Globe Life Inc.

Dan, welcome to the Globe Life Inc. Fourth Quarter 2020 Earnings Release Conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Majors, Executive Vice President, Administration and Investor Relations. Please go ahead, sir.

Thank you. Good morning, everyone. Joining the call today are Gary Coleman and Larry Hatchison, 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 our earnings release, 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 will now turn the call over to Gary Coleman.

Thank you, Mike, and good morning, everyone. I would like to open by saying that in this COVID environment, the company continues to conduct business effectively, and our operations are running efficiently. In the fourth quarter, net income was $204 million, or $1.93 per share, compared to $187 million, or $1.69 per share, a year ago. Net operating income for the quarter was $184 million, or $1.74 per share, a per share increase of 2% from a year ago. On a GAAP-reported basis, return on equity was 9.5%, and book value per share was $83.19. Excluding unrealized gains and losses on fixed securities, return on equity was 13.5%, and book value per share grew 10% to $53.12. In our life insurance operations, premium revenue increased 7% to $678 million. As noted before, we have seen improved persistency and premium collections since the onset of the crisis. Life underwriting margin was $164 million, down 8% from a year ago. The decline in margin is due primarily to approximately $27 million of COVID claims. In 2021, we expect both live premium revenue and underwriting margins to grow 6% to 7%. At the midpoint of our guidance, we anticipate approximately $52 million of COVID claims. Health insurance premium grew 5% to $290 million, and health underwriting margin was up 18% to $72 million. The increase in underwriting margin was primarily due to improved persistency and lower acquisition expenses. In 2021, we expect both health premium revenue and underwriting margin to grow around 6%. Administrative expenses were $63 million for the quarter, up 3% from a year ago. As a percentage of premium, administrative expenses were 6.5% compared to 6.7% a year ago. In 2021, we expect administrative expenses to grow 7% to 8% and be around 6.7% of premium due primarily to higher pension costs, higher IT and information security costs, and a gradual increase in travel and facilities costs. I will now turn the call over to Larry for his comments on the fourth quarter marketing operations.

Thank you, Gary. I am optimistic as I look ahead. I believe we will emerge from the pandemic stronger than before as a result of the adjustments we have made during the crisis. We now have more ways to generate sales and recruiting activity. The ability to recruit agents and sell to customers both virtually and in person in the future will enhance our ability to generate sales growth. Looking back at fourth quarter, we were pleased with the results as we continue to see strong growth in sales and agent count. I will now discuss trends at East Distribution Channel. At American income, life premiums were up 10% to $327 million. and life underwriting margin was up 7% to $105 million. Net life sales were $71 million, up 20%. The increase in net life sales is primarily due to increased agent count. The average producing agent count for the fourth quarter was 9,642, up 26% from the year-ago quarter and up 4% from the third quarter. The producing agent count at the end of the fourth quarter was 9,664. We continue to see significant recruiting opportunity due to current economic conditions and our ability to recruit both virtually and in person. At Liberty National, life premiums were up 3% to $74 million, while life underwriting margin was down 26% to $14 million. The lower underwriting margin is primarily due to COVID claims. Net life sales increased 24% to $18 million, while net health sales were $7 million, down 1% from the year-ago quarter. The increase in net life sales is due to increased agent count, continued adoption of virtual sales methods, and an increased ability to conduct worksite sales activities. The average producing agent count for the fourth quarter was 2,705. up 7% from the year-ago quarter, and up 6% from the third quarter. The producing age account at Liberty National ended the quarter at 2,770. We are encouraged by Liberty National's continued growth and ability to adapt to the current environment. At Family Heritage, health premiums increased 8% to $82 million, and health underwriting margin increased 17% to $22 million. The increase in underwriting margin is primarily due to improved persistency and lower acquisition expenses. Net health sales were up 17% to $21 million. The increase in net health sales is primarily due to increased agent count. The average producing agent count for the fourth quarter was 1,452, up 18% from the year-ago quarter and up 6% from the third quarter. The producing agent count at the end of the quarter was 1,463. Family Heritage continues to generate recruiting and sales momentum. In our direct-to-consumer division of Globe Life, life premiums were up 7% to $224 million, while life underwriting margin declined 42% to $23 million. Frank will further discuss the decline and underwriting margin in his comments. Net life sales were $39 million, up 32% from the year-ago quarter. We continued to see strong consumer demand and basic life insurance protection across all channels of the direct-to-consumer distribution. At United American General Agency, health premiums increased 7% to $116 million, and health underwriting margin increased 21% to $19 million. The increase in underwriting margin is primarily due to increased premium and improved persistency. Net health sales were $22 million, down 30% compared to the year-ago quarter. It is always difficult to predict United American sales as the Medicare Supplement Marketplace is highly competitive. Although it is difficult to predict sales activity in this environment, I will 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 2021 to be in the following ranges. American income, 3% to 14% growth. Liberty National, 1% to 16% growth. Family heritage, 1% to 9% growth. Net life sales trends are expected to be as follows. American income life for the full year 2021, an increase of 9% to an increase of 13%. Liberty National for the full year 2021, an increase of 7% to an increase of 11%. Corrective consumer for the full year 2021, a decrease of 5% to an increase of 5%. Net health sales trends are expected to be as follows. Liberty National for the full year 2021, an increase of 7% to an increase of 11%. Family Heritage for the full year 2021, an increase of 5% to an increase of 9%. United American Individual Medicare Supplement for the full year 2021, a decrease of 3 percent to an increase of 7 percent. I will now turn the call back to Gary.

Thanks, Larry. Excess investment income, which we define as net investment income that's required interest on net policy, liabilities, and debt, was $61 million, a 2 percent decrease over the year-ago quarter. On a per share basis, reflecting the impact of our share repurchase program, excess investment income was up 2%. For the year, excess investment income in dollars declined 5%, and on a per share basis was down 1%. In 2021, we expect excess investment income to be flat, but up 1% to 3% on a per share basis. In the fourth quarter, we invested $359 million in investment-grade fixed maturities, primarily in the municipal and financial sectors. We invested at an average yield of 3.54%, an average rating of A, and an average life of 26 years. While we continue to invest primarily in fixed maturities, 17% of our total investment acquisitions in 2020 were in other long-term investments. primarily limited partnerships investing in credit instruments. These investments are expected to generate incremental additional yield while still being in line with our conservative investment philosophy. For the entire fixed maturity portfolio, the fourth quarter yield was 5.29 percent, down 12 basis points from the fourth quarter of 2019. And as of December 31st, the portfolio yield was approximately 5.28%. Invested assets are $18.4 billion, including $17.2 billion of fixed maturities and amortized costs. Of the fixed maturities, $16.4 billion are investment grade with an average rating of A-, and below investment grade bonds are $841 million compared to $840 million at September 30th. the percentage of below investment grade bonds to fixed maturities is 4.9 percent. Excluding net unrealized gains in the fixed maturity portfolio, the low investment grade bonds as a percentage of equity is 15 percent. Overall, the total portfolio is rated A minus, same as a year ago. Bonds rated triple B are 55 percent of the fixed maturity portfolio, the same as 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. Because we invest long, a key criterion utilized in our investment process is that an issuer must have the ability to survive multiple cycles. We believe that the BBB securities that we acquire provide the best risk adjusted and capital adjusted returns and do a large part to our unique ability to hold securities to maturity, regardless of fluctuations in interest rates or equity markets. Finally, the lower interest rates continue to pressure investment income. For 2021, at the midpoint of our guidance, we assume an average yield rate on new fixed maturity investments of around 3.55%. While we would like to see higher interest rates going forward, low block can thrive in a lower for longer interest rate environment. Extended low interest rates will not impact the GAAP or statutory balance sheets under the current accounting rules since we sell non-interest assisted 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 will 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 positions. The parent began the year with liquid assets of $45 million. In addition to these liquid assets, the parent company generated excess cash flows in 2020 of $388 million compared to $374 million in 2019. 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. Thus, including the assets on hand at the beginning of the year, we had $433 million of excess cash flow available to the parent during the year. In the fourth quarter, the company purchased 1.4 million shares of Globe Life Inc. common stock at a total cost of $123 million, with an average share price of $88.55. For the full year, we spent $380 million of parent company cash to acquire 4.5 million shares and an average share price of $85.24. As noted on our last call, the parent ended the third quarter with $435 million in liquid assets. As just noted, the parent used $123 million of cash for share repurchases in the fourth quarter. In addition, The parent reduced its commercial paper holdings by $25 million during the quarter. The parent ended the fourth quarter with liquid assets of approximately $290 million. Looking forward, the parent will continue to generate excess cash flow in 2021. While their 2020 statutory earnings have not yet been finalized, we expect our excess cash flow in 2021 to be in the range of $330 to $360 million. Thus, including the assets on hand at January 1st, we currently expect to have around $620 million to $650 million of cash and liquid assets available to the parent in 2021. As I'll discuss in more detail in just a few moments, this amount is more than necessary to support the targeted capital levels within our insurance operations and maintain the share repurchase program. As noted on previous calls, we will use our cash as efficiently as possible. We currently believe share repurchases provide the best return to our shareholders versus other available alternatives. Thus, we anticipate share repurchases will continue to be a primary use of the parent's excess cash flows. It should be noted that the cash received by the parent company from our insurance operations is after they have made substantial investments during the year to issue new insurance policies, to expand our information technology and other operational capabilities, as well as to acquire new long-duration assets to fund future cash needs. Now, capital levels at our insurance subsidiaries. Our goal is to maintain our capital at levels necessary to support our current ratings. As noted on previous calls, Globe Life has targeted a consolidated company action level RBC ratio in the range of 300 percent to 320 percent for 2020. Although we have not finalized our 2020 statutory financial statements, we anticipate that our consolidated RBC ratio for 2020 will be at the midpoint of this range, reflecting additional capital contributions of $20 to $30 million. For 2021, we intend to maintain the same targeted RBC range. As discussed on previous calls, a primary driver of potential future capital needs from the parent is the adverse capital effect during this economic downturn from either downgrades that increase required capital or investment credit losses that reduce statutory income and thus total capital. To estimate the potential impact on capital due to changes in our investment portfolio, we continue to model 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 portfolio, as well as other stress tests. We now estimate that our insurance companies will require $35 million to $140 million of additional capital over the course of this credit event to maintain the minimum 300% RBC ratio of our stated target range. This amount is lower than our previous estimate. In our base case, we expect less than $20 million in after-tax credit losses and approximately $700 million of additional downgrades over the next 12 to 18 months. In our worst-case scenario, we increase the expected downgrades to approximately $2 billion over that same time period. Regardless of whether the need is $35 million or $140 million of capital, or something in between, the parent company has ample liquidity to cover the amount required. It is important to note that Globe Life's statutory reserves are not negatively impacted by the low interest rates or the equity markets given our basic fixed protection products. Furthermore, the current interest rates do not have any impact on our statutory reserves given the strong underwriting margin in our products. In the aggregate, our statutory reserves are more than adequate under all cash flow testing scenarios. As noted by Gary, total life underwriting margins declined by 8% during the quarter. These lower margins were primarily due to an estimated $27 million of COVID-related policy obligations incurred in the quarter, $11 million more than we had anticipated on our last call due to 65,000 more COVID deaths across the U.S. in the fourth quarter than projected. During the quarter, direct-to-consumer incurred an additional $13 million in COVID claims, and Liberty National incurred an additional $6 million. Absent these additional losses, direct-to-consumer's underwriting margin would have been 16% of premium for the quarter. In the Liberty National distribution, absent the estimated policy obligations due to COVID, their underwriting margin would have been 27% of premium for the quarter. For the full year 2020, our total incurred COVID policy obligations across our life operations were approximately $67 million. Absent these additional losses, our total life underwriting margin would have been slightly below 28% of premium, comparable to 2019. With respect to our health operations, total health claims were approximately $7 million lower than what we expected at the beginning of the year due to COVID. Finally, with respect to our earnings guidance for 2021, We are projecting net operating income per share will be in the range of $7.16 to $7.56 for the year ended December 31st, 2021. The $7.36 midpoint is lower than the midpoint of our previous guidance of $7.55, primarily due to higher anticipated COVID death benefits. On our last call, our midpoint included an estimate of $32 million in COVID life claims relating to approximately 160,000 U.S. deaths. The midpoint of our guidance now estimates approximately $52 million of COVID life claims on projections of around 270,000 U.S. deaths, the vast majority of which are expected to occur in the first quarter of 2021. We continue to estimate that we will incur COVID life claims of roughly $2 million for every 10,000 U.S. deaths. Obviously, the amount of death benefits paid due to COVID-19 in 2021 will depend on many factors, including the effectiveness of the various vaccines and the speed at which the highest risk segments of our population get vaccinated. The larger than normal range for our guidance reflects this additional uncertainty. Those are my comments on there. Now turn the call back to Larry.

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

to our telephone audience. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you would like to ask a question. And we'll take our first question from Ryan Krueger with KBW.

Hi, good morning. If I take your updated COVID guidance, it looks like there may have been a small amount of reduction to the EPS expectation outside of COVID. Can you provide any detail on any additional drivers beyond just COVID mortality?

Sure. Yeah, we are expecting a higher average share price in 2021 than what we had anticipated back in October, just reflecting our higher trading price right now. So it did have a reduction in the overall effect of the buyback, maybe six to seven cents ultimately, and then probably three or four cents, better underwriting results ultimately, really American income and Liberty just a little bit better, slightly better than what we maybe anticipated back in October.

Got it. Actually, on the buyback, can you provide any thoughts on your expectations for buyback levels in 2021? You obviously have some excess cash at the parent company, but any thoughts there?

Yeah, Ryan, right now we anticipate just using whatever excess cash flow that we generate at the parent company for those level buybacks. So again, in that $340 to $370 million range, somewhere in there. As far as the excess cash that's sitting there at the parent company, for right now, we'll hold on to that to make sure of what levels of additional capital we might need. And as we work our way through the year, then we'll see if we're able to redeploy those in some other fashion.

Thanks. And I just had one last quick one. Life persistency has Generally been favorable or was favorable in 2020. Looked like some of that reversed in the fourth quarter in direct-to-consumer. So curious what you're expecting for persistency in 2021.

Ryan, we're in the midpoint of our guidance. We... assumed that the persistency over the year would eventually get back to prior to 2020. So what we saw in the fourth quarter, even in the direct-to-consumer, is that the persistency wasn't quite as good as it was in the second or third quarter, but still it was better than what it had been historically. You know, we're just – I don't think – We've never had a pandemic like this. We're just not sure whether or when the losses will return back to the prior historical levels. But as far as our guidance, we assume that as we get toward the end of 2021, it'll be back to more what it was 2019 and prior.

Got it. Thank you.

And we'll take our next question from Andrew Quigerman with credits.

Hey, good morning. I guess the first question, I'm looking at the life underwriting margins. And as a percent of premiums in direct-to-consumer, it fell 860 basis points to 10.1%. But then when we look at American incomes, it only fell 90 basis points to 32.1%. So I just kind of, you know, I think I have a sense of the answer, but I'd like a little more color on what might be driving the disparity between these two channels.

And I think, did you say, well, Liberty National has a little bit more exposure to some of the higher populations within their overall book of business? When you look at American income, American income generally ensures a little younger portion of the population has less exposure to, let's say, those portions of the populations that are being most impacted right now. So just proportionally, Liberty National is seeing just a higher impact overall from the COVID.

And direct consumer as well.

Yeah, and direct-to-consumer is a little bit more of the nature of their simplified underwriting, especially as compared to American income. American income has a little bit more underwriting processes being done in the field, whereas with direct-to-consumer and their simplified underwriting, we anticipate higher mortality. We've always priced in and have higher mortality experience in direct-to-consumer. They also have as a percentage of their in-force, a little bit older population, or they do have an older population than American income. It's not quite as, it's a little bit less than what Liberty National has. Overall, for our book of business, it's about 4% of our policies in force relate to insureds that are 70 years old and above At direct-to-consumer, it's closer to 5%, and Liberty National is just a little bit higher than that, and American income is about 3.5% or so.

I see. That makes sense, and everything seems on track. So then, as I think about the sales trends, and nothing short of phenomenal there, I'm just curious, some color around the margins. What percent of sales would you say in your exclusive producer channels, what percent are being done virtually versus face-to-face?

Ryan, we don't keep the data because all of our applications are uploaded electronically. So I want to distinguish, I would estimate at this point in time, probably 80% of the American income sales are still virtual. I think it would be a much lesser percentage than the other two agencies. Now, the reason we don't capture that data is, as we go forward, it's a little less important. As we look at closing rates, we look at activity, that's really a better measure of what sales will be. And so it really comes down to consumer preference. We'll sell either virtually or in person, depending on what the consumer prefers as a sales channel.

I see. I see. Makes sense. And then just, you know, again, maybe a little color around statistics or metrics for, you know, just demand for protection-based products. Are there any metrics out there where you're seeing that pick up? I know earlier you said that you expect persistence. You'll kind of revert back to where we were in 2019. Do you think demand will come down as well?

Well, I think we do expect a decrease in life insurance demand from pandemic levels. However, we think demand should be greater than pre-COVID levels. Now, that's because I think that the sales will benefit from the continued increased awareness of the importance of life insurance. Of course, there's a possibility of future pandemic, you know, currently the variants for the current pandemic. I think we'll see a consumer preference for the digital experience, which will help our direct-to-consumer When the agencies are decreasing demand, I think it would be offset by our ability to sell both virtually and in person, and the growth in the agencies, both the agents and middle management, will also generate additional sales to go forward.

Andrew, I'd like to add, too. I mentioned earlier that we assumed that lapses would go back to historical trends by the end of the year, but I do want to reaffirm I'm just not sure because we haven't been through a pandemic like this before. It well could be that because of the impact of so many people and so many families in this country that it turns out that the persistency of the premise we've seen continue for a period of time. But just to be conservative, we assume that they would go back to the historical averages by the end of this year.

That's helpful. Thanks a lot.

We'll now take our next question from Eric Bass with Autonomous Research.

Hi, thank you. I think your guidance is for health premiums and underwriting income to both grow 6% to 7% in 2021, which implies flat margins. I think before you had expected the margin to come down a little bit, given some of the benefits of lower claims in 2020. So are you changing that view at all? And do you expect some of the benefits to continue into 2021?

Well, Eric, I think we expect from a policy obligation standpoint that we'll probably be around the same in 21 as we were in 2020. But what we're seeing is because of the improved persistency, we're seeing a lower acquisition cost, lower amortization. And we went from 19% of premium in 2019 to 18% in 2020. We're thinking it could be a little bit less than 18% this coming year. So that's helping keeping that margin up.

So overall, kind of in the 24% to 25% range again, is that what you're expecting?

Yes, it should be.

I think at the midpoint of our guidance, it's just right around 24%. Got it. Thank you. And then I was just hoping you could maybe give a little bit more color on the long-term investments that you talked about, the limited partnerships. I was hoping you could provide a little bit more detail on what these are, the credit profile, and how they're treated in terms of required capital and the accounting for investment income.

Sure.

Yeah, most of these are long-term, you know, limited partnerships. that primarily invest in credit-related investments. Some of them have participation mortgages that are very short-term mortgages that are made like three years in duration and have very good loan-to ratios. Ultimately, these are designed to be kicking out investment income on a periodic basis as well as have the potential for long-term gains, if you will, long-term target rates. The quarterly distributions generally on most of these range from 5% to 6%, and ultimately have maybe a long-term return prospects of 8% to 10%. And really that's the difference between those quarterly distributions that we obtain from these partnerships and then some of those long-term returns. are what flow through ultimately as capital gains that flow through our realized gains and losses, you know, over time. But the majority of those are, you know, in the nature of that. There's also some other opportunistic credit partnerships that we've had on our books for a while. But we continue to look at some of those types of generally credit-related, you know, structured-type partnerships that are get us into a little bit different type of exposure on the credit side than the normal corporate fixed maturities. Got it.

Thanks. That's helpful. So should we expect a little bit more volatility quarter to quarter in terms of the investment income from those? And is there a higher assumed capital charge as well?

Yeah, you know, there is a higher capital charge. And so we take that into account when we're taking a look into that, you know, and evaluating the the benefits of getting into that type of an investment versus the fixed maturity. Given the higher yields that they have right now, it is, you know, it's worth the higher capital charge. It is a little bit, you know, from a risk perspective, they're definitely, you know, lower in risk than, I'm going to say, you know, kind of the general alternatives or especially those that might be a little bit more equity-based hedge fund type partnerships. The structure of these with getting some type of a a quarterly distribution from them from a statutory income, then we've got a steady stream and a predictable stream still of income that's receivable from these particular partnerships. Long-term and on the balance sheet, there is some volatility just in the value of those on a quarter-to-quarter basis. Got it. Thank you.

And we'll now take our next question from John Barnage with Piper Sandler.

Thank you very much. With the increased level of COVID deaths kind of embedded in revised guidance, can you talk about the corresponding claims tailwind offset we should be thinking about from lower utilization and health?

Yeah, on the health side, right now for 2020, we really see the utilization really coming back to a pretty normal level, especially on a MedSupp type business. where we did see some benefits from lower utilization in 2020. We've really seen the trends toward the end of the year to get back to pretty normal utilization, and right now we're anticipating that same type of utilization in 2021. We're really not, on the health side, expecting really any substantial benefits or costs, if you will, associated with that. Did that answer the question?

Yeah, no, it did, thank you. Maybe related to that, can you talk about maybe telemedicine, do you feel that could long-term offer some claims savings for the health business?

I'm not sure I understood the question.

If telemedicine becomes a more permanent part of People using Medicare supplemental products, their claims utilization rates could maybe secularly decline possibly?

Yeah, potentially. I don't know. I do not think that we've built into that into any type of our guidance, but it does seem plausible that that could potentially have some cost savings in the long term.

Thank you for your answers.

And we'll now take our next question from Jimmy Bullock with JP Morgan.

Hi, good morning. So first I just had a question on your sales and you've obviously seen very good growth across all of your channels. Do you think there's some adverse selection going on as well and what are some of the things that you're doing to potentially prevent that? And if you have any statistics on claims that you might have seen on policies that you've written since the onset of the pandemic.

Jimmy, I'll touch on kind of the last part of that, especially, you know, I mean, we do continue to really monitor, you know, the sales, especially on the direct-to-consumer side, you know, looking at, you know, are we seeing changes in the average age of new applications and the amounts that are being requested and, you know, are they coming from, you know, higher risk, you know, geographies and looking at those and are we seeing changes in those type of demographics. And we're not, we are not seeing any significant, really, changes in those over the course of the year. You know, so we do, and of course we've limited, you know, some of our exposure, especially to the higher age, you know, segments of the population. You know, we've taken steps through the marketing and underwriting efforts to try to protect ourselves there. But with, and with respect to, you know, the claims that we've paid so far, we've paid 28 claims through the, you know, in 2020 on policies that were issued after 3-1 with a total face amount of about $178,000. You know, and considering that we issued about, you know, close to 2 million policies during the year That's a pretty small number. Now, we had about 3,800, a little less than 3,800 claims in total in the year that we've actually paid. Of course, there may be some of those that are in the process that are still getting, that are in the process. But we're seeing about 85% of our claims are above age 60 and above, so we're still really seeing it in those high risk. It's consistent with what we're seeing, consistent to where one would think, focused in those highest levels. And then, you know, almost 70% of our claims are from policies being issued in 2010 or before, in 97 or before 2019.

So we're seeing a pretty good distribution from over the... Jimmy, on the sales side, the company is monitoring the increased sales levels to be sure anti-selection is not occurring. We haven't experienced any significant shift in product mix, applicant age, or location of the new sales. If you look at direct-to-consumer, it's interesting that the sales increases across all channels. However, the juvenile sales have actually increased at a higher rate than adult life insurance. That gives us some further confidence there because the highest incidence of serious illness and mortality has been at the older ages.

And then do you have any better insight into sort of the impact of changes in accounting for long-duration contracts going into effect in a couple of years?

Yeah, I really don't have anything new from what we talked about on the last call. We do continue to work through that. It'll be something I think over maybe the latter part of this year that we'll have a little bit more information to really share on that.

Okay. And just lastly, if you talk about your agent recruiting and retention, it's obviously benefited, I think, from a softer labor market in the services area. Um, if, uh, assuming COVID vaccines are successful and we sort of get to normal later this year and everything opens up, do you think, um, you could suffer in terms of retention as some of these guys have left other industries, um, and come to your, uh, come, uh, become sales agents or leave, or what are your views on your retention? If we sort of get to normalcy agent retention.

The COVID vaccine could affect both recruiting and retention. I'd point out that in terms of low unemployment, we haven't been able to recruit successfully. We really focus on the underemployed, not just the unemployed. You're correct. Low unemployment does have a greater effect on retention than on recruiting because there's greater work opportunities. We think the ability to recruit both virtually and in person and to sell virtually and in person will enhance our ability to grow the agencies. And I think retention will be at historical levels as we go forward.

Okay, thanks.

And we'll take our next question from Tom Gallagher with Evercore.

Good morning. Question on direct-to-consumer. You said, I think I got this right, excluding COVID losses, the margin was 16% in the quarter. that's a bit lower than it's been trending on a normalized basis. I guess full year last year was 18%. 4Q last year was 19%. Are you expecting lower margins to persist in that business into 2021?

Yeah, Tom, we did see in the fourth quarter a little pickup in some of the non-COVID claims. You know, really, especially in the you know, some of the areas that we've seen in the press, you know, homicides and deaths due to drug overdose, whether that be, you know, drug or alcohol-related type accidents, you know, which some have kind of attributed, if you will, to, you know, some of those indirect, you know, COVID-related, you know, deaths and trends. And in fact, they're up over about 24%, you know, those types of claims over the fourth quarter of 2019. And that was about, you know, 2% of the premiums in the fourth quarter. Now we do anticipate those staying a little bit elevated levels into 2021. So overall, you know, we're expecting, you know, margins for full year of 2021 to be in that 12 to 16% range. You know, probably three points of that is, you know, due to COVID. And you probably got another one or 2% that are just due to, you know, what we think are some of these higher other causes of death that are kind of the byproduct of the COVID environment that we think will subside over time and won't stick with us for the long term. But right now we are including some of that into 21.

But Tom, excluding the impact of COVID next year, the direct COVID claims, it's still going to be somewhere, it'll be in the 16 to 17% range.

Gotcha. So a little bit lower. And just given that expectation, any consideration or reason to reprice, or are you still very comfortable with that level of margin from an overall return standpoint?

Well, we've always looked at possibility of repricing, but I think when we And looking out, we're only giving guidance through 2021, but I think our feeling is that if we get past the amount of COVID claims, if we get past 2021, we think we'll get closer back to that 18% range that we were prior to 2020. Okay.

And then just on the excess cash you expect, For 2021, I guess it's about $30 million to $40 million lower versus your 2020 figure. Is that all just due to the expectation of credit drift and credit losses, or is there anything else affecting that?

Well, yeah, that's predominantly the credit losses that we actually had in 2020, which impacted statutory income in 2020, and therefore the dividends that are available to the holding company in 2021. And then there's probably another $10 million or so we're kind of seeing just looking at some of the other cash flows that the holding company has that looks like they may be a little bit lower in 2021 versus 20.

Okay. Thank you.

And it appears there are no further telephone questions. I'd like to turn the conference back over to our presenters for any additional or closing remarks.

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

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.