Primerica Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 9 speakers on the call.

Operator

Welcome to Primerica's Second Quarter 2023 Earnings Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. At this time, I'll turn the conference over to Nicole Russell, Senior Vice President of Investor Relations.

Operator

Ms. Russell, you may now begin.

Speaker 1

Thank you, Rob, and good morning, everyone. Welcome to Primerica's 2nd quarter earnings call. A copy of our earnings press release, along with materials that are relevant to today's call are posted on the Investor Relations section of our Web Joining our call today are our Chief Executive Officer, Mr. Glenn Williams our Chief Financial Officer, Ms. Graham, Glenn and Allison will prepare will deliver prepared remarks, and then we will open the call up for questions.

Speaker 1

During our call, some of our comments may contain forward looking statements in accordance with the Safe Harbor provisions of the Securities Litigation Reform Act. The company assumes no obligation to update these statements to reflect new information. We refer you to our most recent Form 10 ks filing As may be modified by subsequent Forms 10 Q for a list of risks and uncertainties that could cause actual results to materially differ From those expressed or implied, we will also reference certain non GAAP measures, which we believe provide additional insight into the company's operations. Reconciliations of these non GAAP measures to their respective GAAP numbers Are included at the end of their earnings press release and available on our Investor Relations website. I would now like to turn the call over to Glenn.

Speaker 2

Thanks, Nicole, and thanks, everyone, for joining us today. Our strong second quarter results highlight the value of Primerica's complementary lines of business And the continued efforts of our team to grow our distribution capabilities, growth in our sales force and the appeal of our life insurance products are creating sales momentum Despite the continuing financial pressure on middle income households, adjusted operating revenues of $690,000,000 rose 3% year over year, While adjusted net operating income of $145,000,000 increased 11% and diluted adjusted Operating earnings per share of $3.99 increased 18% compared to the prior year period. These results reflect the predictable growth in our Term Life business and the benefit of higher interest rates on our investment portfolio, both of which more than offset the continued pressure of lower sales commissions in our Investment and Savings Products business. In addition, the absence of a negative tail revenue adjustment in the Senior Health segment this quarter was an improvement versus the $5,400,000 negative tail adjustment recorded in last year's Q2. Our like license sales force growth continues to be driven by 2 key dynamics: The attractiveness of additional income from our entrepreneurial business opportunity during uncertain economic times and our focus on and improvement in our life licensing process.

Speaker 2

During the quarter, we recruited over 86,000 individuals, 23% increase compared to the Q2 of 2022. We also continue to see our hard work over the last few years in creating a clear path through the Our licensing process pay off with over 12,600 new reps licensed during the quarter, a 10% improvement over the prior year period. We ended the quarter with nearly 138,000 life license reps and remain confident that our momentum will lead to a 3% or 4% increase And the size of our sales force for the full year of 2023. Turning next to our sales results, starting with the Term Life business. The appeal of our new insurance products continues to drive solid year over year growth.

Speaker 2

During the quarter, we issued nearly 97,000 new term life policies, Up 9% compared to the prior year period on a comparable one life per policy basis. Productivity was at the upper end of the historical range at 0.24 policies per life license rep per month. We issued more than $32,000,000,000 New term life face amount in the quarter, a 16% increase over the prior year period. As a reminder, new face amount issued captures both face amount of newly issued policies and any additions to in force policies. This provides a more complete picture of the total protection we provide for our clients.

Speaker 2

Higher cost of living, of course, remains a real headwind for middle income families. We believe this is a key driver of 2nd quarter lapse experience, Which in the aggregate is 5% to 10% higher across all durations versus pre pandemic levels. To provide some context, at the height of the financial crisis in 2009, lapses were 15% higher than pre crisis levels. Given the magnitude of that crisis, it took about 2 years for lapse rates to normalize. It's impossible to know whether we've reached the height of this cycle or how long it will take for lapses to normalize.

Speaker 2

However, we believe the appeal of our new life insurance products and the continued growth in the size of our sales force Can partly overcome current inflationary pressures, which in turn give us confidence that we can grow full year policies issued by 4% to 6% in 2023. Turning to the ISP segment. Total sales of $2,400,000,000 during the quarter declined 11% Our Clients remain focused on their long term goals despite the economic uncertainty dominating headlines and they continue to invest systematically each month. However, new sales are still under pressure. We believe the compounding impact of high inflation over the last few years has slowed middle income families' ability It is also possible that clients find the current high rates and money market or other high yield savings options to be an attractive alternative to equity markets.

Speaker 2

Even though headwinds persisted, we recorded $542,000,000 of net new client inflows during the quarter. Ending client asset values have largely recovered and reached $91,600,000,000 at the end of the quarter. This represents a 6% difference Compared to their all time quarterly high of $97,300,000,000 set on December 31, 2021. Given the continued uncertainty, it's difficult to predict sales levels beyond the next few months. Based on July trends, we believe year over year sales will be down around 5 Looking next at Senior Health.

Speaker 2

Churn rates have stabilized in the Agent productivity and careful lead utilization. We believe these steps have positioned us well for the October opening of the annual enrollment period. We've adjusted our agent compensation model to incentivize and drive desired behavior and we've made meaningful improvements to technology that allow for a more efficient and improved enrollment process. We believe this business is generally headed in the right direction and continue to evaluate opportunities in the context an evolving industry. We do not anticipate the need to provide capital to this subsidiary in 2023 and we continue to evaluate future growth opportunities.

Speaker 2

Primerica's balance sheet remains very strong with cash at the holding company of approximately $340,000,000 at quarter end. We remain committed to returning capital to stockholders as evidenced by our repurchasing of an additional $111,000,000 of our common stock and paying $24,000,000 in regular dividends during the Q2. In summary, I'm pleased with our progress and the momentum building across our businesses. I'm proud that we can continue to serve our clients by providing them with the education and the motivation necessary to put their financial plans into action. Now, I'll turn it over to Allison.

Speaker 3

Thank you, and good morning, everyone. Now that you've heard from Glenn on distribution trends, let me expand on our Q2 financial results. Before doing so, I'd like to briefly discuss the immaterial errors in prior period results associated with the adoption of LDTI that we identified this Quarter. The errors were related to double counting certain reinsurance premiums and excluding a small portion of capitalized costs from the historical cash flows Used in our valuation model. In aggregate, these adjustments reduce the full year 2022 benefits and claims ratio By approximately 70 basis points to 57.9 percent and increased the 2022 DAC amortization ratio by 10 basis points to 11.8 percent.

Speaker 3

The adjustments added approximately $3,500,000 to pre tax income each quarter of roughly $0.07 to diluted adjusted operating earnings per share. While these changes were immaterial to the quarter's results, It was necessary to revise results back to the January 1, 2021 LDTI adoption date to properly reflect the cumulative effect on the balance sheet. Financial information prior to the Q2 of 2023 has been revised as reflected in the Q4 2022 revised restated financial supplement and the Q2 2023 financial supplement, both of which are available on our Investor Relations website. All year over year comparisons that follow are in relation to 2022 revised results. Now let's turn to our Q2 results, starting with the Term Life segment, where pre tax operating income Grew 9% year over year.

Speaker 3

Adjusted direct premiums grew 6% year over year, in line with our prior guidance. While lapse rates remain elevated across many durations, the heightened demand for our new term life insurance products has helped mitigate the associated loss of premium With solid projected sales growth during the second half of twenty twenty three, we remain confident that ADP growth will stay around 6% for the remainder Total operating revenue growth of 3% was lower than ADP growth, reflecting the continued rise in other Expected claims rather than being level like direct premiums are. While GAAP requires us to treat other stated premiums as a Hunter revenue, for performance analysis, we include the line item as a component of our benefit and claims ratio. The 2nd quarter benefit and claims ratio was 57.6% versus 57.7% in the prior year period. Both periods have lower than expected incurred claims, but at this point, we view this as normal volatility rather than an ongoing shift in claims experience.

Speaker 3

Given our close proximity to the LVT I adoption date, experienced variances are largely spread to future periods. We expect the full year 2023 benefits and claims ratio to be approximately 58%. The DAC ratio was 11.8% versus 11.7% in the prior year period, demonstrating the expected consistency in this ratio under LDTI. We expect the DAC ratio to stay around this level for the remainder of the year. LVTI requires us to review our assumptions at least annually, and we plan to do so during the Q3.

Speaker 3

While experience for our business has historically been very steady, the pandemic and current economic environment have our long term assumptions. One small assumption change we do expect to make is for general mortality improvement. As is typical in the industry, our assumptions provide for a modest level of future mortality improvement based on population trends. The assumption expires for a set number of years regardless of policy issue date. We expect a favorable impact In the Q3 of $1,000,000 to $3,000,000 from moving our mortality assumptions forward by a calendar year.

Speaker 3

To wrap up term life, the 2nd quarter insurance expense ratio was 7.5% compared to 8% in the prior year period. The first half of twenty twenty two included a Temporary step up in expenses due to the timing of the 2022 biennial convention and costs for a total of 3 field leadership events In 2022 as opposed to our usual pattern of 2 events per year. Consolidated operating expenses will be addressed later in my remarks. Turning to the Investment and Savings Products segment, 2nd quarter operating revenues of $215,000,000 to pre tax operating income of $50,000,000 declined by 4% 5%, respectively, as the recovery of client asset values helped offset Earnings pressure from lower investment sales. Sales based revenues decreased 15%, while revenue generating sales Sales 12%.

Speaker 3

Revenues declined at a higher rate than sales due to the discontinuation of front load products in Canada in June of last year. Sales based commission expenses declined in correlation with related revenues. Asset based revenues increased 5%, while average client asset values rose 1%, reflecting the favorable revenue dynamics of a higher mix of assets Managed accounts and mutual funds sold under the principal distributor model in Canada. Asset based Commission expenses increased in line with the related revenues after excluding revenues on Canadian Segregated Funds since the related expenses are in insurance commissions and amortization of DAC. Looking next at the results in our Senior Health segment, LTV per approved policy of $8.80 during the quarter improved on a year over year basis, largely due to annual carrier commission rate increases.

Speaker 3

Churn levels have stabilized in recent quarters, and we did not need to report a tail revenue adjustment this period. In contrast, a $5,400,000 negative tail revenue adjustment was recognized in the prior year period. Ask per approved policy declined 10% year over year as we continue to become more proficient in managing lead utilization. Keep in mind that second quarter activity is lower than the 4th and first quarters as fewer seniors are eligible to enroll in Medicare. Lead conversion rates typically declined during the Q2, which in turn increases labor and lead cost per sale.

Speaker 3

As a result, the LTV to CAC ratio was 0.9 times for the quarter. As Glenn noted earlier, We continue to operate prudently to ensure we are managing growth responsibly. We've recognized a pre tax operating loss of around $10,000,000 through June 30. We expect the full year loss to be at or slightly below this level With a loss in 3Q consistent with that recognized in 2Q and a modest profit in the Q4 during AEP. We do not expect that the Senior Health business will require additional capital to fund operations in 2023.

Speaker 3

The Corporate and Other Distributed Products segment recorded an adjusted loss of $3,600,000 during the quarter Compared to a loss of $9,100,000 during the prior year period. The improvement was driven by an $11,000,000 increase in net investment income, partially offset by higher operating expenses. We also recognized a $2,000,000 reinsurance recoverable write off on a block of discontinued products Our New York subsidiary from the expected liquidation of a reinsurer. Our average rate on new investment purchases was 5.46 percent for the quarter with an average rating of AA-. The portfolio's duration Remain relatively short at 4.7 years.

Speaker 3

While the recent rate environment has provided for higher earnings on cash and short term investments, We continue to look opportunistically for high quality longer term investments where we feel we are being paid for the risk. If the rate environment stays consistent, we expect NII to be around $34,000,000 per quarter for the remainder of 2023. As we noted last quarter, we have limited exposure to commercial real estate, especially office exposure, and the exposure we do have is an investment grade on average. Our invested asset portfolio ended the period at an unrealized loss of $288,000,000 which is largely due to the Steep rise in interest rates since the beginning of last year. We regularly evaluate the portfolio for Possible credit impairment and do not believe the large unrealized loss is due to significant credit concerns with our holdings.

Speaker 3

We continue to have the intent and ability to hold these investments until maturity. Finally, consolidated insurance and other operating expenses $142,000,000 during the quarter increased around 3% year over year. The primary drivers were higher technology spend, including rising software costs and continued investments in technology, higher employee related costs driven by market wage adjustments and fewer open positions, higher legal costs and as well as normal growth in our business. The year over year comparison benefited from $5,000,000 higher cost Looking ahead, we expect Q3 insurance and other operating expenses Increase around $12,000,000 or 9% year over year. The drivers of the increase are generally consistent with those seen in the second quarter, About half of the increase coming from higher compensation costs, another $4,000,000 from technology and $2,000,000 from normal growth in the business.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question comes from the line of Wilma Burtis with Raymond James. Please proceed with your questions.

Speaker 4

The 3Q results to be similar to 2Q given some feasible unfavorable unfavorability for the business?

Speaker 2

Yes. Well, generally, 2nd and third quarters are very similar in their reaction. As you know, the 4th quarter is largest production quarter with AEP and then the following Q1 with OEP is where the second level of business But second and third quarters generally look very similar. 3rd quarter could be even a little less activity than the 2nd quarter, but generally they're pretty close.

Speaker 4

Okay. Thank you. And then a quick follow-up on that one. It sounds like you're committed to no capital contributions for

Speaker 3

Have any significant capital contributions in 2024. As we've done throughout this year and we'll continue to do next We're going to build this business very prudently. The only way we would ever really need some capital to be infused is if we to have very dramatic growth, and that would then be a short term infusion of capital. But our plans right now are to continue with a relatively controlled growth based on what we are finding throughout this AEP and next OEP and to 2024 should grow from there. So again, there may be some, but if anything, it would be very small.

Speaker 4

Thank you. And then one more, could you just talk about the term life sales appear to be better than expected, while the ISP sales were a bit worse And expected, but it seems like there's a lot of cost of living pressures as you discussed. So maybe just talk about why it's impacting the segments a little bit

Speaker 2

Yes, Wilma, that's not that unusual to have the 2 businesses go in different directions Temporarily, that's the reason we enjoy the complementary nature of the 2 is often one is strong when the other is a little weak. That's what we're seeing right now. The strength in the Life business is driven by our growing sales force. We have stronger And also, I believe there's a continued positive impact of the improvements we made to our product set almost a year ago now. And so that is really overcoming the headwinds, we believe, of the higher cost of living in middle income households, Which we definitely feel that's a headwind.

Speaker 2

It's just that we've got a stronger tailwind from those 2 positives on the life side. The investment side, we believe, is being hampered by the Continued uncertainty and negativity that people are hearing about the marketplace even though returns are certainly improving in the market. There's still so many questions about what does the future hold, which are interest rates, have they gotten as high as they're going to get? As inflation slowed down, it certainly hadn't turned the opposite direction. And so prices are still increasing just at a slower rate.

Speaker 2

And there are alternatives because of the higher interest rates. So, all that's working together, I think, to impede the growth in our ISP business More so than you see in the Life business. But as we stated, we were coming off of record levels in 2022, particularly Q1 of last year and during 2021 and where we've landed right now is we're getting pretty close to The same quarterly numbers for sales as last year within a few percentage points is still significantly higher than where we were there pre pandemic. So, we had that spike during 2021, the 1st part of 2022 and things have come back down due to all those headwinds we described. But we're in a pretty strong position where we've landed and we do see that the comparisons are growing more favorable, As we noted in the prepared comments, down just probably a few percentage points in the next quarter.

Speaker 2

And so things are starting to stabilize. And if we can get some confidence In some of the conversations around the future, we believe we're in a good position for the future in our ISP business.

Speaker 4

Thank you very much.

Speaker 2

Certainly.

Operator

Our next question is from the line of Ryan Krueger with KBW.

Speaker 5

I had a, I guess, a somewhat similar, but slightly different question. Why do you think the interim life specifically that year that the inflationary pressures are impacting lapses, But not sales? Is it just more of a function of the new product and the excitement around that?

Speaker 2

Yes. Again, I think it's The same thing. I mean, sales generally follow sales force growth fundamentally and then the new product and the excitement around it, Our ability to meet the needs of families more easily, more quickly and with more clarity, I think, has got our sales force energized and excited about talking more new clients, but we do see every month as clients struggle with the higher cost of living, they're making those priority decisions About what bills get paid and what bills maybe are delayed to a later time and that does tend to impact persistency of sales that were made previously, Whether it was earlier this year or in past years. And so it is normal for those two dynamics to travel more together, But we just got positives on the front end of the business that I think are a little stronger and are pushing sales, while the families are struggling with all of their payments for all of their bills In a lot of situations, and that's having the negative impact on persistency.

Speaker 5

Okay. And then on the assumption review is Allison, is your just from your earlier comments, is your view that the higher lapses because they are likely a short term phenomenon, would it need to be factored into the longer term assumption?

Speaker 3

Yes, that is correct. We are our plan at this point is to treat any Fluctuations that we're seeing in lapses as experienced variances, not assumption changes.

Speaker 5

Okay, great. Thank you.

Operator

Our next question comes from the line of Jeff Schmitt with William Blair. Please proceed with your question.

Speaker 6

Hi, good morning, everyone. Good morning, Glenn. Question on the lap rates, and I think that you had mentioned this in your prepared Remarks, but have they fully normalized from the pandemic and now they're sort of weaker than historical levels? Are they still moving back to historical levels?

Speaker 3

Yes. So they have definitely normalized from what we saw through COVID, and that actually happened last So that wasn't a 2023 event. Again, this is a little bit of an art here. We're going back and trying to determine what pre pandemic was. So historical norms pre pandemic, the pandemic was A significant event, it did create new patterns and we don't know how much if any of that We'll continue on a long term basis.

Speaker 3

So just so you know, the way we come up with our version of what we're Pre pandemic is we're looking at 2019 activity. So when all is said and done, we are looking at things in relation to where we were Just prior to the pandemic and from that perspective, in aggregate, we're looking at about 5% to 7% higher. Is that Perfect. Is 2019 an exact picture of historical trends? No, but we think it's a good A proxy where we were heading into the pandemic.

Speaker 3

So again, 5% to 7% above right before the pandemic. Do believe it's largely driven by economic the economic environment simply because we're seeing it not just in sort Early duration persistency where maybe you would say somebody wasn't committed to the product. We're seeing it across many durations. And when you start to see people giving up a policy After several years of paying premiums on the term policy, you suspect it's largely because of economic factors.

Speaker 6

Got it. And then how many agents are licensed to sell investment products now? I think historically it was Around 24,000, but just given how strong sales have been and sort of continue to be, did interest in getting those licenses increase? Or how is the number trending?

Speaker 2

Yes. We're at the total U. S. And Canada, just a little over 25,000 at this point. And that's been Fairly stagnant.

Speaker 2

It doesn't move quickly. It has a different set of dynamics that drive it much like the difference in our 2 business lines, 2 major business lines that we discussed earlier. And you're right, when sales are strong and growing, there's more interest in getting license. When people see success In a business line they're not in, they tend to get interested in getting in that line of business. So we have seen some slowing of that licensing momentum as sales have come down off the record peaks.

Speaker 2

And we anticipate as we level out and start the next phase of growth, we'll see increased interest. And we always recognize that by growing the size of our life sales force, We're increasing the number of those that are eligible and likely to get licensed. So that's a good indicator of what could happen in the future. So, the growing life sales force is a positive for our investment business in the years to follow. So, we think when the attitudes

Speaker 7

Sure.

Operator

Our next question comes from the line of Suneet Kamath with Jefferies. Please proceed with your question.

Speaker 2

Good morning, Sami.

Speaker 8

Hey, good morning, guys. Just to go back to the lapse rate one more time in term, can you give us any color in terms of how the lapse Sort of developed as we moved through the Q2. I guess what I'm trying to figure out is, is the trend sort of That the lapses remain high or are they getting higher or lower? Just some directional help would be helpful.

Speaker 3

Yes. And again, all of this puts the caveat on what I said earlier that it's all done in relation to what we were seeing in 2019. And there is seasonality in our lapse rates. We've always seen it. The second quarter is historically a very Strong quarter for persistency.

Speaker 3

But with all that said, it looked like it was about in the 3% to 5% range in the 1st quarter, and it's in the 5 7% range in the Q2. What I don't know is that actually a progression that something is deteriorating or if Some of that is simply because of the seasonality in the business. But I'd say, again, given the fact that this is sort of a rough comparison just to 2019 and nothing exact, If you will, I think going from maybe the 3% to 5% to 7% is saying it's largely in the same zone, Maybe a slight bit of deterioration.

Speaker 8

Got it. Okay, that's helpful. And then I guess pivoting to Senior Health, you've talked a lot about wanting to get comfortable with the Profitability of the business before you sort of accelerate growth. Just from a timing perspective, I guess, how long do you think it will take for you guys to get your arms around This business, is it a couple of quarters? Or are we going to need to see results sort of through 2024 before you have a real good handle on kind of what's going on under the hood?

Speaker 8

Thanks.

Speaker 2

Yes, that's a great question, Suneet. As we look at it, we obviously are impatient to be able to make conclusions and decisions, But we'll balance that with some patients as well, because we recognize in this business the real quarters that we as we talked about earlier that you can evaluate Your success and your progress on are primarily the Q4 and the Q1. So, while we are working hard during quarters 2 and 3 to improve the business, You often don't see the results of your improvement and then can assess it until after you experience the Q4 and the following Q1, then you have time to assess that business. Obviously, sales are real time, but the quality of that business and the persistency of it takes some time. So, we're definitely going to be beyond this next AEP and OEP for us to be able to evaluate where we are and whether we think it's time to accelerate.

Speaker 2

So we think by the time we get beyond the next two periods, Q4 of this year and Q1 of next year, We'll have much more information about the results of the efforts we've made and we'll be able to make some more decisions at that point. We're taking it a step at a time. We're moving very deliberately. We don't want to get too far out over our skis until we really think we've got our arms wrapped around the business. So it's better to be a little too conservative than it is too aggressive in our opinion.

Speaker 8

Understood. Thank you.

Speaker 2

Sure.

Operator

Our next questions are from the line of Mark Hughes Mr. Hughes, your line is unmuted for questions.

Speaker 7

Yes, here I am. I'm sorry, I was on mute. Good morning. Morning, all.

Speaker 2

Good morning.

Speaker 7

Allison, in the Term Life business, the ceded premium ratio, I think you've Touched on this earlier and you probably explained this in the past, but I'll ask again. The ratio has been moving up 100, 150 bps Year over year for the last several quarters, does that continue? Is that a function of The interaction between the benefit ratio and the adjusted direct premiums, should that Stabilize, I'm just sort of thinking how to model that on a go forward basis. Should it continue to inch up or does it stabilize At some point here.

Speaker 3

Yes. So and again, like I said in my comments, according to GAAP, I have to call that a contra revenue. But realistically, the way we look at other ceded premiums analytically, it's a component of our benefits and claims ratio. That number is going to continue to grow. We see 90% of our mortality risk under YRT Reinsurance.

Speaker 3

Our direct premiums are level. So what a pre what an insured pays is the same for the entire level term period of their policy. But when you go the difference of the mortality cost in year 1 versus year 5 is significant. So the other ceded premium line Has always and will continue to grow much faster than the direct premium line. So there is nothing unusual about this.

Speaker 3

This trend will not Stop. I think what's really important to understand from a P and L perspective is you don't see any of that Volatility hitting the bottom line because the ceded reserves take all that into consideration and Smooth out or levelize out the cost of the reinsurance. So it is a function of the fact that GAAP requires the presentation a specific way, but economically, you have Look at what we're paying in line with the benefit cost we're getting through a reduction in our reserves. So you have to think about those 2 holistically, again, which is why we included as a component of the benefits and claims It does create a really strange anomaly when you look at our revenue growth because it artificially suppresses it, When realistically, again, that is just balancing out the growing cost of benefits as our block of business ages.

Speaker 7

And then did you give guidance for Term Life operating profit relative to just the direct premium?

Speaker 3

We didn't there is a little bit of lumpiness this quarter. Again, two things. 1 is persistence We saw strong in the Q2 and also this is the last quarter we have where we have this Benefit, if you will, of the fact that we had elevated operating expenses last year because of the timing of our field leadership events. Ship events. So I think it will come down a little bit from where it was in the Q2, but it should stay about this range.

Speaker 3

If you remember All the things I've been saying about LDTI and what you've seen thus far is from period to period, Actually, because we're not expecting any large assumption changes, the benefit ratio and the DAC ratio are going to remain Pretty consistent. The real anomaly or driver could be if there is any quarterly fluctuation in expenses, although at this point, like I said in my comments, we're not assuming anything outside of what we've been saying for the 3rd Q4 on operating expenses. So I didn't give a specific guidance.

Speaker 7

So maybe high 20s, 23% this quarter?

Speaker 3

No, it will be lower than that. It will be lower than that.

Speaker 7

Yes, no, high 20 High 20s.

Speaker 3

High 20s, I see what you're saying. It will be somewhere lower than the 23%. Again, it's really going to be a function of how operating expenses And if we have, the one thing that could be a volatility, and we see a little bit of it, in the last two quarters is if we have to do any remeasurements Based on mortality, actual experience, but again, that's been in the $1,000,000 to $2,000,000 range, so nothing too significant.

Speaker 7

Yes. Okay. And then Glenn, on the recruiting front, did you I think you gave guidance for the sales force growth for the Full year, did you make any comments about what you expect in terms of recruiting growth next quarter Balance of the year?

Speaker 2

Yes, Mark. We have because we provide incentives and recruiting numbers tend To move pretty significantly quarter to quarter, for example, in our comparisons for the Q3, you're going to be comparing to the convention incentives that we ran A year ago, coming out of the convention and we really spiked recruiting in the Q3. So, we won't recruit at those levels in the 3rd Because we're not running any incentives at this point. It's all kind of fundamental organic growth that we're seeing right now. So, we expect recruiting to continue to be strong, but we started trying to provide the net the sales force growth, So that you really understand when recruiting spikes and sometimes we don't get the pull through from licensing, rather than go through all that noise, we just kind of cut bottom line, which is the sales force growth.

Speaker 2

So for the Q3 specifically, we're expecting a strong recruiting quarter. It won't compare in top line numbers to all of the Special incentives we had a year ago, but we're expecting it to be a good quarter for us.

Speaker 7

Thank you very much.

Speaker 2

All right.

Operator

Thank you. This will conclude today's question and answer session and this also concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time and log off your computers. Thank you for your participation.

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