Globe Life (GL) 25 Oct 182018 Q3 Earnings call transcript

Good day, and welcome to the Torchmark Corporation Third Quarter 2018 Earnings Release Conference Call. Today’s conference is being recorded.

For opening remarks and introductions, I would now like to turn the conference over to Mike Majors, VP, Investor Relations. Sir, please go ahead.

Thank you. everyone. morning, Good

today Co-Chief call Officer; Coleman Larry and Brian Joining Officers; are Frank our Counsel. Executive our Financial Svoboda, Hutchison, Mitchell, the General Gary our and Chief

your of XX-Q with questions are Some on for purposes our file refer guidance the Accordingly, general or any XXXX comments answers XX-K provided may forward-looking and statements our contain that please to only. SEC. to subsequent Forms

for the earnings a may also contain measures. release Some and and our to will website to of of measures. comments our Coleman. reconciliations discussion Please non-GAAP terms call these I see Gary GAAP now over turn

per you, Mike, Net operating a for net $X.XX of quarter, million a year the Thank third income or a million increase $XXX share quarter share, good XX% $X.XX and ago. per per share In from $XXX or year share the was per to $X.XX $XXX everyone. ago. income compared was morning or million

growth estimate was X.X%, Excluding the return XX, as September impact value the reported of GAAP On on of been we equity basis, and tax that XX%. a approximately share would $XX.XX. was per reform, book have

American gains fixed was and XX% equity $XXX value of growth return on XX.X%, at operations, life grew our and underwriting to increased margins per unrealized share life In underwriting to the X% in losses margin The and book from XX% $XX.XX. to insurance maturities, revenue exceeded Excluding premium ago. higher and million growth year margin was up Direct $XXX a premium due Response. million Income

life underwriting income For grow the X%. to expect year around we

up underwriting to Heritage margins exceeded and million. $XXX in premium growth health Income. revenue Family premium side, X% On margin the health to X% at American Growth million underwriting $XX was to and due higher margin grew

to expectations. up in-line around the For year grow we Administrative from were $XX income for X% and with underwriting the X%. our quarter, million expenses at a expect health year, ago

X.X% to X.X% of expenses percentage administrative premium, a As year were compared a ago.

compared year, in and full I be for over now expenses on operations. around will the to Larry marketing the X.X% expect we administrative call to up premium XXXX. to the comments his X% For of X.X% around turn

Gary. you, underwriting up agent producing $XX XX% million, sales average million were was to life $XXX million. At premiums Thank American down life X%. were margin Net X% to and up life Income, $XX count The was the up a at year was X% from The down the quarter. the for third the second third quarter X,XXX. ago of X% but from producing quarter agent X,XXX count end

growth great income's we challenges. While some we're American optimistic do have still potential, about

new First because this doesn't long-term this we opened have It managers middle to owners sustainable Well, new leave agency become in existing offices. offices have XX top in offices near-term year. is it the news production as growth. great supports

a and career at that historically, ruling fees low. new resulted This discussion Supreme non-union economic opportunities. in of not regarding conditions abundance potential members. to due In on income a have the reports recently we public other the termination a of is currently at agent American have is agent have rates in uptick to growth addition, our unemployment impact little XX There year be one to prohibits There Court on do challenge. is the been however of bargaining collective unions impact assessing consider issue that an

income. will call, a have As this we do believe last impact said on the not American significant we at

to American incomes a expect reduction as lead X% about production ruling. of the of in only a overall We see result

individual These individual to our an In addition policies from policyholders. to force directly we do collect it The tied business. not not in union impact membership. policies, persistency were premium the the expect of to

business great weighted leads. are towards leads private of our more the As leads we unions. non-union new have union are Furthermore, majority previously, discussed our

into penetration has ruling they our ways mix Board membership. that the health a net income X% unions, and leads. approximately of The premiums Net from programs to was quarter. average There at our American has life board sales been same X% The the public At incorporate as the opportunity Liberty Globe $XX is producing advisory increased National, make Net our court's X,XXX, from a to accrue and margin up ago add life no we up operations $XXX up National of were $XX historically Labor count response while XX% Advisory the ended million value at or quarter Liberty to makeup agent between quarter life membership Life, million unions to Our up relationships our creates correlation XX% In down to to as to the is and with was million, life down million producing direct representation underwriting million. $XX underwriting to X,XXX. the were were agent account margin life public premiums increased X% million. business X% quarter. significant union year public union low. $XX an million. Actually, from X% sales life year sales the ago second $X third X% believe and were for the at $XX

quarter At X% were quarter. To sales increased year up X% at premiums General million. new to and the We to programs the XX% health X% to net margin sales effort American from count X% Health health of profitability million. was grew increased X,XXX. ago quarter. discussion year for in XX% agent operations, adjust I $XX my the X,XXX, now projections. health Agency, $XX producing average refine XX% $XX provide million marketing underwriting count compared Net of agent business. up $XX million, the health increased third to an and ago up At continue and Family quarter The $XX second will million. The to to some complete the maximize United premiums marketing a the to end producing the in our of the was Heritage,

at around Family X,XXX, to flat X,XXX, to American the at to XXXX around XXXX XXXX of end National, X% X% the at XXXX growth, of for around agent X% the to each Heritage Liberty growth. for We expect X% for agency the producing X% growth, X,XXX, as XXXX of XXXX, end for count be end follows. Income

X% approximate the X% life American growth, XXXX, for for full to X% to X% for to growth, XXXX, XXXX National, National, full Direct XXXX, to year X% to net to XXXX, United for are full XX% full the XX% Supplement Gary. Liberty X% year expected Family year X% XXXX, American growth, for year be sales Individual year X% X% turn of of growth, Medicare flat growth. to XXXX, income X% growth, Liberty X% decline, to the the net to as growth. XXXX, sales of X% for the Total XXXX, for X% follows; to for follows. X% flat X% Our as for of call to now XXXX, for I’ll XX% growth, be X% the X% XXXX, year for to XXXX, health full growth. back to Response expected growth, Heritage, X% to full growth, for to XX% the are

investments few minutes to spend operations. our a want discussing I

X% the over policy of impact increased excess investment excess repurchase investment on income less we share a liabilities a year increase interest income, our per X%. program income, the quarter. $XX First, million, net ago excess investment investment and define net basis as reflecting income On were debt which required share

expect year XXXX, per excess X%. For X%, share the income to result full increase which about investment in about we grow of a

as the fixed below excluding bonds of the leverage percentage XX%. net interest fixed gains quarter. $XX.X ago the million $XXX rates. the Now Overall, are maturities lower fixed and million, approximately ago of bonds rated the primarily same portfolio million With regarding same year of had maturities $XXX grade amortized $XXX the grade below compared total Of grade average X.X% cost. due equity were to A quarter is investment net is of maturities investment to below changes fixed investment to gains of billion maturity year times The including and $XX.X portfolio the quarter. portfolio of grade percentage ago. Invested in fixed an unrealized minus investment billion market a in as the investment assets $XXX portfolio. million We than with X.X bonds $XX.X of billion rating BBB+ is maturities to are previous year unrealized

quarter, sectors. XX We As financial invested industrial $XXX in of invested average in we investment million BBB+ the third life X.XX% of investment and at average yield primarily an in rating yields an years. average an maturities, grade fixed and and

X yield For of portfolio, basis points yield third third the the X.XX% down the from in quarter X.XX% XXXX. was the entire quarter

encouraged an the rate and yield the are At As portfolio of quarter approximately investment fixed were positive we our recent We income was interest of will in a our on of average impact money new the of average guidance, in income. a weighted in XXXX. midpoint September rate X.X% rates driving fourth by the increase assuming new money operating maturity excess up by have X.XX%. rates, X.X% XX,

hold unrealized intent not importantly the are and we ability about more realize were We interest to or losses investments concerned just them, have rate driven, maturity. our potential not expect the we to

call Now, turn Frank. the I’ll over to

Thanks Gary.

capital Torchmark shares we First, I the want buy third minutes spent $XX.XX. position. XXX,XXX discussing a price share In repurchases at average our million few quarter, and to $XX spend to of an

of through average $XX.XX, company’s parent October, the in today, shareholders. from XXX,XXX price full the cash on being from we less have an at shares the at million $XXX price to $XX.XX. thus from to shares fee made paid million an spent and purchase than more purchases These parent interest subsidiaries, of are company debt far the as paid acquire received The X.X cash by of Torchmark $XX flow, flow. we company’s So year to average spent dividends results cash the we excess have for define parent primarily it, its dividends excess parent million

approximately million for million cash be parent. expect XXXX plus to can the far, cash repurchases We share spent from assets flow flows excess we expect around available available With to to the parent year on remainder other the our have $XXX excess in dollars $XX $XXX. the thus of to

use that of primary conditions on efficiently repurchases share As If will we our noted previous possible. market be as favorable we use expect funds. a are continue call, will cash to as those

company expect of operations. the of support to our XXXX end to at $XX dollars to parent $XX also funds insurance these the million absent retain utilize of any assets We to approximately need million

cash XXXX, that excess of Looking to preliminarily the million. $XXX the the in forward will to parent available to be $XXX we range million flow estimate

levels subsidiaries. capital regarding that Now insurance our

to is Our necessary maintain support capital to our levels goal ratings. current at

on does years increased. discussions For the This our to basis. RBC regulated XXX%. been XXX% rating consolidated around several NAIC RBC represent with to simply the target net factors ratio ratio the of consolidated to capital changed that not RBC agencies, represents a In tax past be we that an of reform the following in are reflects within the NAIC legislation range which light current level denominator statutory subsidiaries, capital of the has and and which of ratio lower an has the to amount but the fact intent XXX% hold required the reducing

statutory sale with redeem the amount fact, million million notes a subsidiaries to additional on greater approximately $XXX mature issuance the notes a of as scheduled capital The the call in the maintained of were our for premium, in as to company. commercial $XXX tax purposes will net remaining In May of the to million, X.XX% paper. On assets as million and outstanding capital billion due utilize the proceeds XX, completed reform intends company company's will senior proceeds repayment approximately price XX, including of with be XXXX. been assets. overall corporate principal general aggregate of $XX X.XX% of insurance also of use in October for to invested The well $XXX insurance deferred Torchmark the XXXX, a the including replaced quality senior post-tax defined approximately September XXXX, have of $XXX portion intends that company for

current tax ratings. notes, ratio the of the that less the Following XX%, ratio reform less XX% than prior carried senior redemption the to supports debt-to-capital ratio below Torchmark’s XX% and X.X% than our should be

our With affirmed until debt will also noted quality previously capital existing of new but senior only levels statutory rating Fitch be capital insurance in as Moody’s exceed ratings. previous agencies additional will the S&P companies the they our capital and greater. not of with their each in rating indicated that issuance our conjunction In Moody's, to RBC level the is from maintained XXX% the debt the while rating threshold our the understanding their on Best is review reducing current negative XXX% review issue, rating it’s were XXXX. that A- scheduled regularly not to A.M. placed our new their next formally for value normal our affirmed on practice it

quarter underwriting favorable of of the This in of our direct response compared attributable quarter margin premium the third in claims was Next as a percent to claims few comments XX% our primarily in to to year quarter. normal compared XX% the the operation, a XXXX. in respect on this With higher year ago operations. the quarter was than third to

the range margin of we percentage for we was last anticipated, While the overall estimated it that percentage for than the the XX% the our higher the year would XXXX within call, was margin in XX%. quarter underwriting expected. On full range be XX% to we

the are the the in XX% range of to be estimating percentage XX%. underwriting for year for we full direct XXXX Now, to margin response

think quarters previous saw we has XX% compensation reform in and compared the with XXXX, result respect rate excess tax the still XXXX. percentage range the We as XX.X% to the the in it’s best We are for the margin the to tax in legislation. remain approximately be the consistent in for we and for very anticipate four response the expense XXXX direct million. increase quarters percentage margin while during last improved With stock fact an a experience that $XX early last will benefits the to in averaged decrease primarily our XX% the to quarter, attributable to tax underwriting encouraged expense, by of claims year, the

expect we million. be range the of to the million XXXX, $XX to $XX expense For in

for higher operating quarter than $X.XX, better internal were for expected channels. earnings family earnings the margin highs. each direct percentage response underwriting the quarter. $X.XX not third share five-year operations, was at results only our As for these in our channels of estimate $X.XX heritage primarily than Gary share of that and noted, heritage income the family and high for our but also The income in excess and per expectations end our American attributable net our to the The American were results, per of

levels $X.XX believe we to revert and especially XXXX American and the such, are to will for attributable $X.XX prior operating earnings we year of for for XXXX, percentages this the projecting share quarter. guidance a fluctuation fourth will income the in favorable net normal underwriting more experience As margin ended XX, be respect $X.XX per midpoint that a direct With of our to over the guidance the result channels. in quarter range our to this increase midpoint This the December income reflects XXXX. of $X.XX and $X.XX income, for primarily positive response underwriting in

For range per are XXXX, midpoint XXXX. we the Larry. the the operating income my in comments. increase X% are now projecting to to share I from back will will $X.XX be of an turn at call net the Those $X.XX,

Thank you, Frank. are Those our comments.

questions. now will We the open for call

Bass first from Our Erik Autonomous will Instructions] [Operator question come from Research.

National. Liberty of a a this on margins life deteriorated period First I followed is have strong guess growth. bit sales year-to-date,

seeing? for margins And your what guidance? more you're dynamics XXXX So could some you're on what in I provide was hoping you just guidance assuming

is policy a XXXX. to for high was - quarter-over-quarter it as compared XX% this low last all, year of a the looking year at XX% which for obligations First the was

of unfavorable it’s comparison. part an So -

we obligation that year However pattern the expecting occur. a in quarter were pattern ratio third as just because normal lower and the this seasonal - policy didn't as

of a higher it XXXX. able expect ratio to that normal higher more return in year we still have back because So we order do but to we a than in and going just the will expect this get we fluctuation - were a be pattern, we're

difference point the So, that's about a in margin.

older difference year. higher, the XX% And about the the in amortization on percentage is point We're is running reason off. the that than in rate versus Liberty business bought amortization amortization. previous running commissions because the last in the around the National that's the the business main other XX% for non-deferred The running is margins and higher years airports on

in - So continue. probably that we'll will that

XX% forward, we’re the we're Looking for underlining about year a at - margin.

the to revert XXXX for the that obligations around the the that But expecting a up opposed in will and end XX%. of up also we back more percentage little to we're creep range to policy as amortization also to XX% expect expect We we're year, the bit.

up, So level. looking XX% the around margins to that XXXX, at for we’re that for sum stay to

Erik, we our on investments to the little sales do expenses future efforts that over would that is on those to one and that both in making the from as future that some time. are just creeping the thing I that bit technology are paying the having look, we back that seeing add and up the as we of a sales non-deferred sales, some as well agency, well sales there that growth expanding as investments supporting

or And ratio think of you talked maintain the capital about contribution, in and through? raise buffer do potential range of need CX impact how a where the you in XXX% a market either, about downturn the the there come that are just the to RBC that then from debt your is changes downgrades? NAIC the you'll Or the credit you if following to ratings have in and XXX%, fall for range the

comfortable may if very you buffer whole some events our lot you may liquidity so we're need that for a and or position future. not a I will, don't of the with in occur strong Yes, know feel tougher

our redeemed, agencies at still line some we probably next and five than ratio have saw our year debt-to-cap and at so markets, But we know we know from year, of kind time, we some been up the and rating ago $XXX didn't maximum this that little we to have ratio at that range, we that. would debt-to-cap a the of And reason of run so like see RBC $XXX level our if the million actually we've - be know the million years have XX%, million, we less this was where in through a really that X.XX% kind of to expect of capacity the our flow as around and about for of that we the to within $XXX public coming free line. we ratios, is once fall you just end a anticipate have after rating from capacity time overall bank there agencies for cash that XX% within access to even our perspective you general bank that for fitting year quite and $XXX million within access our

that amount added for that And just creates liquidity of so us.

So those comes. we do do we us I that impairments, think good all that if some together with have time give be comfort that the when if some able to downgrades, deal have we'll

we know if what there. Erik, that's know as than know, point have down until we have would debt was of view that very the Frank consider but to and there have - We also companies, the the liquidity through see flow the we actually - we we’ll that is would than you how to don't mentioned to in any go rather need kind we free dividend putting out let’s of it have cash need, more of need that money because the I add difficult say is we until before back that getting flow, down but ordinary historically. a liquidity in, to we we free the pretty to. put put you that good the money process regulators. buffer wait ability a too We the feel We get companies need add that much comfortable it's for capital - to we this the because as is we once cash companies

Sachs. Our next from Alex Scott comes Goldman question with

I some the you just union growth the of question is and first things appreciate the just on on could agents why agent business number guess the income. the further impact. in on elaborate more in are that at comments I American going the My on? decline that of

a we’re comments, American my the how growth to factors agent in increase going is in seen affected I agent in this year stated challenge growth way. the several the negative income think we've as that and I

year at American X%. first higher unemployment. actually is the The for Income is Recruiting up the

been recruits, improve growth and forward, we we're terminations new higher end. at new a go year we're And had productivity. our bonuses commission your encourage course, changing and increase we've compensation to monthly agent Of have the our than system, agent include a as our The agent little for in for so count retention. going changes agents share flat to count

bonuses recruiting count for We’re increasing X% for positive Income. guidance have for new agency impact in agents. for a And We to in will think XXXX our is middle train managers lastly, managers American and XXXX agent bonus our agent to retention. new we’re at owners that X% growth the changing

expected you that's provide sort And color performance then what be you block you're mortality Is of the Response, forward it go margins the in is lower like additional in Direct increase are just the to can what expectations the in that feel there of increased? favorable incidence that would any there, it seeing the about and the great. causes driving

experience really we've well as death really particular as years types that causes seeing favorable no of product seen, or or really effect. to anything we’re across most specific Yes, issue

to claims been years, XXXX a seen So years. XXXX the broad. issue say We've and respect of that's overall lot in it's some our few the past talked about with we've to - fairly problem kind has to improvements actually over

in of really And we've years. so claims issue those more some recent the seen moderate

comfort Obviously pattern So that see into able higher seasonality we're year. we forward be be but quarters running that lower maintain we at this kind bit going we're then. least expect that would that a we first to should we claims see fluctuations at seeing saw will claims the couple to claim margins, And XXXX, just and looking that general us the due that. same that normal the some of little gives more in level to to that

much seen volume stays add really we’ve claims, the when same. a lower we I’d say, lower pretty it’s dollars claims the So claimed average

Jimmy next Our from with question Bhullar JPMorgan. comes

couple a of Hi. I questions. had

weak. been been decline response I the little they've of sales, a pace bit. First, But decelerating has just on direct think

what you what's they begin and to expectation that? drive of your So will turn when think do

We're think XXXX. in little an seeing increase Jami, the insert I churn in early in media. seeing mail higher And we're volumes. sales bit total inquiries

So as we'll in adjusted our see sales XXXX. marketing we've higher

last it or had mostly sales, your guess policies in And and that then, you've good driving four XXXX? pretty really. on group individual quarters I sales, What's expectation what's Is health business that? in the for

So, and of saying the the XX% supplement sales and increase, comes the XX% the Medicare’s comes a individual supplement. group cut Medicare XX% from from

group productivity, in sales productivity written predict by group seen of agent the The strong increase We for think by we and hard the driven growth the So groups recurring results in to and standpoint, increased in really hard some and to of good by percentage the sales family last increase really in what's they're the individual favorable and agents forecast. the tend premium – the group sales several is driving we've we in and of the earnings. the is year time. a from it’s impacted had over and because is the addition past XXXX. just number per have heritage, but we family be market in size are average sales growth pricing it's agents conditions to so even at group point In quarters will the in that's this an

from Glasspiegel Bob from comes question next Janney. Our

and down The $XXX million bond than are more issued even paying you've go invest. overall you’ll to I you though costs have interest a back, refinancing, lot your mean

in decent guidance? $X.XX have that I Is accretive your it to $X.XX. a So bit as

$XXX is it to for CP pointing going a of that is our in that well. to probably we're your reduction And Bob, know Yes, guidance. you million in there that's of as maybe kind that’s portion invest

actually reinvested within have the thinking to give million probably is to million $XXX we're company. probably going So $XXX you probably

your What's these CP days? rate

We've over into we north to the you than in bit expect along XXXX little bids. and the recently of changes do and here course two the tick of been remainder with a half this of know up a year that

your money two-digit arbitraging at say mean you're and debt cost I you're But because new investing $XXX. debt sort cost of your

up I'm pick bps you're repaying. you’re a Are are what ahead. charges clearly go on nice you the excess So XX - bps that And XXX not any transaction. saving you on there repaying sorry,

on think borrowing will the be whole are that seeing over far being be that, going this, but as Absolutely, the were. Bob spread your making and will our costs arbitrage will decent portion be fourth at quarter. you able a premium make quarter, premium, whole that expensed I that to reinvest we actually of that you what a line we And fourth as were the we that will below question, when expense, on redeem if in

interest a month, double… per right, little the extra of bit And with

on fourth Yes, million interest have quarter, we in a the have up the actually because in fourth here me, roughly for interest to income, expense double we excuse about $X of that did debt excess quarter, for - month.

help on results. Now, portion reinvested our of that and investment get will

but I just $X the million down a to investment guess right. pickup in quarterly CP, knocked so roughly, about this million maybe they from pickup got just million income, have $X income $X I investment

fair. sounds that Yes,

We've back had be stat hold them mean And must I earnings cash a bid. last growing growth your penalty thing, flow. free a decent

and point for a bump earnings sort past you're for that up there next something from passed flowing through offsetting more year? this of keeping growth the we that's the else need in is or the crossover So causing dividends looking the for year

to we earnings, our fair. expect statutory million early to The over be we're where it’s general probably $XX that's them $XX little anticipating in but XXXX. million we year for a kind think were yet XXXX, growth, up of Bob, so bit I

most part, growth. X% about For the that's a

interest That has as XXXX. that's been positive, and The with of some that line where of some a we've rate those several not to see will we’ll helpful. past a well. the a So growing until claims moderating then rate challenges in our the help much as clearly in response, be been having direct premiums. you're benefit incremental us years with a well clearly pretty you least overall much obligations growth XXXX But in at tax higher the from growing moderation going cost of lower and

earnings be with stat in earnings? able should here from to So line grow GAAP

think do much growing end that years, if we earnings. quite that, that growth see it you’re sales going those expect then as Yes, to statutory high as in lower and will earnings. I some not stress on the But know having statutory are digit if numbers, you up we work to against that now would single-digit numbers mid-single tend

lips Thank From if to God's develops? your problem ears that you.

Our with comes question Nadel UBS. from next John

midpoint I'm just is question not follow have up thinking sure that first the comment. the And of to how exactly about last guide. the I XXXX

what I million. think it’s $XXX

be of impact should about bit? how upper to flexibility yields end overall the on for then money give investment the range portfolio midpoint, lower income? yield portfolio and a excess or we the yields And some assume thinking new shift end that at So, I and

think the John we've declines portfolio as been to declines the We've having We've gone far know, year-over-year point - XX basis having points in declines points. been X range in yields as I you to in is end a the X.XX%, what's of off points. this so we now portfolio that three where will year be that coming portfolio yield are at think we're basis we rolling the year, next investing this whereas of X.XX% for basis

very the grade the getting close. yield portfolio to So investment and we’re are - where point getting getting that we’re

what got in helpful, that decline. That's we've of that's terms The… outlook a

about the and I’ll that that is the money of think basis you might what that impact some about points John, just When over - pivot thinking overall. $X.XX those - XX yield so. and just plus about it you’re highs the the have sensitivities the that the new about minus thinking years, on say, lows on new, course impact or from of

investment mean, net new mean, got flows incremental other the I I so, to the from cash you've invest, debt. than

Correct.

bucks, million, flows take, cash million new $XXX or $XXX give I’m invest, guessing? about to what The

year about new $X.X or But because over as so. next little reinvested. you're billion been talking the on after we’ll $X that, you’re invest - that Well, billion, money, correct we’ve department

First one, is million. about the maturity $XXX less

going of accounting then, question long otherwise, a, going your conceptually early but of Gary think to or it's out the impact second new the I early And this you time are duration over ferreted yet. the Frank, on to know be statements? thoughts or FASB financial And period is any rather is, course stuff standards days how lengthy

provide to it Yes, quarter and still it effective this changes to time, reviewing amendments our make this and point is in processes we’ll bill here ultimately pretty determining be the early. in XXXX. the need and to will that to amendments at the we’re comply. They really final what systems And did

now be there So work between a lot of will and then.

using interest the current adjustments some bigger that for You very least changes will think that loss. the to to a those changes at potential have quarterly with assumptions changing cash know your income in But kind get and to the of you rate. is future respect of lot but a impact level through of the I flow on of then, rate are so a revalue overall, be reserves to and for things assumptions will have And couple change that market going through you’ll flows, to at that really you high have at the flow OCI to current those least, net a operation.

companies to in tend right little benefits general, in the be harder are think, the that margin volatility like about the some that these on those those I more flows. it may to assumptions have So that risk of bit are a just talked down that guidance, future that bit nail a little future have cash policies they those may because looks

is thought, of with be hopeful really come you it’s us. guarantees the volatile haven’t the given we but up. products, actual again to may the there that through earnings the once we’re lot going know have it to impact know been maybe work know not as and we You exactly and you what on But that able as a way our see nature of

I topic got a on I’m that But you non-callable BBB the there of scenario have your the run or a lack leverage for very within bank of more portfolio, I complete you on securities. one type have do a your operation, the grade the go lot tuned exposure to asset stay risk. and heavy liabilities a just more guys. being investment sure and appreciate appreciate We'll I of lower

So sort back circling on. of

very bit against cycle protect quality any little of Is sort move I the higher here. to margin capital maybe downturn? late portfolio ratios at a earlier, reallocation credit we’re in because think there and Erik's it was the getting question potential even expectation of the some

overall Also certain at or they the leverage invested changed have is made point in leverage the Well, quality guess have higher because are we we we than invested in bit our in John, the we've than may we're bonds this little in past. tweaks higher there I prefer cycle. bonds. municipal it’s we have what issuers that we we haven’t - doing. investment higher although now past, aren’t more in have One think I we philosophy, few a

strategy the we still made overall, like changes is the but So have that same. in some

next [Operator KBW. Ryan from with comes Instructions] question Our Krueger

saw wondering but Bob’s guess on you question on reform just statutory follow-up given I'm had bit start from from I the earnings emerge much we a see benefits over fairly tax if longer over a generation. - This changes. tax longer tax a to time? a some of reform year you I of on minor more tax basis of cash term longer-term statutory a little I to on of will look period uplift the guess basis

probably in $XX year Yes, transition of certain that year over benefit the back estimated incremental there $XX will time that if the period of much part of a think are cause portion from That's to you’re $XX past - of we million first initially and our to then us reform. of range. we because the right start tax Once range part kind After million as million eight probably a that rules result reform intermediate I that we'll cost we of us tax will $XX more get tax reserves near kind eight are We've of transition year. will benefits a you to of there pay will somewhere reform. costing a significant million in rules years. term believe see think term, tax be the that - the there or as

free eight. up So year would after that the

get of or kind about so million pathway that $XX year see eight could you once So you uptick immediately?

That's able at well. and overall your XX% being right. that works lower in And base rate to grows, then, of course, differential pay a there income statutory tax grows taxable as income

on earnings lift of So you're having that too. growth that just the going to be

I'd Thank to for currently you. turn the I'm questions management closing now like to in it remarks. back further queue. no over showing

this to morning. Those Okay. you Thank comments our we’ll you us are quarter. and talk again for next joining

this Thank concludes you. Ladies teleconference. and today's gentlemen

You may now disconnect.