Suneet Kamath: Okay. Thanks.
Operator: Thank you very much. We now have a follow-up question from Jimmy Bhullar calling from JPMorgan. Please go ahead
Jim Bhullar: Hey, so just wanted to follow up on a couple of things related to your guidance. Are you assuming the lower share price for buybacks in your updated guidance as well?
Tom Kalmbach: We are. Yes. The lower share price, if I think about the $0.20 increase to our guidance, a little less than half was related to investment income, and the remainder was really driven by share price changes.
Jim Bhullar: And then the remeasurement gains, it seems clear that that’s in your assumption as well. Any sort of big changes in your assumptions, the underlying assumptions as part of the annual actuarial review, are those in guidance as well or are they not?
Tom Kalmbach: They’re reflected in our range, Jimmy. So again, we’re making based upon what we know today and the trends, we’re trying to make our best estimate as far as where we think guidance will emerge.
Frank Svoboda: Yes, Jimmy, it’s still too early to know whether or not, of course, whether there would be any assumption change coming up in the third quarter. We’re obviously, as a range, we’re looking at various possibilities. I mean if we continue to have remeasurement gains and whether or not that could lead to an assumption change or not, or if we end up having some worse experience, which goes the other way, right? So all of that’s embedded in the overall range.
Jim Bhullar: And then if we look at CDC data, overall population deaths, they’re still running higher than pre-COVID, and some of that has to do with drug abuse and other things. They’re improving, but they haven’t gotten back to pre-COVID yet. Are you noticing the same in your book as well? Or is your book recently been running close to long-term pre-COVID type levels?
Tom Kalmbach: Yes. I’d say it’s still running a little bit higher, particularly for some causes and drug-related deaths are – continue to be elevated. Even we’ve seen some improvements off the peak for, say, heart disease, but it’s still not back to pre-pandemic levels. Where we are seeing some significant improvements in motor vehicles and homicides seem to have come down quite a bit.
Jim Bhullar: And then just lastly, on the deal that you were talking about, was this along – I’m assuming this is along the lines of deals that you’ve done in the past in terms of business mix and distribution. But in terms of size, was this a lot larger than what you’ve done in the past? Because I don’t remember you’re doing sort of a multibillion dollar type deal recently, but it seems like this could have been a lot bigger. But I’m not sure if you’re able to comment.
Frank Svoboda: Yes, Jimmy, you can’t really comment about any kind of specifics. I mean, obviously, it was material enough. It was – I would just say, a little bit bigger than some of them that we’ve done recently.
Jim Bhullar: Okay. And I’ll just ask one more. On direct response sales have been weak for a while, and part of that is just high inflation and higher postage costs. There is talk of postage costs going up further. I’m assuming that, if they do, then you’ll probably see continued weak sales or an incremental impact from that, right?
Matt Darden: Yes. It’s getting more muted over time as more of our sales come through the digital channel, but it does have an impact. And we do watch closely what the postage increases are planned to be and adjust accordingly. As I’ve mentioned, our guidance is probably slightly down for the year from a sales growth perspective. But also just keep in mind, it’s very important the activity the Direct to Consumer is doing to support all of our agency sales. That would not be reflected directly in the sales attributed to the Direct to Consumer channel.
Jim Bhullar: Yes. Okay. Thank you.
Operator: Thank you very much sir. We have another follow-up question, this time from Wilma Burdis of Raymond James. Please go ahead
Wilma Burdis: Hey guys. Thanks for taking the follow up. Just a quick one. I think Tom asked earlier about the DOJ investigation. From everything I kind of read, it seems like it could be related to the EEOC and the investigation to the sexual harassment claims. Is that – am way off mark there or?
Matt Darden: Yes. As we mentioned in our prepared remarks, is the subpoena sought documents related to sales practices by certain licensed insurance agents in the areas organization who were contracted to sell American Income policies.
Wilma Burdis: Okay. Got you. And then the other one, you guys talked a little bit about the percentage of premiums from policies that have been in force for more than one year. Have you noticed any trends in that figure over time or has it been pretty stable?
Frank Svoboda: Really been pretty stable. I mean you look at the data, and I would point your attention to the data that we did put on the supplemental financial information on the website. And so we’ve got 10 years’ worth of data out there for both Globe Life’s and then – as a whole, and then American Income, and it’s a 10 years breakdown between renewal and first year premium on those as well. So and I just think that really shows the stable nature of our business. As I continue to go through and look and I think about our business, if you go back three, five, 10 years and look at our in-force business, it has grown over 5% in each of those periods. And I think if you look at 15 years – this is on our life business. And if you go back 15 years, it’s probably just a little bit under 5%.
And our earned premiums are growing basically at that same rate as well. And you kind of look at that schedule and you look at the renewal premium versus the first year premium and it’s pretty consistent. So it is – it’s just really showing a very stable, consistent growth. And that, as Matt mentioned in his comments, turns into stable, consistent growth of cash premium collections, of which, at least at American Income, over 95% of those are collected on a monthly basis. And it’s a little bit less than that on a total Globe Life basis. But again, that’s consistent cash flow that we’ve talked about over the years, many years on, is the strong, stable support for our operations and our statutory operations where we generate over $1 billion of operating cash flows year in and year out.
So the trends on those are pretty consistent over time.
Wilma Burdis: Thank you.
Operator: Thank you very much. We’ll now go back to Tom Gallagher of Evercore ISI. Please go ahead
Tom Gallagher: Just a follow-up on something you mentioned on the investment new money yield side, when you said the 8% to 10% expected returns on some alternative-type strategies. Can you just clarify how much money were you expecting to invest in those? And what types of asset classes are you looking to expand into again?
Frank Svoboda: Yes. That’s about $400 million to $500 million is what we would anticipate in spending in non-fixed maturities investments during the year. And what that is, is really it’s a three year commercial – transitional commercial mortgage loans. And then there’s LP strategies, about half of which are in commercial – some of those are in commercial mortgage loans as well as other – that have more – they have underlying debt-like characteristics, whether it be infrastructure or other types of debt strategies within them. So it’s probably not quite, relatively close to half and half with respect to those.
Tom Gallagher: Got it. So infrastructure and transitional real estate are the main two categories?
Frank Svoboda: Yes.
Tom Gallagher: And just out of curiosity, I presume there’s a higher C1 charges. And if you’re looking to [indiscernible] capital and improve free cash flow, isn’t that going to be somewhat of a drag, obviously, not for this year’s free cash flow, but for next year?
Frank Svoboda: Yes. So on the commercial mortgage loans, that’s not the case. Now if they are in the LP structure, you do end up with a little higher RBC. Obviously, we’re taking that into account as we look – we talk a lot about having a risk-adjusted and capital-adjusted returns. So when we look at these investments that are getting put on schedule BA and having a little RBC charge, we make – we look at that and make sure that we’re getting that as an appropriate lift, if you will, to pay for that additional capital.
Tom Gallagher: Got it. Okay. Thanks.
Frank Svoboda: And I will just clarify, there’s some piece of that. Infrastructure is one of them, there’s also just straight credit LPs, we’re looking just at some private credit strategies. And keep in mind, all of these are managed by outside, and we’re partnering with JPMorgan, Goldman, PIMCO, Ares, MetLife. So we have had several different partners that are helping to – we’re investing these through.
Tom Gallagher: Yes. Thanks.
Operator: Thanks very much Mr. Gallagher. We have another follow-up question, this time from Wes Carmichael of Autonomous Research. Please go ahead
Wes Carmichael: Yes. Thanks for taking my follow up. Just one on American Income. I think you said the midpoint of your guidance on agent count and sales growth, is low to mid-single digits. And I think that’s a slowdown from what you’re expecting last quarter. And I guess I’m just curious, is that slowdown you’re anticipating from negative press or litigation? And are you actually seeing that show up yet?
Matt Darden: Like I mentioned earlier, we’re really not seeing it in our recruiting pipeline, which I think is where it’d show up first. So we just revised down slightly to low single-digit growth on the agent count side and mid-single-digit growth on the sales side. And just again, it’s too early to tell, but we’re really not hearing much from the field related to any sort of disruption or concerns. So just trying to be cognizant of what’s out there and it’s early days.
Wes Carmichael: Thank you.
Operator: Thank you, sir. Ladies and gentlemen, that will conclude today’s question-answer session. I turn the call back over to Stephen Mota for any additional or closing remarks. Thank you.
Stephen Mota: All right. Thank you for joining us this morning, these are our comments, and we will talk to you again next quarter.
Operator: Ladies and gentlemen, that concludes today’s call. We thank you for your attendance. You may now disconnect. Have a good day, and goodbye.
