Prioritizing Share Buybacks over M&A
Q: Why did you walk away from the potential acquisition?
A: Management decided to walk away primarily because the current low stock price made share repurchases a better use of funds for shareholders, offering the highest and best risk-adjusted returns. They believe buying back shares at prices below book value provides a very good return for shareholders. - , -

Impact of Investigations on Business
Q: Is the ongoing WilmerHale investigation affecting your business?
A: Management stated they are not seeing any impact on their business from the investigation. Agent recruiting pipelines remain strong with no significant changes, and customer feedback has been minimal, with call volumes on the topic decreasing to zero recently. - , - , -

Guidance Update and Excess Cash Flow
Q: What drove the increase in 2024 excess cash flow guidance?
A: The increase in excess cash flow guidance is due to higher statutory earnings and favorable mortality results in the third and fourth quarters of 2023, leading to higher subsidiary dividends to the parent company. -

Consideration of In-Force Reinsurance Transactions
Q: Would you consider in-force reinsurance to fund share buybacks?
A: Management is open to exploring various options, including in-force reinsurance transactions, to monetize existing in-force value and generate additional buyback capacity, taking advantage of the depressed stock valuation. -

Assumption Changes and Remeasurement Gains
Q: Are remeasurement gains from assumption changes included in guidance?
A: Remeasurement gains or losses from assumption changes are reflected in the guidance range. Management continues to monitor mortality trends and will adjust assumptions accordingly in the third quarter, but it's too early to know the exact impact. - , -

American Income Life Lapse Rates
Q: What's driving higher lapse rates at American Income Life?
A: The uptick in lapse rates is attributed to normal fluctuations and seasonality, with the first quarter typically higher. Additionally, a change in the mix of business, with more new policies in their early durations that have slightly higher lapse rates, is impacting overall lapse rates. -

Composition of Sales Channels
Q: How significant is the Arias Organization to your sales?
A: The Arias Organization accounts for about 6% of American Income Life's new sales, which is about 3% of overall company sales. While it's one of the larger agency groups, the company has over 100 agency owners, and the top 20% produce around 70–80% of new sales. - , -

Investment in Higher-Yield Assets
Q: What are your plans for investing in higher-yield assets?
A: The company anticipates investing about $400–$500 million in non-fixed maturity investments during the year, including transitional commercial mortgage loans and limited partnership strategies in areas like infrastructure and private credit, targeting expected returns of 8% to 10%. -

Blackout Periods and Buyback Timing
Q: When does the buyback blackout period end?
A: The blackout period ends tomorrow, and the company will be open to buying back shares again. They had previously been in a blackout due to considering a material acquisition, which they are no longer pursuing. - , -

Impact of Postage Costs on Direct Response Sales
Q: How are higher postage costs affecting Direct Response sales?
A: Higher postage costs have impacted Direct Response sales, but the effect is diminishing over time as more sales shift to digital channels. Management expects sales growth in this area to be slightly down for the year but notes the importance of Direct-to-Consumer activities in supporting agency sales. -

Mortality Trends Relative to Pre-COVID Levels
Q: How do current mortality trends compare to pre-COVID levels?
A: Mortality experience is still running a little higher than pre-COVID levels, particularly due to elevated drug-related deaths and heart disease. However, there have been significant improvements in motor vehicle accidents and homicides. -

Stability of In-Force Premiums
Q: Have you observed any trends in premiums from policies in-force over one year?
A: The percentage of premiums from policies in-force over one year has been stable, demonstrating consistent growth. The in-force business has grown over 5% in each of the past 3, 5, and 10 years, showing the stable nature of the business and consistent cash flow. -

Capital Strain from New Business
Q: What's the capital strain on free cash flow from new business?
A: For the agency channels, the statutory strain is about 40–50% of any increase in sales. If there were no new sales, about half of that amount would increase excess cash flows, leading to higher statutory earnings in the current year and excess cash flows to the parent in the following year. - , -

Mix of First-Year vs. Renewal Commissions
Q: How significant are renewal commissions compared to first-year commissions?
A: The majority of commissions are paid in the first year, with renewal commissions being less than 10% of renewal premiums. -