Q2 2023 Primerica Inc Earnings Call
Greetings welcome to Primerica's second quarter 2023 earnings webcast.
At this time, all participants are in listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
At this time I'll turn the conference over to Nicole Russell Senior Vice President of Investor Relations.
Mr. Russell you may now begin.
Thank you, Rob and good morning, everyone welcome to Primerica's second quarter earnings call.
A copy of our earnings press release, along with materials that are relevant to today's call are posted on the Investor Relations section of our website.
Joining our call today are our Chief Executive Officer, Mr. Glenn Williams, our Chief Financial Officer, Ms. Alison Rand Glenn.
And Allison will prepare.
We will deliver prepared remarks, and then we will open the call up for questions.
During our call some of our comments may contain forward looking statements in accordance with the Safe Harbor provision of the Securities Litigation Reform Act the.
The company assumes no obligation to update these statements to reflect new information, we refer you to our most recent Form 10-K filing as.
It may not be modified by subsequent Form 10-Q for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied.
We'll also reference certain non-GAAP measures, which we believe provide additional insight into the company's operations.
Reconciliations of these non-GAAP measures to their respective GAAP numbers are included at the end of their earnings press release and available on our Investor Relations website, I would now like to turn the call over to Glenn.
Thanks, Nicole and thanks, everyone for joining us today.
Our strong second quarter results highlight the value of primary because complementary lines of business and the continued efforts of our team to grow our distribution capabilities.
Growth in our sales force and the appeal of our life insurance products are creating sales momentum despite the continuing financial pressure on middle income households.
Adjusted operating revenues of $690 million rose, 3% year over year, while adjusted net operating income of $145 million increased 11% and diluted adjusted operating earnings per share of $3.99 increased 18% compared to the prior year period.
These results reflect the predictable growth in our term life business and the benefit of higher interest rates on our investment portfolio, both of which more than offset the continued pressure of lower sales commissions and our investment and savings products business.
In addition, the absence of a negative tail revenue adjustment in the senior Health segment. This quarter was an improvement versus the $5 4 million dollar negative tail adjustment recorded in last year's second quarter.
Our life licensed sales force growth continues to be driven by two key dynamics. The attractiveness of additional income from our entrepreneurial business opportunity during uncertain economic times, and our focus on and improvement in our life licensing process.
During the quarter, we recruited over 86000 individuals a 23% increase compared to the second quarter of 2022.
We also continue to see our hard work over the last few years in creating a clear path through the entire licensing process pay all with over 12600, new reps license during the quarter, a 10% improvement over the prior year period.
We ended the quarter with nearly 138000 life licensed reps and remain confident that our momentum will lead to a 3% or 4% increase in the size of our sales force for the full year of 2023.
Turning next to our sales results starting with the term life business.
The appeal of our new insurance products continues to drive solid year over year growth during the quarter, we issued nearly 97000, new term life policies up 9% compared to the prior year period on.
On a comparable one lakh for policy basis productivity was at the upper end of the adjusted historical range at $2 four policies per life licensed reps per month.
We issued more than $32 billion of new term life face amount in the quarter, a 16% increase over the prior year period.
As a reminder, new face amount issued captures both the face amount of newly issued policies and any additions to enforce policies. This provides a more complete picture of the total protection, we provide for our clients.
Our cost of living of course remains a real headwind for middle income families. We believe this is a key driver of second quarter lapse experience, which in the aggregate is 5% to 10% higher across all of Eurasians versus pre pandemic levels.
To provide some context context at the height of the financial crisis in 2009, lapses were 15% higher than pre crisis levels.
Given the magnitude of that crisis. It took about two years for lapse rates to normalize.
It's impossible to know whether we've reached the height of this cycle of how long it will take for lapses to normalize. However, we believe the appeal of our new life insurance products and the continued growth in the SaaS or our sales force can partly overcome current inflationary pressures, which in turn gives us confidence that we can go full year policies issued by 4% to six.
Percents in 2023.
Turning to the ISP segment.
Total sales of $2 $4 billion during the quarter declined 11% compared to the prior year quarter still elevated activity.
Although current sales levels to remain higher than pre pandemic levels. Our clients remain focused on their long term goals. Despite the economic uncertainty dominating headlines and they continue to invest systematically each months. However, new sales were still under pressure, we believe the compounding impact of high inflation over the last few years.
Ours is slow middle income families ability to invest for the future.
It is also possible that clients find the current high rates and money market or other high yield savings options to be an attractive alternative to equity markets.
Even though headwinds persisted, we recorded $542 million of net new client inflows during the quarter.
Ending client asset values have largely recovered and reached $91 $6 billion at the end of the quarter. This represents a 6% difference compared to their all time quarterly high of $97 3 billion.
Seth on December 31, 2021.
Given the continued uncertainty it's difficult to predict sales levels beyond the next few months.
Based on July trends, we believe year over year sales will be down around 5% in the third quarter.
Looking next at senior Health <unk>.
<unk> rates have stabilized and the senior health distribution industry, which allows us to estimate lifetime values more accurately.
We've also made good progress in reducing the cost of acquisition by focusing on agent productivity and careful lead utilization.
We believe these steps have positioned us well for the October opening of the annual enrollment period, we've adjusted our agent compensation model to incentivize and drive desired behavior, and we've made meaningful improvements to technology that allow for a more efficient and improved enrollment process.
We believe this business is generally headed in the right direction and continue to evaluate opportunities in the context of an evolving industry. We.
We do not anticipate the need to provide capital to the subsidiary in 2023, and we continue to evaluate future growth opportunities.
Primary <unk> balance sheet remains very strong with cash at the holding company of approximately $340 million a quarter and we remain committed to returning capital to stockholders as evidenced by our repurchasing of an additional $111 million of our common stock and paid $24 million in regular dividends during the second quarter.
In summary, I am pleased with our progress and the momentum building across our businesses I am proud that we can continue to serve our clients by providing them with the education and the motivation necessary to put their financial plans into action.
Now I'll turn it over to Alison. Thank you and good morning, everyone now that you've heard from Glenn on distribution trends, let me expand on our second quarter financial results.
Before doing so I'd like to briefly discuss the immaterial errors in prior period results.
With the adoption of LTE Ti that we identified this quarter.
The average will related to double counting certain reinsurance premiums and excluding a small portion of capitalized costs in that historical cash flow used in our valuation model.
Brigade easy Katharine forgive me for full year 2020 to benefits and claims ratio by approximately 70 basis points to 52.
Seven 9% an increase of 2020 to DAC amortization ratio by 10 basis points to 11, 8%.
Yes, Jasmine added approximately $3 $5 million to pre tax income each quarter, roughly seven cents diluted adjusted operating earnings per share.
While these changes were immaterial to the quarters result, it was necessary to revise results back to the January one 2021 L. DTI adoption date to properly reflect the cumulative effect on the balance sheet.
Financial information prior to the second quarter of 2023 has been revised as reflected in the fourth quarter 2022 revised restated financial supplement in the second quarter 2023 financial supplement both of which are available on our Investor Relations website.
Oh year over year comparison that follow are in relation to 2022 revised for adults.
Now, let's turn to our second quarter results, starting with the term life segment with pre tax operating income grew 9% year over year.
Adjusted direct premiums grew 6% year over year in line with our prior guidance.
While lapse rates remain elevated across many duration the heightened demand for our new term life insurance products has helped mitigate the associated loss of premium revenues.
With solid projected sales growth during the second half of 2023, we remain confident that ADP glass, let's say around 6% for the remainder of the year.
Total operating revenue growth of 3% with lower than ADP.
The continued rise in other ceded premiums.
As a reminder, these are wire T based ceded premiums have a growth pattern that match expected claims rather than being level like direct premiums are.
While GAAP requires us to treat other ceded premiums as a contra revenue for performance analysis. We include the line item as a component of our benefits and claims ratio.
The second quarter benefits and claims ratio was 57, 6% versus 57, 7% in the prior year period.
Both periods had lower than expected incurred claim but at this point, we view this as normal volatility rather than an ongoing shift in claims experience.
Given our close proximity to the L. DTI adoption date.
Peering think are largely spread to future periods.
We expect the full year 2023 benefits and claims ratio to be approximately 58%.
That ratio was 11, 8% versus 11, 7% in the prior year period, demonstrating the expected consistency in this ratio under L. D Ti.
We expect the DAC ratio to stay around this level for the remainder of the year.
That'll be Ti requires us to review our assumptions at least annually and we plan to do so during the third quarter, while experience for our business has historically been very steady the pandemic and current economic environment have created some volatility.
In our view this volatility is largely short term and not indicative of a permanent shift in our business that would require changes to our long term assumption.
One small assumption change we do expect to make is for general mortality improvement as.
As is typical in the industry, our assumption to provide for a modest level of future mortality improvements based on population trends.
<unk> for a certain number of years, regardless of policy of T D.
We expect a favorable cash impact in the third quarter of $1 million to $3 million from moving our mortality assumptions powered by a calendar year.
To wrap up her life, the second quarter insurance expense ratio was seven 5% compared to 8% in the prior year period.
The first half of 2022 included a temporary step up in expenses due to the timing of the 2022 biennial convention and cost for a total of three field leadership events in 2022 as opposed to our usual pattern of two events per year.
Consolidated operating expenses will be addressed later in my remarks.
Turning to the investment and savings products segment second quarter operating revenues of $215 million pre tax pre tax operating income of $60 million declined by four and 5% respectively.
We have client asset values helped to offset earnings pressure from lower investment sale.
Sales based revenues decreased 15%, while revenue generating sales fell 12%.
Revenues declined at a higher rate than sales due to the discontinuation of flat load product in Canada in June of last year.
Sales based commission expenses to decline in correlation with related revenue.
Asset based revenues increased 5%, while average client asset values was 1%, reflecting a favorable revenue dynamics of a higher mix of assets in managed accounts and mutual funds sold.
The principal distributor model in Canada.
Asset based commission expenses increased in line with the related revenues after excluding revenues on Canadian segregated funds since the related expenses are reflected in insurance commissions and amortization of DAC.
Looking next at the results in our senior housing segment.
LTV per approved policy at $880 during the quarter improved on a year over year basis, largely due to annual carrier Commission rate increases.
Aaron levels have stabilized in recent quarters, and we did not need to record a tail revenue adjustments this period.
In contrast, a $5 4 million negative tail revenue adjustment was recognized in the prior year period.
After a few policy declined 10% year over year as we continue to become more proficient and managing lead utilization.
Keep in mind that second quarter activity is lower than the fourth and first quarters as fewer seniors are eligible to enroll in Medicare.
Lead conversion rates typically declined during the second quarter, which in turn increases labor and the cost per sale.
As a result, the LTV to CAC ratio was <unk> nine times for the quarter.
As Glenn noted earlier, we continue to operate prudently to ensure we are managing growth responsibly.
We've recognized a pretax operating loss of around 10 million excuse me June 30, yes.
Expect the full year loss to be at or slightly below this level with a loss in <unk> consistent with that recognizing TQ and a modest profit in the fourth quarter during AEP.
We do not expect that the senior health business will require additional capital to fund operations in 2023.
The corporate and other distributed products segment recorded an adjusted loss of $3 6 million during the quarter compared to a loss of $9 1 million during the prior year period.
The improvement was driven by an $11 million increase in net investment income, partially offset by higher operating expenses.
We also recognized a $2 million of reinsurance recoverable write off on a block of discontinued products in our New York Security subsidiary and the expected liquidation other reinsurer.
Our average rate on new investment purchases was $5 four 6% for the quarter with an average rating of double a minus.
Portfolio duration remains relatively short at four seven years.
While the recent rate environment has provided for higher earnings on cash and short term investments. We continue to look opportunistically for high quality longer term investment, but we feel we are being paid for the risk.
If the rate environment stays consistent we expect NII to be around $34 million per quarter for the remainder of 2023.
As we noted last quarter, we have limited exposure to commercial real estate, especially office exposure and the exposure. We do have is an investment grade on average.
Our invested asset portfolio and ended the period at an unrealized loss of $288 million, which is largely due to the steep rise in interest rates since the beginning of last year.
We regularly evaluate the portfolio for possible credit impairment and do not believe the large unrealized loss is due to significant credit concerns with our holdings.
We continue to have the intent and ability to hold these investments until maturity.
Finally, consolidated insurance and other operating expenses of 140 million $42 million during the quarter increased around 3% year over year.
Primary drivers were higher technology spend including rising software costs and continued investments in technology higher employee related costs, driven by market wage adjustments and fewer open positions.
Higher legal costs.
And as well as normal growth in our business.
The year over year comparison benefited from $5 million higher costs in the prior year period associated with the additional field leadership event held in 2022.
The second quarter is the last quarter, we will see the year over year benefit from the timing of C. A leadership event.
Looking ahead, we expect third quarter insurance and other operating expenses increased around $12 million or 9% year over year.
The drivers of the increase are generally consistent with those seen in the second quarter, but about half of the increase coming from higher compensation costs, and another $4 million from technology and $2 million from normal growth in the business.
A full year basis, we expect insurance and other operating expense growth of around 5%.
With that I will turn the call over to the operator for questions.
Thank you well.
I will now be conducting a question and answer session.
I'd like to ask a question today. Please press star one from your telephone telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if he like to remove your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment, please when we poll for questions. Thank you.
Our first question comes from the line of Wilmar Burtis with Raymond James. Please proceed with your questions.
Good morning, gentlemen.
Oh, Hey, good morning, everybody.
I guess first question just on senior health should.
Should we expect <unk> results to be similar to Q2.
Given.
Some seasonable unfavorable favorability for the business.
Yes, when were generally the second and third quarters are very similar in their reaction as you know the fourth quarter is the largest production quarter with AEP and then the following first quarter with OAP is where the.
The second level of business is done, but second and third quarters generally look very similar third quarter could be even a little less activity than in the second quarter, but generally they're pretty close.
Okay. Thank you.
And then a quick follow up on that one.
It sounds like you're committed to no capital contributions for 2023, but should we think of how should we think of 2024.
I will not I would say at this point, we do not expect to have any significant capital contributions in 2024 as we've done throughout this year and we'll continue to do next year, we're going to build this business very prudently.
The only way, we would ever really need some capital to be infused is if we tried to have very dramatic growth and that would then be a short term infusion of capital, but our plans right now are to continue with a relatively controlled growth based on what we are finding throughout this AEP and in next L. P.
And to see where 2024 should grow from there. So again, there may be some but if anything it would be very small.
Okay. Thank you.
And then one more could you just talk about where the term life sales appear to be better than expected, while the ISP sales were a bit worse.
I expected.
It seems like there's a lot of cost of living pressures as you discussed.
Maybe just talk about why it's impacting the segments a little bit differently.
Yes.
Not that unusual to have the two businesses go in different directions temporarily thats. The reason we enjoy the complementary nature of the two is often one is strong when the other is a little weak and that's what we're seeing right now the strength in the life business.
It's driven by our growing sales force, we have stronger distribution and also I believe there is a continued positive impact of the improvements we made to our product said almost a year ago now.
So that is really overcoming the headwinds we believe of the <unk>.
Higher cost of living and middle income households, which we definitely feel that as a headwind. It's just that we've got a stronger tailwind from those two positives on the life side.
The investment side, we believe is being hampered by the continued uncertainty of negativity.
That people are hearing about the marketplace, even though returns are certainly improving in the market. There is still so many questions about what's the future hold which are interest rates and they've gotten as high as they are going to get as inflation slowed down. It's certainly hadn't turn the opposite direction and so prices are still increasing just to the slower.
We're right in there.
There are alternatives because of the higher interest rates. So all of that's working together I think to impede the growth in our ISP business more so than you see in the life business, but as we stated we were coming off of record levels in 'twenty.
2022 particularly the first quarter of last year and during 2021, and where we've landed right now as we're getting pretty close to the same quarterly numbers for sales as last year within a few percentage points its still significantly higher than where we were pre pandemic.
We had that spike during 2021, the first part of 2022 and things will come back down due to all those headwinds we described but we're in a pretty strong position, where we've landed and we do see that the comparisons or growing more favorable as we noted in the prepared comments down just probably a few percentage points in the next quarter.
And so things are starting to stabilize and if we can get some confidence in some of the conversations around the future. We believe we are in a good position for the future in our ISP business.
Yeah.
Okay. Thank you very much.
Certainly.
Our next question is from the line of Ryan Krueger with Keyw. Please proceed with your question.
Good morning, Ryan.
Hey, good morning.
I guess, a somewhat similar but slightly different question.
Why do you think the in term life.
Specifically at year that would.
The inflationary pressures are impacting lapses.
Sales is it just more of a function of that.
New product and the excitement around that.
Yeah again, I think it's the same thing I mean sales generally follows salesforce growth fundamentally and then the new product and the excitement around it.
Our ability to meet the needs of families more easily more quickly and with more clarity I think has got our sales force energized and excited about talking to more new clients, but.
But we do see every month as clients struggle with the higher cost of living there, making those those priority decisions about what bills get paid and what bills. Maybe are delayed to a later time and that does tend to impact persistency of sales that were made previously whether it was earlier this year or in past years and so it's it is normal for those.
Two dynamics to travel more together, but we just got positives on the front end of the business that I think are a little stronger and are pushing sales.
While the families are struggling with all of their payments for all of their bills in a lot of situations and thats, having a negative impact on persistency.
Okay. Thanks, and then on the assumption review is Alison as your just from your earlier comments is your view that the higher lapses because they are likely a short term phenomenon.
Needs to be factored into the longer term assumptions.
Yes that is correct, where we our plan at this point is to treat any.
Fluctuations that we're seeing in lapses as experienced variances not attempting changes.
Okay, great. Thank you.
Our next questions come from the line of Jeff Schmitt with William Blair. Please proceed with your question.
Hi, Good morning, everyone. Good morning, Glenn.
Question on the lab side.
I think you had mentioned this in your prepared remarks, but have they fully normalized from the pandemic and now theyre sort of weaker than historical levels or are they still moving back to historical levels.
So they have definitely normalized from what we saw through Covid and that actually happened last year. So that wasn't a 2023 event.
You know again. This is this is a little bit of an art here, we're going back and trying to determine what pre pandemic was so historical norms pre pandemic the pandemic war.
Significant event it did create new patterns and we don't know how much if any of that will continue on a long term basis. So that just so you know the way we come up with our version of what we're calling pre pandemic as we're looking at 2019 activity.
So when all is said and done we are looking at things in relation to where we were just prior to the pandemic and from that perspective, you know in aggregate, we're looking at about 5% to 7% higher.
Is that perfect in 2019, an exact picture at historical trend no, but we think it's a.
Good.
<unk>, but you know where we were heading into the pandemic. So again five.
5% to 7% above right before the pandemic do you believe it's largely driven by economic the economic environment simply because we're seeing it not just in sort of early duration persistency, where navy would say somebody wasn't committed to the product we are seeing it across many variations and you know when you.
Hard to see people, giving up a policy after several years of paying premiums under current policy is expected to largely because of economic factors.
Got it.
And then how many agents are licensed to sell investment products now thank.
Thank you historically it was around 24000, but just given our strong sales of.
And sort of continue to be.
And getting those licenses increase or how is that how's the number trending.
Yes.
Total U S and Canada, just a little over 25000 at this point.
And that's been fairly stagnant it it doesn't move quickly. It has a different set of dynamics that are driving that much like the difference in our two business lines two major business lines that we discussed earlier and you are right. When when sales are strong and growing there is more interested in getting license when people see success.
And a business line theyre not in they tend to get interested in getting in that line of business. So we have seen some slowing of that licensing momentum as sales have come down off the record peaks and we anticipate as we level out and start the next phase of growth, we will see increased interest and we always recognize that by growing the size of our life sales force where inquiry.
<unk> the number of those that are eligible and likely to get license. So that's a.
That's a good indicator of what could happen in the future. So the growing watch Salesforce is a positive for our investment business in the years to follow so we think when the attitudes turnaround, we'll see some energy in that line of business will see licensing increase at that point.
Okay, great. Thank you.
Sure.
Our next question is coming from the line of Sumit Kumar with Jefferies. Please proceed with your question.
Good morning.
Hey, good morning, guys.
Just to go back to the lapse rate one more time in term can you give us any color in terms of how the lapses sort of developed as we moved through the second quarter I guess, what I'm trying to figure out is is the trend sort of that the lapses remain high or are they getting higher or lower just some directional help would be helpful.
Yeah.
And again all of this put the caveat what I said earlier that it's all done in relation to what we were seeing in 2019.
And there is seasonality in our lapse rates, we've always seen it the second quarter is historically, a very strong quarter for persistency, but with all that said it looked like it was about in the 3% to 5% range in the first quarter and it's in the 5% to 7% range in the second quarter, what I don't know.
Is that is that actually a progression that's something deteriorating or is some of that is simply because of the seasonality in the business, but I'd say again, given the fact that this is sort of a rough comparison just to 2019 and nothing exact if you will I think coming from maybe the three to five to five to seven is saying it's barb.
Liam the same zone, maybe a slight there is deterioration.
Got it Okay. That's helpful. And then I guess pivoting to senior health, you've talked a lot about wanting to get comfortable with the profitability of the business before you sort of accelerate growth just from a timing perspective, I guess, how long do you think it'll take for you guys to get your arms around this business is it a couple of quarters or are we going to need to see results.
Through 2024 before you have a real good handle on kind of what's going on under the Hood. Thanks, Yes.
Yes, that's a great question Sidney.
As we look at it we obviously are impatient to be able to make conclusions and decisions, but we're balanced that with some patients as well because we recognize in this business the real quarters that we as we talked about earlier that you can evaluate.
Your success and your progress on are primarily the fourth quarter and the first quarter.
So while we are working hard during quarters, two and three to improve the business you often don't see the results of your improvement and then can assess it until after you experience the fourth quarter and the following first quarter and then you have time to assess that business. Obviously sales are a real time, but the quality of that business and the persistency of it takes.
Some time, so we're definitely going to be beyond this next.
And OUP.
For us to be able to evaluate where we are and whether we think it's time to accelerate so we think by the time, we get beyond the next two periods Q4 of this year in Q1 of next year, we'll have much more information about the results of the efforts, we've made and we'll be able to make some more decisions at that point, we're taking it a step at a time, we're moving very deliberately.
We don't want to get too far out over our skis until we really think we've got our arms wrapped around the business. So it's better to be a little too conservative too aggressive in our opinion.
Understood. Thank you.
Sure.
Our next questions are from the line of Mark Hughes with <unk> Securities. Please proceed with your questions.
More and more.
Mr. Hughes your line is on mute for your questions.
Okay.
Oh, Yes, I'm, sorry, I was on mute good morning, good morning, good morning.
Alison.
Term life business through ceded premium ratio.
Based on this earlier and you probably.
Blayne this in the past.
Again.
The ratio has been moving up 100 150 bps.
Year over year for the last.
Several quarters.
Does that continue is that a function of.
Yes.
Interaction between the benefit ratio.
Adjusted direct premiums should that stabilize them just sort of thinking.
How to model that on a go forward basis should continue to inch up or does it stabilize at some point here.
Yeah, So and again like I said in my comments. According to GAAP I have to call that a contra revenue, but realistically the way we look at other ceded premiums analytically, it's a component of our benefits and claims ratio that number is going to continue to grow we see 90%.
<unk>.
Our mortality risk under why Archie reinsurance or direct premiums are level.
So what <unk>, what our insurer pays the same for the entire level term period at that policy, but when you go the difference of the mortality half in year, one versus year five is significant.
Other ceded premium line has always and will continue to grow much faster than the direct premium line. So there is nothing unusual about that this trend will not stop I think what's really important to understand from that from a P&L perspective, if you don't see any of that.
Volatility hitting the bottom line because the ceded reserves take all that into consideration and smoothed out or a level is out the cost of the reinsurance. So it is a function of the fact that GAAP requires the presentation of specific way with <unk>.
Now likely you have to look at what we're paying in line with the benefit costs were getting through it.
A reduction in our reserves. So you have to think about those two holistically again, which is why we included as a component of the benefits and claims ratio. It does it does create a really strange anomaly. When you look at our revenue growth because it artificially suppressed as it.
When realistically again that is just balancing out the growing cost of benefit as our block of business Hs.
And then did you give guidance for the term life.
Operating profit relative to adjusted direct premium.
We didn't there was a little bit of Lumpiness. This quarter again, two things one is persistent seasonally strong in the second quarter and also this is the last quarter, we have where we have this.
Benefit if you will of the fact that we had elevated operating expenses last core last year because of the timing of our field leadership events. So.
So I think it will come down a little bit from where it was in the second quarter, but it should stay about this range. If you remember all the things I've been saying about El DTI and what you've seen thus far is from period to period, especially because we were not expecting any large assumption changes the benefit ratio in the DAC ratio.
Are going to remain pretty consistent.
The wheel nominally our driver could be if there was any quarterly fluctuations in expenses. Although at this point like I said in my comments, we're not assuming anything.
Outside of what we've been saying for the third and fourth quarter on operating expenses.
I didn't give it.
Alright.
Yes, so maybe high 20.
That would be 3% this quarter.
Yes, hi, good morning.
It'll be lower.
Hi, <unk>.
I see what you're saying it'll be somewhere lower than the 23.
It's really going to be a function of how operating expenses come in and if we have the one thing that could be a volatility and we see a little bit of it in the last two quarters is if we have to do any re measurements based on mortality.
Actual experience, but again thats been in the $1 million to $2 million range, So nothing too significant.
Yes, Okay, and then Glenn on the recruiting front could you I think you gave guidance for the.
Sales force growth for the full year did you.
Make any comments about what you expect in terms of recruiting growth.
Next quarter.
The balance of the year.
Yes, Mark.
Because we provide incentives and recruiting numbers tend to move pretty significantly quarter to quarter. For example, in our comparisons for the third quarter youre going to be comparing to the convention incentives that we ran a year ago coming out of the convention and we really spiked recruiting in the third quarter.
So we won't recruit at those levels in the third quarter, because we're not running any incentives at this point, it's all kind of fundamental organic growth that we're seeing right. Now. So we continue we expect recruiting to continue to be strong, but we started trying to provide the net sales force growth.
So that you really understand when recruiting spikes and sometimes we don't get the pull through from licensing rather than go through all of that noise. We've just kind of cut to the bottom line, which is the sales force growth. So for the third quarter, specifically, we are expecting a strong recruiting quarter. It won't compare in topline numbers to all of the special incentives, we had a year ago, but were.
<unk> it to be a good quarter for us.
Thank you very much.
Alright.
Thank you this will conclude today's.
A question and answer session and this also concludes today's conference. Thank you for your participation. You may now disconnect. Your lines at this time and log off your computers. Thank you for your participation.
Yeah.