Globe Life Inc.
Q4 2010 Earnings Call Transcript

Published: 10 Feb 2011

[Operator:]

Good day, everyone, and welcome to the Torchmark Corporation Fourth Quarter 2010 Earnings Release Conference Call. Please note that this call is being recorded and is also being simultaneously webcast. At this time, I will turn the call over to the Chairman and Chief Executive Officer, Mr. Mark McAndrew. Please go ahead, sir.

[Mark McAndrew:]

Thank you. Good morning, everyone. Joining me this morning is Gary Coleman, our Chief Financial Officer; Larry Hutchison, our General Counsel, and Mike Majors, Vice President of Investor Relations. 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 2009 10-K and any subsequent Forms 10-Q on file with the SEC. Net operating income for the fourth quarter was $136 million, or $1.68 per share, a per share increase of 14% from a year ago. Net income was $155 million, or $1.91 per share, a 40% increase from $1.36 a year ago. For the year, net operating income was $526 million, or $6.41 a share, a per share increase of 7% over 2009. Net income per share for the year grew 29% to $6.30. Excluding FAS 115, our return on equity was 13.8% and our book value per share was $49.03, an 11% increase from a year ago. On a GAAP reported basis with fixed maturities carried at market value, book value grew 22% for the year to $49.86 per share. In our life insurance operations, premium revenue excluding United Investors grew 4% to $415 million and life-underwriting margin increased 5% to $115 million. Life net sales declined 5% in the quarter to 77 million, but finished the year up 1% at $330 million. Life first-year collected premiums were up 1% for the quarter and 9% for the full year. At American Income, life premiums were up 9% to $144 million and life-underwriting margin was up 12% to $48 million. Net life sales declined 7% for the quarter to 33 million, but grew 8% for the full year. On the last call, I mentioned several actions being taken to renew our growth in producing agents and sales at American Income. These initiatives are progressing and we should begin to see a turnaround in the first quarter. We have, however, reduced our growth expectations for new sales to the mid-single-digit range for 2011 at American Income. In our direct response operation at Globe Life, life premiums were up 4% to $138 million while life underwriting margin was down 4% to $34 million. Net life sales were up 1% for the quarter to $31 million and grew 4% for the full year. With the difficult economic conditions, I’m pleased with the 4% sales growth in 2010 at Globe Life. Barring another significant turndown in the economy, we now expect improved sales growth in 2011 in the 8% to 10% range. Life premiums at Liberty National declined 1% to $73 million and life underwriting margin was up 16% to $17 million. Net life sales declined 11% to $10.8 million for the quarter and were down 19% for the full year to $45 million. Much effort was given during 2010 to improve the underwriting margins at Liberty National. In addition to improving our persistency, significant rate increases were implemented during the fourth quarter on the life insurance portfolio. We also closed or consolidated a number of unprofitable offices during the year. While these changes were necessary, they did adversely affect our new sales. The negative impact of these changes are mostly behind us and we fully expect to see double-digit growth in our life sales at Liberty National in 2011. On the health side, premium revenue excluding Part D declined 6% to $188 million, while health underwriting margin grew 3% to $35 million. Health net sales declined 49% for the quarter to $20 million and were down 33% for the full year. Most of the decline in health sales was in our Group Medicare Supplement business, which had an extremely strong fourth quarter of 2009. Also, the new business generated from Medicare Advantage disenrollees was disappointing, as 86% of those people dis-enrolled chose to re-enroll in another Medicare Advantage plan. After several years of decline, we now believe our health sales have hit bottom, and we expect to see single-digit growth in new health sales for 2011. Premium revenue for Medicare Part D was $51 million for the quarter, a 15% increase. And the underwriting margin was $8.5 million, up 48%. For the full year, revenues were up 14% to $209 million, and underwriting margin increased 15% to $24 million. Administrative expenses were $41 million for the quarter, an 11% increase, but rose 3.5% for the full year to $156 million. For 2011, we expect administrative expenses to increase in the 1% to 2% range. I will now turn the call over to Gary Coleman, our Chief Financial Officer, for his comments.

[Gary Coleman:]

Thanks, Mark. As previously disclosed, Liberty National closed the sale of its wholly-owned subsidiary United Investors to Protective Life on December 31st, 2010. Prior to the closing, United Investors distributed approximately $305 million of assets to Liberty in the form of dividends. In addition, the proceeds from the sale are approximately $364 million, resulting in a statutory gain of $183 million pre-tax, or $119 million after-tax. Now, although the sale generated a statutory gain, we recognized a GAAP loss of approximately $35 million after-tax due primarily to DAC, goodwill, and the difference in the GAAP and stat benefit reserves. Now I want to spend a few minutes discussing our investment portfolio, excess investment income, capital, and share repurchases. First, the investment portfolio. On our website are three schedules that provide summary information regarding our portfolio as of December 31st, 2010. As indicated on these schedules, invested assets are $11.1 billion, including $10.4 billion of fixed maturities at amortized cost. Of the fixed maturities, $9.6 billion are investment grade, with an average rating of A-minus. Below-investment grade bonds are $863 million, 8.3% of fixed maturities, compared to $824 million a year ago. Although the percentage of below-investment grade bonds at 8.3% is high relative to our peers, due to our significantly lower portfolio leverage, the percentage of big bonds to equity, excluding OCI, is 22%, which is likely less than our peer average. Overall, the total portfolio is rated BBB-plus, same as a year ago. During the quarter, we recognized $18 million of after-tax realized gains. For the year, we had net realized capital gains of $24 million after tax. We have net unrealized gains in the fixed maturity portfolio of $108 million, compared to net unrealized gains of $572 million at September 30th, and net unrealized losses of $455 million a year ago. The decrease in unrealized gains in the fourth quarter is due primarily to higher interest rates, with Treasury yields increasing more than credit spreads declined during the quarter. As far as investment yield, in the fourth quarter, we invested $314 million in investment grade fixed maturities, primarily in industrial sectors. We invested at an average annual effective yield of 5.8%, an average rating of A-minus and an average life of 27 to 29 years. For the year, we invested $1.7 billion at an average yield of 5.9%. For the entire portfolio, the fourth quarter yield was 6.65%, compared to 6.68% yield in the previous quarter and 6.85% in the fourth quarter of 2009. The decline in yield is due to the lower new money yields. As of December 31st, yield on the portfolio is 6.63%. Now turning to excess investment income. Excess investment income is our net investment income less the interest costs on the net policy liabilities, and the financing costs of our debt. In the fourth quarter it was $76 million, up $11 million, or 17% from a year ago. On a per share basis, reflecting the impact of our share repurchase program, excess investment income was $0.94, up 21% over the fourth quarter of 2009. The increase in excess investment income is due primarily to investment income being up $17 million over a year ago. This represents a 10% increase in investment income, compared to an 8% increase in average invested assets. Despite the lower yields in the bond portfolio, the investment income increased at a higher rate than the-related assets because we held significantly more cash and short-term securities in the fourth quarter 2009 than we did in 2010. Regarding RBC, we plan to maintain our RBC ratio at or around the 325% plus level. This ratio was lower than some of the peer companies, but is sufficient for our companies in light of our consistent statutory earnings, the relatively lower risk of our policy liabilities and our ratings. Although, we haven’t finalized our 2010 statutory financial statements, we expect that RBC at 12/31/10 will be in the range of 400% to 410%, higher than normal due to the impact of the sale of United Investors. Finally, regarding share repurchases, in the fourth quarter we used $62 million to buy 1.1 million Torchmark shares. For the year, we spent $204 million to acquire 3.8 million shares. At December 31st, the parent company had liquid assets of $204 million. In addition, in the fourth quarter, Torchmark renewed its $600 million revolving credit facility through January 2015. In addition to the $204 million of liquid assets, we estimate that 2011 free cash flow at the parent company will be approximately $655 million. This consists of approximately $350 million of free cash from normal operations along with $305 million resulting from the sale of United Investors. To-date in 2011, we have used $74 million of this cash to buy 1.2 million Torchmark shares. As noted before, we will use our cash as efficiently as possible. If market conditions are favorable, we expect that share repurchases will continue to be a primary use of those funds. Those are my comments. I will now turn the call back to Mark.

[Mark McAndrew:]

Thank you, Gary. For 2011, we are affirming the guidance we provided on the last call of expected earnings per share in the range of $6.75 to $7.10. This guidance assumes we spend between $600 million and $650 million on share repurchase for the year. I will also remind everyone that we expect the sale of UILIC United Investors to dilute 2011 earnings per share by about $0.05, followed by accretion of $0.10 to $0.20 per share next year with additional accretion in subsequent years. Those are my comments for this morning. I will now open it up for questions.

[Operator:]

(Operator Instructions) We’ll go first to the line of Randy Binner with FBR Capital Markets. Please go ahead.

[Randy Binner:]

Great, thank you. I’d like to focus on the sales issue at American Income and I guess – I mean, Mark just a couple of questions. The first is, if you could kind of characterize what it is that’s holding back sales there? I think we’ve seen from other captive type agents and companies that it’s harder to get folks motivated to take a bonus job maybe in this kind of macro environment. But if it’s that or if it’s something else, would be curious what it is that’s been kind of challenging that? And what it is that you think might change, as it relates to your initiatives that could turn sales around there to single-digit growth?

[Mark McAndrew:]

Okay, well, Randy, there’s a number of things there, which we’re addressing. As I’ve mentioned before, part of the issue is growing our middle management. In order to recruit more agents, we need more middle managers who are kind of the frontline in recruiting and training of these people. We did see some growth there, I think we added four SGAs in the fourth quarter and 11 middle managers. That’s not enough growth, but we’ve started to at least turn the corner there and growing the middle managers. In some cases – in a few places it’s a lead issue, generating more leads to supply additional agents and in the first quarter so far, our lead generation efforts have been pretty successful. There is one other thing, actually as far as the Internet recruiting sites, overall the total number of new resumes that were out on the three major sites actually declined last year, which doesn’t – we have plenty of resumes out there to recruit from, but again, that’s something that we’ve got to look at; if that trend continues what other sources out of recruiting can we look at. So, it’s really a combination of a number of things, Randy. We’re moving forward, we are trying to centralize more of the recruiting effort to make it more efficient and to expand it, and I feel pretty good about where we’re at. It’s just not something that turns around in a very short period of time. It’s something that will be more of a gradual turnaround as the year progresses.

[Randy Binner:]

Yeah, and it means, just to follow up there, does it feel a little bit different though than other downturns and I guess the answer has to be yes, right? And so is it feeling different this time around in this soft economic cycle?

[Mark McAndrew:]

Well, I think, I do believe it’s a short-term. We did see rapid growth over the last three years in our agent recruiting and our sales as a result of the downturn in the economy. That’s kind of flattened out and now the unemployment rate is starting to come down, as I’ve mentioned the number of new resumes out there have started to come down a bit so it’s a little bit tougher environment than it was a couple of years ago, but there’s still no reason we can’t renew that growth this year.

[Randy Binner:]

All right. I’ll leave it there, thank you.

[Operator:]

We’ll take our next question from the line of Jeffrey Schuman with Keefe, Bruyette & Woods. Please go ahead. Jeffrey Schuman – Keefe, Bruyette & Woods Good morning. First want to just touch briefly on direct response. I think the benefit ratio there was a bit higher than we’ve seen quite a number of quarters. Any concerns there of any emerging trends or it was just not a particularly favorable quarter?

[Mark McAndrew:]

Well, overall I don’t think there’s any particular trends there. We have some fluctuations there, so we did have a little higher than normal claims, but for the full year, the margins were about what they were in 2009 and we expect similar margins in 2011, so I think it was just an abnormal quarter. Jeffrey Schuman – Keefe, Bruyette & Woods The other thing I’m wondering about is this curious phenomenon of so many people being disenrolled from Medicare Advantage, and then somehow being absorbed back into the Medicare Advantage market. I guess I’m wondering is what that sort of implies for the future of the insured product. I mean, if the insured product can’t really claw back much market share in the face of that kind of disenrollments does it mean that maybe the Medicare Advantage is kind of permanently supplant it to you or how should we think about that?

[Mark McAndrew:]

Well, Jeff, again, this is kind of a first round of disenrollments, and there were other Medicare advantage options available to people in these areas. Now, if – yeah, I think there is a big question mark right now especially with the change in the control of the House, will the cuts that were proposed previously continue over the next three, four, five years? If they do, you’ll see the disenrollment accelerate and you’ll see fewer options for people to move to, but I think it’s a big question mark. We’re not really projecting any significant growth there and really, right now, I don’t think anybody really knows what the future of that is. We’ll just have to kind of wait and see. Jeffrey Schuman – Keefe, Bruyette & Woods And just one follow-up there. I don’t know if you looked at the demographics, I’m just curious. I mean, are people that have Medicare Supplement today older people that always kind of had that historically or do you actually still sell to new customers as they turn 65 and enter Medicare for the first time?

[Mark McAndrew:]

Most of our new sales other than a group tend to be people turning 65, but again, there again, our new individual sales have declined to the point, it’s not a significant amount and we did – we do pick up some people who are disenrolling from the Medicare Advantage plans, but you don’t see a lot of replacement of business of other Medicare Supplement business. Jeffrey Schuman – Keefe, Bruyette & Woods Okay. Thank you very much.

[Operator:]

We’ll take our next question from the line of Jimmy Bhullar with JPMorgan.

[Jimmy Bhullar:]

Hi, thank you. Mark, I was wondering if you could give us an update on just your Part D enrollees for 2011. And then secondly, just maybe talk about the M&A environment, seems like you’re committed to buy back, but I was wondering if you’ve seen any properties potentially out there that you might be interested and is it reasonable to assume there is some chance that you’d use the capital for a deal or is it mostly going to be used for buyback?

[Mark McAndrew:]

Okay, well first off, our Part D sales were less than what they were a year ago, primarily in our Group side and we did lose a little, the auto enroll business we have. So, right now, we’re expecting our Part D revenue next year to be down a little bit in the probably 7% range. Margins maybe slightly less than what they were this year, although they were surprisingly strong because of the volume of rebates that we received. So, we expect – in our guidance, we’re expecting about a 7% decline in our Part D for next year. On the M&A side, in the guidance we’re assuming we’re using that cash for share repurchase, but we are actively looking at what’s out there in the acquisition, as an acquisition candidate. There are some companies out there that are attractive to us, and the timing of something like that is hard to say. We don’t feel pressure to make an acquisition, but it’s something we’re definitely going to be looking hard at this year, although we’re still – we’re in a good position to make an acquisition in addition to buying back shares, so I wouldn’t expect to use all of that cash in an acquisition, but I think the chances of an acquisition coming along this year are much better than the last two or three.

[Jimmy Bhullar:]

And then lastly, on Liberty National, the margins are actually better than what we thought about. I think part of it is lower amortization. Is that – the margin this quarter, should we assume that’s a run rate or was there something abnormal this quarter in that business?

[Mark McAndrew:]

Well, overall, the margins are improving at Liberty National. Again, we made some changes. We saw some negative changes in our persistency a couple of years ago that we had to react to and now that persistency has improved, which results in the lower amortization. So, we expect – overall we expect the margins for 2011 to be roughly what they were for the full-year 2010. But again, we’re continuing to – we raise the rates on the products that we’re raising. The new business we’re writing going forward, definitely has a better margin than what we’ve written in the last couple years.

[Jimmy Bhullar:]

Okay. Thank you.

[Operator:]

We’ll take our next question from Paul Sarran from Macquarie. Please go ahead.

[Paul Sarran:]

Hi, thanks. First question is on direct response. Sales did feel a little bit light in kind of the second half of 2010. So, want to ask what you saw in the quarter that caused you to raise your sales growth outlook for next year. It was I think mid-single-digits the list time you talked about it and now you’re saying 8% to 10% or high single-digits I guess.

[Mark McAndrew:]

Well, again, I think I’ve said on the last call, some of the response rates we saw a decline in the summer of last year did come back somewhat from where they were in the summer, which impacted our sales the second half of the year. But we’ve really – we continue to test and we’ve continued to find ways to be better. And again, just our response rates just pretty much hold where they’re at with the additional things that we’re pursuing we think that growth is very achievable. Part of it, we’re exploring ways to better underwrite our products, which will add margin, which will have a positive impact on our mortality, which will allow us to expand our distribution. But there’s a number of different things. There’s a number of different pieces to that that cause us to have that optimism.

[Paul Sarran:]

Okay. And the price increases you implemented for Liberty. Can you talk about what drove that? Is it interest rate-related changes to your persistency assumptions or something else altogether?

[Mark McAndrew:]

Well, it just comes down to even – prior to that, the margins on the business at Liberty National were the lowest of any of our life distribution. And they had been deteriorating particularly. We have a lot of fixed expenses at Liberty National even though we’ve been managing those pretty effectively. The margins we just felt weren’t acceptable and we felt the need to increase the rates to offset those.

[Paul Sarran:]

Do you think about in terms of return targets or required returns, did you change your return requirement or is it just with the shrinking distribution size on fixed costs, you have to raise prices to get back to the same return?

[Mark McAndrew:]

Well, it was mostly. The reason for the increases were basically just a rise in our acquisition expenses. Although it is something we are taking a look at now and we will make a decision before the end of the first quarter as to whether or not we’re going to change our interest rate assumptions for 2011. We don’t – we figured it both ways. We don’t expect it to have a material impact on 2011 results regardless of what we do, so it is something we’re looking very hard at, we will make a decision on our interest rate crediting before the end of the first quarter.

[Paul Sarran:]

Okay. Thanks. And then just one last one on health margins. The underwriting margin declined sequentially from 19.3% to 18.8%, and it had been kind of on a rising trend. And I think we’ve talked about it in the past, we would have expected it to continue increasing given the ongoing mix shift away from the limited benefit product into more of Med Supp and supplemental products. So, is there any change in the trend here or is it kind of a one quarter blip or can you kind of just talk on that?

[Mark McAndrew:]

Well, the decline in the margin is really still that underage 65 health insurance block and it’s really the lapse rates are continuing to be high on that, and so we’ve had to increase the amortization of the DAC. For 2011, we may see a slight decline in that margin but –

[Paul Sarran:]

Sorry a slight decline in the overall health margin, or just for the under 65?

[Mark McAndrew:]

Well, in the overall, as a result of the under age 65.

[Paul Sarran:]

Okay. Thanks.

[Operator:]

We’ll go next to the line of Steven Schwartz with Raymond James. Please go ahead.

[Steven Schwartz:]

Hi. Good afternoon. Most were answered. I just have one simple question now, and that has to do with the movement, just so I’m clear. The movement in interest rates over the quarter and since that point, my assumption has to be that you’ve gotten much closer even since the fourth quarter with being even up in terms of new money versus the effective yield, that would be correct, yeah?

[Gary Coleman:]

Well, Steven, we’re so far through the first quarter, we’ve invested a little over 6%, which is quite an improvement over the 5.8% in the fourth quarter, and 5.5% in the third quarter, but we haven’t gotten back up toward the 6.5%, 7% range, but 6% is quite an improvement.

[Steven Schwartz:]

Okay. That’s really what I wanted to get to, thank you. As I said, the rest have already been asked.

[Operator:]

We’ll go next to the line of Chris Giovanni with Goldman Sachs.

[Christopher Giovanni:]

Thanks. Yes, most of mine have been answered as well, but just one question around buybacks. I think you alluded to taking the proceeds of United Investors and basically being in the market March and April putting to work all of the proceeds. Is that still the expectation, or has that changed at all?

[Gary Coleman:]

Well, when I mentioned that on the last call, I said that that’s the way we had done our guidance with that kind of assumption, we’ve got – that money is going to be coming up March 15th, but as I mentioned, we’ve already spent $74 million on share repurchases in 2011 to-date. You can continue to buy more. We have no set time. When we’re going to buy those shares, we’re really buying when it’s an opportune time. Until that money comes up, if we need to, we can use our short-term line for just a short period of time, but we’re not really pinpointing that we’re going to spend that money at a certain point in time.

[Christopher Giovanni:]

Okay. And then, I apologize if I missed this, did you talk about when you were upstreaming dividends? Has that been done already?

[Gary Coleman:]

Well, let’s break it into two pieces. The dividends just related to our normal statutory operations this year are going to be right around $470 million. That $470 million will be spread evenly throughout the year. The $305 million that’s related to United Investor sale, that will probably come up, as I mentioned, in mid-March.

[Christopher Giovanni:]

Okay. Thank you very much.

[Operator:]

We’ll go next to the line of Bob Glasspiegel with Langen McAlenney. Please go ahead.

[Robert Glasspiegel:]

Well, the marketplace is giving you an opportunity today. How long do you stay out of the market when you report, or can you buy the day of report?

[Mark McAndrew:]

We can buy tomorrow morning.

[Robert Glasspiegel:]

Tomorrow morning, you come back in?

[Mark McAndrew:]

Yes.

[Robert Glasspiegel:]

Okay. With the yields, I assume the price increase at Liberty National is motivated by the decline in interest rates. Is that fair?

[Mark McAndrew:]

That is part of it, but again, as I mentioned, Bob, with all the fixed costs that we have there – as Liberty sales have declined, it has raised our overall acquisition costs, so it was something we felt necessary. The increase in acquisition costs was a big contributing factor.

[Robert Glasspiegel:]

Okay. So, that maybe negates my question, but with rates – with earning above 6%, when you started this at 5.50, might you have overshot the rate increase, and if interest rates continue to climb, would you slow it down, or you’re going to take them now that you’ve got them and keep passing them through?

[Mark McAndrew:]

Well, we’ve passed them through. Obviously, it’s something we we’ll give a good look at, Bob, but I can’t imagine – sales would have to come up significantly and persistency continue to improve before we take a look at repricing them back downward.

[Robert Glasspiegel:]

Okay. So, it’s more a size of the business than interest rates, as far as a factor?

[Mark McAndrew:]

Yes. Right.

[Robert Glasspiegel:]

Okay. On the Med Supp in the quarter, anything that spiked margins back to get you even for the year, it seems like it was well above – I know the fourth quarter can be some catch-up, but was there anything unusual in there?

[Mark McAndrew:]

I don’t know –

[Robert Glasspiegel:]

Part D I’m talking?

[Mark McAndrew:]

On Part D?

[Robert Glasspiegel:]

Yes.

[Mark McAndrew:]

Yes, there was on Part D. We were a little surprised. Most of that increase are rebates that we received based upon 2009 results, but we just finally settled up with our pharmacy benefits manager in the fourth quarter from the prior year, and also, we settle up with CMS for the 2009 results, and both of those were more favorable than what we had anticipated, so the 2010 experience, again, we won’t really have final numbers until late this year, but we don’t expect quite as good of total rebates as what we received in 2009, but again, it will be later this year before we know the exact numbers.

[Robert Glasspiegel:]

Okay. And finally, is there anything in the AIG carcass potentially of interest or – I know American General was, at one point in the history bank – interest strike zone of Torchmark.

[Mark McAndrew:]

That’s a possibility. Yes. If that comes on the market, it’s something we would at least definitely take a hard look at, Bob.

[Robert Glasspiegel:]

Okay, but doesn’t sound like there’s been anything yet. Thank you very much.

[Mark McAndrew:]

Sure.

[Operator:]

We’ll go next to the line of John Nadel with Sterne, Agee. Please go ahead. John, your line is open... John, your line is open.

[John Nadel:]

Sorry, guys. The cord fell out of my phone. I had a couple for you. I’m sorry if I missed this. I think in your guidance for 2011, you guys have been talking about 10% to15% sales growth for Liberty, and I think as well for American Income. I may have missed this at the beginning, are you still on track for that? Frankly, I assume the comps, given the fourth quarter results, actually make that a little bit easier to achieve.

[Mark McAndrew:]

Well, now we’ve lowered our overall – at American Income, we’re now just assuming mid-single-digit.

[John Nadel:]

Okay.

[Mark McAndrew:]

But at Liberty, we still think we can achieve something in excess of 10% growth in life sales there because we do have easier comparisons.

[John Nadel:]

Okay. And then Gary, on the risk-based capital ratio, the 400 to 410 estimate, after the dividends you expect to make up to the parent, where does that come down to? Does it come all the way to your 325 target, or are you still somewhere above that level?

[Gary Coleman:]

No, we would still be above it because at around 410% level we would have 350 million of excess capital.

[John Nadel:]

Above the 325, okay, and the dividend’s about 305?

[Gary Coleman:]

Right.

[John Nadel:]

Okay, got it. And then Mark, more maybe a philosophical question on thinking about deploying capital, but I’m wondering if you guys have considered perhaps redirecting some of the extra cash flow or extra buybacks that you’re doing, into maybe taking your dividend yield up, especially in a relatively low rate environment, perhaps a stock in my coverage universe that could stand out with a higher dividend yield. I’m just wondering if you guys have considered that, would it make some sense, especially given the predictability of your cash flow.

[Mark McAndrew:]

Well, John, yeah. I mean, it’s obviously something we’ve considered. In fact, we’ve talked with most of our larger shareholders about their preference.

[John Nadel:]

Okay.

[Mark McAndrew:]

And basically, their attitude is they would prefer to use share repurchase. We feel like we’re returning the money to our shareholders.

[John Nadel:]

One way or the other.

[Mark McAndrew:]

One way or the other.

[John Nadel:]

Yep.

[Mark McAndrew:]

The thing about a cash dividend is it’s very hard to reduce, and we have been increasing our dividend every year for the last few years and we intend to continue that, but again, we would like to – we want to be able to pursue acquisitions and if we get committed to too big of a cash dividend, I would hate to have to cut that at some point in the future in order to make an acquisition, or to – and to be quite honest, the bulk of our long-term shareholders prefer the share repurchase.

[John Nadel:]

Yeah, understood. Thank you.

[Operator:]

(Operator Instructions) We’ll take our next question from the line of Colin DeVine with Citi. Please go ahead.

[Colin DeVine:]

Thank you very much. Let’s get away from capital for a bit, and I was hoping we could just talk about what you’re looking at in terms of maybe modifications to your products this year, if there’s anything sort of coming down the pike?

[Mark McAndrew:]

Collin, I don’t see any major changes in our product portfolio. Again, we’re going to continue selling basic protection products, barring an acquisition that we might get into another product line. We are looking into the possibility of – with some of our captive sales force, the possibility of selling some other products that we may not necessarily feel comfortable taking the risk on, but we do have a significant captive sales force there that there is the possibility we may offer some other company’s products that don’t directly compete with our own, but we don’t envision any major new product lines.

[Colin DeVine:]

Would those be insurance products, I assume, or other types of Financial Services?

[Mark McAndrew:]

It’s possible it could be either, but I would be thinking more insurance-type products and lines that we’re not in.

[Colin DeVine:]

Okay. Thank you.

[Operator:]

And at this time, I show no further questions in queue.

[Mark McAndrew:]

All right. Well, thank you for joining us this morning and we’ll talk to you again next quarter.

[Operator:]

That concludes today’s conference call. Thank you for your participation.