Globe Life Inc (GL) — Q3 2020 Earnings Call Transcript

Thank you. Good morning, everyone. Joining the call today are Gary Coleman and Larry Hutchison, our Co-Chief Executive Officers; Frank Svoboda, our Chief Financial Officer; and Brian Mitchell, our General Counsel. Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to the third quarter earnings release we issued yesterday along with our 2019 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 terms and reconciliations to GAAP measures. I'll now turn the call over to Gary Coleman.

Thank you, Mike. Good morning everyone. First, I will point out that the company continues to effectively conduct business and our operations are running smoothly. In the third quarter, net income was $189 million or $1.76 per share compared to $202 million or $1.82 per share a year ago. Net operating income for the quarter was $188 million or $1.75 per share, a per share increase of 1% from a year ago. On a GAAP reported basis, return on equity was 9.4% and book value per share was $77.60. Excluding unrealized gains, return on equity was 13.6% and book value per share grew 10% to $52.39. In our life insurance operations, premium revenue increased 7% to $674 million while life underwriting margin was $171 million, down 6% from a year ago. With respect to premium revenue, we've been pleased to see persistency and premium collections improve since the onset of the crisis. However, the decline in margin is due primarily to approximately $18 million of incurred claims related to COVID-19. For the year, we expect life premium revenue to grow approximately 6%, while life underwriting margin is expected to decline 2% to 3% primarily due to the impact of COVID-19 claims. At the midpoint of our guidance, we anticipate approximately $56 million in COVID-19 claims for the full year. In health insurance, premium revenue grew 7% to $288 million and health underwriting margin was up 20% to $73 million. The increase in underwriting margin was primarily due to lower acquisition costs. For the year, we expect operating revenues to grow approximately 6% and health underwriting margin to grow 11% to 12%. Administrative expenses were $63 million for the quarter, up 4% from a year ago. As a percentage of premium, administrative expenses were 6.6% compared to 6.7% a year ago. For the full year, we expect administrative expenses to grow around 5%. I'll now turn the call over to Larry for his comments on the third quarter marketing operations.

Thank you, Gary. We are pleased with the third quarter sales. Direct to consumer sales grew across all channels and the agencies have adapted to virtual sales appointments and recruiting; they are thriving in this environment. Additionally, agent licensing centers have opened and are conducting some in-person sales in certain situations. I will now discuss current trends at each distribution channel. At American Income Life, premiums were up 9% to $319 million. Our life underwriting margin was flat at $100 million. Net life sales were $68 million, up 14%. The increase in net life sales is primarily due to increased agent count. The average producing agent count for the third quarter was 9,288, up 23% from the year-ago quarter and up 11% from the second quarter. The producing agent count at the end of the third quarter was 9,583. We continue to see a significant pool of candidates, in part due to current unemployment levels. At Liberty National, life premiums were up 3% to $74 million; our underwriting margin was down 21% to $15 million. The lower underwriting margin is primarily due to higher claims related to COVID-19. Net life sales increased 2% to $14 million. Our net health sales were $6 million, down 2% from the year-ago quarter. The average producing agent count for the third quarter was 2,551, up 6% from the year-ago quarter and up 7% from the second quarter. The producing agent count at Liberty National at the end of the quarter was 2,574. We have seen continued adoption of virtual recruiting and selling practices, and the relaxation of certain local restrictions has allowed agents to be able to return to some in-person presentations in addition to virtual methods. This environment has also provided abundant recruiting opportunities, supporting continued agent growth for the future. At Family Heritage, health premiums increased 8% to $80 million and health underwriting margin increased 19% to $22 million. The increase in underwriting margin is primarily due to a decrease in claims related to COVID-19. Net health sales were up 11% to $19 million. The increase in net sales is primarily due to increased agent count. The average producing agent count for the third quarter was 1,371, up 21% from the year-ago quarter and up 10% from the second quarter. The producing agent count at the end of the quarter was 1,469. We are pleased with the results from Family Heritage as its agents continue to successfully adapt to this environment. In our direct-to-consumer division at Globe Life, life premiums were up 8% to $228 million, while life underwriting margin declined 17% to $34 million. Frank will further discuss the third quarter decline in underwriting margin in his comments. Net life sales were $44 million, up 50% from the year-ago quarter. As we said on the last call, times of crisis highlight the need for basic life insurance protection. This has proven true with a pandemic. Application activity and sales were up across all direct external channels. At United American General Agency, health premiums increased 11% to $114 million, while health underwriting margin increased 27% to $18 million. The increase in underwriting margin is primarily due to lower acquisition costs. Net health sales were $13 million, down 19% compared to the year-ago quarter. It is always difficult to predict sales in this highly competitive marketplace. Group Medicare sales are even more volatile and are generally heavily weighted towards the end of the year. Although it is still difficult to predict sales activity in this uncertain environment, I'll now provide projections based on knowledge of our business and current trends. We expect the producing agent count for each agency at the end of 2020 to be in the following ranges: American Income, 9,100 to 9,400; Liberty National, 2,700 to 2,900; Family Heritage, 1,330 to 1,530. Net life sales are expected to be as follows: American Income for the full year 2020 an increase of 3% to an increase of 7%. For the full year 2021 an increase of 4% to an increase of 12%. Liberty National for the full year 2020 a decrease of 2% to an increase of 2%. For the full year 2021 an increase of 3% to an increase of 9%. Direct to consumer for the full year 2020 an increase of 32% to an increase of 36%. For the full year 2021 a decrease of 6% to an increase of 10%. Net health sales are expected to be as follows: Liberty National for the full year 2020 a decrease of 2% to an increase of 2%. For the full year 2021 an increase of 3% to an increase of 9% and Family Heritage for the full year 2020 an increase of 3% to an increase of 9%. For the full year 2021 an increase of 2% to an increase of 10%. United American Individual Medicare supplement for the full year 2020, a decrease of 25% to flat and for the full year 2021 a decrease of 1% to an increase of 7%. I will now turn the call back to Gary.

Thanks, Larry. Excess investment income, which we define as net investment income less required interest on net policy liabilities and debt, was $59 million, an 8% decrease over the year-ago quarter. On a per share basis, reflecting the impact of our share repurchase program, excess investment income declined 5%. For the full year, we expect excess investment income in dollars to be down about 5% and down about 1% on a per share basis. Next to our investment yield, in the third quarter, we invested $343 million in investment-grade fixed maturities, primarily in the municipal, industrial, and financial sectors. We invested at an average yield of 3.34%, with an average rating of A and an average life of 29 years. For the entire portfolio, the third-quarter yield was 5.31%, down 16 basis points from the yield in the third quarter of 2019. As of September 30, the portfolio yield was approximately 5.32%. Invested assets were $18.2 billion, including $16.9 billion of fixed maturities at amortized cost. For the fixed maturities, $16 billion are investment grade with an average rating of A-minus, and below investment grade bonds are $840 million compared to $772 million at June 30. The percentage of below investment-grade bonds to fixed maturities is 5.0% compared to 4.6% at June 30. Excluding net unrealized gains, the fixed maturity portfolio below investment-grade bonds as a percentage of equity is 15%. Overall, the total portfolio is rated right at BBB plus, compared to A-minus a year ago. We had net unrealized gains from the fixed maturity portfolio of about $3.4 billion. Bonds rated BBB are 55% of the fixed maturity portfolio, same at the end of 2019. 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, CLOs, and other asset-backed securities. We believe that the BBB securities we acquire provide the best risk-adjusted capital-adjusted returns, due in large part to our ability to hold securities to maturity, regardless of fluctuations in interest rates or equity markets. Because we invest long, key criteria in our investment process is that an issuer must have the ability to survive multiple cycles. This is particularly true in the energy sector. Our energy portfolio is well diversified across sub-sectors and issuers. It is heavily weighted to issuers that are less vulnerable due to depressed commodity prices. As we’ve discussed previously, approximately 57% of our portfolios is in the midstream sector, 34% is in the exploration and production sector, and the remaining 9% of our holdings are in the oilfield service and refiner sectors. We have no exposure in the drilling sector. The composition of our energy portfolio was essentially unchanged during the third quarter, and the fair value increased approximately $53 million. While we have no intent to increase our holdings in this sector, we are comfortable with our current energy holdings. Finally, lower interest rates continue to pressure investment income. At the midpoint of our guidance, we're assuming an average new money rate of around 3.4% in the fourth quarter and a weighted average of around 3.5% in 2021. With these new money rates, we expect the annual yield on the portfolio to be around 5.33% for the full year 2020 and 5.22% in 2021. While we would like to see higher interest rates going forward, Globe Life can thrive in a prolonged low interest rate environment. Extended low interest rates will not impact the GAAP or statutory balance sheets under the current accounting rule since we sell non-interest sensitive protection products. Fortunately, the impact of lower new money rates on our investment income is somewhat limited, as we expect to have an average turnover of less than 2% per year in our investment portfolio over the next five years. Now, I’ll turn the call over to Frank for his comments on capital and liquidity.

Thanks, Gary. First, I want to spend a few minutes discussing our share repurchase program, available liquidity, and capital position. In August, the company resumed its share repurchase program. In the third quarter, we spent $118 million to buy 1.4 million Globe Life shares at an average price of $81.79. For the full year through the end of the third quarter, we have spent $257 million of parent company cash to acquire more than 3 million shares at an average price of $83.74. The parent company ended the third quarter with liquid assets of approximately $435 million. This amount is higher than normal, due to share repurchases through September of $257 million being less than the $360 million of excess cash flow available to the parent through September, and a $300 million net increase in our borrowed funds since December 31. In addition to these liquid assets, the parent company will still generate additional excess cash flow during the remainder of 2020. The parent company's excess cash flow, as we define it, results primarily from the dividends received by the parent from its subsidiaries, less the interest paid on debt and the dividends paid to Globe Life shareholders. Keeping our common dividend rate at its current level for the remainder of this year, we anticipate the parent company's excess cash flow for the fourth quarter to be approximately $20 million. Thus, including the $435 million of liquid assets available at the end of the third quarter, we expect the parent company to have around $455 million available for the remainder of the year. As I'll discuss in more detail in just a few moments, we believe the $455 million in liquid assets is more than necessary to support the targeted capital levels within our insurance operations and maintain the share repurchase program. As previously noted, during the quarter, the company issued a 10-year $400 million senior note with a yield of 2.17%. The proceeds of this long-term debt offering, along with other cash at the holding company, were used during the quarter to reduce our short-term indebtedness by over $550 million to more normal levels. In addition, we successfully negotiated a new $750 million credit facility with our banks that lasts through August of 2023. Now regarding liquidity and capital levels at our insurance subsidiaries. As we continue to navigate this current environment, we are keenly focused on liquidity and capital within our insurance operations. With respect to liquidity, our insurance company operating cash flows continue to be very strong. In general, while we do expect higher COVID-related life claim payments over the course of the year, these higher claims are expected to be largely offset by higher premium collections and lower health claim payments. We do not see any issues with the ability of insurance companies to fund all remaining dividends payable to the parent during the remainder of 2020. Now with respect to capital, as previously discussed on our earlier calls, Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. At December 31, 2019, our consolidated RBC ratio was 318%, near the highest point of our range. Taking into account only the downgrades and credit losses that have occurred through the end of the third quarter, we estimate this ratio would have declined to approximately 310%. At an RBC ratio of 310%, our insurance subsidiaries have approximately $50 million of capital over the amount required at the low-end of our consolidated target of 300%. This excess capital, along with the $455 million of liquid assets we expect to be available at the parent, provides over $500 million of assets available to fund future capital needs. As we discussed on the last call, the primary drivers of additional capital needs from the parent are lower statutory income due to COVID-19 related factors, lower statutory income due to investment portfolio defaults or other credit losses, and investment downgrades that increase required capital. At this time, we anticipate that our 2020 statutory income before any realized gains and losses will be approximately $20 million to $40 million lower than 2019. To estimate the potential impact on our capital from losses and downgrades within our investment portfolio, we have modeled several scenarios that take into account consensus views on the economic impact of the recession, the strength and timing of the eventual recovery, and a bottoms-up application of such views on the particular holdings in our investment portfolio. We have also analyzed transition and default rates as published by Moody's and evaluated the impact to our RBC ratios should we experience the same transition and default rates as we've experienced in 2001 and 2002, as well as from 2008 to 2010. Taking into account these various models, we now estimate our RBC ratios would be reduced from year-end 2019 levels in the range of 30 to 55 points, requiring an additional $75 million to $200 million of capital to maintain a 300% RBC ratio. It should be noted that not all of this additional capital will be required by the end of 2020, as a portion of these defaults and downgrades are expected to occur after the end of this year. Even if all this capital was needed currently, the amount needed is well below the amount of liquidity available at the parent company. Our base case assumes $60 million in total after-tax credit losses, plus approximately $2.1 billion of downgrades to our fixed maturity portfolio. Through the third quarter, we have experienced approximately $40 million in losses for statutory reporting purposes and $960 million of downgrades, mostly from category NAIC-1 to NAIC-2. It is important to note that the Globe Life statutory reserves are not negatively impacted by the low interest rates or the equity markets given our basic fixed protection products. Given the strong underwriting margins in our products, our statutory reserves are more than adequate under all cash flow testing scenarios. At this time, I'd like to provide a few comments relating to the impact of COVID-19 on our third quarter results. As noted by Larry, life and underwriting margins declined at both our Direct to Consumer and Liberty National distributions during the quarter. These declines are primarily due to higher COVID-19 policy obligations. During the quarter, we estimate that Direct to Consumer incurred an additional $10 million related to COVID claims and Liberty National incurred an additional $4 million. Absent these additional losses, Direct to Consumer's underwriting margin would have been 19.5% of premium for the quarter and would have grown by approximately 8%. In the Liberty National distribution, absent the estimated policy obligations due to COVID, their underwriting margin would have been 25% of premium for the quarter and flat versus the year-ago quarter. In total for our life operations, we estimate that our total incurred losses from COVID deaths were approximately $18 million in the third quarter and $40 million year-to-date. Absent these additional losses, our total life underwriting margin would have been approximately 28% of premium and up 4% over the year-ago quarter. Finally, with respect to our earnings guidance for 2020 and 2021. We are projecting net operating income per share will be in the range of $6.84 to $7 for the year ending December 31, 2020. The $6.92 midpoint is consistent with prior quarters' guidance. As I'll discuss in a moment, we do expect higher life policy obligations in 2020 than previously anticipated due to higher projected COVID-related deaths in the U.S. However, at the midpoint of our guidance, we expect the higher life claims to be offset by higher premiums, lower expenses, and higher share repurchases than previously anticipated. On our last call, we indicated the midpoint of our guidance assumed approximately $45 million of claims related to COVID-19 on an assumption of around 225,000 deaths. We continue to estimate that we will incur COVID-related life claims of approximately $2 million for every 10,000 U.S. deaths. However, at the midpoint of our guidance, we now estimate approximately $56 million of COVID life claims for the full year 2020, reflecting an expectation of approximately 280,000 COVID-related deaths in the United States, which is higher than previously anticipated. With respect to our health claims, we estimate our supplemental health benefits for all of 2020 will be approximately $7 million lower than what we expected at the beginning of the year due to COVID, similar to our estimate on the last call. Taking into account the higher COVID life obligations, we expect the life underwriting margin for 2020 as a percentage of premium to be approximately 25.6% at our midpoint. Absent the higher COVID-related policy obligations, the life underwriting margin percentage would be similar to the percentage for the full year 2019. The health underwriting margin as a percentage of premium for the full year 2020 should increase to approximately 23.8%. For 2021, we are projecting net operating income per share will be in the range of $7.30 to $7.80. The $7.55 midpoint is a 9% increase from the 2020 midpoint. We are anticipating COVID-related life claims in 2021 of approximately $32 million at the midpoint of our guidance, with no significant benefit expected from lower health claims. Obviously, the amount of COVID-related claims in 2021 will depend on many factors, including the development of effective therapies and vaccines. The larger normal range for our guidance reflects this additional uncertainty. Those are my comments. I will now turn the call back to Larry.

Thank you, Frank. Those are our comments. We will now open the call up for questions.

I wanted to start with a question on your sales outlook. I’m just kind of looking at the expectations, 4% to 12% growth in sales in the American Income, Liberty National after a year where you're up roughly 35%. So, I mean, maybe a little more color on why ‘21 should actually be quite strong based on these guided numbers you've given, you said there is a gap.

First of all, I apologize, your audio wasn't the clearest. I will try and answer the question. I think you asked why are we predicting maybe sales aren't quite as strong in ‘21 as in ’20, I think that’s the answer to your question.

More along the lines of just know that they're very strong in ‘21, in my view both in the agencies and direct to consumer, and what are the qualities that are enabling that? It looks like recruiting is very strong that probably closing well, and you talked a little on the call about virtual and how they adapted, so I just wanted a little more clarity on that.

Thank you. Your question, as you followed up, I think it was, why will sales be so strong in ‘21? Direct to Consumer first, we don’t expect we will have the 50% rate expansion in the third quarter going forward. However, we do expect this level of increased sales at least in the remainder of 2020 and likely the first quarter of 2021. That's really based on the increased demand we're seeing for basic life insurance protection. The last three quarters of 2021, I think sales growth may be even more challenging given the large sales increases in 2020. In respect to the three agencies, again, we see the demand for both Life and Health Insurance is very strong, and we think as the pandemic continues through 2021, whether mid-year or through the full year, it’s likely to have a positive impact on sales. I think the uncertainty with the agency is that emphasis in sales and recruiting can be a challenge during the pandemic, if the restrictions come back in place. However, we can offset some of those challenges by our use of virtual recruiting and sales.

Okay. In terms of adverse selection in this environment, you saw a pickup in pressure on the underwriting margin, naturally from COVID-19, and both direct to consumer, maybe American income. But could you talk a little bit about the business you wrote, say, from April or March to present, what you've done from the vantage point of putting controls in place to prevent adverse selection of those claims that you mentioned? I think you said that 10 million of COVID in Direct to Consumer, 4 million in claims for Liberty. In the portion of those claims, might have come from business written from April on that.

I will answer the first part of your question, which is the underwriting process. I'll have Frank address the second part of the question, which is the actual experience. For the time being, we started in March, we've eliminated the maximum face amounts we issued for older ages. We stopped issuing additional coverage to existing policyholders of older ages. We also temporarily stopped issuing policies to applicants with certain health conditions. At the same time, our underwriting and other departments have studied the business on a weekly basis. What we haven't seen is any shift in business either by geography or demographics. We don’t think there's adverse selection occurring. Those are additional steps we've taken, and we will take additional steps if we see any development. Frank, do you want to address the rest of this question?

Yes. I’ll probably add one thing; we've actually seen an increase in the amount of applications concerning the juvenile block that we have in older ages. As we know, the most susceptible to claims for COVID are at the older ages. In fact, about 85% of our claims are actually in ages 60 and above. And when we look at our enforced business as a whole, we only have about 4% of our business over age 70. About 12% is age 60 or above. As we evaluate the claims we've incurred, about 98% of those have been issued before 2019. With respect to policies issued since March 1, we have paid eight claims through October 17, totaling about $42,000. We have not seen any significant claims on any policy that we've been writing really since the first of the year. I will say that the distribution of claims is really spread out throughout our entire blocks. Probably about two-thirds, roughly two-thirds of our claims are coming from policies that were issued in 2010 or earlier.

First, I had a question on your expense ratios in both the life and health businesses. They were lower than in the past, and I wanted to get an idea on whether it's persistency or something else that's driving that, and what your outlook is for expense ratios in the next few quarters.

Jimmy, the primary reason for the reduced expenses is due to the increased persistency. That's certainly true on the life side. On the health side, it's true, but on the UIGA, we also have implemented a rate increase this year, which also helps drive the expense for premium down. I think for the year, on the life side, we are looking at the amortization being just slightly lower than what we had last year, and it'll be more pronounced on the health side, where we'll be more to 18% of premium versus 19% of premium in terms of amortization last year.

And then on persistency, there were concerns earlier this year, that with the weaker economy, you might see a little bit of a drop-off. In reality, it has actually gotten slightly better. What's your view on the sort of the reason for that? And are you still concerned about the drop-off in persistency if the economy gets weaker entering this year or next year?

Well, I think that possibility exists that we could see some drop off if the economy worsens, but we haven't seen it yet. We've actually seen improvement in persistency. We think that's due in large part to while we're also seeing higher sales, people recognize in this pandemic the need for life insurance. That's why more borrowing, and people that have asked before are making sure that they keep the policy in force. We've seen improvement in our premium collections and have seen a reduction in delay for premiums, so it's been positive thus far. We expect it to continue into next year because we think the pandemic has made people more aware of their needs for insurance.

Okay. And then just lastly on, how are you thinking in terms of taking advantage of the lower stock price and potentially front-ending some of the buybacks versus the need to sort of preserve capital, given the risk of a deterioration in credit?

Yes, Jimmy. I would say for the remainder of this year, we're comfortable being able to utilize all of our excess cash flows for these buybacks through the remainder of the year, which would point to somewhere in that $120 million to $125 million to get us up to 380 for the year. That would again be a price where we have excess cash flows. We'll take a look to see as we get close to the end of the year what happens with the stock price, what happens with the economy, how comfortable we feel with our investment portfolio. We'll consider that if we accelerate some from 2021, perhaps. But right now, I would say that we anticipate just continuing to utilize our excess cash flows through the remainder of the year.

How many deaths does the $32 million in life claims assume in 2020 guidance, as I imagine, there's probably an assumption for improved therapeutics embedded in that?

Yes. We were using kind of that same rule of thumb for that $2 million for about every 10,000 U.S. deaths. So that kind of gives a range; we're estimating 100,000 to 220,000 deaths, and at that midpoint, around 160,000. So that $32 million would relate to around 160,000 deaths in the year. Really, what that kind of assumes is that we continue to see the average daily deaths decline, and that trend continues over time, just that it continues on into the second and even into the third quarter of the year.

Okay. And then, my follow-up. I'm curious why there's no assumed health benefit in 2021 since there's an assumed COVID impact on life claim? I ask because I can see how there could be a secular decline in Medicare supplemental claims utilization given general concern over infectious disease that wasn't present in the U.S. previously.

Yes. I think from what we see at this point in time is that we really don't anticipate the utilization, especially around the non-med supplementation claims, getting back to normal. We are not seeing or expecting any kind of a catch-up, if you will, for missed procedures. But I think without the standard closures of clinics and such that we would anticipate just getting back to more normal levels of both med-sub type claims and appointments, as well as traditional medical services.

Maybe just to follow up on John's question on the health business. What are you assuming for an underwriting margin in 2021? And you had mentioned some lower acquisition costs? So is that something that you would expect to continue into next year?

Yes. Are you talking about just on the med-sub business or the health business as a whole?

The health business as a whole, just kind of what level of underwriting margin you're assuming percentage-wise?

Yes, assuming that should be relatively close and kind of in the same range in that 23% to 24% range for all of 2021.

Okay, thank you. And then, apologies if I missed a bit, did you give the outlook for premiums that you're assuming for both life and health in terms of the year-over-year growth in your 2021 guidance?

Yes. We're looking at the midpoint of the guidance, we're looking at about a 6% increase in life premiums and a little over 7% increase in health premiums.

Thank you. And then, if I can just squeeze in one more just on recruiting. I know, historically, you've talked about seeing a sort of a stair-step pattern when you bring in a lot of new agents and then kind of the agent count tends to flatten out a little bit. Is that what you would expect going into 2021 at this point? Or how should we think about that?

Expect to see a stair-step process; I think we will have an increased agent count. While higher recruiting, we've also had a real addition in middle management. American Income is growing 22% year-to-date. Middle managers are responsible for much of the recruiting that takes place. The 24% increase in middle management, I think will see strong recruiting into 2021. Also, virtual recruiting has allowed us to reach a greater number of possible recruits. Finally, in 2018 and 2019, American Income added approximately 15 new agency owners; these additional options have contributed to the increase in agents. So while it’s typically a stair-step process, I think we'll still have increases in 2021.

For 2021, could you provide your margin outlook for the life insurance business? And then if you have it, what it would be if you excluded your assumption for COVID claims next year?

Yes, Ryan. For the total life margin, we expect it to be around 26%, and it will be around 27% to 27.1% is what we'd anticipate without the COVID benefits in there.

Got it. In the midpoint of your EPS guidance of $7.55, that includes the $32 million of COVID claims. So it would be almost at $0.25 higher if you did not project those COVID claims?

That is correct. The midpoint includes the $32 million.

Just a follow-up on health persistency. The favorable persistency and the lower amortization this quarter, are you assuming that benefit will fully continue into 2021? Or should we assume some fade of that benefit?

Well, I think we assume it's going to be through 2021. But over time, we'll probably see it revert back more to normal trend. And that's been taken into consideration.

Got it. And any particular views as to what's driving that improved persistency? Is it awareness over the need for health insurance, or any views as to what's been driving that improved consistency?

Yes. I think you hit on it; I think it's similar to what we're seeing on the life insurance side as well— the need for the insurance.

Yes. I would guess that we've looked at either toward the end of 2021, or as we get about this time next year, that I would hope that we would start to be able to get some preliminary indications of it. Obviously, we're still working through putting the systems in place and getting our estimates and looking at the impacts of what the new accounting guidance would ultimately be. With COVID, some of the activities that we have been doing in that area have been put to the side a little bit, so it's not progressing maybe as quickly as it might have been otherwise, but the FASB did extend that out a year. But I would say again, whether it be towards the end of next year or at the beginning of 2022, we should be able to get some guidance on that.

Okay. Thank you for joining us this morning. Those were our comments, and we'll talk to you again next quarter.