Globe Life Inc.
Q2 2011 Earnings Call Transcript

Published: 28 Jul 2011

[Operator:]

Please standby. Good day, everyone, and welcome to today’s Torchmark Corporation Second Quarter 2011 Earnings Release Call. Today’s call is being recorded. For opening remarks and introductions, I’d like to turn call over to Mr. Mark McAndrew, Chairman and Chief Executive Officer of Torchmark Corporation. Please go ahead.

[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 2010 10-K and any subsequent Forms 10-Q on file with the SEC. Net operating income for the second quarter was $129 million, or $14 per share; a per share increase of 8% from a year ago. Net operating income per share from continuing operations increased 14%. Net income was $149 million, or $1.32 per share, up 29% from a year ago. Excluding FAS 115, our return on equity was 13.5% and our book value per share was $33.61; an 8% increase from a year ago. On a GAAP reported basis with fixed maturities carried at market value, book value grew 10% to $35.40 per share. In our life insurance operations, premium revenue, excluding United Investors, grew 4% to $434 million, and life underwriting margins increased 10% to $125 million. Life net sales declined 4% in the quarter to $85.5 million, while life insurance first year collected premiums were down to 2% to $62 million. At American Income, life premiums were up 8% to $151 million, and life underwriting margin was up 11% to $51 million. Net life sales declined 2% for the quarter to $36 million. The producing agent count at the end of the quarter was 4,332 up 3% from a year ago and up 7% from the last quarter. I am pleased with the continued progress being made in American income. The agent count is now at an all-time high and growing at a strong pace. The number of new agents who achieved our top bonus level for the first time increased 27% during the quarter. Our mid-level sales management ranks also increased 11% during the second-quarter. In our Direct Response operation global life, life premiums were up 5% to $151 million and life underwriting margin was up 1% to $38 million. Net life sales were down 2% to $37 million. While second-quarter sales were somewhat let less than expected, I remain optimistic that we will see significant growth during the second half of 2011. While the previously discussed change in our direct response underwriting which utilizes its prescription drug data has improved on margin, it had a negative impact on our second-quarter sales as we rejected additional uninsurable applicants. We had made a significant improvement in the design of our Insert media packaging which resulted in a 16% improvement in our initial response rates during the second quarter. As a result of the improvements made in our packaging and the additional margins from the change in underwriting we have increased our third quarter Insert media distribution in excess of 20%. While there is a 60 day to 90 day lag before these increases reflected in our net sales, I am confident that we will see significant growth in our direct response life sales during the second half of this year life premiums at Liberty National declined 2% of $73 million. Life underwriting margins was up 29% to 418 million. Net life sales declined to 18% to $10 million. The producing agent counter at Liberty National at the end of the second quarter was 1792, decline of 3% during the quarter and down 20% from a year ago. On a bright note, health sales at the Liberty National increased 10% from a year ago and 40% from the first quarter level as a result of the introduction of new cancer policy. We’ve made good progress during the quarter in our efforts to conserve or enforce life insurance. During the second quarter, out new incentives conserved $2.2 million life premium. We currently project that number to grow to $15 million to $16 million during the second half of this year and $40 million to $45 million in 2012. On the health side, premium revenue excluding part D declined 7% to $185 million while health underwriting margin was down 11% to $34 million. Health net sales were $13 million for the quarter, 15% less than a year ago. Premium revenue for Medicare part D was $49 million, which is down 8% and the underwriting margin was $5.4 million, which was up 6%. Administrative expenses were $40 million, which were up 2% from a year ago and in line with our expectation. I will now turn the call over to Gary Coleman, our Chief Financial Officer for his comments.

[Gary Coleman:]

Thanks, Mark. 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, our three schedules that provide summary information regarding our portfolio as of June 30, 2011. As indicated on these schedules, invested assets are $11.2 billion, including $10.7 billion of fixed maturities at amortized cost. Of the fixed maturities, $10 billion are investment grade with an average rating of A-minus. Below-investment grade bonds are $721 million, down from $863 million at December 2010. The $142 million decline this year is due primarily to dispositions, a $119 million of sales, $12 million of cost, and $10 million of maturities. The percentage of below-investment grade bonds to fixed maturities, at 6.7%, the lowest that it has been since the fourth quarter of 2008. That percentage may still be a little higher relative to our peers, however, due to our significantly lower portfolio leverage, the percentage of below-investment grade bonds to equity, excluding OCI, is 20%, which is likely less than the peer average. Overall, the total portfolio is rated A minus compared to BBB plus a year ago. During the quarter, we recognized – realized gains of $31 million pre-tax and $21 million after tax. These gains resulted primarily for dispositions above investment grade bonds that had been impaired in previous years. We have net unrealized gains in the fixed maturity portfolio of $306 million compared to gains of $156 million at the end of the first quarter and $178 million a year ago. The increase in unrealized gains in the second quarter is due primarily to treasury yields declining more in credit as far as increased. Regarding the investment yield, in the second quarter we invested $432 million in investment-grade fixed maturities primarily in industrial sectors. We invested at an average annual effective yield of 5.75%, an average rating of A-minus at an average life of 28 years. For the six months, we’ve invested $697 million at an average yield of 5.84%. For the entire portfolio, the second quarter yield was 6.56%, compared to 6.62% yield in the previous quarter and a 6.74% in the second quarter of 2010. The decline in yield is due to lower new money yields. As of June 30, the yield on the portfolio is 6.55%. Now turning to excess investment income, excess investment income is net investment income less the interest cost and the net policy liabilities and the financing cost of our debt. In the second quarter, it was $74 million, down $492,000 from a year ago. However on a per share base, reflecting the impact to our share repurchase program, excess investment income was $0.65 per share, up 8% over the second quarter of 2010. As the components, net investment income was up $6 million or 4%, slightly lower than the 5% increase in the average invested assets. Despite the lower yields in the bond portfolio, investment income increased at around the same rate as the related assets because we had significantly more cash in short-term securities during the second quarter of 2010 than we have in 2011. The interest cost on net policy liabilities increased to $6 million or 8%, in line with a 7% increase in the average liabilities. Now turning to capital, regarding RBC, we planned to maintain our capital at the level necessary to retain our current ratings. For the last two years, that level has been around an NASC RBC ratio of 325%. This ratio was lower than some peer companies, but is sufficient for our companies in light of our consistent statutory earnings, the relatively lower risk of our policy liabilities and the level of our ratings. Finally, regarding share repurchases and parent company assets, in the first six months, we spent $602 million to buy 14 million Torchmark shares. So far in July, we’ve used $15 million to buy another 350,000 shares. For the full year through today, we have used $617 million of parent company cash to acquire 14.3 million shares or 12% of the diluted outstanding shares at the beginning of the year. The available liquid assets at the parent company consist of our assets on hand and the expected free cash flow from operations. Free cash flow results from the dividends received up to the parent from the subsidiaries, less the dividends paid to the Torchmark shareholders and the interest paid on the debt. The parent began the year with liquid assets of $205 million, and we expect to generate approximately $665 million of free cash flow for the entire year. Thus, the total free cash available for all the 2011 will be around $870 million. Now in the first six months, we generated about $485 million of free cash flow, and that included $305 million resulting from the sale of United Investors. As mentioned, the parent used $602 million in the first six months for Torchmark share repurchases. As a result, , the parent ended quarter with $87 million of available liquid assets and that’s comprised with the $205 million of beginning assets, plus $485 million are free cash flow, less $602 million of share repurchases. Going forward along with $87 million of cash on hand at the second quarter, we should generate approximately $4,180 million of free cash flow in the next two quarters. As of today, after deducting the $15 million of July share repurchases, the parent will have approximately $252 million available between now and the end of the year. As noted before, we will use our cash as efficiently as possible. If market conditions are available, we expected share repurchases will continue to be a primary use of those funds. Those are my comments, I will turn the call back to Mark.

[Mark McAndrew:]

Thank you, Gary. We are narrowing the range of our earnings guidance for 2011 and raising the low end of that range. We currently expect our net operating income per share will range from $4.60 to $4.73. Those are my comments for this morning. I will now open it up for questions.

[Operator:]

Thank you very much (Operator Instructions). We’ll take our first question at this time Jimmy Bhullar, JPMorgan.

[Jimmy Bhullar:]

Hi, thank you. I head question on just the base of buybacks, you mentioned you have bought back $617 million worth of stock so far this year. And should we assume that the $252 million that’s available for buybacks through year end most of that will be used up through for buybacks or are you going to keep some of the $87 million and push or are you going to keep some of that. And the second question I had was just on Liberty National, the agent count declined again in the second quarter. Sales were weak, I think they were down around 18% so what is your outlook is for growth in the agent count and the sales in the second half of the year at Liberty National. Thanks.

[Gary Coleman:]

Okay, the first half Jimmy on share repurchase as Gary said I think we have $252 million available at the parent for the balance of the year. It’s something that – we have – again we have a board meeting next week that we’ll continue to evaluate we took that free cash down to $87 million at the end of the last quarter. I think it’s fair to assume that we’ll probably keep it somewhere around that level for balance of the year, but again we will continue to evaluate each quarter. As far as Liberty National, the agent count decline slowed, but it was still down 3% during the quarter. I can’t – I am not expecting any big turnaround. I think we have – we are about at the bottom there, but I am not expecting for the balance of this any big turnaround. We are seeing some growth on the health side, as a result of new product we have introduced, but I would expect our life sales that Liberty National for the balance of the year to stay at about the same level there.

[Jimmy Bhullar:]

Okay, fine.

[Operator:]

Our next question will come from Jeffrey (inaudible) KBW.

[Unidentified Analyst:]

Thank you. You talked about the kind of the trajectory for the conservative (inaudible) $15 million to $16 million in the back half, $40 million to $45 million next year. I’m sure you said this today, but I think what I follow is was that companywide or is that mostly specific to American income or what we talk about.

[Gary Coleman:]

Well, that’s companywide. We do, we have the most impact at American income and again I think we put, we have a new exhibit out on the website now showing lapses by distribution. We think we can conserve 20% of the lapses. In 2012, at American income ranging down to I think roughly 13% of liberty national and roughly 15% in the direct response. So, the bigger portion in the second quarter, we first started with American income because that is obviously our most profitable business. But if those numbers that I gave are across the board and we will have an impact in all three of the major distribution systems, but it will be a little higher at American Income.

[Unidentified Analyst:]

Okay. Thanks for that. And then on the prescription drug underwriting impact, can you remind us kind of what the trajectory is there? Is that something where a better mortality will bleed in over many years or it something that maybe a year from now it actually will be really visible to us, what do we expect there?

[Gary Coleman:]

Well, it will take. It will bleed in basically over a number of years. I look it will have more impact and that allow us to grow our sales, but on insert media side, which is about 60% of our sales, it improves our margin by, I believe, it’s 16% to 18%. Now, that’s a significant block of business, but that’s just our new business going forward. So, we’ll have some impact and it’ll be a growing impact on our financials. It gives us more margin to work with as far as increasing our sales, as I mentioned earlier and partially as the result of that, we are increasing our volume – our distribution volume by, I think, 22% in the third quarter and right now we anticipate increasing our volume by 24% in the fourth quarter. So, you’ll see more of the impact on the sales side.

[Unidentified Analyst:]

Okay. Thanks a lot, Mark.

[Operator:]

And next we’ll hear from Randy Binner, FBR Capital Markets.

[Randy Binner:]

Hey, thanks. I have a question about – there is a callable prefers out there, I believe, that have a pretty high coupon, I think, it’s 710 basis points and, so I think that there is $120 million worth in the callable and there were callable in June, and so I didn’t see anything in the results that indicated that those have been called, to me it seems like, kind of, a no brainer to try and do it, just because you have such much cheaper sources of funding, but I didn’t know if that was still on the table, if there is color around that if that a big buyback in the quarter maybe had anything to do with that, I’d love to hear color on that potential opportunity?

[Gary Coleman:]

Okay, Randy, that’s something we take a look at, they because callable as of June 1st and they are callable as they are they are due past and they are callable in whole or part and at par, and they’ll continue to be call but one (inaudible). We did take a look at that in terms of how to redeem it if we felt the use of cash – if we’re going to use cash, we felt that using the cash or share repurchases provided a greater return. We also looked at, though if we refinance and if we issue the similar security – the summer trust referred that the key point, we’d actually be able to higher than 70 and we’ve today. Because, remember, this is a very long-term, as you know the 35 years around on the security, so it’s – for long-term security – it’s not that better rate. (inaudible) we looked at those, if we refinanced or reissuing debt, we looked at – for example, (inaudible) two-year debt, we can do that at a lower rate, and we’d pick up $0.01 to $0.03 maybe earnings per share. That concern there is the refinancing risk, five to 10 years, what interest rates will be and may be much higher. So, our current thinking is that we’ll, kind of, stay where we are and not redeem them, but that’s something we’ll continue to look at as conditions change.

[Randy Binner:]

I guess, I mean, if the – does the buyback clearly has slowed from the pace of the first half, I mean, there is less cash available for buyback, there is (inaudible), meaning that the earnings yield on your buyback is better than 710 basis points right now according to most analysts forward numbers. So, that I guess there, but if you had less cash available for buyback, would that effect the decision or is it a longer term decision there?

[Gary Coleman:]

Well, I think it will be a longer-term decision in that, but the fact that would matter though, you know how consistent our cash flow is – the free-cash flow. We’ll continue to do generate free cash and what we might do is we must start redeeming or calling them in parts as supposed to calling the whole 120 million at one time.

[Randy Binner:]

Very good. Thank you.

[Operator:]

Chris Giovanni with Goldman Sachs is next.

[Chris Giovanni:]

Thanks so much. I just want to see if you guys can update us on sort of the liquidity buffer that you guys had been keeping at the parent company. I believe it was roughly $200 million or so. It’s sort of certainly below that today, as we get kind of through here and maybe some of the economic uncertainty increases, how are you thinking about moving forward with that question?

[Mark McAndrew:]

Well Chris, that’s why we are not giving a lot of guidance there because as Garry mentioned we have $252 million available at the parent for the balance of this years. Obviously the pace of our share repurchase so far in July, we have slowed down and it’s something we will continue to evaluate. Sure, there is some definite uncertainties out there today, and even in our guidance, I think we put in a range of 70 – I think $78 million, Gary, that $228 million as far as the range.

[Gary Coleman:]

It’s right.

[Mark McAndrew:]

Of share repurchase in our guidance. It didn’t make a lot of difference, it only made a couple of cents difference in our earnings for the balance of the year. But it’s something I’m not really prepared to say how much we will spend the balance of the year. We will continue to evaluate as we go.

[Chris Giovanni:]

Okay. And then within the aging count trends, obviously American income you guys are having some success there. Can you comment a little bit on sort of some of the drivers there and are there any takeaways that you can try and pull out to try and improve sort of the downward trend we have been seeing at Liberty National?

[Mark McAndrew:]

Well first of I will talk about American Income, I am very pleased with where we are at. I know sales were still down 2%, but if you look – if you look at the numbers, we were down 4% going into the quarter and rising accounts and were up 3% at the end of the quarter. We grew by almost 300 agents during the quarter. If we can continue close to that pace, if we can continue and grow 250 agents a quarter the next two, by year end our agent count be up 25% from a year ago and sales will follow that trend. There is not a lot new going on, there is more just a refocus. As I mentioned, we have grown our middle management ranks in a very concerted effort to promote more people into middle management. We grew that by 11% during the quarter. The other problem we had last year even though recruiting was up, we – because we did not have more middle managers and because we lost focus on the training of those new agents, our turnover went up and that’s why that number as far as new bonus earners hitting the top level bonus, those are the people we retain and for that number to be up 27% from a year ago, it is being reflected in higher agent retention. So all of the things that we’ve talked about last really six to nine months are coming – are panning out. We are refocused, we are hiring more agents, but we are also retaining more agents. So I feel very good about where American Income is and their sales will come back very strongly in the second half.

[Chris Giovanni:]

Okay, thank you. And just one last one, any updates sort of on EITFO9-G in terms of impact or implementation for you guys?

[Mark McAndrew:]

No, no update on that. The current status of that is that, first of all we would like to talk directly, which I think most companies well. So we’re in a process of doing our calculations of what the initial write-down will be the DAC asset, but there is still a lot of implementation issues that haven’t been fully resolved and I know the big four firms are still consulting with the SEC and how to interpret certain provisions and of course as we work through that that effects and we’re doing so. I think all this should be cleared up in the third quarter and by the time we’ll get to the analyst calls for the third quarter. We will have defensive numbers at that point.

[Chris Giovanni:]

Okay. Thank for the time.

[Operator:]

And next we’ll hear from Colin Devine with Citi.

[Colin Devine:]

Good morning, good afternoon I guess now. Couple of questions, first, I guess, with the buybacks you’ve done – I appreciate you’re still fair amount of debt capacity, but does that mean that M&As is really not something that’s likely depend of this year and I suppose that also going to bring it up your current thinking on actually with first command. Then Mark, with respect to Liberty, I appreciate your – it sounds like getting fairly frustrated with it. What is not working there that clearly works so well for your American income?

[Gary Coleman:]

Okay. First on the M&A activity. Colin, we have looked extensively and really don’t see anything out there when we made the decisions obviously buyback that much in the quarter. It was because we didn’t see any M&A activity on the short-term horizon. So, your conclusion there is accurate. Liberty National, as I have mentioned before, it really is there are so many differences between Liberty and American Income. And again, I’ve equated it in the past to franchise versus a company-owned store and American Income, it’s a straight commission situation whereas the Liberty National, the agents and managers are employees, those are our offices. We have a lot of fixed expenses and the production pervasion is sustainably less. It was about half of what it is at American Income. It’s – we’ve been, really over the last two or three years, trying to move Liberty more to an American Income and we will continue to do so, but it’s just not a quick fix there. The things that work at American Income, we have tried to implement similar-type programs at Liberty National, but they – up to this point, they have not been successful.

[Colin Devine:]

Let’s get first command, you got any comment on that and then just – and also Liberty, with the new, sort of debt treatment, because that’s – you’ve seen me, sort of, put that business model even under more pressure than it’s at right now?

[Gary Coleman:]

Well, that’s correct. First off – I’m sorry, first amendment, it’s independent agencies that we continue to – their sales have been down now for number of years. It’s a very persistent business and very consistently profitable business. And we’ll continue to – there are no plans to do anything at this point, but it is an independent agency that we really don’t control. But, it’s – another one I was saying is we don’t believe that we get fair value out of it. We don’t control the distribution, but it’s become a relatively small piece of our total, so really no plans to do anything there.

[Colin Devine:]

Okay. And then with the (inaudible) change, I mean does that really put even more pressure on you right now with Liberty?

[Mark McAndrew:]

It does and again that’s something that we have been addressing and we’ll continue to address. The number of offices that we have at Liberty has – I think we are somewhere in the mid-90s now where I believe a year ago we were at 150. So we have been very much addressing some of that where we have in reducing our expenses there. And we are continuing to look for ways to lessen the impact of the debt change.

[Colin Devine:]

Okay, thank you.

[Operator:]

And next we hear from John Nadel with Sterne Agee.

[John Nadel:]

Hi, good afternoon everybody. A couple of questions for you, one is just to go back to the guidance and the buybacks and just – I just want to understand your revised guidance, it appears I think as you mentioned Mark in response to somebody’s question, it seems you revised guidance includes a higher level of buybacks than you were originally assuming six or nine months ago when you originally gave us that guidance. Is that the case?

[Gary Coleman:]

Well, there is no doubt at beginning of the year even though we knew what the available cash would be, the reason we had such a wide range was not just how much we would spend on share repurchase but at what price? So obviously earlier in the year pre-split, the stock was up around $68, so when we ran our projections out, we ran not only different amounts being spent, but different prices. So we were able – we did spend towards the high-end of our guidance as far as the amount of money, we spend, but we also got at a lower price than what our guidance was. So, now that the bulk of that share repurchase has been completed and we know the price and the amount, it definitely took the bottom end of their range out of the picture.

[John Nadel:]

Understood. I guess, I was sort of – I was wondering if upper end of their range, would if otherwise being higher, if not for – something else going on the business relative to your original guidance, I’m not sure.

[Gary Coleman:]

I think everything else is going pretty according to the plan as far as, even last quarter even though we were under the Street estimate, we’re right where our projections and the same this quarter. Other than share repurchase, our earnings are about where we thought they would be at the beginning of the year.

[John Nadel:]

And then, okay. So separately just a question on the life underwriting margin and my model definitely doesn’t go back nearly as far as your business does, but as far as I can see, your underwriting margin on the life insurance business this quarter was as high as I have ever seen it. Is that sustainable? Is there is something that – when it just really well this quarter that – we are going to think about that more like we have seen it over the past few years?

[Gary Coleman:]

Well, it was better this quarter, but particular at Liberty, it was I think up 29%, but that was more a result of, a year ago, it was particularly bad quarter.

[John Nadel:]

I guess, I’m just looking at underwriting income divided by premiums?

[Mark McAndrew:]

It was a little above the average, but Gary, you have any comments on that.

[Gary Coleman:]

Well, it was for example, 29%. I think it’s just about higher than where we were last quarter and the big part of that was Liberty. We’ve had two as I said this quarter was unusually low in terms of life claims whereas and if you look at last year’s comparison of – the second quarter last year was particularly high claim quarter. We’re seeing some fluctuation in those life claims, we anticipate that we get back to more of a norm and so I would think that we’re now looking for that level to continue at Liberty and as a result. If it goes back to more than norm then we’ll get back to around the 28% level that we reported last couple of quarters.

[John Nadel:]

Okay. So..

[Gary Coleman:]

28 year-to-date. I think that’s sustainable, we were one point over that in the second quarter.

[John Nadel:]

Okay, that’s – I’m just going to ask you, if more the year-to-date was a better indication. Okay. Thanks, guys.

[Operator:]

(Operator Instructions). And next we will hear from Mark Hughes with Sun Trust.

[Mark Hughes:]

Yeah, thank you. The use for the prescription drug data for underwriting, how much to that dampen sales in the quarter, can you say?

[Gary Coleman:]

Well, again in the – it had more of an impact on the insert media, which is 60% of our sales we’re declining above on additional 5%, but I will give you a little more clave on what’s going on in direct response. Again, the insert media side, which is 60% of our direct response sales. We increased as a result of the potential gain on the underwriting margin. In the first quarter, we increased our circulation by 12%, but we saw a 13% decline in our response rate, so it, kind of, washed. We actually did not see an increment of volume of new inquiries coming in, people saying that they are interested in buying life insurance. However, as I mentioned, we through some testing that we did, we found a package that performed much better, so in the second quarter, our circulation there, we increased at 9%, but we had a 17% improvement in our response rates as a result of packaging. So, we actually saw a 27% improvement increase in the number of people responding to us in that marketplace. So, going forward, again we’re now back to where we were increasing the outbound circulation there, 22% and 24% in the next two quarters. So, we feel very good about where we are at going forward, but the first quarter was – our response rates were disappointing there, but that has definitely turned around in the second quarter and we expect to see good growth in the balance of this year and next year. The problem is that there is a lag between the initial response and the time we report sales.

[Mark Hughes:]

Right. Now the good package or better package you said on the second quarter, is that more broadly distributed in Q3 or are these new packages that you’re going to be distributing in the back half?

[Gary Coleman:]

Well, now it actually – it’s something we had tested previously that we rolled out within the second quarter. Again, that’s why we went from a 13% decline in our response rates to 16%, 17% improvement in the second quarter as a result of rolling out with that new package. We expect continued, we continue to expect to see that improvement in response rates, second half of the year. But again you need to understand that – those are people that send in our cards saying, yes, I’m interested in buying life insurance. We then over the next six months or sending them numerous product packages and they in turn send an application back in. But even after the application is received because there is a dollar introductory offer, we don’t treat it as a sale until they pay the first fully initial premium. So that’s why I say there is a 60 day to 90 days lag from the time we get that initial inquiry and before we start reporting the sales, that’s why again the second quarter sales numbers did not grow even though the number of new inquiries coming in grew at a very nice clip about – that will be reflected in higher sales for several quarters down the road.

[Mark Hughes:]

(Inaudible) the visibility for Q3 and Q4?

[Gary Coleman:]

Yes.

[Mark Hughes:]

How when you look at this kind of economic environment where there is – I don’t know if you can characterize it but does it make a difference – much of the difference on your business when you’ve got – I don’t know economic slowdown, let’s say more uncertainty in the economy should that have much impact?

[Gary Coleman:]

Well it hasn’t and direct response it has and again that’s our constant challenge as I mentioned again in the first quarter our response rates were down 13% from a year ago. Basically using the same package that we were using a year ago and borrowing us continuing to find ways to be better our sales would be down fairly significantly in direct response. But again we continue to look for ways to (inaudible) as a result. Even in the difficult economy, we fully expect to grow.

[Mark Hughes:]

Great. Thank you.

[Operator:]

Currently, we have no questions in the queue, but I’d like to take the opportunity remind our audience (Operator Instructions). We will pause for just one moment. And we have no questions in the queue at this time. I’ll turn the conference over to our host for any closing or additional remarks.

[Mark McAndrew:]

All right. I want to thank everyone for joining us, I guess this afternoon now, and we’ll talk to you again next quarter. Have a great day.

[Operator:]

And that does conclude today’s conference call. Thank you for your participation.