Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primerica, Inc. Q3 Earnings Results Conference Call. [Operator Instructions] This call is being recorded. And I would now like to turn the conference over to Nicole Russell, Head of Investor Relations.

Ma'am, you may begin your conference..

Thank you, Keith. And good morning, everyone. Welcome to Primerica's second -- excuse me, Third Quarter Earnings Call. A copy of our earnings release, along with materials, relevant to today's call are posted on our Investor Relations section of our website at investors.primerica.com.

Joining our call today are our Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Alison Rand. Glenn and Alison will deliver prepared remarks, and then we will open the call up for questions.

During our call, some of our comments may contain forward-looking statements in accordance with the safe harbor provision of the Securities Litigation Reform Act. The company does not assume any duty to update or revise these statements to reflect new information.

We refer you to our most recent Form 10-K filing as modified by subsequent 10-Q filings 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.

Reconciliation of non-GAAP measures to their respective GAAP numbers are included at the end of the earnings press release and are available on our Investor Relations website. I would now like to turn the call over to Glenn..

Thank you, Nicole. And thanks, everyone, for joining us. Today, Alison and I will share the highlights from our most recent quarter, including financial results and how the pandemic continues to impact our business. Our third quarter was exceptionally strong with solid financial growth and sustained production momentum.

Our ability to adapt and gain experience in this environment is continuing to contribute to our success. However, COVID-19 disruptions are influencing us, both positively and negatively.

Some of the positive impacts of the pandemic include, consumer sentiment that results in stronger demand for both insurance protection and for our business opportunity. This led to a significant increase in new life sales, continued strong persistency and growth in recruiting.

The pandemic is also creating headwinds, including market uncertainty, which has a negative impact on ISP sales, although third quarter results were stronger than originally projected.

Life insurance licensing and renewals continue to be the most disrupted by the pandemic, as states and provinces worked through testing and processing backlogs and other temporary measures that were put in place because of COVID-19. Starting on slide three, our financial results show year-over-year growth across the board.

Adjusted operating revenues of $567 million increased 9%. Adjusted net operating income of $111 million increased 16%. And diluted adjusted operating income per share of $2.78 increased 23%. Operating ROAE was 28% compared to 24.9% in last year's third quarter.

As I noted earlier, demand for protection products and interest in our business opportunity are at an all-time high. However, COVID disruptions require us to navigate some unique operational challenges. Let me expand on these, starting with our distribution results on slide four.

During the third quarter, we recruited a total of 101,861 individuals, which represents a 41% increase compared to the same period last year. As we discussed last quarter, we aggressively discounted our licensing fee at the onset of the COVID pandemic to preserve our momentum.

While the discount ended and our licensee fee returned to $99 on August 1, we continued to see year-over-year increases in the number of new recruits during the months of August and September.

It's difficult to determine how much of the recent growth in recruiting is attributable to the fundamental strength in our business and how much may be aided by temporarily increased interest in our business opportunity. Some clarity on this matter should emerge over the next few quarters.

The testing and processing of permanent life insurance licenses remains challenged. State and provincial measures such as temporary licenses have provided an alternative licensing path and kept top line licensing numbers strong.

However, the extended period of time it now takes a recruit to complete the permanent licensing process puts pressure on our licensing pull-through rate. We are working to keep recruits engaged during this delay with our field training program and the opportunity to refer products that do not require a license.

The number of temporary and permanent licenses issued during the quarter was 13,138, up 4% year-over-year. Our sales force ended the quarter at 136,306, also up 4% year-over-year. Two state licensing measures impacted the size of the sales force.

Our quarter end life license count of 136,306 includes about 20 -- excuse me, includes about 5,200 COVID-temporary licenses and around 4,800 licenses with extended renewal dates. Early indications are that approximately 40% of the individuals with COVID-temporary licenses will eventually obtain a permanent license.

Each state has its own process for extending renewals, which makes an overall renewal rate difficult to project, but we believe the current blended rate of extended renewals that will ultimately renew is also about 40%. This rate reflects a unique situation in Illinois. Illinois has extended its renewal of expired licenses every month since April.

And we now have over 2,000 Illinois licenses with extensions, which could expire with less than one month's notice. We assume that 90% of this lot will not renew, which at some point in the future will reduce our sales force size by roughly 2,000.

While we're planning for this event as we run our business, it will eventually create noise in our sales force count. Our Term Life results on slide five reflect the field's quick response to navigating the challenge brought on by COVID-19 and our clients' desire to protect their families.

During the third quarter, we issued 100,199 new life insurance policies, an increase of 36% year-over-year. Our productivity rate at 0.25 policies per life insurance license representative per month remains well above our historical range of 0.18 to 0.22.

High productivity, when combined with a larger sales force, helped drive record life sales results. Turning to slide six. Similar to the term segment, results in the investment and savings product segment were stronger than expected.

Sales of $1.8 billion were down 1% year-over-year, as investors previously sidelined by market volatility earlier in the year returned to active investments. This led to a 26% increase in sales of managed accounts and a 5% increase in mutual fund sales.

However, annuity providers have been reducing living benefits, making them less attractive in the current low rate environment, thus creating a headwind for annuity sales.

Overall, net client inflows during the third quarter were $508 million, significantly higher than last year's comparable quarter as clients continue to stay invested in the markets. Our clients' commitment to their long-term goals is reflected in a historically low level of redemptions.

Client asset values ended the quarter at $73 billion, up 10% year-over-year, while average client asset values, which more closely correlate to revenues, were up 8% to $71.5 billion. Production in the fourth quarter is off to a solid start. Recruiting remains strong even without the discounted licensing fee.

And the momentum we saw in August and September continued into October. Likewise, licensing is improving, and the proportion of permanent to total licenses is growing. As previously discussed, the size of our life sales force will be impacted by states eliminating their temporary licensing options and determining how to handle extended renewals.

The recent strong trends in life sales have also continued into October. We expect fourth quarter issued policies to increase between 15% and 20%, resulting in full year-over-year growth of 20%. Our ability to meet the increased demand for life insurance protection has placed us on track to issue over $100 billion of new face amount during 2020.

This is a new record for us. While third quarter ISP sales were stronger than previously projected, increasing uncertainty is now pushing some investors to pause. With so much uncertainty in the markets, we think investors may stay on the sidelines for much of the fourth quarter.

We expect fourth quarter ISP sales to be down approximately 5% compared to the fourth quarter in 2019. A full year 2020 ISP sales to be relatively flat compared to 2019 results. Finally, our mortgage distribution business continues to progress. We have corporate licenses in seven states, and our corporate license is pending in additional states.

We continue to see strong demand from clients to refinance mortgage and consumer debt, and we're receiving excellent support from our partner, Quicken Loans. In addition, we're seeing good traction in both representative licensing and sales. With that, I'll turn it over to Alison..

Thank you, Glenn, and good morning, everyone. I will begin this morning by walking you through the quarter's key earnings driver by segment, followed by a review of companywide insurance and other operating expenses. As I do so, I will highlight where COVID-19 has impacted and likely will continue to impact our financial results.

I will end my prepared remarks with a discussion of our invested asset portfolio and capital and liquidity positions. Starting with the Term Life segment on slide seven. Operating revenues of $358 million grew 14% year-over-year, while operating income before taxes grew 26% to $105 million.

Term Life margins increased to 22.2% for the quarter and 20.1% in the prior year period, as tailwinds created by COVID-19, namely strong persistency and high sales levels, more than offset elevated claims experience.

We identified strong persistency as a COVID theme last quarter, and its favorable impact on earnings has significantly expanded in the third quarter. We saw a step-up in policy retention across all durations during the second quarter of 2020, which we attributed to the heightened value being placed on life insurance products during the pandemic.

While we had concerns that changes in government stimulus could revert some of these persistency gains, in actuality the ongoing uncertainty caused by the pandemic has led to further improvement in persistency. To put this in perspective, in the second quarter, policy lapses decreased an average of 15% year-over-year.

In the third quarter, the decrease in lapses grew to 35% year-over-year. The lower lapses we were seeing across all policy durations, leading to a level of policy persistency we have not seen in our history.

From an earnings standpoint, stronger persistency reduced DAC amortization by $22 million for the quarter, which was partially offset by increase benefit reserves of $8 million, for a net contribution of $14 million to pre-tax income. For comparison, the net income of favorable persistency on pre-tax income in the second quarter was $4 million.

October results continued to show favorable persistency levels. And if these trends continue through the end of the year, we estimate persistency will add about $8 million to fourth quarter earnings. We do not believe this level of policy retention is permanent and fully expect persistency to normalize once the pandemic risk subsides.

The timing of this normalization remains uncertain as just the level at which persistency will ultimately land. Prior to pandemic, we were experiencing improving trends in early duration persistency as a result of company retention initiatives.

We believe these actions, combined with the awareness that has been created about the value of life insurance, will be positive factors in determining where post-pandemic persistency rates settle. As Glenn discussed, policy issuance levels were strong in the third quarter.

And when combined with the considerably higher policy persistency, led to a 14% increase in adjusted direct premium year-over-year. This added another $2 million to the third quarter's pre-tax earnings. Year-to-date, adjusted direct premiums have grown 12%, and we expect the growth rate to be between 12.5% and 13% on a full year basis.

Death claims is another recurring COVID theme that impacted the quarter's results. We recorded $9 million of unfavorable claims experience in the third quarter, $8 million of which we attribute to COVID-related deaths, with the remaining being normal volatility. Our death rate rose somewhat in comparison to the rate experienced overall in the U.S.

and Canada, likely due to a decrease in the average age of COVID deaths in the population during the quarter. CDC data shows the portion of COVID deaths for ages under 65 increased from 20% to 23%, which increased our exposure.

Assuming the same demographics are impacted by COVID in the fourth quarter, and using the current estimate of about 85,000 deaths, we expect to incur about $9 million in COVID-related claims next quarter.

One last point to highlight about Term Life results for the quarter is that insurance commissions, which is a component of the DAC ratio, increased by approximately $2.5 million as a result of special licensing incentives and other non-deferrable programs.

The increased funding for these programs largely came from the cancellation of sales force events, which have historically been reflected in insurance expenses. This redirection of funding, coupled with the impact that COVID has had on general expense levels, led the Term Life expense ratio to decline to 6.7% from 7.7% in the prior year period.

As I mentioned earlier, we saw a strong increase in the Term Life operating margin this quarter. And on a year-to-date basis, the margin is 20.7% versus 19.5% in the prior year period. A lot of uncertainty due to the pandemic remains.

Taking into consideration fourth quarter new business assumptions setting, which is expected to reduce pre-tax earnings by about $3 million, we estimate that on a full year basis, the 2020 Term Life margin will be around 20%. Turning to slide eight.

ISP segment operating revenues of $176 million increased 2%, while pre-tax income of $51 million grew 5%. Sales-based revenues declined 5%, in line with revenue-generating sales, while an 8% increase in average client asset values drove the increase in asset-based revenue.

Expenses from both sales and asset-based commissions were largely in line with their respective revenues. Canadian segregated fund DAC amortization was slightly favorable as a result of market performance of the underlying funds. As Glenn mentioned, we expect fourth quarter ISP sales to be lower than the prior year by about 5%.

Based on the current sales mix, this equates to a year-over-year decline in sales-based net revenues of about $1 million in the fourth quarter.

We cannot predict how the markets will react to the election during the fourth quarter, but as a reminder, at the current asset mix, every $1 billion change in average client asset value results in a $500,000 change in asset-based net revenue per quarter.

On slide nine, companywide insurance and other operating expenses of $105 million during the third quarter increased 6% year-over-year and were largely in line with our prior guidance. Our priorities around strategic investments remain unchanged. We continue to invest in technology infrastructure and digital initiatives to modernize our business.

In addition to these ongoing initiatives, expenses were higher due in part to employee-related expenses, including the year-over-year impact of the annual true-up of our employee health benefits that takes place typically in the third quarter as well as continued investment in the expansion of our mortgage distribution program.

Lower expenses from COVID-19 restrictions continue to offset a portion of these increases. Looking ahead, we expect insurance and other operating expenses to come in at approximately $114 million in the fourth quarter. Let's move now to investment income and our invested asset portfolio on slide 10.

Adjusted net investment income on a consolidated basis was down slightly year-over-year, as the impact of lower yields on the portfolio were largely offset by a combination of growth in the size of the portfolio and income from called securities.

At the segment level, we continue to see more investment income allocated to the Term Life business to support the growth of the block of business, which is offset by lower income in the corporate and other segments. Our invested assets portfolio remains well diversified across industries and issuers.

Despite significant actions by rating agencies over the past few months, we maintained an average credit rating of A, and our below investment grade mix remains very manageable at about 4%. Credit spreads continued to tighten during the quarter, and the portfolio ended the period with an unrealized gain of almost $135 million.

Finally, on slide 11, liquidity at the holding company remains strong, with an invested assets in cash of $251 million at the end of September. Primerica Life statutory risk-based capital ratio is estimated to be 425% at quarter end. We believe our capital levels are more than sufficient to meet our operating needs.

As announced, our Board of Directors has declared a $0.40 per share dividend, again, this quarter. And we have completed approximately 231 million of share repurchases through the end of October. With that, operator, I will open the line up for questions..

Thank you. [Operator Instructions] The first question comes from Andrew Kligerman with Credit Suisse. Mr. Kligerman your line is live. All right, as we're not getting response, I'll move on to the next question, which comes from Mark Hughes with Truist..

Good Morning, Mark..

Good Morning, Glenn. Good Morning, Alison..

Good Morning..

Good Morning, Nicole. Glenn, when you think about the impact on recruiting, I think you said it was hard to judge how much was Primerica versus how much was kind of the COVID and focus on, as you say, business opportunities and protection. Any thoughts of -- why might it be Primerica? The COVID seems pretty clear.

I'm also interested in any expanded thoughts you've got on kind of what you're doing internally, and what could be driving at least some or a good portion of the improvement here?.

Sure. Well, I think it starts, Mark, with the momentum we had before the pandemic started, as we started seeing momentum increase and some of the positive results of a lot of the efforts we've put in over time at the very end of last year.

And of course January, February and the first half of March were extraordinarily strong, which means we kind of hit the disruption with a lot of momentum, which is very positive in powering through the uncertainty of the early days. And then of course, I do believe there is some additional interest based on the time.

That's the piece that we attribute to the pandemic is kind of the consumer sentiment or opportunity sentiment, if you will, on the recruiting side. But we've also gotten better at telling our story in both how we describe the Primerica opportunity.

And we're much more efficient in touching more lives because I think we've leveraged the capabilities of remote working, Zoom and other remote capabilities to tell our story to more people.

Of course, those were created or maybe magnified by the pandemic, forced by the pandemic, but they don't go away at the end of the pandemic with anything we've learned and advantages we've gained from that will continue.

So that's where it gets a little cloudy to try to figure out exactly how to differentiate between the two, but we're feeling very good about the things that we've done, that are fundamental to the business, that can continue beyond any potential change in the sentiment that's out there.

But at the same time, we want to take advantage of the sentiment that's here because it's genuine and it's real and it's helpful. It's positive for us, and we believe for those recruits as well. So we do believe there's a strong fundamental theme underlying it.

And we believe we can carry a lot of that through beyond any kind of normalization that happens, once we get beyond the major part of the pandemic..

You made a point about your ability to reach prospects using Zoom, that sort of thing.

The recruiting, just the way your field leadership is going about, getting in touch with people and kind of getting them enthused about the idea here, just could you talk about how it's -- how much it's shifted from in person to more electronic or digital?.

Sure. Well, it starts with the relationship, Mark. A recruit that comes to Primerica, generally has a warm market, a sphere of influence. And that's where they start to work and build their business. And in the old days, it might have been a drive-by visit or a telephone call, or real old days, it might have been a postcard.

Some way to initiate the contact and get the conversation started. And then of course that would lead in pre-COVID days generally to a face-to-face meeting. I think the front end of that works exactly the same way when somebody joins our business, they contact their warm market in whatever way is most convenient and most comfortable for them.

A lot of social media involved in that just reaching out to your friends on social media through a direct message. Not en masse communication, but in a one-on-one connection that's often facilitated by social media. And that's an introductory kind of conversation that's followed up with a presentation of our opportunity.

That's generally assisted by someone who's very familiar or a field training manager or someone like that, a field trainer or regional vice president joins.

And that's the piece that was done that after the initial contact, which is being done very efficiently today in so many different ways, that first meeting is what has done more often now through Zoom or some of the kind of web conferencing capability. And of course it's incredibly efficient.

As long as licenses are in place, state lines and provincial borders are not as critical. Time and commute distance is not as significant. And so it's just a much more efficient way as long as we measure it, make sure it remains effective, and we're getting the results.

Doing 10 Zoom conferences but not getting anyone interested is not as effective as doing one face to face where it's permitted and having someone say, "I'd like to give Primerica a try." So we're really getting the leverage kind of in that second step, if you will, not the initial contact.

But in that first meeting is being done much more frequently electronically now. And I would say that our recruiters are now -- where regulations permit and it's -- health protocols are appropriate, are using a combination of Zoom and in person to find the most effective combination.

And that probably differs by personality, both the recruiter and the recruit. But it gives us more options than we've ever had. And those are some of the positives, I think, we carry beyond the pandemic..

Thank you for that. Alison, early thoughts around expenses next year? You've got a lot of moving parts with COVID, plus and minus, and with new investments in technology.

How should we think about next year roughly?.

Yes, and it's a little early for us to share that guidance. We're actually in the process of finalizing our budget to present to our Board, at least our preliminary budgets later this month. But just some things to think about, and again, a lot depends on when restrictions that are COVID related would go away.

But assuming they go away relatively soon, let's say, we think certain things go back to normal. We think things like our travel, I'd say, 3/4 or 2/3 go back to normal. I do believe there are aspects of things that we've started to do remotely that can permanently replace having to get on a plane and go places.

But again, those aren't super significant components of our expense base. We are currently -- we have, obviously in the game plan for next year, both the convention and an incentive trip. What happens around those, always is question. We're moving forward, obviously, full steam ahead.

I think from an expense standpoint, we should keep in mind is, we fully expect to take whatever funds we have earmarked toward those events and ensure that, that gets pushed back into the field, either via events or some incentive or the like.

So, you might see some geography, like we've seen this year, between insurance commissions and operating expenses. But again, our commitment to those endeavors hasn't changed. We've talked about -- I'm not giving you numbers, I'm giving you just bunch of theories here, some things to consider. We've talked about our mortgage program.

That's a place where in operating expenses, you'll see sort of an increase there because we have to do a lot to build out our infrastructure. Of course, that will lend itself to being something that's revenue generating, both next year and then to a greater extent into the future. And we continue to obviously invest in technologies.

I think the level at which we've hit sort of an ongoing operating level at this point. I do think it will still be a place where you're going to see elevated increases by 6%, 7% maybe, but nothing to the tune of what necessarily we talked about in the past. So those are probably some of the major themes that I can think of that are out there.

You've heard Glenn mention, there's a lot going on, social media, making sure we have ourselves well positioned from both a reputational standpoint, dealing with social media and the like, and then dealing with any other things that are going on in the environment around us, whether it be regulatory or just economic.

So can't give you a number now, gave you a lot of food for thought. I would expect that when we do our fourth quarter call in February, we will give you some number that you can then deal with..

Thank you..

Thank you. [Operator Instructions] And the next question comes from Jeff Schmitt with William Blair..

Hi, Good Morning. Question on the conversion rate, just looking at the new life licensed reps moved up some, it was around 13% of total recruits. And I know there's kind of a lot of moving parts in that right now, and I think you mentioned that testing procedures are still a challenge.

But are you seeing that really start to improve even just in the last month? I think you typically have kind of strong conversions in December.

I mean can that normalize fairly quickly? Or are there enough issues where that could take a number of quarters spill?.

Yeah. It is getting better, Jeff, there's no question. We're seeing much better pull-through of permanent licenses, and fewer and fewer states are even issuing the COVID temps now.. And I think it peaked at about 25 usable states had COVID temps, and we're down now to about 11.

So it is getting better as far as states are back to issuing permanent licenses within a reasonable time frame. The time frames are still extended, unfortunately. And the longer someone -- a recruit, has to live in that zone between becoming a recruit and getting a license, delays -- almost always hurt our pull-through rates.

So we're working hard to compress those time frames as much as we can. But there's some states that are just dealing with backlogs, they're dealing -- because it's not just testing, there's also fingerprinting in some states, processing of the applications. Finding proctors for remote testing has emerged.

A few technical glitches in the remote testing capability have slowed things down. So there's still a bunch of things out there. So to give you a time frame on it, I think it is going to be beyond year-end before we could say things are pretty much to normal. But it is improving and moving in the right direction, and we feel good about that..

Okay, that's helpful.

The 5,200 sales agents with temporary licenses, I'm just curious, what was the type of productivity for them? I mean, did they sort of sign up because they had a sale to make? Or was productivity not much for that group?.

It was definitely life. Remember, as we think about productivity, of course you have to have a license first to be able to measure productivity, or else we can't see sales activity that you do. You're not allowed to do it without a license. So -- but in these states that issued these licenses, they were issued very quickly.

And at many times, they were still training to take place. It's not just giving a state license and you're ready to go. There's the training process and all the skills you need to be able to do our business. And quite frankly, some of those licenses were so short, people never got trained enough to use them.

It was a very interesting set of dynamics to have people get licensed so fast, but with such a short fuse that the license expires. So they were definitely less productive than going through a longer process or normal process.

But at the same time, based on the alternative of just sitting out there and waiting, that's very discouraging for a new recruit. And we find that, that creates discouragement that leads to people saying, "I'm not going to try this now. I'm not interested in Primerica now, I'll check back at another time," and we see them drop out quickly.

So while it certainly wasn't perfect, it was a huge advantage to have that alternative path during this time. And it helped us, I believe net-net, retain more people and therefore, grow our business. But as you point out, it was a bumpy process with a lot of imperfections..

Okay.

And then could you just give us an update on the number of sales agents that can sell investment products? Have you seen that change much through the pandemic? Or has that been fairly flat?.

It's been fairly flat. We have seen a slight increase in very small numbers. We would categorize it as flat. The good news is, that process was disrupted as well, as you might imagine. Because many times, it's the same testing providers with the same types of providers that provide those exams.

And fortunately, FINRA moved fairly quickly to move to remote testing. And so we didn't see as much disruption in the pipeline of people getting licensed because it was -- they reacted quickly and that pipeline moves a little slower. So the good news is that we were able to maintain things that were flat.

There was a lot of distraction from focusing on that process with as much disruption as we had in our overall business, particularly in life licensing.

Our field leadership to a certain extent said, "we're going to focus on making sure we keep life licensing going, and we'll get back to securities licensing or mutual fund licensing later." And so there was a focused shift toward life in order to kind of preserve the momentum that we had early in the year.

But even through all of that, we were able to maintain those numbers as flat in licensing and sales force size. So we're feeling that we're at a good spot to build from here on that..

Okay, that is great. Thank you. Thanks for the answers..

Certainly Jeff, thank you..

Thank you. And the next question is a follow-up from Mark Hughes with Truist..

Hello, Mark..

Hello.

Alison, refresh me again on the timing on the YRT, the reinsurance when you go through that process of purchasing it, possible impact on pricing? What's that dynamic again?.

Sure. Actually, the contracts sort of self-renew. So we don't go out for rebid every year. We go out every handful of years when we see that a period has gone by and there's been mortality improvement or the like. So it's not a process we reprice each year.

We do, from time to time, have reinsurers reach out to us and say they're not interested in staying in the pool, or they're interested in taking on a larger share, but there's no sort of set timing. Those all annually renew, unless they cancel or unless we've changed them. So by default, they'll all renew come January 1.

We are not currently really looking at any pool changes for January one at this point or anticipating any significant changes at this point..

And then on the persistency, if that continues to be very good at this level, how does the benefit play out over time? Is there an impact once you lap the benefit? Could you talk about that dynamic?.

Yeah. And I tried to address this to some degree in my prepared remarks, but the difficulty is we don't know where this will land. Just to reiterate, what we are seeing right now is a strength in policy retention that quite frankly we have never seen before. And it is across all policy durations. So usually you get fluctuations.

And when I talk about changes and persistency, I'm talking about first, second, third, where people still are maybe not fully committed, or they haven't invested so much time, money, energy in the policy that they're more willing to potentially walk away from it.

But when you look at the latter years, especially once somebody has been paying their premiums seven to 10 years, we hardly ever see a shift in those persistency rates. We're seeing those rates go up significantly.

So just as you think about how all that impacts current financials, if you have a policy that's been on the books for 10 years and the rate of persistency is increasing on those -- on that block of policies, that actually has a greater impact on benefit reserves, which obviously is a negative. You have to put up greater reserve increases.

Then it would impact or slow down the DAC annotation, because by then so much of the DAC is amortized. The flip is true, if it happens on early duration. And that's in fact what we're very much seeing, which is why the impact on the DAC has been so substantial -- was so substantial in the third quarter.

And as I indicated, we expect it to continue into the fourth quarter. The concern is, if in fact, there is a large shift in sentiment, do we lose some of these current policies that are going on the books? Are people buying life insurance as quite frankly a temporary measure? We can't answer that.

Obviously, what we are doing is we're very aware of that. Glenn and team are working very diligently with our sales force. Our sales force is extremely aware of that. The good thing is they are partners of ours in this. This will -- if those policies fall off, it impacts them financially. So they have a very strong vested interest as well.

And again going into this whole experience, and it's hard to even remember what life was like before March, but going into this whole experience, we were really seeing an improving trend in our early persistency because of these types of actions and protocols that we put in place with our sales force.

And so we continue to remind them of how important they are, we continue to remind them of their responsibilities and their need, how much benefit there is to making sure these clients stay on the books.

And we continue to interact with those clients to a greater extent than we ever have in the past, just to -- our development, we've talked about technology. I mentioned it earlier in expenses. A lot of that money is going toward things like client relationship management.

And so all the things that we're doing to continue to expand, how we can reach and impact our clients on an ongoing basis, are all meant to help maintain a good level of persistency once this pandemic gets behind us, but there will be a disruption.

As I said clearly, I do not expect this level of persistency to, no pun intended, but persist after the pandemic..

Thank you..

You are welcome..

Thank you. That concludes question-and-answer session as well as today's call. Thank you so much for attending today's presentation. You may now disconnect your lines..