19 deaths.
At the midpoint of our guidance, we estimate will occur.
Approximately $50 million of covered life claims.
Assuming approximately 145000 COVID-19 deaths in the U S.
Most of which are expected to occur in the first half of the year.
Yeah.
Now I'd like to take a few moments to comment on some qualitative impact of the new long duration accounting standard that will be effective in 2023.
We anticipate being in a position to discuss the more quantitative impact of the standard on our book of business. After the second quarter of this year once we finalize it properly test our models, our assumptions and the determination of current discount rates.
To the extent, we are in a position to discuss the quantitative impact sooner we will do so.
Remember nearly all of our business is impacted by the new rule and we are required to apply historical data and future assumptions on every one of our 16 million policies subject to the rule.
Given the volume and complexity the computations, we need to ensure the computations had been validated with proper controls in place.
Before discussing the quantitative impact.
In general this accounting change will have no economic impact on the cash flows of our business.
Meaning it will not impact our premium rates.
The amount of premiums that we collect nor the amount of claims we ultimately pay.
In addition, it will not influence us to change our business model.
Abiding basic protection oriented products to the underserved and low to middle income market.
The accounting change will also not impact our capital management philosophy. As this is a GAAP accounting change and will not impact the capital required by regulators to be held at our insurance subsidiaries or.
Or the amount of dividend cash flow to the parent.
Both of which are driven by statutory accounting rules.
The accounting standards simply modifies the timing of when the profits emerge on our insurance policies.
With respect to the impact on earnings.
Overall, we anticipate our reported GAAP net income and net operating income to increase under the new standard.
With respect to our reported underwriting income we expect a relatively small change to our overall policy obligation ratios and expect the amortization of our deferred acquisition cost to be significantly lower in the near and intermediate term.
This significant reduction in amortization is primarily due to the requirement to stop interest accruals on DAC asset balances.
And to unlock lapse assumptions, which will generally extend amortization periods beyond current schedules.
Both of these changes will result in less amortization being incurred as a percent of premium.
Thus, we anticipate our reported underwriting income and our underwriting margin as a percent of premium to increase due to these changes.
A portion of the expected increase in underwriting income will be offset by a reduction in excess investment income related to the elimination of interest accruals on our DAC asset.
With respect to the potential impact to our equity.
Under this standard we will elect a modified retrospective approach as of January one 2021.
The standard requires a much more granular view of reserve sufficiency.
For certain blocks that have embedded policy reserve deficiencies, we will be required to increase the policy reserve balance as of the transition date or January one 2021.
We do not expect this adjustment to cause a significant change to equity excluding a OCI upon adoption of the standard.
We do however.
And that our reported GAAP equity, including the effects of LCI will be significantly reduced upon adoption.
This was primarily due to the requirement to use current discount rates to re measure the policy liabilities for LCI purposes.
Our lowered that our current valuation rates that are based on historical investment strategies and assumptions.
Since current rates are lower than the rates assumed in valuing our policy liabilities for income statement purposes.
We will have an unrealized interest rate loss that is recognized through OCI.
This is especially relevant for globe given the high persistency of our products and the fact that we have many policy is still on the books that were sold 30 40, or even 50 years ago. When the interest rate environment was much higher than today.
While the required methodology requires the unrealized interest rate loss to be reflected in the LTI.
It ignores the unrealized gains from underwriting margins on future premiums that are available to fund future policy benefits and changes in interest rates.
Which has the effect of overstating the policy liability that will be reflected on the balance sheet upon adoption.
Given our strong persistency. This exclusion is especially impactful the globe due to our strong underwriting margins and low policy obligation ratio.
The lower the ratio the more future gains from future premiums that are excluded from the computation of the new liability.
Finally, as the average duration of our policy liabilities is over 20 years the amount of the ALC adjustment is expected to be larger than the OCI market rate adjustment on our fixed maturity portfolio will.
We will be sensitive to changes in interest rates.
And we'll have the potential to be volatile going forward with the current interest rate used to determine the reported policy liabilities is reset each quarter.
Should interest rates decreased from period to period, we will see a decrease in our reported day LCI.
If interest rates increase we will see an increase in our reported LCI.
Again, none of these interest rate changes will impact the amount of claims we will pay in the future.
In summary, we expect the new guidance will be a positive to our net our GAAP net income and net operating income.
And will initially result in a significantly lower GAAP equity, including ALC I do to the adjustments required in computing the policy liabilities to reflect current interest rates.
While the new guidance will likely lower GAAP equity, including LCI as of the transition date for many life insurance companies.
We expect the impact will be amplified for globe and other companies like globe to have a substantial portion of their business subject to the new guidance.
Reserves on policies issued many years ago.
Policy liabilities with long duration.
And strong underwriting margins.
Following the transition date, we expect GAAP equity, including <unk> to be more volatile as market rate adjustments impacting our policy liabilities will be greater than those impacting our fixed maturity assets.
Given the non economic impact on our business operations from these market adjustments.
Due to our intent and ability to hold assets to maturity and the noninterest sensitive nature of our liability cash flows.
We still believe that equity, excluding <unk> will be a superior and more meaningful measure of <unk> financial condition going forward.
Those are my comments I will now turn the call back to Larry.
Thank you Craig.
<unk>, we will now open the call up for questions.
Thank you if you wish to ask a question at this time.
Please signal by pressing star one on your telephone keypad. Please proceed with any function in your telephone is switched off.
Jimmy Choo.
Again, it is star one to ask a question.
We can now take our first question from Jimmy <unk> of Jpmorgan. Please go ahead.
Hi, Thanks.
So first just a question on claims and the life side, you mentioned non Covid claims being high do you think some of those are related to the pandemic as well.
Indirectly or are they independent but that it could stay elevated even months.
Go over debates.
We do think that.
A good portion of those are indirectly related to the pandemic seem.
It seems to be just looking at trends that we're seeing across the U S.
Given indication that some of these are.
At least can be attributed.
Attributed to.
These are delayed in care or delay in care.
So we do anticipate.
The starting to subside somewhat in 2022, and we anticipate that they will.
Start to be less impactful.
Over the course of 2022.
But we do anticipate that we will still at least see some elevated levels throughout the year.
Okay.
And has your view on margins being like longer term changed at all because of what's happened with COVID-19 , either because of any potential sort of adverse selection in your sales or just long term health effects of the pandemic.
At this time, Jimmy it's really hard to determine what that impact will be.
Now our views are not have not been changed with respect to that whether it's had some potential negatives due to COVID-19 and if you will the long COVID-19 , that's being talked about.
Having an adverse impact on mortality, there's also the possibility of <unk>.
Some positive impacts to mortality in the future whether that'd be through improved vaccines. The use of this particular vaccine.
Yeah.
Type of factors that might normally caused some.
Better mortality. So at this time it is a little bit early we'll continue to look at the data and see what's out there and.
Take that into consideration.
Okay, and just lastly can you talk about like the recruiting and retention.
That is given the tight labor market and how much of it.
Tough environment given the market.
Sure.
New agent recruiting.
It was down as expected in part because of the seasonality with stretch in the fourth quarter of this year.
That seems a lot like last year.
Our retention has actually increased over the last few years.
Talking about income because of the flexible brokered homes schedule.
Let's see.
We're seeing more kind of a solicitation at maturity.
So it's just somebody available.
And the labor market has.
I spent a lot of difficult to attract and also retain the wages.
I know, we can grow the three agencies going forward.
Historically, we've been able to do that.
As example.
The economic downturn of 2019 2010.
At American income had a strong relationship growth.
2000, and nature that chain, where we had record low unemployment.
American income and Liberty of family Heritage All had strong growth.
Our ability to grow the agencies, who are dependent on growing middle management.
We're scaling new office openings and providing additional sales to our agents.
During 2022.
We're going to open new officers of the three agencies equivalent increase the number of managers in all three agencies are also providing an additional sales technologies to support our agents' Trust Covid declines we expect to see the recruiting I think Asia counts pick up during the end of the first one is the second quarter of this year.
Thank you.
Chris.
Okay.
Go ahead.
Yeah.
Hello can you hear me.
Yes, yes, yes.
Yeah, Okay, great because the operator was so.
So thank you for taking the question.
<unk>.
You mentioned 27 million of the Covid claims came from direct to consumer.
Any any concern around that.
Yes.
Is it something.
So read into that being the biggest component of that.
Covid claims and not the biggest component of the premium.
Yeah.
No.
<unk>.
It has a little bit more of an impact on DTC kind of given there.
One they are simplified underwriting there.
They tend to have mortality that mirrors, a little bit more closely that a general U S population.
And then just to remember that there are policy obligations are a much greater percentage.
There.
Yes.
They are premium and so we expect higher mortality just in general within our DTC line than we do in our other other agency lines.
The things that we do look as we look at what percentage of their claims are being paid relate.
Related to Covid versus kind of the average for the entire company and it's in line.
And when you look at total claims.
We also take a look at just what levels of increased activity, we're seeing on our Covid claims versus what would be expected when looking at COVID-19 deaths across the U S and again.
<unk> that our risk profile really hasnt changed with respect to DTC.
Got it.
And maybe just a quick follow up on the recruiting question as we looked at the American income agent down.
3%.
Year over year and the.
Family Heritage agents down 21%.
The points were great as to.
The ability to grow but why not.
Not in 2021 why is that.
The drop offs, particularly at family Heritage.
I think 2021 is an extraordinary year.
I don't have the Covid second all three agencies in April or may be a greater emphasis on production with recruiting.
I remember two at family Heritage.
Heritage as a life insurance company or excuse me a health insurance company. The first is a hyper trends company.
I think it was much more difficult to recruit.
In 2020 in 2021 that was life assurance.
Because of the extraordinary demand for life insurance. In addition family Heritage is a much smaller perhaps much smaller agencies in either Liberty capital or American income.
So the middle managers at family Heritage.
Much more involved.
Production with recruiting and the larger agencies in American income and Liberty National.
Measures are primarily focused on recruiting rather than production.
The last changes Hello heritage.
Think about life insurance changes usually huge.
Push up our virtual contact of presentations.
So it was easy to recruit to host virtual presentations.
The healthy hesitation, it usually context of health insurance without the benefit of a wage.
So those are tend to be in person in home presentations version versus virtual.
Again, it was more difficult recruiting efforts.
Got it and then just maybe lastly, real quickly on persistency highlighted that it was very good premium was up.
Terrific, 8% in the quarter.
<unk>.
Do you feel good about that from a claims standpoint going forward. Some some have suggested.
A variety of insurance companies that there could be persistent see anti selection, how do you feel about the greater persistency in terms of the profitability going forward.
Well, Andrew we're seeing the improvements and persistency.
Both of them.
The first year and renewal year.
But we haven't seen any.
Anything to call just have concern that we would have antigen selection.
I think it's again its more of the but what we've talked about before that the pandemic has raised awareness of the need.
For protection.
And our policyholders as one of their buys for the pure protection.
And so we.
We haven't seen.
Indications that could be and is likely to really don't expect it to them.
The persistency may.
Not hold at the higher levels higher than pre pandemic levels for a longer period of time that we don't know.
The.
Persistency. This year is just a little bit.
Less than it was for 2020, but were still higher pre pandemic level at some point it could go back with pre pandemic levels, but we don't expect there to be.
Any extreme as far as annual selection or.
Things like that.
Awesome. Thanks, so much.
And we can now take our next question from John Barnidge of Piper Sandler. Please go ahead.
Thank you could you maybe talk about average age of Covid deaths in the <unk> 21 versus <unk> 21 for your Insureds.
Okay.
Yes, what we saw in our pay claims was about the same.
She had.
About overall about 62% of our deaths are over age 60.
And.
That was a little bit.
About the same overall is what we really saw in Q2, what we're starting to see.
Because a lot of those COVID-19 deaths still are kind of hitting a little bit of a younger ages than what we had seen earlier in the pandemic.
And of course, we also saw its kind of more in the south and those take claims in both Q3 Q4.
Q4 was probably about the same.
As far as the geography was concerned as well probably just a little bit more even in the south as we caught up on some of those mills.
Yes that had occurred in the third quarter.
When we kind of tried to sit through the numbers and look at more of our in current claims we're seeing just a slight trending upward on that average age I don't have what that exact the exact ages are.
We're seeing a little bit more trend towards the higher ages, which gives us.
Ah indication for the future any way that that's that may be seeing that average age move forward a little bit at some of the younger ages get more vaccinated.
Great and then my follow up question with employment market Hot makes it more challenging for commission like geography, Groupement can you maybe talk about the tools that are being.
Brought to existing producing agents to drive productivity gains. Thank you.
Well I think that there is not necessarily tools.
Obviously, you have the additional technology with Eric.
The agents.
Alright at 2019, 2020 , one so they can better recapture beads in a more efficient cost.
The virtual presentations in terms of more presentations.
It's a lower cost to them because there's lots of travel involved.
Okay.
Thank you.
Okay.
We can now take our next question from Erik bass of Autonomous Research. Please go ahead.
Hi, Thank you thank.
Thank you mentioned in one of the factors.
Changing your guidance range was a reduction in the health underwriting margin outlook. So just hoping you can give some more color there on what youre, saying.
Yeah.
Yeah, Eric just looking at.
What we were seeing in October and what we were projecting back at that point in time versus.
Our revised revised outlook here.
Just slightly higher it's a little bit and several different things that are maybe a little.
A little lower premium little higher acquisition expenses.
And a little higher claims as well so.
Thank you.
So it's a combination of all those that for the most part we're looking at our health margins to gravitate back.
Toward.
2000 22019 levels.
2020 was we had some very favorable claims.
Just experience I should say and.
And we're really just didn't kind of anticipating.
Those to move back a little bit more toward a normal more normal levels. When you think about our underwriting margin on the health side still thinking that's about between 24, and 25%, but maybe a little bit closer to 24%.
As a percentage of premium than what we had anticipated back in October .
Got it that's helpful. Thank you and then just another.
On sort of the ties between recruiting and sales and obviously a pretty wide ranges for both and should we think of those two things being linked so that may make you come in towards the higher end of.
The agent count growth that would push you towards the higher end of the sales range and vice versa or are those two things not as directly tied.
They are they are connected and there is a.
Production over a long period of time in the short run.
You can have a <unk> a decrease in recruiting new agents could actually have an increase in production.
For those that are in Asia, so much more productive new agents.
So with less training involved with many managers.
As you have more veteran agents you can increase your production because the percentage of agents depending on a weekly basis can go up.
Average premium written for Asia.
We'll also go up in the short run.
The long term success is obviously tied to increasingly Asia counts.
So if you look at long periods of time, there is a correlation that's fairly close between Asia growth.
And sales growth in premium growth for each of the agency calculation.
Yeah.
Got it.
Sales ranges for this year more a function of productivity rather than the number of productivity, but it's also those shelves ranges are based on the impact of Covid and what COVID-19 to clients.
Ill cover the clients quickly with respect sales would be in the upper <unk>.
Side of those ranges if COVID-19 continues if theres no variance.
<unk> sales activity in the agent count would be lower.
Sorry to close branches.
Got it thank you.
And as a reminder, the star one if you do wish to ask a question.
We can take our next question now from Mike Zemlinsky Welcome Research. Please go ahead.
Hey, great. Thanks.
Maybe one question on.
On pricing just given the continued uncertainty.
Regarding the pandemic.
Would you.
Are you using pricing as a tool or is the industry using youre seeing pricing as a tool.
<unk> T is kind of maybe.
Increased pricing and combat some of the margin pressure.
And I feel like you guys are in a unique.
Positioned to since your sales are mostly captive.
Yes, Mike I would say that our pricing is.
Isn't so much to combat.
The COVID-19 and changes in mortality, we havent really viewed the mortality.
Kind of mentioned before the long run long term mortality assumptions very differently. We did we did have some pricing increases in 2021, but that was more for regulatory.
<unk>.
Regulatory changes that went into place as well as.
The lower interest rate environment.
So thats, where while we had some premium increases.
And given our captive agency, we're able to put in some premium increases from time to time.
For those purposes, but I would say that we're really seeing any four directly related to the COVID-19 .
Thank you.
Yeah.
And we have no further questions at this time I would now like to 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.
Okay.
This concludes today's call. Thank you for your participation you may now disconnect.
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