Good day, and welcome to the Primerica Third Quarter 2015 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference call over to Ms. Kathryn Kieser, Executive Vice President, Investor Relations. Ms. Kieser, the floor is yours, ma'am.
Thank you very much. Good morning, everyone. Welcome to Primerica's third quarter earnings call. A copy of our earnings release, financial supplement presentation, and webcast of today's call are available on our website at investors.primerica.com. Glenn Williams, our Chief Executive Officer, and Alison Rand up for questions. We reference certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures have limitations, and reconciliations between non-GAAP and GAAP financial measures are attached to our press release. You can see our GAAP results on page three of the presentation. We will also make forward-looking statements, and the company will not revise or update these statements to reflect new information, subsequent events, or changes in strategy.
Risks and uncertainties that could cause actual results to differ material from those expressed or implied are discussed in the company's 2014 annual report on form 10-K, as updated quarterly by our reports on form 10-Q. Now I'll turn the call over to Glenn.
Thank you, Kathryn, and good morning, everyone. Today, I will discuss our third quarter financial performance as well as distribution results. Beginning on page three of the presentation, you can see that during the third quarter of 2015, operating revenues increased by 5%, and net operating income grew 18% versus the prior year period. Strong operating results were driven by growth in the Term Life segment, including 21% growth in life insurance policies issued and a 12% increase in adjusted direct premiums. Investment and savings product segment revenues remained consistent with strong performance in the third quarter of 2014, despite market volatility and the declining Canadian dollar value.
Comparisons of year-over-year company-wide net operating income were impacted by approximately $3 million of unusually high incurred claims in the prior year period, as well as $5.1 million of employee equity award expense related to the addition of retirement provisions to the 2014 awards in the third quarter of last year. The declining Canadian dollar value reduced operating revenues by approximately $11.5 million and net operating income by approximately $2 million versus the prior year period. Strong performance and ongoing share repurchases drove record EPS of $0.98 and record ROAE of 17.7% on an operating basis in the third quarter. Year-to-date, ROAE is 16.4%, and we expect ROAE to increase to around 18% for the full year 2016, driven by solid performance as well as continued capital deployment next year.
During the third quarter of 2015, we repurchased $71.4 million or 1.6 million shares of common stock for a total of $181 million or 3.9 million shares repurchased through September 30, 2015. Year-to-date, we have returned over 100% of Primerica's net operating income to our stockholders through common stock repurchases and shareholder dividends. For the full year 2015, we expect to repurchase a total of $200 million of Primerica's common stock and have board authorization to deploy another $150 million of capital in 2016. In addition to strong financial performance, we've also experienced very positive distribution results. This year, we have successfully engaged all of the generations of the sales force, from our newest emerging sales force leaders to seasoned leaders who've grown their already strong businesses.
We leveraged this dynamic in the July convention with announcements focused on attracting millennials, incentives to drive sales and distribution growth, and fundamental business enhancements to improve our product offerings and client experience. During the convention, we focused sales force leaders on stretching their personal goals and the importance of growing the licensed sales force to achieve long-term success. The results speak for themselves. As you can see on page four, our life license sales force grew 7% to 104,702 at the end of September compared with the year-ago period. Combined with convention messaging and initiatives drove a 34% increase in recruiting of new representatives and 27% growth in new representatives obtaining a life insurance license versus the prior year period. In the third quarter, we achieved the highest number of new life licenses in a single quarter since becoming a public company.
This we've made to our licensing processes over the past several years to build licensing momentum simultaneously with recruiting growth. The percentage of licensed non-renewals and terminations in relation to the size of the sales force remain low, with continued consumer confidence within the middle-income market and increasing optimism in the ability to achieve success as a Primerica representative. This ratio tends to increase slightly in the fourth quarter with heavier state renewals at year-end. Our underlying fundamentals are strong, and we expect the size of our life license sales force to increase in the fourth quarter.
The size of our mutual fund licensed sales force also continued to grow in the third quarter, up 4% from the year-ago quarter, primarily due to ongoing growth in the size of the life insurance sales force and our continued focus on mutual fund licensing, as well as enhancing investment and savings product offerings. Now that we've spent some time on how we're growing the front end of the business, let's walk through how life insurance licensed representatives progress through the business. As you can see on slide five, we have 104,700 licensed representatives, and 81,100 of those have only a life insurance license. Approximately 90% of our representatives will remain part-time throughout their Primerica career as they learn about the business, serve clients, and build an organization. After representatives achieve success in the business, they may choose to obtain a mutual fund license.
This could be a few months to several years after they become life insurance licensed, most of whom are also appointed to sell Variable Annuities in the U.S. and segregated funds in Canada. Once representatives are successful in the investment business, they may go on to become investment advisor representatives and sell managed accounts. We currently have over 2,800 investment advisor representatives. It's also helpful to understand our retention of life license representatives. The average tenure for our 104,700 life license representatives is six years. As would be expected, representatives with both a life insurance and mutual fund license have a higher average tenure of eight years, and our investment advisor representatives have been with the company an average of 14 years.
Overall, we have a large number of representatives who have been with the company a substantial amount of time, including over 23,000 representatives who have been here more than 10 years and 8,600 who have been with us over 20 years. Turning to production results on page six. Term Life issued policies grew 21% compared with the prior year quarter, significantly outperforming the industry, which increased 2% year-over-year according to the Medical Information Bureau Life Index. Our larger life insurance licensed sales force and productivity that was in the high end of the range drove strong growth in the third quarter. Productivity increased in the quarter to 0.22 policies issued per life licensed representative per month from 0.19 in the third quarter a year ago and remained in a similar range to the 0.23 in the second quarter of 2015.
Productivity was driven by continued middle market consumer confidence, post-convention initiatives, and our ability to successfully meet the needs of the growing middle market. With only a 4% market share of the individual life insurance face amount issued in 2014, we continue to see significant opportunity for the future. Investment and savings products had net inflows of about $200 million, while ending client asset values declined 3% year-over-year to $45.85 billion, primarily reflecting market performance and the declining Canadian dollar. $3.7 billion were consistent with the strong sales in the prior year period. Canadian segregated funds experienced significant sales growth due to recent product enhancements and positive media recognition of product performance in the first half of 2015. Fixed Indexed Annuity sales increased 22% with the addition of another product provider and the recent introduction of a Fixed Indexed Annuity provider in Puerto Rico.
Conversely, Variable Annuity and managed account sales declined year-over-year as these larger ticket sales respond more quickly to market volatility than smaller investments. On a sequential quarter basis, total investment and savings product sales decreased 13% from the seasonally strong sales in the second quarter. Total client asset values were 7% lower than the end of the second quarter, primarily reflecting market performance and the declining Canadian dollar value in the third quarter of 2015. Regarding the Department of Labor, we remain actively engaged in the process and have continued to provide comments to help get the final rule to the right place. We are hopeful the DOL will make changes to the proposed rule, as their leadership has been quoted saying. Regardless of what happens, we will make the necessary adjustments to our business to ensure middle-income families receive sound investment advice for retirement savings.
Let me turn the call over to Alison to discuss financial results.
Thank you, Glenn, and good morning, everyone. Before I go through the quarter's results, let me spend a few minutes discussing the change we made this quarter to our basis of allocating net investment income and interest expense between segments. As you can see on slide seven, this change had the effect of moving the majority of net investment income and all interest expense previously reflected in Term Life to our Corporate and Other distributed product segments. There was no impact on the company's consolidated financial statements as a result of this change, nor does it influence the way we view the profitability of our products. We believe the new allocation method is a better reflection of how we evaluate our Term Life business and manage our invested asset portfolio.
Historically, we have used statutory reserves and required capital as a basis for allocating invested assets and income to Term Life. Over the last several years, we have successfully executed statutory reserve financing transactions that greatly reduced the level of invested assets we need to hold to support statutory reserves. As a result, we have chosen to allocate net investment income to Term Life such that it equally offsets the net interest accreted to the segment's GAAP future policy benefit reserves less the DAC acquisition cost in lieu of using a statutory-based approach. This method is consistent with our view that net investment income is not a key driver of earnings for the Term Life segment, nor does it heavily influence product pricing decisions.
Going forward, net investment income should be a small but modestly increasing component, a clearer view of long-term income dynamics for Term Life while showing the full performance of our invested asset portfolio in C&O such that market trends and their effect on investment income can be viewed holistically. Let me take this opportunity to reiterate that our Term Life business, by nature, generates predictable long-term recurring income that withstand fluctuations in the economy and the market. Slide eight helps to highlight this. We believe that the Term Life segment's operating income should grow at a rate consistent with the growth in adjusted direct premiums, with periodic fluctuations for unusual levels of incurred claims, persistency, and insurance expenses.
We expect adjusted direct premiums to continue to show attractive growth rates around 10% annually for the next several years as a result of the reinsurance transactions we entered into at the time of the IPO. There is further upside in growth from continued sales growth as earnings from higher sales emerge meaningfully over time. As an example, given the growth we have experienced in 2015, if we assume that Term Life sales grow by 5% annually for the next four years, our pre-tax Term Life earnings will be about $40 million higher in 2019 than they would have been had sales remained at 2014 levels for the five-year period. Term Life's operating income before income taxes as a percentage of adjusted direct premiums should be in the 17%-18% range on an annualized basis, with quarterly fluctuations for incurred claims, persistency, and insurance expenses.
Known seasonality in these items, such as higher than average first quarter employee-related expenses for equity award vesting and the benefit of seasonally higher persistency in the second quarter, will continue to impact quarterly results. Let me walk through this quarter's segment results. Starting on slide nine, our Term Life segment experienced strong growth year-over-year. Operating revenues grew 11%, driven by a 12% increase in adjusted direct premiums from the inherent growth trajectory in the segment, as well as strong recent sales trends. Operating income before income taxes was 37% higher than the same quarter last year, as the prior period results included heightened employee equity award expenses, as well as $3 million of incurred claims that were above historical levels. Current period results were also modestly impacted by the reprocessing of certain reinsurance transactions, which increased operating income before income taxes by $1.4 million.
Term Life operating income before income taxes as a percentage of adjusted direct premiums was 18.2%, up from 14.9% in the prior year period. The ratios we use to assess the business were all in line with expectations and improving versus the third quarter a year-ago. The ratio of benefits and claims to adjusted direct premiums decreased to 59.3% from 60% in the prior year period and reflect incurred claims that were generally in line with historical levels this quarter. The ratio of Term Life DAC amortization and insurance commissions to adjusted direct premiums declined to 15% from 15.4% in the third quarter of last year, reflecting slightly improved persistency. The ratio of insurance expenses to adjusted direct premiums at 8.2% was in line with expectations.
On a sequential quarter basis, operating income before income taxes as a percentage of adjusted direct premiums was consistent with the second quarter, primarily reflecting solid premium growth and the impact of the previously mentioned reprocessed reinsurance transactions in the third quarter, as well as somewhat elevated incurred claims in the second quarter. Persistency was lower than the strong seasonal persistency in the second quarter as expected. Moving now to our Investment Savings Products segment. On slide 10, you'll see our ISP operating revenues were flat with the prior year, while ISP operating income before income taxes was 6% lower than the year-ago period. The lower Canadian dollar value relative to the prior year negatively impacted the year-over-year comparison of pre-tax operating income by $1.7 million in the third quarter.
Revenue-generating product sales and sales-based revenue declined 2% and 3% respectively from the strong results experienced in the third quarter a year ago. Sales-based net revenue as a percentage of revenue-generating sales was 1.33%, down slightly from 1.37% in the third quarter a year ago. The variability in this metric was caused by fluctuations in sales mix of our products during the quarter. Asset-based revenues and average client asset values were consistent year-over-year, despite volatile market performance and the lower Canadian dollar value in the third quarter. We continue to see strong net inflows as our sales are balanced with a relatively low and stable level of redemptions as a percentage of assets. We believe our redemption rates are well below the industry average, reflecting the long-term relationships we have with our clients as they save for retirement.
During the third quarter, the ratio of asset-based net revenue as a percentage of average client asset values declined to 0.049% from 0.054% in the third quarter of last year. While the U.S. ratio was consistent between periods, the Canadian ratio declined to 0.111% from 0.123% in the year-ago period, primarily due to about a $1 million acceleration of DAC amortization related to lower segregated fund performance in the third quarter. Account-based revenues grew 12% year-over-year, largely reflecting the addition. On a sequential quarter basis, ISP operating revenue decreased 5%, and operating income before income taxes declined 8%, primarily reflecting 13% lower revenue generating product sales from the seasonally strong second quarter, and a 3% decline in average client asset value. Canadian segregated. Moving to the Corporate and Other Distributed Products segment.
As discussed earlier, the allocation change in net investment income results in the majority of net investment income and all interest expense being reflected in the C&O segment. In addition, this segment includes the run-off business of our New York subsidiary's non-Term Life insurance products, our non-core product lines, and corporate expenses not allocated to Term Life or ISP. On slide 11, you can see that Corporate and Other Distributed Products operating revenues decreased $2.5 million from the prior year period, and the operating loss before income taxes decreased slightly to $6.1 million. Benefits and claims for our New York subsidiary's non-Term Life insurance products were somewhat higher than in the prior year. Insurance and other operating expenses were lower than the prior year period, largely due to heightened employee equity award expense in the prior year.
Net investment income for the segment was down $2.1 million to $17.2 million due to lower incomes and calls, fixed income securities, lower yields on invested assets, and the continued deployment of excess capital. Our investments in cash, excluding the held-to-maturity asset held as part of a redundant reserve financing transaction, totaled $1.92 billion as of September 30th, down from $1.97 billion as of June 30th. This decline primarily reflects stock repurchases of approximately $71 million during the quarter, and a decrease in the net unrealized portfolio gains due to widening credit spreads and the currency translation impact of the lower Canadian dollar on our Canadian invested assets. Slide 12 provides a more detailed review of company-wide insurance and other operating expenses. Expenses of $70.7 million were $5.6 million lower than the third quarter of 2014, and more in line with the second quarter of 2015.
The year-over-year change largely reflects $5.1 million of expense that was incurred in the prior year period, as we introduced the employee equity award retirement provision in the third quarter of 2014 for that year's award. Expenses were also impacted by an increase of $1.9 million for premium and growth related expenses, and about $1 million in DOL related expenses. General reductions throughout the business more than offset these increases. Looking forward, we expect insurance and other operating expenses in the fourth quarter to be at a level consistent with third quarter results. Our effective tax rate for the third quarter decreased from both the prior benefits due to statute of limitations that expired during the third quarter, which lowered the effective income tax rate by 1.3% for the current period.
We continue to maintain a strong capital position with Primerica Life Insurance Company statutory risk-based capital ratio estimated to be in excess of 400%, and holding company liquidity of $65.6 million at the end of the third quarter. With that, I will open the call up to questions.
Thank you, ma'am. We will now begin the question and answer session. To ask a question, you may press star then one on a touchtone phone. If you're using a speakerphone, please pick up a handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. Again, it is star then one to ask a question. At this time, we'll just pause momentarily to assemble our roster. The first question we have comes from Suneet Kamath of UBS. Please go ahead.
Hi. Thanks. Good morning. I wanted to start with the DOL if I could. I think on the last quarter call we had talked about if the plan goes through as proposed, you'd operate outside the BIC, and as such, you'd have to have these levelized commissions. Have you spent any time talking to your manufacturing partners about how feasible it is to have levelized commissions across a variety of different products?
Yes. Good morning, Suneet. Good question. We have open conversations with our product providers on a preliminary basis. Without details of the final rule, it's a little difficult to frame it exactly, but we have talked with them about the topic, engaged in some very good conversations, and shown that they're interested in continuing those conversations. We've been unable to take them to a detailed level without more understanding of what the final rule might be. We certainly have those lines of communications open.
As you think about next steps here, I'm not asking for details, but are your conversations leading you to suggest that it's feasible to have levelized commissions across a variety of different products?
Yes. Of course, as we talk to each provider, we're speaking with them about their product sets. Of course, our product providers have large numbers of products under each umbrella. As we talk to those providers, we're discussing with them about levelizing or equalizing compensation, if you will, among all of their products. Then, of course, as we move from one provider to another, we make them aware of the potential for us to talk across providers in the future. Yes, absolutely, we are doing that, and we've gotten a good indication that that's a possibility if it should become necessary.
I will say, we mentioned this last quarter, that given the amount of work that goes into this, it is likely that we would have to limit the number of providers we work with. That being said, we feel like we could still have a full breadth of opportunity for our clients.
I guess doesn't limiting the number of product providers in some ways go against what the DOL is trying to do, which appears to me to be give as many options as possible?
No. First of all, Suneet, we operate in a simpler model with a simpler product set already, a narrower set of products, which we believe is appropriate for the middle market. That said, each of our mutual fund providers, more specifically, have a large number of products within their product set that cover all the asset classes. So we can give appropriate coverage to the asset classes as needed through a narrower set of providers than perhaps a more traditional upmarket company might find it necessary to do to meet the demands of the consumer. We don't believe there's a conflict in this view of what we're trying to accomplish in the DOL's view of breadth of product offering, because we will have coverage of all asset classes.
Understood. I guess the last one on this is just, we talked again, I think about this on the last call, just on the expense side, there's been a lot of figures thrown out there about expense increases for the industry related to this.
We have looked at that, of course, we have a very robust process in place today to operate under the current rules and feel like that covers most of the bases. Some of the things that are being discussed by the DOL that have been mentioned by the leadership of the DOL as potential for change as the rule evolves are managing the types of processes that create these expenses. Number 1 is we feel like we have most of the bases covered with our infrastructure in place. Topics of discussion that the DOL is working to address and simplify because the entire industry has raised that as an expense question and the possibility of building that infrastructure in time.
We feel good on both fronts that the things that are new and unusual, if you will, are being looked at by the DOL, yet we have infrastructure in place that can accommodate most of what we anticipate will be needed.
Okay. Thank you.
Next, we have Ryan Krueger of KBW.
Good morning, Ryan.
Hey, thanks. Hey, good morning. Just one follow-up on the level commission option. Do you think it would be feasible to have the level of the commission to be similar to, I guess, the average all-in commission that you have now under that type of option?
That is the discussion that we're having with our product providers, is to equalize, if you will, the commissions of a product set sort of on a weighted average of what we're experiencing today. That's correct.
I will just add to that. It may mean to some degree that there's movement by product, if you will, towards averages on both asset and sales- based, all three of those components. Part of it would be in the aggregate, I think your point is the answer is yes, you might see different composition than you see today by component.
Got it. I had a question on productivity of the sales force. The last couple of quarters it's been pretty strong. I know you've always talked about a 0.18-0.22 range. I guess you're kind of starting to run more towards the upper end of that. Do you think that's sustainable going forward?
Yeah, we're excited about the progress that's been made, we're always in process of trying to improve productivity to the upper end of that range. We've been successful in that, as you can tell, not just for a single quarter, but for several quarters now. I think that reflects the excitement level of our sales force, great field leadership that stepped up in an incredible way throughout 2015, not just in this quarter. We're encouraged by that and believe that we do have some momentum that's sustainable into the future. We hope to stay within that range, but toward the upper end of that range.
Okay, got it. Last one. RBC ratio, the release said over 400. I think the comment last quarter was over 430. Can you just discuss how much the RBC ratio declined and I guess, how you feel about where it stands at this point?
Sure. The specific reason for the crease, our capital deployment this year to $50 million, we went ahead and extracted certain dividends from Primerica Life. That was the key driver for the decline. I'll say the other component of the decline is the fact that we've been having very strong life production, obviously on a short-term basis, that does create some statutory strain, but in the long run, obviously creates far more capital than the short-term strain. With that said, we really do think the ratio is going to be somewhere in the low 400s, let's say between 400-420. Generally, there are some things that will happen periodically just based on the timing of when we take out statutory dividends, et cetera. For the most part, we think we're going to be in that low 400s range in the near term.
Thanks a lot.
Again, as a reminder, if you'd like to participate in today's Q&A, please press star then one on a touchtone phone. Again, it is star then one. Next, we have Steven Schwartz of Raymond James. Please go ahead.
Hey, good morning, everybody.
Good morning, Steven.
Hey, Glenn. Just a quick one back on the levelized commission before I go up north. Is the issue here so much you're getting Franklin, full disclosure, Franklin came to Raymond James and discussed this with us. Is the issue getting Franklin to do it, or is the issue really getting Franklin and Legg Mason to match each other?
Well, again, in working with our product providers, we do believe that if we had a single product provider that could accomplish that had the coverage of asset classes, that would give us what we need. I can't speak on behalf yet of how the product providers might work together, clearly we would engage them in that conversation, that would be a benefit. I think the broader our product set is, up to a certain limitation of too much complexity, would help us. Clearly we would lean in that direction. We start out talking with our product providers individually, get a read on their reaction, talk to them about working together, to try to give us and the rest of the industry that might use this model, by the way, a broader product set.
Okay. Thanks, Glenn. I have a series of questions on Canada. While we discussed the DOL, I think the Canadian thing is happening sooner. Everything I've read on the internet, and of course everything on the internet is true. Is that the new test is definitely coming January 1. I think on the last call you mentioned that the test is going to be broken up into four segments instead of one, everything I've read suggests that the test is going to be a lot harder than it has been. Do you agree with those statements?
Well, I think you've captured, Steven, our concern that the change was so radical, if you will, that it was impossible to predict the impact. You have to assume that a modular test, four mini tests, is more difficult to pass than one larger test because if you fail any one of the modules, you're out until you pass that module. On the positive side, if you pass three modules, you only have to go back and take the one you failed. There is some give and take in this, the concern that we had was we couldn't figure out how to predict impact.
Even though we were assured by regulators that the intent was not to make the test more difficult, we felt like the structure of the exam was going to make the test more difficult to pass, even if the questions were of similar difficulty level. Of course, as you know, we felt very strongly about that and brought legal action against two provinces as a result. One thing that has happened since we last spoke, is that we have settled those legal actions and dismissed our cases.
The reason we've done that is because we were able to negotiate a transition process, beginning with the change that you mentioned in January 1, going for a period of time where we could ease into the new process in a number of provinces by continuing to have compensatory scoring, a single exam rather than the modular exam, as we change, because there will be some change in questions and administration, and we can start to see impact on a transition basis over a period of time. There's not an exact period of time. There's a number of exam attempts that determine the length of the transition. What that does is it gives us a chance to see impact as we go and isolate these various facets that I just talked about that we're not sure of the impact going forward.
One thing about the transition period that was part of our settlement agreement, which by the way, these changes have been announced to the industry, so we're very confident that they actually are in play. It's not just a discussion that we've had with the two provinces and of course, Quebec, who administers the program. One is the compensatory scoring or the singular scoring for some provinces so we can compare the two exam methodologies. We're also having the new exam reviewed by a professional psychometrician, third party, independent, that can assess has the exam gotten more difficult, both the questions themselves and the process. Then that psychometrician will recommend changes to the exam should there be unintended consequences in the process.
In addition, there are ongoing stakeholder sessions that have been committed to in the settlement, transparency around the change in fees, transparency was appropriate to dismiss our cases and that we could manage through this and minimize the unintended consequences and flex our business model around what is happening. In addition to that, while all of that in the common law provinces, in the nine common law provinces and territories, is a change to what appears to be a more difficult exam process, although time will tell, it actually is a simpler process than what we're experiencing in the province of Quebec, which is the second most populous province for our business, and we anticipate to actually get a benefit from this change in Quebec, that will help offset some of the very difficult to measure possible negatives in the other provinces.
Net-net, we feel very good about this settlement. We believe we got the appropriate changes. They have been introduced and talked about to the rest of the industry, so it's not unique to Primerica. These are industry changes. As we prepare for 2016, we believe we're going to be able to manage through this and minimize significant disruption to the business.
Okay. It seems a lot of my questions looks like are going to be up in the air, I do want to ask this one with regards to Canada. Do you know, off the top of your head, what % of recruits and newly licensed reps were in Canada this quarter?
Generally, I don't know the answer for this quarter. We can look that up. Generally, what we see is Canada does run in the normal kind of 10% rule of thumb number for recruiting. Because the process is longer there, we see the licensing-
That's quite-- Then one for Alison, the reserve adjustment. The reinsurance adjustment, excuse me.
Yes.
What line items did that affect?
It would go through adjusted direct premiums and net premiums for that matter. Then it would also go through benefits and claims.
Okay. Do you have those numbers handy?
I believe it was just about over $3 million of adjusted direct premium increase, the net would make it about $1.6 to benefits and claims for a net pretax of $1.4.
I'm sorry. It was adjusted was $3 million. Net premium was how much?
$1.6 increase.
Then the benefit and claims?
I'm sorry. Let me repeat that. The $3 million is the same for adjusted direct premiums and net premiums.
Okay.
The $1.6 is the increase to benefits and claims for a net of $1.4.
All right. Thank you very much.
Thank you.
Very good.
Well, at this time, we have no further questions. This will conclude our question and answer session and today's conference call. I would like to thank management for their time today, and we thank you all for attending today's presentation. At this time, you may disconnect your lines.