Earnings Call Transcript - PRI Q1 2023

Operator, Operator

Greeting and welcome to Primerica's First Quarter 2023 Earnings Conference Call. Currently, all participants are in a listen-only mode. A short question-and-answer session will take place after the formal presentation. As a reminder, this conference is being recorded.

Nicole Russell, Head of Investor Relations

Thank you, Maria, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings press release along with materials relevant to today's call are posted on the Investor Relations section of our website. 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'll open the call up for your questions. 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 obligations to update these statements to reflect new information. We refer you to our most recent Form 10-K 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 non-GAAP measures to their respective GAAP numbers are included at the end of our earnings press release and available on our Investor Relations website. I would now like to turn the call over to Glenn.

Glenn Williams, CEO

Thank you, Nicole, and thanks everyone for joining us today. We're encouraged by our first quarter performance reflecting positive results from our focus on growing distribution capabilities and improving the attractiveness of our products. Our unique ability to meet the financial needs of middle-income families is attracting more people to our entrepreneurial opportunity. These dynamics have created momentum in recruiting and licensing, resulting in sales force growth. In addition, both our clients and our sales force have reacted positively to our new series of Term Life products, leading to growth in sales. Although securities market conditions continue to create resistance to growth in our ISP sales, clients' desire for financial guidance remained strong. Starting with a quick recap of our financial results. Adjusted operating revenues of $695 million remain largely unchanged year-over-year, while adjusted net operating income of $129 million grew 10%. These results reflect the continued growth in Term Life premiums, the benefit of higher interest rates on net investment income and our progress in improving the results of our Senior Health business. The quarter was also negatively impacted by persistent inflation and continued equity market volatility that pressured ISP and Term Life sales and led to a modest increase in policy lapses. On the capital deployment front, we repurchased $85 million of our common stock and paid $24 million in regular dividends during the first quarter. Given the strength of our capital and liquidity positions, we believe we will meet our targeted repurchases for the year of $375 million. Recognizing the importance of growing the sales force, both the home office and field leadership teams are focused on its key components: recruiting and licensing. Starting with recruiting, momentum remained solid with approximately 93,500 individuals joining Primerica during the first quarter. This represents a 10% increase over the prior-year period. Licensing results were similarly strong with more than 11,000 new life licensed reps added during the quarter, which represents an 11% increase year-over-year. We ended the quarter with 136,430 life licensed reps, which was slightly elevated due to delays in processing about 800 terminations by the State of Florida. These terminations should all be processed during the second quarter and we continue to believe that we can grow the sales force around 3% in 2023. Turning next to our production results. The new Term Life insurance products introduced last fall have given the sales force an increased degree of enthusiasm. By introducing more rate classes, we're able to better match risk and price which allows our clients to potentially purchase more insurance coverage. During the quarter, we issued 84,500 new life insurance policies, which represents an increase of nearly 2% year-over-year after adjusting the prior year figure to reflect a one life per policy issued equivalent. Productivity at 0.21 policies per life licensed rep per month remained in our historical range of 0.20 to 0.24. In addition to issued policies, we believe estimated annualized issued Term Life premiums and issued Term Life face amounts provide useful information about our Term Life business. These figures capture the amount of protection in newly issued policies as well as additions to coverage in force policies. During the quarter, estimated annualized issued Term Life premiums were $89 million, up 6%, while newly issued face amount of $28.1 billion grew 14% year-over-year. Looking ahead, we believe the high cost of living will moderate sales growth in the near term, where we believe full year growth in issued policies will be in the mid-single digit range. Turning to the Investment and Savings Products segment, sales of $2.3 billion declined 25% compared to the first quarter of 2022, which was our largest sales quarter ever. Client asset values ended the quarter at $87.6 billion, up around 4% since the beginning of the year, but down 6% versus March 31, 2022. Volatility in the equity market continues to negatively impact large transactions such as rollovers. However, we see very little change in the number of automatic monthly investment transactions or redemption activity. Net inflows during the quarter were $642 million. We believe that our clients' continued focus on long-term goals along with systematic monthly investing sets Primerica apart from many other distributors. Considering the current market environment, we expect second quarter ISP sales could decline as much as 7% to 10% year-over-year, but ongoing uncertainty makes it difficult to project too much further ahead. We turn now to our Senior Health business. Results for the quarter were in line with our expectations and our efforts to maintain controlled growth during the fourth quarter's AEP and this quarter's OEP. Progress has been made on our goal of improving unit economics, first quarter LTV to CAC ratio was 1.1. As we discussed last quarter, we deliberately entered the 2022 enrollment in the 2023 renewal periods with about half the number of agents compared to the previous year and focused on agent productivity. The early results of these efforts are encouraging. We are also pleased that leads sourced by Senior Health certified Primerica representatives represented 10% of first quarter sales volume, up from 4% last year. These leads remain attractive in terms of conversion rates and early indications are more favorable persistency. We're encouraged by the progress of the e-TeleQuote team over the last three quarters. It is clear that we need to keep working towards scaling the business and we will continue to evaluate how best to do so. While it's still early, our efforts to grow judiciously are consistent with our plan to achieve adequate volume supported by reasonable and growing margins while controlling the capital required by the business. Finally, I'm proud of the Primerica team and the steady progress we are making, executing against our plan to grow the size of the sales force. It's clear that middle-income families need help navigating these uncertain times. The current economic conditions underscore the important role that Primerica representatives play in providing education and guidance to their clients, keeping them focused on the future and working toward financial independence.

Alison Rand, CFO

Thank you, Glenn, and good morning, everyone. A quick housekeeping item to mention before I review our first quarter financial results. Last Tuesday, we filed a Form 8-K which provided financial results for the year ended December 2021 and for each quarter of 2022 under the new accounting standard for long-duration targeting improvements or LDTI. The revised results also recognize all net investment income in the Corporate and Other segment. An adjusted version of our fourth quarter 2022 financial supplement can be found on the Financial Info tab of our Investor Relations website. Starting with the Term Life segment. Operating revenues of $421 million during the quarter increased 3% year-over-year and pre-tax operating income of $127 million increased 7% compared to the first quarter of 2022. The pre-tax operating margin during the quarter was 21.4% versus 21.2% in the prior-year period. Adjusted direct premiums grew 6% year-over-year in the first quarter in line with expectations. Assuming the mid-single digit sales growth, Glenn discussed earlier, combined with the size and stability of our in-force premium days, we expect ADP growth of around 6% to continue for the remainder of 2023. The DAC amortization ratio for the quarter was 11.8% versus 11.7% in the prior-year period. As discussed in the last earnings call, we expect the DAC ratio under LDTI to be very stable from period to period and around 12% each quarter. Moving to the benefits and claims ratio. The first quarter ratio was 58.7% compared to 58.9% in the prior-year period, reflecting the stability we expected from LDTI. The benefits and claims ratio came in slightly higher than the preliminary estimate of around 58% we provided during our fourth quarter earnings call. As we finalized all of our processes related to the adoption of LDTI, we found a modification that was needed to properly reflect the disability incident rate under our waiver of premium rider. Since the liabilities for future waves policy premium versus a death benefit, it is not subject to YRT reinsurance, and therefore, led to a disproportionate increase in the benefits and claims ratio. We expect the full year 2023 benefits and claims ratio to generally be in line with first quarter results. With the adoption of LDTI, the benefits and claims ratio now includes the future policy benefit remeasurement gain loss. This line item reflects the cumulative effect of assumption changes and experience variances back to the latter of the 1/1/21 transition date or the policy issued date on the current period beginning with reserve balance. Given our proximity to the transition date, in the near term, assumption changes and experience variances will largely be recognized in future periods by unlocking the rate at which benefit reserves are accrued. Given the weighted average duration of our future policy benefit liability, we should reach a steady-state about 50% of assumption changes and experience variances being reflected in the period of occurrence in 2028 or 2029. The remeasurement gain loss was de minimis in the first quarter as claims experience for the period was largely in line with LDTI assumptions. While persistency deteriorated slightly versus pre-pandemic levels, it does not have a significant impact on the net liability for future policy benefit nor as we discussed last quarter, does it have a significant impact on DAC under LDTI. If current trends continue, we do not anticipate any meaningful revisions when we perform our annual unlocking of reserve assumptions in the third quarter. The insurance expense ratio was slightly higher in Q1 than we expect it to be for the remainder of the year. Given this and the consistency in the DAC and benefits and claims ratios from period to period, we expect the full year Life margins to be near 22%. Turning next to the Investment and Savings Products segment. First quarter operating revenues of $210 million declined 13% compared to the same period last year, while pre-tax operating income of $56 million declined 16%. Market volatility continues to put downward pressure on both sales and client asset value. Year-over-year revenue generating sales declined 29%, which led to a 30% decline in sales-based revenues and commission expenses. Asset-based revenues, which benefited from a mix-shift towards products on which we earn higher asset-based fees such as managed accounts and mutual fund sales under the PD model in Canada declined 1% year-over-year, while average client asset values declined 8%. Asset-based commission expenses were generally in line with asset-based revenues after excluding revenues from segregated funds for which asset-based expenses are recognized as insurance commissions in DAC amortization. Continuing with results in our Senior Health segment. As Glenn mentioned earlier, we continue to make progress building a sound Senior Health business and our profitability metrics are improving. LTV's per approved policy for the quarter were $856, generally in line with expectations. Both the charge-back rate on business sold during the fourth quarter AEP and the renewal rate for the January 1st annual renewal cycle were in line with our revenue assumptions and therefore we did not need to recognize a negative revenue tail adjustment this quarter. We believe this is indicative of both our significant progress in refining our revenue recognition model as well as a stabilization of churn trends in the marketplace. CAC per approved policy improved to $814 during the quarter, reflecting our progress in managing leads selectively and efficiently. Looking ahead, we expect normal seasonality to pressure CAC as there is a limited number of seniors who can enroll in Medicare during the second and third quarters. We expect to incur modest losses in the second and third quarters and a profit in fourth quarter during AEP. On a full year basis, we expect segment losses to be around in the $5 million range. Currently, we do not expect that the Senior Health business will require capital from the holding company to fund operations in 2023. The Corporate and Other Distributed Products segment adjusted loss of $11 million decreased $3.5 million year-over-year. The improvement was driven by significantly higher net investment income partly offset by lower mortgage loan sales and volatility in the small block of discontinued business in our New York subsidiary. Adjusted net investment income increased $10 million compared to the prior-year period. Growth in the portfolio contributed to the increase in NII, but the rise in interest rates over the last year had been the primary driver. We've seen both steadily rising average book yields in our fixed maturity portfolio as well as rising yields for our cash and money market balances, which alone added $5 million NII in the quarter year-over-year. If the rate environment stays consistent, we expect NII to be around $32 million per quarter for the remainder of 2023. On a year-over-year basis, we expect NII to be favorable by about $9 million in 2Q and continue to be favorable for the remainder of the year, but to a lesser extent given the rise in rates began last year. As we've noted in the past, given the nature of our business, we are not constrained by our liability duration in choosing how best to invest our portfolio. We are focused on optimizing our income while also maintaining a conservative portfolio that does not subject us to undue risk. On a regular basis, we review the relative value of purchase opportunities in various asset classes and durations looking for those that we feel pay us for the risk. The inversion of the yield curve has allowed us to invest at attractive levels without extending duration. Our new money rate of almost 5.6% is up more than 200 basis points compared to the first quarter of 2022, while the average duration of purchases remained relatively short at 4.3 years. Commercial real estate has received a lot of attention recently, particularly office space. We do not write any direct mortgages and most of our exposure is in syndicated CMBS and publicly traded REITs, which combined account for about 8% of our portfolio. Office space exposure is estimated to be less than 3% of the portfolio. With respect to our CMBS holdings, our average rating is AA minus with a weighted average loan to value of about 60% and weighted average debt service coverage of 2.4 times. Our public bond issued REITs have an average rating of BBB plus. There's also been a lot of attention paid to stress in the regional banking sector. With respect to regional banks, we have limited exposure at around $25 million or less than 1% of the portfolio with an average rating of BBB plus. We hold a small position of less than $3 million in Silicon Valley Bank bonds, on which we took a $2 million credit impairment during the quarter. We continually review our holdings and have not identified any other issues that would prompt us to record any impairment. Moving to consolidated insurance and other operating expenses, the total incurred for the quarter of $151 million increased $6 million or 4% versus the prior-year period. We experienced higher technology spend during the quarter after a slower start last year and are also seeing higher employee and growth-related costs that are in line with the overall growth in the business. The year-over-year comparison benefited from lower sales force leadership event costs in the current period as we resumed our typical two per year event cadence after holding an additional event in 2022. Looking ahead, we expect second quarter insurance and other operating expenses to increase 2% to 3% year-over-year, driven by continued growth in the business, technology spend, and employee-related costs. We will also benefit from $5 million lower costs associated with sales force leadership events due to the convention in the prior year. We remain on pace for a full year insurance and other operating expense growth rate of 4% to 5%. Liquidity at the holding company remains strong with invested assets and cash of $330 million and Primerica Life statutory risk-based capital ratio was estimated to be 455% as of March 31st, 2023. We continue to take ordinary dividends from Primerica Life as available and plan to modestly reduce our RBC over time.

Operator, Operator

I'll open the line for questions.

Daniel Bergman, Analyst

Thanks. Good morning. I guess to start just with recruiting continuing to be strong this quarter. I just want to see if you could give any more color on the key drivers of the strength? Were there any incentives or discounted fee offers in place during the quarter? And just any thoughts given the macroeconomic backdrop on the outlook for recruiting over the remainder of the year?

Glenn Williams, CEO

Yes, Dan, it was a strong quarter for recruitment. We did not use any incentives during this time, which reflects genuine growth that we're very satisfied with. We're becoming more effective at communicating our success story, and as we move forward, we have a compelling narrative to share. There is a noticeable trend in the current job market, with individuals seeking alternatives, additional part-time income due to rising living costs, or different career paths. We believe that our story resonates well with potential recruits, and again, there was no artificial stimulus provided in the first quarter. Typically, we start the year in January in the same way every year, so the comparisons remain consistent. We do offer a discount at the beginning of the year in January, but it is consistent with what was offered in January of the previous year.

Daniel Bergman, Analyst

Got it, got it. Makes sense. Thanks. And then maybe just one on the Term Life business. It sounded like persistency was modestly unfavorable versus pre-pandemic levels this quarter. So I just wanted to see if there's any more color you can give on the drivers and how different cohorts of policies are behaving? And anything you can quantify in terms of the magnitude of the change in the lapse rate versus either pre-pandemic levels or where it had been in recent quarters? Thanks.

Alison Rand, CFO

Yes, I'll take that one. Really, it's best to look at it in line with pre-pandemic because obviously, during COVID, we were dealing with some very unusual results that we did not anticipate would stay in place forever. But looking at it versus pre-pandemic I'd say there's been a slight deterioration. I'd say, especially in most years, it's less than 5%, so you're not talking about anything significant. The interesting thing is we are seeing it across all durations. And that, to me, indicates that it's more economy driven than anything else. The last time we really saw it across all durations, putting aside COVID, was back in 2008 during the financial crisis during that period. So again, nothing to that level of extreme. Just a little bit of a downtick and something we're keeping our eyes on. And really that's probably the best I can provide right now.

Wilma Burdis, Analyst

Hey, good morning. The Term Life policy count grew 2%, but the face amount of new business grew 14%. Could you talk a little bit about why the face amount grew so much more quickly and give us some insight into which metric gives us better insight into the adjusted direct premium growth?

Glenn Williams, CEO

Yes. Wilma, I'd be happy to do that. What we attempted to do because we've changed the basis. Normally, we've tracked the number of issued policies, but by changing the way we issue those policies to one life per policy rather than on occasion multiple lives for policy in the past, even though we changed the historical numbers to try to adjust for that. We realized that we were getting a little noise in that comparison, and so we wanted to give more color. And so traditionally, you have a policy count in our industry as one way of tracking, premium is another way of tracking and face amount is another way of tracking. They obviously relate to each other. But as we made the change to our products, as we anticipated, more accurately pricing the product and the risk gives our clients an opportunity to be able to increase their purchase, their dollar goes further when we more correctly priced good risk and your dollar doesn't go quite as far as we more correctly priced bad risk. So some rates went up and some went down. But ultimately, people are getting more for their money in a lot of cases and are often buying a little more. So we felt like tracking all three of those numbers gave the outside world a better opportunity to kind of triangulate how our life business was moving. The others are estimates. The new premium use and face amount use, so we have to make some estimates in that. But it gives you a little more color around that. And I think it gives you a better flavor of our business. We did anticipate that when we changed the product, we would have this kind of movement, so it's clearly what we expected. And as I said, we're pleased with the excitement around the new product line and our sales force. I think that's part of what's giving us some sales momentum in this high-cost economy, inflationary economy, high cost of living that Alison was just describing, we're overcoming that resistance on sales and continuing to grow sales, which I think a lot of that goes to the excitement around the new product set.

Alison Rand, CFO

Yes. One thing I would add is the 2% is our best estimate; I mean, we used to sell multiple lives per policy. Now it's a single adult life per policy. So we did a calculation to estimate what we saw through that it looked like last year. But really the 2% is not necessarily indicative of the activity that's happening day-to-day in our sales force right now. So when you look at the other two metrics with it, we thought you get a fuller picture. The other important thing is that the other two metrics, both annualized issued premium and face amount include things like add-on riders or IBR riders. So it's not just the new business. It's what we're increasing the book of business for us. So just a couple of other things. We just felt like given the nuances in the definition year-over-year on issued policies, so more color was necessary.

Wilma Burdis, Analyst

Thank you. And then just on Senior Health, should we expect Primerica to put any capital into that in 2024? And also, if you could just talk a little bit about how many leads are coming from the life licensed reps to the Senior Health licensed reps?

Alison Rand, CFO

For 2024, we don't plan to invest any capital in 2023. We'll utilize the remaining net operating loss carryforwards we have. After that, there may be opportunities for capital. However, we won't make substantial investments until we feel confident in the business's profitability and our strategy moving forward. Therefore, for 2024, I think we should hold off on discussions until we refine our operating plan. We will be cautious with the capital we do invest, focusing on growth while ensuring we can establish a profitable and cash-generating business. Just like life insurance, any growth we pursue will initially require more upfront investment than what we will gain in the first year, which could create some strain. Still, we'll closely manage these investment levels, and I suggest we revisit this later in the year. Regarding sellers, it’s important to highlight that it's not necessary for a representative to have a life license to participate in this program, which is appealing because those seeking a life license can become certified to sell or refer Senior Health. Specifically, as Glenn mentioned, we've achieved about 10% participation during AEP.

Glenn Williams, CEO

Absolutely. Our leads accounted for about 10% of the sales. And again, we are seeing those leads are higher quality than what can be generated just out from the public lead sources. So we're encouraged by that growth, but we recognize that's a business that needs to have multiple sources of leads. And so we're continuing to grow on all fronts.

Ryan Krueger, Analyst

Good morning. I have a couple of related follow-up questions. First, regarding lapses, when they differ from your expectations under LDTI, does this primarily show up in remeasurement gains and losses or annual assumption updates, since I know it no longer affects DAC?

Alison Rand, CFO

Yeah, it's interesting that it's pretty unlikely it's going to come through anywhere that you'll notice it. You're right, where we used to see it extensively with DAC, and as I explained last quarter, we're not going to see that anymore. Even if you remember when we were talking during COVID, we used to have a very large impact from DAC with a much smaller offset in reserve. So the reason you don't see a whole lot of impact in reserves is because a lapse decreases both the expected future premiums you're going to get and the expected future benefit. So both components go down. So net-net, the liability hasn't changed all that much. It would be a pretty tough, it would be a very dramatic change for us to see something come through. Really what you're seeing in remeasurement gain loss is going to largely be claims activity.

Ryan Krueger, Analyst

Okay, got it. And then can you comment on your subsidiary dividend expectations from the Life subs? I guess you've had this year, but also just what you can go a reasonable annual amount would be?

Alison Rand, CFO

One reason the RBC has increased over time is that it is calculated as the larger of 10% of surplus or the gain from operations before realized gains and losses from the previous year. In 2021, our statutory gains from operations were $257 million, which was the higher of the two metrics, because we were still managing significant COVID-related claim payments. This resulted in lower statutory earnings, limiting what we could withdraw in 2022. For 2023, the equivalent figure for 2022's gain from operations is $446 million. This means we have the capacity to withdraw $446 million from Primerica Life, in addition to what we would take from Canadian operations and non-Life operations, without needing to request an extraordinary dividend. While we can always ask for an extraordinary dividend, there’s no current need to do so. The comparison of $257 million to $446 million illustrates how much more we expect to withdraw from subsidiaries year-over-year. However, it's important to consider that on the non-Life side, depending on market conditions, we could still experience some limitations on withdrawals from our ISP business.

Andrew Kligerman, Analyst

Hey, good morning, nice to talk to you. Shifting over to Senior Health again. So I think Alison talked about a $5 million full year net loss. Given your efforts and the terrific progress that you've made over the prior year, do you think line of profitability is in sight for 2024? And another slide on that topic is, have you considered layering in other products maybe Term Life onto the platform to help scale it?

Alison Rand, CFO

I'll start and then Glenn can provide additional insights on the product discussion. Just to clarify, it wasn't a 5% figure, it was a $5 million amount. As you know, since it’s early in the year, we will keep you updated on that figure as the year progresses. The reason I shared that number is to emphasize that we don’t anticipate a significant financial impact from this segment, good or bad, on a full-year basis. I believe we are taking the necessary steps to steer the business toward profitability. The key focus this year will be on expanding our agent force and ensuring that as we grow, we maintain a level of profitability we are comfortable with. The team is actively working on various aspects, including lead acquisition, lead identification, and cost management, to ensure we have the best agents available and compensate them appropriately. However, this is not a straightforward process; there is a lot of fine-tuning happening that we will continue throughout the year. Glenn, do you have anything to add?

Glenn Williams, CEO

On the topic of other products, our main priority is to ensure our current profits are sustainable, and that has been our focus. The e-TeleQuote team is actively exploring related products and markets, as well as lead generation opportunities from those areas. They are also considering other products that could complement our Senior Health business. Presently, we have no plans to introduce Primerica products into that sales center, as it could create significant channel conflict and reach a different client base. Our team specializes in addressing the needs of seniors, and we believe that expanding into non-adjacent markets would be counterproductive at this time.

Mark Hughes, Analyst

Thank you, good morning. I missed part of the earlier call, so I apologize if this has already been discussed, but the YRT ceded premium ratio was slightly higher in the first quarter compared to the first quarter of last year. I think compared to the entire previous year, it wasn't significantly different. Should we expect this ratio of 31%? Was there any increase in costs or anything like that?

Alison Rand, CFO

Mark, you were correct in identifying a technical aspect of the business that I wasn't sure anyone would catch. We didn't include it in the script, but YRT ceded premiums are paid annually on the policy anniversary, which differs significantly from how we collect our direct premiums. Looking at last year, during the significant sales growth due to COVID, that cycle peaked in the first quarter, which I'm struggling to recall precisely due to having a head cold. Thus, this is the last year where we see an increase in the first quarter, which is why the rate aligns more closely with what you noticed for the remainder of last year, as it all adjusts annually. The uptick in the first quarter is not related to any rate changes, and you would not see YRT rate changes being that impactful so quickly because they apply solely to new business, which is a minor segment of our overall operations. Moreover, as we have mentioned before, YRT rates are stable and aligned with the mortality curve. So, the initial YRT rates for the first-year policies are slightly above zero, with rapid growth thereafter. This is why the other ceded premium line increases more quickly than any other line in our premium revenue section. I would also like to note that if we could operate without DAC constraints, we would classify the other ceded premium as a benefit line item. This is why when we analyze the benefits and claims ratio, we include that component in the benefits cost, and you'll see that the benefits and claims ratio has remained quite consistent on a year-over-year basis.

Mark Hughes, Analyst

Okay. So it does look for the full year pretty consistent with last year, is that the way to think about it?

Alison Rand, CFO

I need to confirm the exact figures, but I believe last year's first quarter was lower. The rate you’re observing now is likely to be what you'll see for the remainder of the year. Therefore, you shouldn’t expect to experience the same increase in the next three quarters as we did in the first quarter. It’s important to note that the 58.7% figure we mentioned included the other ceded premiums, so I want to ensure everyone is calculating it the way we do. Yeah, and that really has to do with a mix shift we've seen. So two things have happened, one, and we continue to see more and more of our sales going towards managed accounts, and as that's happening, we're obviously not getting the sales-based revenue, but our ability to generate asset-based revenues are growing. So you're seeing that compounding of that. And the other is the PD model that we've launched for mutual funds in Canada last year that is continuing to grow, which again will put some pressure on what you recall revenue generating sales, because there are a lot of those are no longer creating a front end sales load, but that contribute to our ability to grow faster on an asset base.

Operator, Operator

We have reached the end of our question-and-answer session. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.