Globe Life Inc (GL) — Q4 2023 Earnings Call Transcript

Thank you. Good morning, everyone. Joining the call today are Frank Svoboda and Matt Darden, our Co-Chief Executive Officers; Tom Kalmbach, our Chief Financial Officer; Mike Majors, our Chief Strategy Officer; and Brian Mitchell, our General Counsel. Some of our comments or answers to your questions may contain forward-looking statements provided for general guidance purposes only. Accordingly, please refer to our earnings release, 2022 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 discussions of these terms and reconciliations to GAAP measures. I will now turn the call over to Frank.

Thank you, Stephen, and good morning, everyone. In the fourth quarter, net income was $275 million, or $2.88 per share, compared to $242 million, or $2.46 per share a year ago. Net operating income for the quarter was $267 million, or $2.80 per share, an increase of 10% from a year ago. On a GAAP reported basis, return on equity through December 31st is 23.2%, and book value per share is $47.10. Excluding accumulated other comprehensive income, return on equity is 14.7%, and book value per share as of December 31st is $76.21, up 11% from a year ago. In our life insurance operations, premium revenue for the fourth quarter increased 4% from the year-ago quarter to $795 million. Life underwriting margin was $305 million, also up 4% from a year ago. In 2024, driven by strong premium growth in both our American Income and Liberty National divisions, we expect life premium revenue to grow between 4.5% and 5% at the midpoint of our guidance, and life underwriting margin to grow between 7% and 7.5%. As a percent of premium, we anticipate life underwriting margin to be in the range of 38% to 40%. In health insurance, premium grew 3% to $336 million, and health underwriting margin was up 1% to $97 million. In 2024, we expect health premium revenue to grow 7% to 8%. At the midpoint of our guidance for the full year 2024, we expect health underwriting margin to grow between 5% and 6%, and as a percent of premium to be around 27% to 29%. Administrative expenses were $77 million for the quarter, down 1% from a year ago, primarily due to a decline in pension and other employee-related costs. As a percentage of premium, administrative expenses were 6.8% compared to 7.2% from the year-ago quarter. For the year, administrative expenses were 6.8% of premium compared to 6.9% a year ago. In 2024, we expect administrative expenses to be approximately 7% of premium, higher than 2023 due primarily to continuing investments in technology as we modernize and transform how we operate. I will now turn the call over to Matt for his comments on the fourth quarter marketing operations.

Thank you, Frank. At American Income Life, life premiums were up 7% over the year-ago quarter to $406 million, and life underwriting margin was up 5% to $183 million. In the fourth quarter of 2023, net life sales were $76 million, up 9% from a year ago, primarily due to growth in agent count. The average producing agent count for the fourth quarter was 11,131, up 20% from a year ago. American Income has had sequential agent growth each quarter of 2023, but accelerated in the last half of the year to double-digit growth, which bodes well for sales growth in 2024. I am pleased to see the strong growth in agent count and sales as we continue to build momentum from the recruiting and agent retention initiatives put in place at the end of 2022. Now at Liberty National, life premiums were up 8% over the year-ago quarter to $90 million, and life underwriting margin was up 16% to $31 million. The growth in life premium reflects the significant progress this agency has made over the past several years. Net life sales grew 12% to $26 million, and net health sales were $9 million, up 9% from the year-ago quarter, primarily due to increased agent count. The average producing agent count for the fourth quarter was 3,387, which is up 15% from a year ago. Liberty continues to generate strong growth in both agent count and sales due in part to the new technology implemented over the past few years, which has provided more granular field activity feedback and allowed agents to track their sales activity and training progress. Now Family Heritage, health premiums increased 8% over the year-ago quarter to $102 million, and health underwriting margin increased 12% to $36 million. Net health sales grew 12% to $25 million due to increased productivity and higher agent counts during 2023. The average producing agent count for the fourth quarter was 1,368, which is up 3% from a year ago. For the full year 2023, the average producing agent count increased 10% from a year ago. Family Heritage will continue to focus on recruiting, with additional emphasis on middle management growth. Now on to Direct to Consumer, in our Direct to Consumer division at Globe Life, life premiums were flat compared to the year-ago quarter at $247 million, while life underwriting margin declined 2% to $59 million due to increased acquisition costs. Net life sales were $26 million, which is down 16% from the year-ago quarter, primarily due to declines in customer inquiries. As we have reduced marketing spend on certain campaigns that did not meet our profit objectives, we continue to focus on maximizing the underwriting margin dollars on new sales by managing the rising advertising and distribution costs associated with acquiring this new business. In addition to generating new business at profitable margins, the Direct to Consumer channel provides critical support to our agency business through brand impressions and the generation of sales leads. On to United American General Agency, here the health premiums were flat compared to the year-ago quarter at $139 million. Health underwriting margin was $14 million, down approximately $3 million from the year-ago quarter due to both higher policy obligations and acquisition costs. Net health sales were $28 million, which is up 40% over the year-ago quarter due to strong activity both in the individual and group Medicare Supplement businesses. Projections, let me talk about where we are headed based on the trends that we are seeing and the experience with our business. We expect the average producing agent count trends for the full year 2024 to be as follows: at American Income Life, high single-digit growth; in Liberty National, low double-digit growth; at Family Heritage, low double-digit growth. Net life sales for the full year 2024 are expected to be as follows: American Income Life, low double-digit growth; also at Liberty National, low double-digit growth; and Direct to Consumer, relatively flat. Net health sales for the full year 2024 are expected to be as follows: Liberty National, low double-digit growth; also at Family Heritage, low double-digit growth; United American General Agency, low to mid-single-digit growth. Now before turning the call back over to Frank, I’d like to discuss one additional item. During 2023, an online publication posted articles related to litigation pending in arbitration against American Income Life and one of its state general agents. Although we generally do not comment on pending litigation and will not be taking any questions on the topic today, we’d like to provide the following limited statement. This litigation relates to allegations made by a former independent contractor sales agent with American Income. In 2021, prior to the litigation and as soon as American Income became aware of the agent’s allegations, the company engaged an external third party to conduct an impartial and thorough investigation. American Income took prompt and appropriate action based on that investigation. We continue to vigorously dispute and defend against the allegations made about American Income Life in this litigation. We do not believe the litigation will be material to Globe Life’s overall results or American Income Life’s agency operations. We take seriously any allegations brought to our attention concerning harassment, inappropriate conduct or unethical business practices, and we do not tolerate such behavior. American Income Life provides numerous ways for sales agents to raise concerns, including contacting the company’s agency department directly or utilizing an independent third-party reporting hotline. We have processes in place to address such concerns when we learn of them. We also provide mandatory anti-harassment and anti-discrimination training to agents and ask agents to review the company’s Code of Business Conduct and Ethics, which includes information about how to report concerns. I want to emphasize that at Globe Life, we strive to act in accordance with the highest level of ethics and integrity at all levels of our organization. I’ll now turn the call back to Frank.

Thanks, Matt. We’ll now turn to the investment operations. Excess investment income, which we define as net investment income less only required interest, was $36 million, up $5 million from the year-ago quarter. Net investment income was $272 million, up 6% or $16 million from the year-ago quarter. The increase is due primarily to growth in average invested assets, but also supplemented by the impact from higher interest rates across fixed maturities, commercial mortgage loans, limited partnerships and short-term investments. Required interest is up nearly 5% over the year-ago quarter, slightly higher than the 4.5% growth in average policy liabilities. For the full year 2024, we expect net investment income to grow between 5% and 6% due to the combination of the favorable interest rate environment and steady growth in our invested assets. In addition, at the midpoint of our guidance, we anticipate required interest will grow around 5% for the year, resulting in growth in excess investment income of approximately 10% to 12%. Now regarding our investment yield. In the fourth quarter, we invested $443 million in investment-grade fixed maturities, primarily in the industrial and financial sectors. We invested at an average yield of 6.61%, an average rating of BBB+ and an average life of 23 years. We also invested approximately $114 million in commercial mortgage loans and limited partnerships that have debt-like characteristics at an average expected cash return of 8%. None of our direct investments in commercial mortgage loans involved office properties. These investments are expected to produce additional cash yield over our fixed maturity investments, and they are in line with our conservative investment philosophy. For the entire fixed maturity portfolio, the fourth quarter yield was 5.23%, up 5 basis points from the fourth quarter of 2022 and up 4 basis points from the third quarter. As of December 31, the portfolio yield was also 5.23%. Now regarding our investment portfolio. Invested assets are $20.7 billion, including $18.9 billion of fixed maturities at amortized cost. Of the fixed maturities, $18.4 billion are investment-grade with an average rating of A-. Overall, the total fixed maturity portfolio is rated A-, same as a year ago. Our fixed maturity investment portfolio has a net unrealized loss position of approximately $1 billion due to current market rates being higher than the average book yield on our holdings. As we have historically noted, we are not concerned by the unrealized loss position and is mostly interest rate-driven and currently relates entirely to bonds with maturities that extend beyond 10 years. We have the intent, and more importantly, the ability to hold our investments to maturity. Bonds rated BBB comprised 48% of the fixed maturity portfolio, compared to 51% from the year-ago quarter. While this ratio is high relative to our peers, we have little or no exposure to higher-risk assets such as derivatives, common equities, residential mortgages, CLOs and other asset-backed securities held by our peers. Additionally, unlike many other insurance companies, we do not have any exposure to direct real estate equity investments or private equities. We believe that the BBB securities we acquire generally provide the best risk-adjusted, capital-adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets. Below investment-grade bonds remained low at $530 million compared to $542 million a year ago. The percentage of below investment-grade bonds to total fixed maturities is 2.8%. At the midpoint of our guidance, for the full year 2024, we expect to invest approximately $1.1 billion in fixed maturities at an average yield of 5.5% and approximately $440 million in commercial mortgage loans and limited partnership investments with debt-like characteristics and an average estimated cash yield of approximately 8.2%. As we said before, we are pleased to see higher interest rates as this has a positive impact on operating income by driving up net investment income with no impact to our future policy benefits since they are not interest sensitive. Now I will turn the call over to Tom for his comments on capital and liquidity.

Thanks, Frank. First, let me spend a few minutes discussing our share repurchase program, available liquidity, and capital position. The Parent began the year with liquid assets of $91 million and ended the year with liquid assets of approximately $48 million. In the fourth quarter, the company repurchased approximately 660,000 shares of Globe Life Inc. common stock for a total cost of $77 million. The average share price for these repurchases was $117.02. For the full year, we purchased 3.4 million shares for a total cost of $380 million at an average share price of $112.84. Including shareholder dividend payments of $84 million, the company returned approximately $164 million to shareholders during 2023. In addition to liquid assets held by the Parent, the Parent company will generate excess cash flows during 2024. The Parent company’s excess cash flows, as we define it, results primarily from the dividends received by the Parent from its subsidiaries, less the interest paid on debt. We anticipate the Parent company’s excess cash flow for the full year will be approximately $420 million to $460 million and is available to return to its shareholders in the form of dividends and through share repurchases. Excess cash flows in 2024 are estimated to be higher than those in 2023, primarily due to anticipated higher statutory earnings in 2023 as compared to 2022, thus providing higher dividends to the Parent in 2024 than were received in 2023. The reason for this anticipated increase is due primarily to favorable life claims, which are sufficient to offset approximately $50 million of realized losses in 2023. So, using the $48 million of liquid assets plus the $420 million to $460 million of excess cash flows expected to be generated in 2024, we anticipate having approximately $470 million to $510 million of liquid assets available to the Parent in 2024, of which we anticipate distributing approximately $85 million to $90 million to our shareholders in the form of dividend payments. As mentioned 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 alternatives. Thus, we anticipate share repurchases will continue to be the primary use of Parent’s excess cash flows after the payment of shareholder dividends. It should be noted that the cash received by the Parent company from our insurance operations is after our subsidiaries have made substantial investments during the year to generate new sales, transform and modernize our information technology and other operational capabilities, as well as acquire new long-duration assets to fund their future cash needs. The remaining amount is sufficient to support the targeted capital levels within our insurance operations and maintain the share repurchase program in 2024. In our earnings guidance, we estimate approximately $330 million to $370 million of share repurchases will occur during the year. With regards to the capital levels at our insurance subsidiaries, our goal is to maintain our capital levels necessary to support our current ratings. Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. As discussed on previous calls, our consolidated RBC ratio was 321% at the end of 2022. For 2023, since our statutory financial statements are not yet finalized, our consolidated RBC ratio is not yet known. However, we anticipate the final 2023 RBC ratio will be slightly above the middle of our targeted range without any additional capital contributions being made. Now, with regards to policy obligations for the current quarter, as we have discussed on previous calls, we have included the historical operating summary under results under LDTI for each of the quarters in 2023 and 2022 within the supplemental financial information available on our website. In addition, we include an exhibit that details the remeasurement gain or loss by distribution channel. As also noted on previous calls, life and health assumption changes were made in the third quarter of 2023. No assumption changes were made in the fourth quarter. In addition to the impact of assumption changes, the remeasurement gain or loss also indicates experience fluctuations. For the fourth quarter, life policy obligations were favorable compared to our assumptions of mortality and persistency. The remeasurement gain related to experience fluctuations resulted in $13 million of lower life policy obligations and $4 million of lower health policy obligations, primarily a result of favorable claims experience versus expected. For the full year, encompassing both assumption changes and experience-related fluctuations, the remeasurement gain for the life segment resulted in $29 million of lower life policy obligations and $12 million of lower health policy obligations. This is the second quarter in a row with life remeasurement gains greater than $10 million. We are encouraged by this short-term trend; and to the extent it continues, we would expect continued favorable remeasurement gains in 2024. The recent experience, as well as life mortality trends in the first half of 2024, will inform the third quarter 2024 update to our endemic mortality assumptions. Recall our endemic mortality assumption currently assumes returning to mortality levels slightly above pre-pandemic levels over the next few years. Recent trends, if they should continue may indicate a quicker recovery than our current assumption. So finally, with respect to our earnings guidance for 2024, for the full year 2024, we estimate net operating earnings per diluted share will be in the range of $11.30 to $11.80 representing 8.5% growth at the midpoint of the range. The $11.55 midpoint is higher than our previous guidance and reflects recent favorable mortality trends continuing in 2024. Those are my comments. I will now turn the call back to Matt.

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

Hi, good morning. So, first, just on the remeasurement gains, what’s your policy in terms of when you see actual experience? Are you reflecting the entire variance in remeasurement gains in the given quarter or only a portion of it in any given quarter on the experience-related gains and losses?

Jimmy, we reflect the full difference between what we had expected in our valuation assumptions versus what we actually incurred from claims and lapse experience in the quarter that it occurs.

Okay, but then you’re not unlocking any assumptions. That just happens when you do your annual review.

Yes. Our plan is to unlock assumptions in the third quarter. So, for instance, we’ve seen two quarters of good mortality experience in the third quarter and the fourth quarter. We’d like to see the development of that fourth quarter experience as it moves into 2024. We’d also like to see that continue in the first half of 2024 before we make a decision to inform our updates to our underlying assumptions.

Okay. And then on the health business, a few health insurers have seen significant uptick in claims and med advantage plans, and they’re raising prices as a result. It doesn’t seem like you’ve seen at least not as much of an uptick in med sup claims, but what is it that you’ve seen and do you expect any impact on med sup sales because of potential disenrollments from med advantage plans?

Yes. Just from a claims experience on med sup, we have seen some increased trend over the course of 2023 in both our individual and our group business, but more so on the group side. That subsided a little bit later in the year. We’ve reflected those trends into our rate projections or rate increases for 2024. So we accounted for that regularly. Whatever trend we’re seeing will build into rates for the following year.

And then, Jimmy, I think your second question was related to sales. As we’ve mentioned in the past, as the Medicare Advantage plans saw people moving into them, that had a little bit of impact on us. From a 2024 sales perspective, to the extent that there is more disenrollment or as you’d mentioned, you’re seeing some trends out there from the cost side, costs might be increased by competitors offering those plans. I think that could be a tailwind for us for our supplemental product. Our goal is really to keep steady in that market, and we see competitive pressures coming and going over a long period of time. Our goal is to keep steady in price for what we ultimately want to achieve and kind of ride out some of the short-term fluctuations from market dislocation.

Okay, thanks. And if I could just ask one more. There’s been a lot of confusion about the Tri-Agency rule on limited benefit health plans. Are any of your products in scope of that, and do you expect any impact on your business if the rule isn’t changed from the initial proposal?

Well, the Tri-Agency rule, the primary target was short-duration health plans. We don’t have any of those products in our portfolio. It did also include some supplemental health plans that we do sell. There’s been quite a bit of reaction to that Tri-Agency rule, and it’s been comments from a broad spectrum of constituents. So we’re really waiting to see what actually happens within that ruling. We’re expecting something to come out in April. At the end of the day, we’ll make the changes that we need to make depending upon what comes out in that rule. But we don’t see it as having a very significant impact overall on our marketing efforts.

Thank you.

Good morning. Thank you very much. I see you updated your commercial real estate disclosures. Could you maybe talk about your outlook for 2024 maturities?

Yes. For 2024, we have about $70 million of our total direct commercial mortgage loans maturing, of which about $4 million are office buildings, and we have about $35 million of mixed-use, of which about $12 million is office. So if you consider, the hotspot right now is what kind of office exposure is maturing here this next year. Between those two, we do have about $16 million of what's maturing. On average, it’s below a 50% LTV and we have over a 90% LTV on any that we’ve looked at. About $47 million to $50 million of those do have some continuing optional extensions, so a good portion could get extended into 2025 or beyond.

Thank you for that. My follow-up question. What does the outlook assume around the rate environment? Can you talk about sensitivity to the short end or floaters? Thank you.

Yes. Sensitivity on the rates of this particular asset class?

No, I’m just talking generally within the outlook for net investment income.

Okay. We’re expecting the benchmark, we rely mostly on 30 years, as kind of our benchmark. I see that being relatively stable, but probably drifting downward over the course of the year. As you know, the spreads are extremely tight. We currently expect that to expand a little bit over the course of the year as well. Built into our guidance, we’re expecting our fixed maturities to be around 5.5%. That’s a little bit lower than we had in 2023. It’s largely due to the declines in the spread. If you look at 2023, our benchmark was just a little bit over 4%, but we were getting nearly 200 basis point spreads on those investments. It’s really tightened up during the fourth quarter, so we don’t expect that higher spread continuing into 2024.

Thank you for the answers.

Hey, thanks. Good morning. First question was on American Income. I think if I look at the full year average producing agents that – for 2023, it was up 12%. But sales were up 2%. I’m just curious what the disconnect there was. Is it first-year agents needing to be trained to become more productive, or something else going on?

Yes. One of the things to look at is just really the agent count growth accelerated in the last half of the year. If you consider that on a sequential basis, Q1 was 3.5%, Q2 was 8.5%, Q3 was 15% to 16%, and 20% in Q4 for growth. So, agent count growth really accelerated in the last half of the year, which bodes very well from a 2024 perspective. Usually, there will be a little bit of a lag from those new agents getting onboarded, trained, and becoming productive. Our more experienced agents are more productive than newer agents. That should carry forward into 2024 as we consider our sales guidance. Overall, agent count is directly related to sales count growth when you look at it over a multi-year basis. Our five-year CAGR is within 1% of each other for agent count growth and sales growth. We’re very optimistic about where we think 2024 is going to go for American Income.

Thanks. I had that question on mortality. And I don’t know if you look at it this way, but maybe stepping back and trying to remove LDTI from the equation. How does mortality look relative to where it did pre-pandemic at this point in 2023? I’m just trying to get a sense of – is mortality fully back to kind of where it was before the pandemic for the company, even though the population is still seeing some excess mortality?

Yes. In the first half of the year, mortality was notably higher. The remeasurement gains were also quite a bit lower than what we saw in the second half of the year. There does seem to be a change that happened in the third and fourth quarter. If you consider the results from the third quarter, mortality is coming much closer to pre-pandemic levels. Similarly with the fourth quarter, we want to see the fourth quarter develop more completely to account for claims adjudication and payment from that period. But at this point, I’d say it’s getting fairly close to pre-pandemic levels, and the excess mortality seems to have dropped much more quickly than our assumptions had anticipated.

One thing I would add is that we’re generally pleased with what we’re seeing in the third and fourth quarters. As Tom mentioned, the mortality was higher early in the year, but we’re observing improvement across all distributions and across all issue years. We see it as a broad-based improvement in mortality, which we consider favorable. As Tom noted, we’ll want to see if this trend continues over the next couple of quarters before making any conclusions.

Thank you.

Yes, thanks. You talked about an acceleration in recruiting in the second half of 2023. I guess as we think about 2024, is the plan to kind of keep the foot on the gas pedal there or maybe shift focus a little bit more on productivity?

I’d say it would be more of a shift toward retaining our momentum, while we will still focus on recruiting. A lot of when we have such significant growth is about getting those agents trained and retained, as productivity is a natural byproduct of that training and experience. Our focus will really be on retention and training that results in higher productivity. It’s also important to note that our agent retention trends have continued upward throughout 2023, and in fact, in American Income, our agent retention rates are higher than 2019 pre-pandemic levels. We implemented initiatives for retention, and those are showing favorable results. I believe this will bode well for our performance in 2024.

Got it. And then it looks like, based on your comments, the RBC ratio is going to be in your range, maybe slightly above the midpoint. Is there a level of liquid assets at the holding company that you just want to keep as sort of a buffer, just as we think about excess capital?

Yes, we tend to keep $50 million to $60 million as our target range for liquid assets at the parent company.

Okay. Got it. If I may sneak one more in. It looks like you took up your 2024 EPS outlook a little bit. Can you just unpack some of the drivers? It doesn’t seem like it’s investment income, but just curious what caused that bump up?

Yes. The biggest driver is continued remeasurement gains in our Life segments based on what we’ve seen in Q3 and Q4. We tried to reflect in our guidance what we see as a potential continuation of those remeasurement gains, along with the potential impact of assumption change in 2024.

Got it. That’s embedded in your outlook already.

It is embedded in our outlook, yes.

Hey, good morning. Could you talk a little bit more about what’s driving the high sales guides in the Health segment? I know you’ve had very strong agent count growth, but is there any tailwind in the market or anything attractive about the market right now?

Well, on Family Heritage for sure, it’s primarily driven by agent count. We rolled out a CRM system in 2023, which helped on the productivity side. Overall, Family Heritage includes all of our exclusive agencies. We see continued positive momentum on the recruiting side, so we anticipate good recruiting growth in 2024. I don’t see anything in the market that suggests we should have a different experience there. On the med sup side, that is influenced by market forces. Clearly, we had a strong Q4, and that was notable in both our individual and group sales, which can tend to be lumpy. We’re seeing strong performance overall. Depending on pricing and market changes, which can be highly price competitive, we could see some additional tailwinds based on what our competitors do as they adjust pricing accordingly.

Thank you. And then a follow-up on Suneet’s question. You mentioned that the higher guide includes some of the life mortality coming through. Should we think about that being weighted towards the back end because you’ll review it in 3Q? Or how should we think about that coming through throughout the year? Thank you.

Yes. The remeasurement gains would continue in the first quarter and second quarter. To the extent that we make an assumption update, that would be in the third quarter. In the first quarter, typically, mortality is a little bit higher just because of the seasonal flu, so we may see it a little higher there. We also expect that we’d see COVID deaths. COVID is still present, and we anticipate 60,000 to 80,000 U.S. deaths in the U.S. next year. As a factor, if trends continue, we should see remeasurement gains in the first and second quarter. We’ll revisit the assumptions and reset those in the third quarter, and the fourth quarter remeasurement will likely be a little lighter.

Thank you.

Thanks. Just a follow-up on Wilma’s question on the remeasurement gains. So if I heard you correctly, the 38% to 40% margin guide on life and in Q4 when you had big remeasurement gains that was at 38%. It looks like it’s a little above that, at least midpoint, in terms of where it’s been trending. Is that because you’ve deferred part of them, and you’ll be getting the benefit through the amortization of those gains through earnings in 2024? Or is it just the deferred profitability that’s emerging here that you’re guiding to?

I would say, Tom, thinking about that, we had a 38% margin in the overall for life in the fourth quarter, which was kind of the expectation on a long-term basis. We had slightly higher expenses; we talked about higher amortization on our overall life business as we continue to capitalize and amortize renewal commissions. That was a bit of a drag in 2023, offset by favorable remeasurement gains that we saw in 2023. There was a slight increase in that overall margin between 2022 and 2023. We anticipate from remeasurement gains and improvement in mortality will manifest in margin improvement in 2024.

That’s helpful. So it’s a little bit less expense drag perhaps obscuring the level of favorability due to the underwriting?

That’s correct.

Now I just want to make sure I’m thinking about it correctly, though. In a year like 2023, where you had particularly in the back half where you had significant favorability of remeasurement gains, there’s some piece of that experience being deferred and amortized back through earnings, I believe. Is that meaningful? And will that like meaningfully improve future earnings at all? Or is that not that meaningful because it gets amortized over such a long time?

It is spread out over quite a long period of time, so that spreading out is reflected in the obligation ratio and the percentage of premium that we need to set aside to pay for future benefits. It’s spread out over quite a long period of time.

Thanks. I appreciate it.

Thank you for joining us this morning. Those were our comments. We will talk to you again next quarter.