Globe Life Inc (GL) Q1 2021 Earnings Call Transcript

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Globe Life Inc (GL 2.80%)
Q1 2021 Earnings Call
Apr 24, 2021, 11:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Globe Life Inc. First Quarter 2021 Earnings Release Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mike Majors, Executive Vice President, Administration and Investor Relations. Please go ahead, sir.

Michael C. Majors -- Executive Vice President, Administration and Investor Relations

Thank you. Good morning, everyone. Joining the call today are Gary Coleman and Larry Hutchison, our Co-Chief Executive Officers; Frank Svoboda, our Chief Financial Officer; and Brian Mitchell, our General Counsel.

Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our earnings release, 2020 10-K and any subsequent Forms 10-Q on file with the SEC. Some of our comments may also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures.

I will now turn the call over to Gary Coleman.

Gary L. Coleman -- Co-Chairman and Chief Executive Officer

Thank you, Mike and good morning, everyone. In the first quarter, net income for the $179 million or $1.72 per share compared to $166 million or $1.52 per share a year ago. Net operating income for the quarter was $160 million or $1.53 per share, a decrease of 12% per share from a year ago. On a GAAP reported basis, return on equity as of March 31 was 8.6% and book value per share was $75.10. Excluding unrealized gains of fixed maturities, return on equity was 11.4% and book value per share was up 9% to $54.36.

In the life insurance operations, premium revenue increased 9% to $708 million. As we've noted before, we have seen improved persistency and premium collections since the onset of the pandemic. Life underwriting margin was $137 million, down 24% from a year ago. The decline in margin is due primarily to $38 million of COVID-related claims. For the year, we expect life premium revenue to grow around 7% and underwriting margin to grow 4% to 6%. And at the midpoint of our 2021 guidance, we assume approximately $50 million of COVID claims.

In health insurance, premium revenue grew 5% to $294 million and health underwriting margin was up 14% to $72 million. The increase in underwriting margin is primarily due to improved persistency and lower acquisition expense. For the year, we expect health premium revenue to grow 5% to 6% and underwriting margin to grow 7% to 8%. Before continuing, I'm pleased to note that this is the fourth quarter in company's history that our total premium revenue exceeded $1 billion. We appreciate the efforts of our agents and our employees in achieving this milestone.

Continuing the first quarter results, administrative expenses were $66 million for the quarter, up 4% from the year ago. As a percentage of premium, administrative expenses were 6.6% compared to 6.8% a year ago. For the full year, we expect administrative expenses to grow 7% to 8%, and being around 6.7% of premium, due primarily to higher acquisition costs, IT and information security costs as well as a gradual increase in travel and facilities costs.

I will now turn the call over to Larry for his comments on the first quarter marketing operations.

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

Thank you, Gary. We experienced strong growth in supply sales during the first quarter and we continue to make progress in the areas that drive recruiting and sales activity. I'll now discuss current trends at each distribution channel. At American Income Life, life premiums were up 11% to $335 million, while life underwriting margin was down 2% at $98 million. The lower underwriting margin is primarily due to COVID claims.

Net life sales were $70 million, up 11%. The increase in net life sales is primarily due to increased agent count. The average producing agent count for the first quarter was 9,918, up 30% from the year ago quarter, and up 3% from the fourth quarter. The producing agent count at the end of the first quarter was 10,329. The American Income agency has adapted exceptionally well to the virtual environment and continues to generate positive momentum.

At Liberty National, life premiums were up 4% to $76 million, while life underwriting margin was down 48% to $10 million of our own underwriting margin is primarily due to COVID claims. Net life sales grew 30% to $16 million while net health sales were $6 million, down 2% from the year ago quarter. The increase in net life sales is due to an increased agent count and improved agent productivity. The average producing agent count for the first quarter was 2,734, up 3% from the year ago quarter and up 1% from the fourth quarter. The producing agent count of Liberty National ended the quarter at 2,727. We are encouraged by Liberty National's continued growth.

At Family Heritage, health premiums increased 8% to $83 million and health underwriting margin grew 12% to $22 million. The increase in underwriting margin is primarily due to improved persistency and lower acquisition expense. Net health sales declined 4% to $16 million due primarily to a decline in agent productivity during the first quarter. The average producing agent count for the first quarter was 1,285, up 5% from the year ago quarter, while down 12% from the fourth quarter.

Agent count at the end of the quarter was 1,235. The drop in average agent count from the fourth quarter is not unusual as Family Heritage typically sees a decline in recruiting activity in the first quarter of the year. We have seen an increase in recruiting activity and productivity over the last several weeks expect this will continue going forward.

In our Direct to Consumer division at Globe Life, life premiums were up 11% to $244 million, while life underwriting margin declined 78% to $9 million. Frank will further discuss the decline in underwriting margin in his comments. Net life sales were $40 million, up 22% from the year ago quarter. We continued to see strong consumer demand for basic life insurance protection across all channels of the Direct to Consumer distribution in the first quarter.

At United American General Agency, health premiums increased 6% to $117 million and health underwriting margin increased 19% to $19 million. The increase in underwriting margin is primarily due to improved persistency and lower acquisition expenses. Net health sales were $13 million, down 11% compared to the year ago quarter. It's always difficult to predict United American sales as the Medicare supplement marketplace is highly competitive. It's still difficult to predict future activity in this uncertain environment.

I will now provide projections based on trends we are seeing and knowledge of our business. We expect the producing agent count for each agency at the end of 2021 to be in the following ranges. American Income 7% to 17% growth; Liberty National, 1% to 16% growth; Family Heritage, 1% to 9% growth. Net life sales for the full year 2021 are expected to be as follows. American Income Life, an increase of 11% to 15%; Liberty National, an increase of 16% to 20%; Direct to Consumer, a decrease of 5% to an increase of 5%. Net health sales for the full year 2021 are expected to be as follows. Liberty National, an increase of 16% to 20%; Family Heritage, an increase of 4% to 8%; United American Individual Medicare Supplement, a decrease of 3% to an increase of 7%.

I will now turn the call back to Gary.

Gary L. Coleman -- Co-Chairman and Chief Executive Officer

Thanks, Larry. Excess investment income, which we define as net investment income was required interest on net policy liabilities and debt was $61 million, a 3% decline over the year ago quarter. On a per share basis, reflecting the impact of our share repurchase program, excess investment income grew 2%. For the full year, we expect excess investment income to be flat, but up 2% to 3% on a per share basis.

As per investment yield, in the first quarter, we invested $299 million in investment-grade fixed maturities, primarily in the industrial and financial sectors. We invested at an average yield of 3.41%, an average rating of A minus and an average life of 34 years. We also invested $61 million in limited partnerships that invested in credit instruments. While these investments are expected to produce incremental additional yield, they were in line with our conservative investment philosophy.

For the entire fixed maturity portfolio, the first quarter yield was 5.24%, down 15 basis points from the first quarter in 2020. The portfolio yield as of March 31 was also 5.24%. Invested assets were $18.7 billion, including $17.4 billion of fixed maturities of amortized costs. Of the fixed maturities, $16.6 billion of investment grade with an average rating of A minus. And below investment grade bonds were -- are $802 million compared to $841 million a year in 2020.

The percentage below investment grade bonds to fixed maturities is 4.6%. Excluding net unrealized gains and fixed maturity portfolio, below investment grade bonds as a percentage of equity is 14%. Overall, the total portfolio is rated A minus compared to BBB plus a year ago. Bonds rated triple B or 56% of the fixed maturity portfolio compared to 55% at the end of 2020. While this ratio is in line with the overall bond market, it is high relative to our peers.

However, we have minimal or no exposure to higher risk assets such as derivatives, equities, residential mortgages, CLOs and other asset-backed securities. Because we invest long, a key criteria in utilizing our investment process is that an issuer must ability to survive multiple cycles. We believe that the BBB securities we acquire provides the best risk adjusted and capital adjusted returns due in large part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets.

Lower interest rates continued to pressure investment income. For 2021, the average fixed maturity new money yield assumes that the midpoint of our guidance is 3.6% for the full year. While we would like to see higher interest rates going forward, Globe Life can thrive in a lower to longer interest rate environment. Extended low interest rates will not impact the GAAP or statutory balance sheets under the current accounting rules since we sell non-interest sensitive protection products.

And fortunately, the impact of lower new money rates on our investment income is somewhat limited as we expect to have an average turnover of less than 2% per year in our investment portfolio over the next five years.

Now, I will turn the call over to Frank for his comments on capital and liquidity.

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Thanks, Gary. First I want to spend a few minutes discussing our share repurchase program, available liquidity and capital position. The parent began the year with liquid assets of $290 million. In addition to these liquid assets, the parent company will generate excess cash flows in 2021. The parent company's excess cash flow, as we define it, results primarily from the dividend received by the parent from its subsidiaries, less the interest paid on debt and the dividends paid to Globe Life shareholders.

We anticipate our excess cash flow in 2021 will be in the range of $360 million to $370 million, higher than previously indicated and reflective of our final 2020 distributable statutory earnings. Thus, including the assets on hand at the beginning of the year, we currently expect to have around $650 million to $660 million of assets available to the parent during the year.

In the first quarter, the parent company repurchased 944,000 shares of Globe Life Inc common stock at a total cost of $90 million, at an average share price of $95.47. So far in April, we have spent $13 million to repurchase 132,000 shares at an average price of $99.18. Thus, for the full year through today, we had spent $103 million to purchase 1.1 million shares at an average price of $95.92. Excluding the $103 million spent on repurchases so far this year, we will have approximately $550 million to $560 million of assets available to the parent for the remainder of 2021.

As I'll discuss in more detail in just a few moments, this amount is more than necessary to support the targeted capital levels within our insurance operations and maintain the share repurchase program. As noted on previous calls, we will use our cash as efficiently as possible. We still believe share repurchases provide the best return to our shareholders over other available alternatives.

Thus we anticipate share repurchases will continue to be the primary use of the parent's $360 million to $370 million of excess cash flows during the year. It should be noted that the cash received by the parent company from our insurance operations is after they have made substantial investments during the year to issue new insurance policies, expand our information technology, and other operational capabilities as well as acquire new long duration assets to fund our future cash needs.

Our goal is to maintain our capital at levels necessary to support our current ratings. As noted on previous calls, Globe Life has a targeted consolidated company action level RBC ratio in the range of 300% to 320%. At December 31, 2020, our consolidated RBC ratio was 309%. At this RBC ratio, our insurance subsidiaries have approximately $50 million of capital over the amount required at the low end of our consolidated RBC target of 300%. This excess capital, along with the $550 million to $560 million of liquid assets that we expect to be available to parent, provides sufficient capital to fund future capital needs.

As we discussed on previous calls, a primary driver of potential additional capital needs from the parent in 2021 relates to investment downgrades that increase required capital. Estimate the potential impact on capital due to changes in our investment portfolio, we continue to model several scenarios and stress tests. In our base case, we expect approximately $500 million of additional NAIC one notch downgrades over the course of the year. We do not anticipate any significant credit losses, although some credit losses would normally be expected from time to time.

With this amount of downgrades, our insurance companies could require up to $70 million of capital to maintain the low end of our targeted RBC ratio of 300%. In addition to the potential capital needed for further investment portfolio downgrades, changes in the NAIC RBC factors relating to investments, commonly referred to as C1 factors, could create the need for additional capital for 2021.

At this time, we do not know what the final factors will be. However, we believe the worst case scenario is that additional capital related to the new factors would not exceed $125 million to $150 million. It is important to note that Globe Life statutory reserves are not negatively impacted by the low interest rates or the equity markets given our basic fixed protection products. In the aggregate, our statutory reserves are more than adequate under all cash flow testing scenarios.

Bottom line is that the parent company has ample liquidity to cover any additional capital that may be required and still have cash available to make our normal level of share repurchases. Once we get -- once we are able to get comfortable that our investment downgrades have returned to normal levels and we are able to determine the amount of additional capital required to support the new C1 factors, we will reevaluate our parent company retained assets.

We will first determine the appropriate amount of liquid assets that should be retained at the parent. We'll then determine the best use of any excess amounts that remain. Depending on available alternatives, we would likely return such excess cash to our shareholders through additional share repurchases. At this time, we anticipate holding our higher level of liquid assets through the end of this year.

At this time, I'd like to provide a few comments relating to the impact of COVID-19 on our first quarter results. As noted by Gary, total life underwriting margins declined in the quarter, primarily due to an estimated $38 million of COVID death claims incurred in the quarter. This amount was actually slightly less than we anticipated for the quarter.

The total COVID death benefits include approximately $20 million in COVID death benefits incurred in our Direct to Consumer division or approximately 8% of its first quarter premium income; approximately $8 million of COVID death benefits incurred at Liberty National, over 10.5% of its premium for the quarter; and approximately $9 million at American Income, or 2.7% of its first quarter premium. It is important to note that the total COVID benefits paid through March 31, only 71 claims comprising slightly over $600,000 relate to policies sold since the beginning of March of 2020. This is a very small percent of the roughly 2 million policies sold in 2020.

In addition to the COVID obligations incurred in the quarter, we also saw adverse developments in non-COVID claims related to both medical and non-medical causes of death, primarily those related to heart and other circulatory conditions, Alzheimer's and drug overdoses. This is a continuation of some adverse development that began to emerge last year. While not directly a COVID claim, we believe the elevated deaths are related to the pandemic due to the difficulties many individuals have had in receiving timely healthcare as well as the adverse effects of isolation and stress.

Increases in non-COVID deaths since the start of the pandemic have also been noted by the CDC and the National Center for Health Statistics for the US population as a whole. While we experienced higher obligations from non-COVID causes in each of our distributions, the impact of these higher non-COVID deaths have been more evident in our Direct to Consumer channel, who is insured more closely represent the broader middle income US population than our other distributions.

In addition to COVID deaths, the adverse experience related to non-COVID deaths also contributed to the lower underwriting margin in the quarter. We anticipate a lower margin as a percent of premium, given the significant number of US deaths expected in the quarter and since evidence of the higher non-COVID deaths have started to emerge last year. As with COVID, we currently believe this adverse claims experience will moderate over the remainder of the year. And that the underwriting margin for the Direct to Consumer channel will be closer to 17% to 18% of premium in the second half of the year.

Finally, with respect to our earnings guidance for 2021. While first quarter earnings were substantially lower than recent quarters due to higher COVID and non-COVID policy obligations, the first quarter operating earnings per share were very close to our expectations, since we fully anticipated 200,000 COVID deaths in the quarter. We now believe we have seen the peak of COVID claims and anticipate a sharp drop-off for the remainder of the year.

As noted last quarter, at the midpoint of our guidance, we anticipated approximately 270,000 US COVID deaths over the course of 2021. We still believe that is a reasonable estimate with substantially all of the remaining deaths occurring in the second quarter. As in prior quarters, we continue to estimate that we will incur COVID life claims of roughly $2 million for every 10,000 US deaths.

With respect to the higher obligations from non-COVID causes of death, we believe these will also revert to more normal levels over the course of the year as disruptions in healthcare cease, the economy recovers and people are able to socialize again. As compared to our previous guidance, higher policy obligations from non-COVID causes are expected to be offset by favorable health claims experience, higher premium income and the favorable impact of share repurchases. As such we are keeping the midpoint of our guidance for 2021 at $7.36, while narrowing the overall range to $7.21 to $7.51 for the year ended December 31, 2021.

Those are my comments. I will now turn the call back to Larry.

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

Thank you, Frank. Those are our comments. We will now open the call up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from John Barnidge, Piper Sandler.

John Barnidge -- Piper Sandler -- Analyst

Thank you. Your Direct to Consumer sales guide for life conflicts with what was put up in 1Q '21, can you add some color there? Was there like a one-time uplift last year that you don't think it's following through this year?

Gary L. Coleman -- Co-Chairman and Chief Executive Officer

I think there is a one-time uplift issues. Look at last year, we had a real increase in our sales percentages in Q2, Q3 and Q4. Q1 is fairly easy comparable, because we were flat in the first quarter of last year and that was pre-COVID. So while we had a 22% increase in sales in the first quarter, we guess those comparables in Q2, Q3 and Q4, we think our guidance of negative 5% to plus 5% is reasonable for 2021.

John Barnidge -- Piper Sandler -- Analyst

Okay. And then my follow-up, given your comment about substantially all the remaining COVID deaths been in 2Q '21, is there any way to give us a sense of what we've seen in the first half to what it might run rate for the quarter? Thank you.

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. Thanks, John. In the first quarter, there were around 200,000 COVID deaths. Right now, we're anticipating around 55,000 COVID deaths in the second quarter of the year and then, about 15,000 over the remainder of -- over the second half of the year.

John Barnidge -- Piper Sandler -- Analyst

Thank you very much.

Operator

Our next question comes from Jimmy Bhullar, JPMorgan.

Jimmy Bhullar -- JPMorgan -- Analyst

Hi. Good morning. There is a big echo on your call. It's not on my line thought but anyway. On your comment on life margins ex-COVID, I think you're assuming in your guidance that they might stay elevated. My question is more, if you look beyond COVID, is it reasonable to assume that some of these continue because I think you said people having difficulty getting care. Obviously, that improves or that goes away as hospitals have less burdened and stuff. But if it's related to opioids and stuff, it's easier to get on them, but harder to get off. So could that continue to be a drag for your results beyond the pandemic as well as at least for a little bit?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah, Jimmy. We're seeing -- while we are seeing some elevated in the opioids and some of the other, I would say non-medical causes, really the more that we're seeing is on the medical side with respect to whether it'd be, as I said, really hard circulatory is really one of them that we've seen the larger increase over historical trends, if you will. So I think that's what gives us a little bit more comfort that while that we've seen some increases in multiple causes of death, including some of those from non-medical. As the medical and access to the medical procedures opens back up and has opened back up now for several months that that will subside and we'll be able to get back to more normal levels in those areas.

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

And Jimmy, that the medical -- the medical claims that Frank just talked about is non-COVID piece. Over 80% of those are medical claims whereas the drugs, alcohol would be less 10%.

Jimmy Bhullar -- JPMorgan -- Analyst

Okay. And then on your sales, obviously, we've seen a big step-up in your sales and recruiting end sales because of the pandemic. And I think you you've had an easier time recruiting because of the problems of the services industry. Do you think you'll retain the agency you've hired over the past year or if the economy opens up and things go back to normal that you could actually see a lot of agent departures and the big sort of decline in the agent count, maybe not all the way back, but many of these like what do you think about your ability to retain a lot of the agents that you've hired over the past year?

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

I think recruiting will continue to increase in Q2, Q3, and Q4 of 2021. Given the middle management growth last year, particularly American Income, I think we'll continue to see the recruiting activity. I think it's [Indecipherable] most of the agents would return to their previous jobs, American will recruit the underemployed you were looking for a better opportunity. And again given our sales increases, particularly the American Income, we believe many of these agencies want to stay with the company. Also during '18 and '19 when unemployment levels were extremely low or historically low, all three agencies continue to recruit and grow the level of producing agents.

Jimmy Bhullar -- JPMorgan -- Analyst

Okay. And then just lastly on your sales being strong, have you been -- I'm sure you've enacted and you've talked about this in the past as well -- enacted processes to avoid adverse selection in the pandemic. Can you talk about whether you've seen or what level of claims you've seen from policies you might have sold over the past year and what some of the processes are to avoid adverse selections?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah, Jimmy. We do take a look at really to do a lot of monitoring on the various policies that have been issued and, especially in the Direct to Consumer, but across all the different lines. We're looking at, is there a change in the number of applications by age or we seeing, especially with respect to the pandemic where we have higher exposure to some of the higher ages, but really looking at, are we seeing any changes in the applications and the net issues from before the pandemic, and then what we're seeing in the last year.

We're looking at, are they trying to apply for higher face amounts are we seeing changes in geographies where maybe there's been a little bit more incidents. And we're really monitoring that and we're really seeing no distribution shift toward older adults. We're not seeing really any significant change by state groupings and, again, we're not seeing a shifted to overall, the higher face amounts.

And then we've also done some limiting between what marketing as well as just in our underwriting putting some limitations on the amounts that they can -- older individuals can purchase. At American Income, there are some limitations and some changes on some of the policies there for individuals over 60. So both through the underwriting and the marketing process doing some things to try to limit our exposure there.

And I think as we look at the actual experience, again, I mentioned in my notes that since the --since -- for policies that have been issued since March 1st of 2020, we've only seen 71 claims. So far, they've totaled about $6,000. And so that's -- and that's both inclusive of American Income and Liberty and all the different distributions. So a very small percentage of the overall policies. And of course, the additional incremental those come in a very small incremental marketing costs. So we expect that there will be a little bit of additional mortality, but it's more than paid for through additional profits on that business.

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

I'll add to that is in addition while the sales increases in Direct to Consumer across all channels and products, the sales of adjuvant products have accretion to higher rate at adult life insurance and it gives us further confidence we're not experiencing any selection just the highest incidence of serious illness mortality is at the older ages.

Jimmy Bhullar -- JPMorgan -- Analyst

Got it. Thank you.

Operator

[Operator Instructions] Our next question comes from Erik Bass on Thomas Research.

Erik Bass -- Thomas Research -- Analyst

Hi. Thank you. I guess, sticking on the Life business, I was hoping you could give a little bit more detail on your margin expectations by the business line for kind of the remainder of the year? And then, what would you think of it it's kind of a normalized underwriting margin target for the three main businesses?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

As we think about Life as a whole, and I'll talk about some of the individual businesses, we are -- we saw about 19% in the first quarter, we do see that gradually improving over the course of the year saying that for the full year being somewhere around by 25% for the -- for Life as a whole. And what we're really saying is that by the time we get to that some of the non-COVID claims, and in addition to the non-COVID claims, we've had -- we've talked about some of the lapses and that has an impact on policy obligations as well and makes that a little bit higher.

And that will, again those will -- I think tended -- we think will tend to normalize over the course of the year. At American Income, we anticipate that the margin for the full year will be closer to 32%; for Direct to Consumer, around 13%; and for Liberty National, around 21%. So again, in each one of those lines, we see the overall underwriting margin improving over the course of the year and really by the -- anticipating by the fourth quarter that were able to get back to pretty close to normal margin percentages as a percentage of premium.

Erik Bass -- Thomas Research -- Analyst

Got it. And should we look at 2019 as being a pretty normal margin level to think about hopefully returning to in 2022?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

That's what we're anticipating is when we think about is about those levels.

Erik Bass -- Thomas Research -- Analyst

Thank you. And then maybe on the health side, can you just talk about any changes you're seeing in terms of benefits utilization? And have you seen any pickup in activity as kind of we've had in reopening and more people are getting vaccinated?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. So far, I mean we are starting to see pretty normal levels of utilization both on, especially in the Med Sup lines and that we're seeing pretty normal levels of activity at this point in time.

Erik Bass -- Thomas Research -- Analyst

Got it. So the favorable margin is more -- the better persistency and lower amortization?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

That's correct. That's really driving the most of that.

Erik Bass -- Thomas Research -- Analyst

Okay. Thank you.

Operator

Our next question comes from Andrew Kligerman, Credit Suisse.

Andrew Kligerman -- Credit Suisse -- Analyst

Hey. Good morning and thanks for the thoughtful answers around mortality. I wanted to drill down a little bit more. I was wondering how the policy does Globe Life have outstanding in the life insurance area? I was doing some math around unfavorable claims and I estimated something around 350 to 400 policies above kind of what would have been normal. So the second part of the question is that -- is that decent assessment? And just how many policies do you have in force in the life area?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah, I believe...

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

As you say, -- I don't know exactly [Indecipherable] I think we have around 30 million policies aboard [Indecipherable].

Andrew Kligerman -- Credit Suisse -- Analyst

30 million in force. And so would you have any type of like a standard deviation that you might apply to this to say -- how far out of the normal range is this? I mean is this really unusual? I mean, first quarter of last year actually was modestly favorable if I recall correctly. So anyway that kind of other than the dollars, which we know how well unusual was this?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

And you're just talking about the general COVID claims or with respect to the...

Andrew Kligerman -- Credit Suisse -- Analyst

I'm talking all non-COVID. I'm sorry. When I was estimating close to 400 policies, its non-COVID outside of the norm?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. I mean, I think it's -- I mean it's a -- to tend to think about your claims activity and kind of growing overall with the size of business, I mean, definitely what we've seen here over the last few quarters is a -- is an increase in that activity. We just -- and it's -- and I don't have the percentage right top of my head. But it is not -- it comes from time to time. You'll see those fluctuations to where you will have that on occasion. It is little bit higher than what we would maybe have typically seen in some of the normal fluctuations. But -- and we can see that in just some of our overall claim numbers. But it is not something that is terribly; say way out of the ranges that you might see from time to time.

Andrew Kligerman -- Credit Suisse -- Analyst

Yeah. I mean -- and let me just -- one another thought by you. I mean if this were a trend shouldn't we have seen that in the third quarter and fourth quarter as well, it just -- it just seems like it's kind of come out of nowhere and could very well reverse. Am I thinking about that the right way?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

When I do think the timing of it, it corresponds here with the pandemic, and that's why we're kind of looking at it that it's really popped up here toward the end of -- we started seeing some of the claims emerging. As we get a bit more experience, obviously, we've always talked about there was a two- or three-month lag from what we're really seeing in our claims data to being able to get back and see that. And some of these claims that were actually -- we're saying -- that we're seeing where the deaths did occur in late 2020.

But we are seeing -- and that's what gives us some indication that it's more of a fluctuation relating to the overall pandemic. You may recall that just kind of to your point, and I forget exactly the year 2016 or 2017, we went through a really short period where we ended up having some higher non-medical causes of deaths as well and then those tend to subside and drop back down at periods of time. So that will take place from time to time.

Andrew Kligerman -- Credit Suisse -- Analyst

Very helpful. And then just one last one. I was intrigued competitor of yours did an acquisition of a Medicare insurance oriented -- insurance tech company. And as I look at your Direct to Consumer operation, Medicare supplement finding fraction of your life sales through that channel, is that a vertical that you might want to build out your extensively -- is it something where you could sell on behalf of another carrier as opposed to Globe Life, providing the underwriting?

Gary L. Coleman -- Co-Chairman and Chief Executive Officer

Direct to Consumer is currently group sales. And group sales are harder. We're continuing to try and expand that channel. In the past we've tested individual sales through our Direct to Consumer channel and haven't been very successful with that. We've had greater success, obviously, with our agency operation. Most of our branding efforts as you go forward, we're exploring how to expand those Direct to Consumer health sales and particularly Medicare supplement. So I don't think we'll work other carriers to try and distribute on behalf of other carriers that would detract from our life sales and our agencies. But we will continue to explore Direct to Consumer individual Medicare supplement sales.

Andrew Kligerman -- Credit Suisse -- Analyst

Excellent. Thanks so much.

Operator

Our next question comes from Ryan Krueger, KBW.

Ryan Krueger -- KBW -- Analyst

Hey. Good morning. I may have missed this but did you disclose the amount of -- the dollar amount of non-COVID excess mortality that you saw in the first quarter and also your expectation for the full year?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. For the first quarter, supply ran about $13 million higher than what we anticipated, so roughly about 2% of premium, just from that in the first quarter. And for the full year, we anticipate around $18 million more than what we had kind of anticipated initially. I think, total inclusive for the entire year, including our expectations, if you will, is that will be about $50 million for the full year and it was about $25 million in the first quarter. So, again, about half of what we had kind of anticipated of total extra obligations, if you will, we'll have occurred in the first quarter. And so that's why I think in the first quarter, you kind of look at -- it was probably a drag of about 3.5% of premium due to some this entire obligations and then about 1.8% or so, between 1.5% and 2%, is kind of what we expect now for the full year.

Ryan Krueger -- KBW -- Analyst

Got it. Thanks. You mentioned that higher buyback was a partial offset to this. Can you give some updated commentary on your level of buybacks that you expect in 2021?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. So at the midpoint of our guidance, again, we're looking at that excess cash flow in that $360 million to $370 million. And so that's kind of the level that we have around in that. And we look at some different average prices over the course of the year. That's -- but that is a little bit higher than where we were back in January and kind of at the midpoint, our expectations were not as -- was not quite that high for overall share repurchases.

And then actually in the first quarter, we were able to -- we purchased just a little bit more. So that wasn't -- it is actually a little bit lower price than what we had kind of built into the midpoint of our prior projection. So kind of the benefit of that. So we bought back a few more shares than what we had anticipated that just helps. So we're getting the benefit of that over the course of the year as well.

Ryan Krueger -- KBW -- Analyst

Thanks. And then just a last one you. Are you still thinking that $50 million is your target for parent company liquidity? So as you get to the end of this year yield determine how much you might capital you might be downstream for the updated C1 factors. But beyond that, anything that's about $50 million could be available for buybacks in 2022?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. I think that's kind of where we're thinking. Again, we'll take a look at that in the situation if we get closer to the end of the year probably and a little of this comes more into focus. But I think that's likely kind of that target that we'd be looking forward to retain.

Ryan Krueger -- KBW -- Analyst

Great. Thank you.

Operator

Our next question comes from Tom Gallagher, Evercore.

Tom Gallagher -- Evercore -- Analyst

Hi. Yeah. Just a follow-up to Ryan's last question on capital management plan. So the -- with the $550 million of total resources balance route -- minus to $50 million would imply $500 million? And I know -- I presume some of that's going to be used to the balance of the year. There are timing issues of getting dividends out. But realistically, are you looking at using some meaningful portion of that for additional buybacks? I mean, are we looking at -- I don't know, an extra $200 million to $400 million of buybacks in 2022 or are you thinking about staggering that out more, when you think about capital deployment?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. So when you think about the $500 million $550 million or what have you and then as you kind of mentioned you point out, let's just say for $50 million with $500 million. For the remainder of 2021, if our share buybacks, I would just say are at the high end of that excess cash flow range of $370 million. We've already bought back $100 million. So you got about $270 million that's remaining for this year. Then that's what we'll have to look at that. So that's really leaving you about $230 million remaining out there for various capital needs. So we'll see what type of capital needs we have for C1 and how the downgrades progressed over the year.

Now that's an excess clearly where we -- north of what we think would have -- would be necessary. And so -- but depending on where that is, Tom, I think depends upon -- if that's something that and how much clarity we have. If we end up with a bigger chunk that we're able to return, it probably would come back over a period of time, and they'll clearly into 2022. I think we'd probably be trying to do it earlier than spread it out over the entire year. But I think we'd probably focus on returning it sometime early in 2022, at the very end of 2021, depending on how much there is.

Tom Gallagher -- Evercore -- Analyst

Okay. That's helpful. And then just in terms of the, I guess the philosophy, a $50 million holding company buffer. I think your annual interest expenses are over $80 million now, and I think your common dividends over $80 million. I guess, standard industry practice seems to be holding one times coverage for interest and common dividends, which would be $160 million plus for you. Is that not -- is it the stability of your cash flows that would give you confidence to not hold that much? But just curious why you'd be able to hold a lot less than annual interest expense?

Gary L. Coleman -- Co-Chairman and Chief Executive Officer

Yeah, Tom, Gary. I would say, [Indecipherable] versus ability to cash flow that we have -- it was consistent of the year. The $53 is something we had -- we adjusted that level several years ago and we really had no issues. This past year we did raise some additional liquidity not knowing what the COVID role was going to be like, and is it turns out -- we raised a lot more related. So I think Frank is saying that's going to be $50 million. We'll evaluate that as we go along. But I don't think that we would see the lead to keep as much as you're talking.

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. And I would agree, it really is. When we look at having -- that comfort of having $350 million plus or minus from each and every year in our excess cash flow. So after the payment of those interest dividends that you mentioned, gives us great comfort as we go over that -- that will have the funds and that creates a new pool of liquidity every year that we can access if we in fact needed it.

Tom Gallagher -- Evercore -- Analyst

Okay. And then the final question just on -- I just want to make sure I understood it, the non-COVID -- sorry, the indirect COVID mortality, you said it was negative $13 million this -- in 1Q?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

Yeah. That was higher than what we had kind of anticipated. So we had anticipated higher. We had seen some of the trends at the end of the year. And again we anticipated the higher COVID deaths. So we anticipated a decent amount of higher obligations in the first quarter. But we did see about $13 million more than what we had anticipated.

Tom Gallagher -- Evercore -- Analyst

Okay. Got it. So that was relative to expectation. But if I say relative to returning to normal, I was estimating like $20 million to $25 million. Is that sound about right?

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

That does sound about right. Correct.

Tom Gallagher -- Evercore -- Analyst

Okay. Thank you.

Operator

We have no further questions in the queue at this time.

Michael C. Majors -- Executive Vice President, Administration and Investor Relations

Thank you for joining us this morning. We'll talk to you again next quarter.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Michael C. Majors -- Executive Vice President, Administration and Investor Relations

Gary L. Coleman -- Co-Chairman and Chief Executive Officer

Larry M. Hutchison -- Co-Chairman and Chief Executive Officer

Frank M. Svoboda -- Executive Vice President and Chief Financial Officer

John Barnidge -- Piper Sandler -- Analyst

Jimmy Bhullar -- JPMorgan -- Analyst

Erik Bass -- Thomas Research -- Analyst

Andrew Kligerman -- Credit Suisse -- Analyst

Ryan Krueger -- KBW -- Analyst

Tom Gallagher -- Evercore -- Analyst

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