Welcome, everybody who's joined this conference. This is the annual U.S. Bank of America Insurance Conference. I'm looking at the attendee list. There's a lot of you on the line, and I'm really pleased that you joined me. This is my first conference, as you know. COVID has sort of interrupted things a little bit, so we're doing this virtual conference. I joined Bank of America in May. Yesterday was my first day in the office here at One Bryant Park. Hope to resolve that as soon as possible. I hope that everybody is healthy, your families are well, and I know these are unusual times, but we're going to get through them. We have a really good conference. Insurance isn't everything, but it's what we're here for today. I want to thank you all for joining us. If you are logging on through Bank of America, you'll notice that there's a possibility of asking me questions and asking the companies questions. We can't go live with a camera to you and get you, which I'd really like to see you. I know most everybody who's logged on I know, and I haven't seen you all in a long time, and hope to resolve that. In the interim, you can type questions to me, and you can type questions to me for the upcoming Globe Life meeting, which is going to happen in a minute or two. You can go ahead later in the program and type a question in, and it will come to me. I will see it. You can email me a question, and I'll try and incorporate it. It's a little hard to manage email and the web situation for the conference and whatnot at the same time, but I would really love to ask your questions. This is your conference. I'm going to be talking for eight straight hours, and if you give me a couple of minutes to not have to think for myself and think for you, I would find that really appreciative. Anyways, it's a beautiful day in N.Y. The sun could be out, but the snow's melting. It's a little above freezing here, and we have a full day packed. I can't stress enough how pleased I am to join us today. We'll get started. The first conference of the day is going to be Globe Life. I'll just say one in advance, we have AXIS after. If you're preparing ideas, know AXIS is coming on after Globe Life. You can think about what you want to ask AXIS. Globe Life's going to be now. Please send me questions. We're really excited. We got Larry, Gary, and Frank, the Co-CEOs and the CFO. I'm really pleased. Globe Life is a newer name for me. Hopefully that you've known for a long time. Obviously, the track record's been phenomenal. Let's start with Globe Life, and please send me your questions. I think that we're tuning in, being joined by the team, and I see them on my screen, so I assume you see them as well. Welcome, everybody. How are you doing today? We're doing fine. How are you? Doing great. We're doing great. Good. Okay, we got the audio, we got the visual. Everything's going perfectly. Thank you for joining us. You have the privileged position of being the first presenters at the conference at my first Bank of America Insurance Conference, certainly my first virtual conference. I'm really sorry that we can't be in a room together talking. We're going to work on that in 2022. Obviously, unusual year. Can you just talk a little bit about the hardworking people at Globe Life and how they're doing, what's happening in terms of adaptation, how hard they're working? Obviously, what makes a company is its employees, how your employees are managing this very unusual time. Well, I think on one thing that as we look our employees, it's been a big change. We've obviously moved from basically everybody in our home office being in the office every day to the vast majority of our people working from home like everybody else, and will continue to work from home. Luckily, we've really had great success with that. We've been very pleased that the employees have been able to continue the normal operations and being remote and really have minimal impact on productivity. I think at this point, the employees are first and foremost in trying to keep everybody safe during this time, and we're really pleased that we've been able to, in our minds, really make that transition and be able to work from home and keep everybody safe. I'll add to that likewise, our 13,000 agents have done very well. They've transitioned from an in-person sale in March to a virtual sale. Once they made that transition, we saw sales pick up in the second quarter, had strong sales in the third and fourth quarter, and we've had good recruiting this year. I have to compliment the field that they quickly adapted to the COVID environment and have been successful in that environment. Terrific. They'll continue to do so. Obviously, that's a testament to the company's strength. For those who are not so familiar with Globe Life, can you just give a little tutorial and background about where Globe Life fits in the whole life insurance ecosystem? What is the product? Who it reaches? What sort of walls or moats you have, and why you're successful? Joshua, I'll take that. Our business model is quite different from the other companies probably that you cover. For years, we have operated in the middle income market, selling basic protection life products and supplemental health products. We sell our products through controlled distribution, we control the cost, and we generate a significant underwriting income. That, along with our investment income each year, generates cash that we need to fund our current operations. At the same time, it provides excess capital that we return to the shareholders. Just to kind of go into each one a little bit. We like the middle income market because it is a very large and underserved market that has great growth potential and little competition. As far as the market, industry data shows that over half the people in the market either don't have life insurance or are underinsured. Excuse me. Most other companies operate in the higher income markets where there's many companies operating, there's much competition for agents and customers. We just don't face that in our market. Also, our protection life products that we sell, they have advantages. One, those are the products that are needed in that middle income market. Two, they have an added advantage in that they are simple products. They're easy to understand by both our agents and customers. That aids in the sales process. Then different from other companies is that those protection life products, both Term Life and Whole Life, have a liability that's fixed at the issue date. It doesn't change over time. That's in contrast to the companies in the higher end markets that are selling products where the ultimate liability is determined either by market interest rates or the credit markets. I also mentioned that we control our distribution. We have exclusive agencies as well as our large direct to consumer operation. By controlling our distribution, we're able to control the cost, which also helps in facing any competition in the market. By doing so, we are able, as I mentioned earlier, to generate an underwriting profit. Over the years, selling these long term protection products, we have built up a large in-force block of business that every year generates investment income as well as the underwriting income that we use to fund our operations. As I mentioned earlier, we do generate a fair amount of excess capital each year. We've consistently, over the years, returned that excess capital to our shareholders, generally through dividends and share repurchases. It's a model that we've followed for many years. Larry and I have been with the company over 35 years. The model is pretty much the same as it's been. The difference is we do have to change our methods of how to execute the model. It is a model that is strong and has a great future. Generating leads and whatnot, heavily due to mailings and mailers. To what extent are mailings still a viable way of generating business? Obviously, technology is disintermediating a lot, and this year, clearly with COVID, we're learning a lot more. Given the markets that you try and tap into, how do the old ways stack up in terms of distribution and have some consistency in generating leads and sales today? If you look at our distribution, about 75% of new life sales come from our agency. The other 25% is our direct to consumer. If you look at direct to consumer, the Internet is the fastest growing channel in our direct to consumer business. However, the direct mail, insert media, inbound phone calls are also very important. That gives us a variety of ways to reach customers. In 2020, we had sales growth across each of those channels. I think direct mail will continue to be important. Direct mail sends out hundreds of millions of mail pieces every year. Besides those direct sales, that volume has a positive advertising effect for the other direct to consumer channels and our agencies. I think most importantly, direct mail generates sales as a follow-up to our Internet sales. Direct mail also supports our agencies by providing sales leads. That becomes a more and more important part of direct mail as we go forward. I think direct mail will continue to grow as we use analytics and attribution. We'll make it more efficient, and we can reach more customers with our direct mail operation. To what extent, I guess there's two ways. One is that as direct becomes a bigger part of the business, it seems like, and maybe I'm wrong, that the barrier to entry, the moat, comes down, which I guess is one part. We'll get to the Internet a little bit and how that plays in. Two, I guess the other angle of the question I'm getting at is, to what extent, given how extractive your returns and your results have been, why haven't others also tried to follow suit and copy you? I know it's low face insurance sales, but at a certain amount of success, you have to realize somebody's doing something right. I guess between, one is direct feels to me like a low barrier to entry opportunity, but two, I still feel that you guys are kind of out there and people aren't trying to compete directly against you. I think there's a certain tension there. I think you're really asking about what's the competition we see, and I guess along with that is competition limited by the barriers to entry? Let's talk about direct to consumer first. It really operates at a different segment of the market than the other direct mail competitors. We offer a lower face amount. In our inquiries, there's two types of internet inquiries. One is where people research on the internet, the other is where they go out to different sites, and they look for an ability to buy insurance on the internet. At those sites, we really have a lower face and lower premium amount that we offer than a lot of the competitors. The other advantage we have in the direct to consumer operation is this, is that we have 50 years' worth of data, so we know when to mail, who to mail, how to segment that market. We continue to build on that ability. The other thing is the low-cost environment that we create for our direct to consumer operation, that we take the raw paper and we convert that into a finished product and have it in mail order delivery. It's just delivered to the post office. Our volume at several hundred million pieces of direct mail, so large we have postal inspectors on site. With the low cost, we can offer those low face, low premium policies more competitively than our competitors. On the agency side, as Gary mentioned, we're in an underserved market. Typically, we are not going head to head with competitors. We're the only agent typically that's calling on that household. There's not an agent before us or an agent that follows behind us. We also operate in a different part of the market. As Gary stated earlier, we are in the lower premium, lower face, basic protection life insurance. To date, that just hasn't been a competitive market. I think the other thing that drives our niche is that at American Income, we're the only union-based company I'm aware of that has a unionized agency force and unionized home office. We have a 60-year relationship with labor, and that's important to us. We work at that relationship. It helps us as we receive endorsements from the various locals. That leads to a lot of referrals for the business at American Income. It's somewhat of a protected niche. Again, at Liberty National, in our worksite market, we're the small employer. We're not really trying to write coverage on employers that have 1,000 or 10,000 employees. Our sweet spot for that market are typically an employer has 10 to 50 employees. That's been a growing market for us. Again, it's competitive, but we don't see agents ahead of us or agents behind us in that market. No. I'm. Well, I was going to say, I would add on the agency side, the type of products we sell, as we mentioned before, they're low face amounts, but that means low premiums as well. It is very elusive, and it's important if you're in that market to be able to control not only the administrative expenses but the acquisition cost, because there's just not that much revenue to partly offset. If you go back in time, most companies were in the middle income market, and they were operating through exclusive agencies. I think Met and Pru were the two biggest. Over time, those companies in the '80s and '90s started leaving the business because the expenses of running those exclusive agencies were growing at a faster pace than the premium revenue, and so they were losing margin. That's why they moved up to the higher income market. Most companies sell in that market, sell through independent agents. I don't think they could track independent agents back into the middle income market. Again, going back to the low premium revenue, there would be low commissions at the point of sale. It's a big market, and it's got to be a market that's enticing to people. I think many companies would have difficulty making a transition into the middle income market through agency sales. Joshua, the other thing I should mention is another barrier to entry is having to create an agency. Now we have agency owners, all three agencies that started out with the agents in each respective agency. Now we don't go out and hire experienced agents. We take neophytes, we train them, as they become new agents, they move into a management track. After four or five years, they can become agency owners. It would take a tremendous investment and a fair amount of time to create that body of knowledge that we have with all of our agency owners, our middle managers, and our agents. Secondly, it's a variable cost model. As Gary said, it's a low expense, but those expenses in training and recruiting the agents are primarily borne by those agency owners. For a company to, I guess, find the talent, develop the talent, make that investment, I think would be a long process. To date, we haven't seen any agencies that have come in in our end of the market to try and compete with us. Well, I have a lot more questions that I want to know the answer to, but we have about 70 people online, and questions are coming through. A question just came through that is right along this topic. Someone asks, can you compare your distribution strategy to that of Primerica? Which is better for targeting lower middle income customers? I think Primerica is a little different agency than the Globe Life agencies. First of all, they sell some other investment type products. They do some estate planning type work. I think their agents tend to be more of a part-time agent, although they have full-time agents. It's a great company, but we don't run into them in the market as a competition. The market's so large that we're not calling on the same customers, and we don't hire Primerica agents, so I'm not aware that any of our agents have left for Primerica. It's a great model. It's just a very different model from Globe Life. Larry, I do think that they target just a little bit higher income, than what we tend to find in our customer base. That's right, because they're offering some investment products and our products on both the life and health side are really basic protection, low premium products. Given COVID going on, the resiliency of your agency force, are the things that you learned about distribution during COVID, that if and when things get back to normal, the business model is going to continue to use those skills that you developed in the past year? Actually, you realize that there's extra opportunity in a certain type of customer where you weren't reaching or a certain type of sale that you weren't doing before, that now both things are back to normal and you'll have an extra virtual sales. I don't know what it is, but maybe are there any learnings that have really enhanced the future for Globe? Well, Josh, I was smiling because I don't know what back to normal is. I don't think there's a back to normal. I think there'll be a new normal. One of the things we really learned with the advent of COVID is we could sell virtually in addition to in-person. We looked at virtual sales early to COVID, encouraged us to make the investment and the change. In the agencies, all three agencies have said we want to continue virtual sales and virtual recruiting. I think it's really opened another distribution for the Globe Life companies. I think in-person sales will still be important, but part of the change with virtual is the consumer itself. I think consumers now are much more open to virtual presentations than they were a year ago or two years ago. As we go forward, I think you'll see that virtual sales will be a large percentage of the sales within the Globe Life agencies. There's some advantage of those virtual sales. It really expands the efficiency and the territory for the agent. Now the agent can work leads. They'd be in Houston this morning and Dallas this afternoon and Oklahoma City tomorrow, and there's not that time loss in travel. The agents like the greater efficiency. I think the other good thing about the virtual process is the virtual recruiting. Before, most of the group interviews or individual interviews took place in the agency owner's office. What we found is that virtual recruiting is very effective. Again, it enlarges the territory or the region in which an agency can recruit, because they're not limited by someone having to drive to an office. They can explore the opportunity virtually. The training virtually is also advantageous because with field training, a new agent can accompany an experienced agent as a field training. With a virtual presentation, you have multiple agents watching that presentation and learning from the veteran agent of how to present and how to explain the coverage to a potential customer. We're excited about virtual training and recruiting, and we think it offers a great opportunity for the Globe Life companies to grow as we go forward. Well, I have a question here from an investor about working remote. Do you expect any change in your office footprint? If so, what effect on operating leverage do you think that will have? Examples, marginal improvement, meaningful improvement. As answers, marginal, meaningful, significant, or no effect are the four choices that they've given. It's like a poll. You can pick. How much improvement comes from that efficiency rationalization, I guess? Frank, you want to answer that or? Sure. Yeah, no, I think, as we're really planning for people to come back into our office, it really depends on the particular department, there's not going to be one rule that applies to the organization as a whole. There are certain parts of our organization that work very well remotely, and we're actually finding a little bit better productivity out of those areas. I think we'll continue to use those folks remotely on an ongoing basis. Also gives us a little bit more geographical footprint as far as that ability to hire folks, especially with respect to some of our customer service areas. I think some of the other areas, it's probably a little bit more of a blend type model that we'll probably come back to and give people a bit more flexibility. I think several of our departments, it's one of those things, hey, we're working just fine. We can get the work done, the collaboration isn't quite there. To really move forward and to put the steps in place to move forward, we need to have some of that together time and to be able to meet together and to really work. Individuals here in this organization work not just in their own little silos, it's across the organization. I think we'll end up seeing some type of a hybrid model as we move forward. I guess there's a lot of questions I have and still some more in the audience on COVID-19. Just a quick question. What's the relationship between the pandemic and maybe persistency due to hardship and whatnot during that time. Have we seen any change? Sometimes we hear about people who've saved money during the pandemic due to less leisure usage. Is there any impact on your persistency from the pandemic? Joshua, we've seen an improvement in our persistency, it's been across all our distribution units, it's been also our first-year premiums, renewal year premiums. We've seen significant improvements, positive improvements. It's interesting because as I mentioned earlier, I've been with this company for a long time. Over the years, we really haven't seen much of an impact of macroeconomic conditions on persistency. It's good economy, bad economy, the persistency has stayed consistent over the years. This pandemic is different. Like I said, it's had a significant positive impact on persistency. What we draw from that is we think that every family's been affected by this pandemic in one way or the other. I think it's on people's minds, and I think it's reminded people of the importance of maintaining their life insurance coverage. One of the questions that we have. Go ahead, Frank. I was just going to say, one of the questions we've been getting is, do we think that persistency will stay past the COVID scare, if you will. In our guidance, we have assumed that we'll kind of get back to more normal levels by the end of 2021. We really do think there's a real good possibility that we'll see some longer term benefits, that we'll have some positive impacts going beyond the end of this year. Then, as we think about the sales that we're putting on the books today, we really don't see any reason why they'll be any less persistent. Some will say, well, it's just because of the fear of the pandemic, and once we get all the vaccines, you'll have higher than normal lapses. We don't really see that. The pandemic just increased the awareness for the need, the need's going to still be there even after this pandemic is over. We just really don't see why this book of business, if you will, is going to be any less persistent long term than what we have in our in-force. Is there any increased awareness of one's own mortality coming through in new sales? That they hear about COVID, and you're like, "I could die. I better get some life insurance." Is this happening? Well, we're definitely seeing an increased awareness of it. We're really seeing that on our direct-to-consumer channel and a lot more inquiries and a lot more interest. We're also seeing it in our agencies, too. The nice thing that we've seen with respect to our direct-to-consumer division is that, a lot of those incremental sales, we had the digital tools already in place to handle that increased volume. We were able to do that without a lot of incremental marketing costs. Those cost savings that we're having there are allowing us to pay for, if you will, any higher mortality that maybe we're going to get from some of these higher sales. We're seeing it in the agencies, too, and just increased interest and people reaching out to actually seek out life insurance. I have two questions from the audience on mortality. They're similar. I'll read them both. They're related. The first one is, did COVID cause excess mortality, or pulling forward deaths from the next several years, or both? If indeed there were some pull forwards of deaths, should we expect margins to actually return to levels better than pre-COVID levels, say like 2019 as an example? I guess the second one says, I guess pull forward of deaths that would have happened anyways, are your margins going to get better in the future than they were in the past because people who were going to die just died a few years earlier? Well, I think there's definitely some truth to that in that, especially where the deaths have largely been in the older population, so you probably have less incidents of lapses with policies that have been in force for a number of years. 97% of our COVID claims have been on policies that have been in force for 2 to 3 years or greater, and about two-thirds of them have been for more than 10 years. Those are policies that probably were going to have stayed on the books, and so we would have arguably been paying those death claims at some point in time. Definitely a train of thought that we just pulled those forward. It's difficult to see. We don't have the data yet, of course, to really see what impact that might have on those margins, at least in the near term. Logically, you'd see some benefit going forward. Right now, we do anticipate once we get past this abnormal level of claims that we're seeing this year in 2020 and what we expect here in 2021, that we'll be able to get back to what we would think of our normal underwriting margins and typical mortality. Normal, not above average, I guess, is using normal. Yeah. Yeah. At this point in time, it's difficult to see whether we really have any meaningful impact, material impact on those margins going forward. Logically, it's said that you should have some, but right now it's just too early to tell what we'll see. Similarly, just a different angle on the same question, how were you affected by above normal mortality, which we've talked about, and what do you think will be the long-term impact of the current crisis, including commentary on pricing and volume? Yeah, when we think about the long-term impact is that we're hopeful that clearly that the increased awareness, that sticks around with us for a while because this is a business that we believe that life insurance has to be sold. As there becomes an increased awareness, it makes those sales arguably easier. As we kind of talked about the persistency, there's at least that potential for there to be some positive long-term impacts on the persistency. From a pricing perspective, it's always something we'll take into a look. We're not changing our pricing immediately just with respect to our new business just because we're having this period of higher claims from COVID. As we do look at our overall pricing, and we looked at it with respect to lower interest environment, we do have premium increases from time to time to protect our underwriting margins. As we'll take the higher expected mortality along with lower interest rates, we'll take all that into account as we think about future premium adjustments that might be necessary. One thing that I just want to bring up with respect to that is our premiums on our policies are less than $500 annually. Many are much less than that on many of our policies. If we're putting in a 5% increase, you're really only talking about maybe $2 to $3 additional premium per month that somebody has to pay. We have some price elasticity ability to do that in the markets that we serve. While we want to be careful not to be overcharging any of our customers, we do have that ability to adjust for that and put in some price increases on our new business. Have there been any changes in the mortality tables? Is there anything COVID's done to change the outlook for mortality, I guess? Can you take it any way you want. Not at this time. It's just too early. The mortality tables that we're using for our pricing haven't been changed. Eventually, the stats, if you will, and the experience from this event will work their way into the mortality table, but that'll be somewhere down the road. Okay. We have about five minutes left. I think one of the most important things to talk about is your agency force, and we haven't really talked about their life cycle a little bit. Can you explain to the audience the training that goes into a new prospective agent and the potential for them to be successful at Globe? How many people do you hire? How many actually turn out to be good producing agents, and how many can actually develop a revenue base that propels them to long-term success with the company? Sure. Let's talk about the training first. First of all, our products are really easy to understand. A new agent quickly is making sales presentations, and each agency is providing training in sales, recruiting, and leadership development in that first six months. When we talk about a new agent, there's really distinctions among the three agencies. We'll use American Income as an example. On average, about 10% of your agents remain in the 13th month. With that said, we also track our retention at three, six, and nine-month intervals because that leads to that retention. That retention is an average. In some agencies it'd be lower, it could be 7% or 8%. Some agencies it might be 15%-20%. The success of an agent really depends on their income level in the first year. If an agent has an income of $50,000-$60,000 in their first year, they're probably going to stay in that agency. In terms of the training, in that first three to six months, an agent's really just focused solely on sales presentations, trying to develop referrals using leads, and they're learning during that to be a professional salesperson. In that next period, which will be six to 12 months, an agent really makes a decision to either be a sales professional going forward, and many agents do that. Alternatively, they want to go on a management track. Moving into the management track, that's probably in that six to 12 months, they continue to sell personally, but they also start to recruit. They also get some skills in terms of time management and managing people. As they move forward, their income is a six-figure income because they have renewal commissions, new business commissions, and they have what's called an override commission on the agents that they've recruited and put in their hierarchy. On that next year, they will move forward to the next levels of management and the income increases significantly. If you're in the top level of a middle manager, it's not unusual to have an income of middle six figures. In four or five years, that agent, middle manager, is thinking about if they want to be an agency owner. Some don't because at that income level they're comfortable and they want to stay as a middle manager. Most middle managers in the fourth or fifth year think about an agency owner position. Once they achieve that, their income is really dependent upon their efforts and how they can grow the agency. A successful agency owner in that seven to 10-year period definitely would be middle six figures. It's not unusual, as they move towards that 10th year, a seven-figure income is achievable. It's not uncommon in American Income. The new agent really is having continual training. The training costs are borne by the agency owners for the most part. Our home office certainly gives data support and also uses best practices among the agencies to help the agent be successful. Joshua, does that kind of give a glimpse of what a new agent does? Yeah. The one question I just want to add is, in year one, how many new stream winners come into the system and at the end of year one, how many of them remain? In a year's time, I have to be careful because your recruits, about 50% of recruits or 40%-50% of recruits are going to get their agent license and then move into the agency owner. We don't count an agent as an agent in the system until they produce their first policy. It's a large number, and part of that is we recruit from all walks of life. There's not one type of educational level, one type of background. We want real diversity in our agency. It'd be a large number. We have currently 13,000 agents, we would recruit much greater than that number in terms of recruiting. Each year we would turn, if we lose 90% of those new agents in the first year, we added 2,000, you could see the number might be 20,000 new agents are recruited into the system. Of those that are there in the 13th month, it's about 10% of that figure. That answers it. Yep. Okay. Not all that's income related, Joshua. I mean, part of that is it takes a lot of time and energy, and it's demanding to be a first-year agent. A first-year agent works a lot of weekends and evenings, and we're hoping that with virtual sales, it takes some of that pressure off that weekend and evening commitment for someone to be away from their family. It's just people, if they've been through the training, they've been through the system, there's other work opportunities, and I think people are much better off once they've been through the system, as they learn all the skills they're needing to be an agent. One quick question. We're out of time, people want to know. I think the three of you have been at your current positions for a decade. I know, Larry and Gary, you each have 35 years at Globe. Do investors need to be concerned about a succession plan? Should they be comfortable with the succession? What should they know about you and your future? Given the success that you've lent the company, to what extent should they feel that their investment's in good hands? First of all, I think the success of the company is a lot broader than the CEO, and Gary and I aren't planning to retire immediately. Globe Life does have succession planning at every level of the company, and we know it's important to our future success. Every officer, every employee identifies candidates to succeed them, and they work with them to develop their abilities so they could replace that officer or that employee. Our board of directors is engaged in CEO succession as well as emergency succession, and that process has been in place since we first became CEOs. I feel when Gary and I retire in the future, it will be a seamless transition to the next CEO, and the company will continue to grow and do very well. Gary, anything you want to add? I think I would add that in the last five to six years, we really strengthened the succession planning program, and we've gone into probably lower levels than some other companies do. I'm confident, as Larry is, that at CEO level and also levels below, if we have people leave, that we've got people who can step in and take their place. We feel very confident about that. Well, I'm glad that we hear that from you. I really appreciate the time we spent together today. I'm sure there will be some investors who have questions. They can reach out directly, they can reach out through me. Thanks for lending your time. May your families be healthy and safe, and hopefully we do this again one year from now, but we do it all together. Good. Sounds great. Thanks, guys. Appreciate it. Be safe. Take care. Take care. Bye-bye.