Q3 2021 Primerica Inc Earnings Call
Good.
Primerica Q3, 2021 earnings results conference call and webcast. My name is Daisy and I'll be coordinating today's call.
Tim T to ask a question at the end of <unk>.
Presentation, if you'd like to I'd like to start a question. Please press star one on your telephone keypad.
I will now hand, David to your highest Nicole Russell head of Investor Relations at Primerica to begin with.
Please go ahead.
Yeah.
Thank you David and good morning, everyone welcome to Primerica's third quarter earnings call a copy of the press release, along with materials that are relevant to today's call are posted on the Investor Relations section of our website.
Joining our call today, our Chief Executive Officer, Glenn Williams, and our Chief Financial Officer Alison Rand.
And Alison will deliver prepared remarks, and then we will open the call up for questions.
During our call some of our comments may contain forward looking statements in accordance with the Safe Harbor 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 as modified by subsequent forms 10-Q, and the press release filed with our form 8-K dated July one 2021 for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied.
We will also.
Excuse me, we will also reference certain non-GAAP measures, which we believe will provide additional insight in the company's operations.
Reconciliations of non-GAAP measures to their respective GAAP numbers are included at the end of our press release and are available on our Investor Relations website.
I would now like to turn the call over to Glenn.
Thank you Nicole and thanks, everyone for joining us today.
Our strong results continue to reflect our ability to adapt to the changing business environment. Since the emergence of COVID-19, primarily its been educating and assisting clients in choosing the right protection products to meet their families insurance needs.
As reaction to the pandemic phase, we are helping guide clients investment decisions and assisting families as they prepare for a more financially secure future.
Please go ahead 18 months are a perfect example of the balance and resilience of our business model I am proud of how quickly our sales force has adapted to a combination of virtual and in person client interactions to continue serving middle income families. When they need us most.
Over the same 18 months, we've delivered on our strategic goal of expanding our product offerings. We have moved from pilot to full rollout of the new mortgage business, which continues to grow as we gain experience. We also launched our senior health referral program during the third quarter further rounding out a balanced product platform to help clients through every player.
Actual step of their life journey.
Looking at the third quarter, we continued to set new records with investment and savings sales up over 50% year over year.
At $8 $7 billion total sales during the first nine months of 2021 have already eclipsed full year 2020 levels and we are on pace to break $10 billion in annual sales for the first time in our history.
As anticipated sales in our term life segment have started to normalize versus their COVID-19 Pete.
And while sales are down versus the record levels, we forecast full year sales to be about 10% above pre pandemic levels. We also expect to surpass $900 billion of face amount enforced by the end of the year another milestone in our corporate history.
Starting on slide three adjusted operating revenues of $692 million increased 22% compared to the third quarter of 2020 and diluted adjusted operating income per share of $2 98, <unk> increased 7%.
These results include an adjusted net operating loss of $4 6 million or.
Our 12 cents per diluted adjusted operating earnings per share for our newly acquired interest in E tail quote Alison will expand on the financial impact of the telcos in her prepared remarks.
At 24, 1% during the quarter remained strong.
Turning to slide four we added nearly 92000, new recruits during the quarter down from the third quarter of last year with focus and urgency driven by the pandemic created a tailwind it's worth noting that recruiting remains strong compared to pre pandemic levels. We believe our success and proven track record continue to make our <unk>.
This opportunity attractive to aspiring entrepreneurs.
<unk> and discontinued in the job market create more people looking for alternatives to their current career paths and these individuals may be interested in joining our business.
Throughout the COVID-19 pandemic the process for licensing new recruits has been impaired earlier, one the impact was overshadowed by states implementing short term accommodations now that these programs have ended current licensing numbers reflect the difficulties key among the issues is the difficulty in getting new recruits to complete training class.
In person classroom training provides the greatest completion rates, however, distractions associated with the reopening of the economy and a degree of hesitancy by some to congregate in classrooms is impeding progress.
Online trading alternatives offer ease of access, but often do not have high completion rates due to their lack of discipline and accountability.
We continue to adapt in order to overcome this dilemma by offering more classroom options that appeal to a variety of schedules, increasing our messaging and incentives and better equipping our field leaders to overcome resistance.
A total of 90 381 individuals obtained a new life license during the quarter, which is below our historical pull through rate. We believe this is a reflection of the current COVID-19 environment, rather than an underlying challenge in our ability to get new recruits licensed a key part of our messaging to the field leadership includes the importance of keeping new recruits engage.
And moving toward a permanent license.
We ended September with approximately 130000 life licensed Representatives included in the total about 800 individuals with either a COVID-19 temporary license or license with an extended renewal date.
As we noted last quarter, we now expect the majority of these licenses to age out.
The normalized size of the sales force around 129200.
Normalizing all periods to provide an apples to apples comparison, we ended June 2021, with 129600 life licenses and December 2020, with 100 3700 life licenses.
At this time, we expect to end 2021, with a sales force size roughly equal to the prior year and normalized number which will be a significant significant achievement given the numerous challenges we've navigated.
Turning to the next slide to review our life insurance segment, while a pullback from Covid heightened sales levels was expected. We also believe that clients continue to place a higher value on financial protection for their families as sales remained above their pre pandemic levels.
During the third quarter, we issued nearly 76000, new life insurance policies with productivity at one nine policies per life licensed representative per month, well within our historical range.
Total face amount of $894 billion in force rose, 6% year over year.
We project fourth quarter sales to decline between 13% and 15% year over year, while full year results will be down approximately 8% versus 2000, twenty's elevated levels. It will still represent more than a 10% increase over pre COVID-19 2019 full year results.
Highlights from our investment and savings products segment are presented on slide six sale.
Sales of $2 $8 billion were up 52% year over year, the strength of equity markets continues to support investors' confidence to invest for the future.
Solid demand.
Assisted across all our investment products, including mutual funds annuities and managed accounts.
Net inflows at $1 billion during the quarter remained well above historical levels. Despite these robust inflows significant equity market volatility during the quarter kept ending asset levels largely unchanged versus June levels.
Barring an unexpected change in market sentiment, we expect the fourth quarter investment sales to grow between 20% and 25% year over year and more than 40% full year 2021 versus 2020.
As I noted earlier, we've made significant strides in expanding our product offering over the last two years and our new mortgage business. We continue to make steady progress and are now actively doing business in 17 states through more than 1200 license representatives.
We have closed nearly $1 billion in U S mortgage volume through the third quarter of this year eclipsing the $442 $5 million closed in the entire 12 months of 2020.
During the third quarter, we started to rollout the senior health referral program through primarily Representatives, we've had broad acceptance of the launch from field leaders in primary care reps are excited about how well the program serves their clients' needs. We're seeing encouraging lead generation results since the Medicare annual election period began in mid October.
After our first quarter of ownership, we are excited by the opportunities and are gaining experience in leading our senior field business.
Headwinds caused by labor market issues have caused <unk> to experience recruiting and retention issues with the senior health sales center employees.
Given the lower staffing levels coming into AEP, we expect fourth quarter approved policy levels to be around 36000 to 40000.
Or approximately double third quarter levels.
We believe this labor market imbalance as temporary and expect the return to more favorable conditions, which will improve our ability to attract quality agents that are essential to scaling detailed flow business.
We're investing in technology and talent consistent with our pre acquisition plans. We believe in the long term attractiveness of both <unk> and the senior health industry, and we are positioning ourselves to take advantage of this growing market.
As we look forward to 2022, we have confidence that we will continue to thrive in any business environment and be better positioned for ongoing success. Our plans for the new year include a powerful live senior field leader advantage in early January to set an energetic tone for the year.
In June we returned to the Mercedes Benz Stadium for our biannual convention and the opportunity to cast our vision for the future introduce product improvement and recognize our success with that I'll now turn it over to Allison.
Thank you Guy and good morning, everyone.
I will take you through third quarter result, including those of our new senior Health segment.
Highlight key addition to our financial metrics and disclosures introduced as part of the acquisition of 80% of <unk> on July <unk>.
Starting on slide seven with our term life segment topline growth remained strong with operating revenues up 12% to $401 million driven by 13% growth in adjusted direct premiums.
The compounding impact of 18 months of strong sales and policy persistency continues to drive adjusted direct premium growth and added $12 million pre tax income during the quarter.
This compares to $5 million added in the prior year period.
Third quarter net COVID-19 related death claim to $14 million from $8 million in the prior year period.
This was above our prior estimate I think also led to higher COVID-19 related population deaths in the U S and Canada.
The rate of Covid mortality in our insured population also increased from around 11 million to $14 million per hundred thousand gas.
The increased rate was largely driven by best impacting younger individuals former heavily represented in our insured population.
And higher volume of claims and state vaccination rates have been low.
Cobra claims continue to be linked to older policies with less than 1% of claims coming from policies issued since the onset of the pandemic.
We incurred about $2 million of excess death claims in the quarter not specifically identified as COVID-19, but that we believe are indirectly tied to the pandemic.
We delayed medical care <unk>, such as crime or the behavioral health crisis.
We continue to monitor our experience for any emerging long term trends and the.
P&L perspective, this excess mortality was fully offset by a reduction in the reserves held for policy writers that provide for premiums to be waived phonemic natively disabled.
Main drivers of the reduction were higher that cranes in the weeds population along with expanding our third party disability claims management to include Canada.
During the third quarter lapses remain around 25% to 30% lower than pre COVID-19 levels for all duration, except duration, one which was about 15% lower.
Compared to the pre pandemic baseline DAC amortization was favorable by $11 million offset by $6 million and higher benefit return due to strong persistency for a net favorable impact of 5 million to pre tax income.
The third quarter of 2020 <unk> record.
With lapses around 35% lower than pre COVID-19 across all durations, including duration one for a net contribution to pre tax income of $14 million.
Last year, we highlighted that these levels are unsustainable and ask that you expected lapses to normalize over time.
Year over year, DAC amortization was higher by $11 million and benefit was Eric or lower by 2 million due to persistency changes with the increase in DAC amortization, largely driven by duration one.
Given the higher COVID-19 related deaths cleaned and lower net contribution provided by persistency pre tax income growth was compressed 2% year over year with margins remaining around 20%.
Looking to the fourth quarter, we expect adjusted direct premiums to grow by approximately 12% year over year and future growth rate taper as we layer on new business and trend back to pre pandemic activity level.
Covid related deaths are estimated at $14 million.
On 100000 projected population deaths in the U S and Canada.
We expect strong persistency to continue lapses that are 20% to 25% lower than pre pandemic levels across all durations, except duration, one where expect lapses can be around 15% lower.
This translates to a similar persistency related impact as seen this quarter.
We do not expect the new business assumption review performed annually in the fourth quarter to have a notable impact on earnings.
We anticipate term life margins in the range of 19% to 20% for the fourth quarter.
Turning next to the results of the ISP segment on slide eight.
Operating revenues of $233 million increased $57 million or 32% year every year, our pre tax income of $69 million increased 35%.
Third quarter results continued to reflect the combined benefit of strong sales volume across all products.
And the positive impact of equity market appreciation.
Sales based revenues increased 45% slightly below the growth in revenue generating sales due to a higher proportion of sales volume in large dollar trade, which have a lower commission rate.
Asset based revenues increased 31%, reflecting a similar increase in average client asset value.
Both sales and asset based commission expenses increased in line with the associated revenue.
As Glenn mentioned, we expect fourth quarter IFC sales to grow between 20 and 25% year over year.
Based on the current sales mix with increased sales based net revenue by approximately $4 million over the prior year period.
Assuming no significant market movement during the quarter average assets under management would be approximately 20% higher year over year and asset based net revenues increased $7 million.
Turning to slide nine this quarter, we are introducing our senior house segment as a result of the acquisition of 80% of the telecom.
The acquisition is being counted.
Different combination in accordance with GAAP, which generally requires the purchase price in excess of the estimated fair values of net assets required to be recorded as goodwill.
The table on slide nine shows that preliminary purchase price allocation, which is subject to change at fair value of the net assets acquired are finalized.
The most significant assets acquired were renewal commissions receivable for policies sold by <unk> prior to the acquisition date and identified intangible assets.
The key identified intangible asset is relationships with health insurance carriers of $159 million, which will be amortized over its estimated useful life of 15 years.
In the current period, we had intangible amortization expense of $2 9 million related to acquired intangible assets recognized in the operating results of exiting the health segment.
E Calico purchase agreement provides for the payment of contingent consideration in the form of earn out payment to the sound shareholder based on <unk> achieving earnings results as defined in the participant unit for the calendar year, ending 2021 and 2022.
Given the substantial earnings required to achieve the earn out we do not anticipate nor did we assume any payments will be made as such we have not recognized the liability for the earn out and our preliminary purchase price allocation and do not anticipating recognizing any expense associated with it.
We will acquire the remaining 20% interest in <unk>, which is held by or for the benefit of Telecom management with a series of puts and calls based on a formulaic price defined in the purchase agreement.
We have recognized the remaining interest outstanding in their preliminary purchase price allocation into category redeemable noncontrolling interest and liability class by share based compensation.
Based on the terms and conditions of the individual affairs.
Any post acquisition share based compensation expense applicable shares as well as adjustments for changes in the fair market value of liability classic classified shares subsequent to the acquisition.
Dilutive from our operating results as they represent acquisition related expenses that will not reoccur subsequent to the exercise of the put the call.
The key areas of focus as we evaluate senior health performance going forward will be approved policies commissions and fees, which includes both lifetime Commission revenues recognized at point of sale and any subsequent tail commission adjustments for changes in estimate.
<unk> issued in previous periods and contract acquisition cost.
Other drivers include marketing development revenues reflected in other revenues and other operating expenses.
Each of these items as defined further on page 13 of the financial supplement we also highlight the noncontrolling interests and other purchase related accounting items.
Yes.
As opposed to acquisition business matures, we plan to add cash collections by cohort to track. The time. It takes for a cohort of approved policies become cash positive to our quarterly earnings discussion.
The senior health business experiences some notable seasonality with the fourth quarter being the strongest exceeded the annual election period or AEP, which runs from mid October to early December.
AEP generally has peak levels of demand and as a result, he telephone has higher agent count.
The open enrollment period, our ODP during the first quarter is generally another strong period of individuals have an opportunity to switch between Medicare advantage plans.
The second quarter tends to be a period of focused on individuals who qualify for both Medicare and Medicaid.
We're allowed a special enrollment period, and those aging into Medicare or coming from an employer sponsored Paul.
The pool of potential sales opportunities in the second quarter decreases relative to <unk> and AEP. However volumes are adequate to avoid laying off quality agents.
The third quarter is typically the weakest quarter of the year financially with growing agent counts, leading into AEP and lower lead volume basic supply and demand imbalance.
During the quarter the senior Health segment had an adjusted operating loss before taxes of $6 6 million.
Including purchase accounting adjustments.
As Glenn referenced throughout Covid, there has been pressure around hiring and retaining the quality at Aegean E. Telcos typically attracted buyers accountable.
While there is a generally third quarter hiring in preparation for AEP heightened turned our turnover early in the year.
Higher than usual levels of hiring training and licensing in the third quarter.
The cost associated with this drove contract acquisition cost per approved policy up to $1287, which when combined with the low supply at least typical in the quarter resulted in a loss for the period.
While staffing challenges remain in the fourth quarter, we believe the lead supply benefits of AEP, along with the incremental primerica generated Lee will provide a positive impact to profitability.
We anticipate pre tax operating earnings to be in the $20 million range for the fourth quarter with lifetime value commissions around a $170 and contract acquisition cost around 640 <unk> policy.
Moving next to slide 10 in our corporate and other distributed products segment. The adjusted operating loss increased by $1 5 million year over year to 13 5 million.
Commissions and fee revenue were higher by 6 million, including $3 7 million and mortgage sale.
This was partially offset by $3 7 million lower net investment income as portfolio yields were lower and the allocation to the term life segment increase in support of the growing book of business.
I guess could benefits and expenses increased $3 7 million largely due to the expansion of the mortgage program, including $2 6 million higher sales commissions and operating expenses.
Operating results for the corporate and other segment.
Certain costs related to the acquisition of <unk> Telecom, most notably $9 6 million and transaction related expenses.
Turning to slide 11, consolidated insurance and other operating expenses increased $17 3 million or 16% year over year with $7 5 million coming from senior health and the remainder due largely to growth in our businesses.
Expenses were lower than projected last quarter in part due to the timing of certain technology projects.
Licensing costs and savings and miscellaneous items.
Looking ahead, we expect fourth quarter insurance and other operating expenses to be around $129 million, including the layering in of <unk> other operating expenses of $8 million.
Turning to slide 12, consolidated net investment income was $20 million down slightly from the prior year period, due lower effective yields partially offset by an increase in the size of the portfolio.
<unk> had unrealized gains at the end of September of approximately $108 million down slightly from the end of June as rates rose during the quarter.
Portfolio remains of high quality and well diversified across sectors initially.
On slide 13 liquidity at the holding company remained strong with invested assets and cash of $192 million.
Primerica life's statutory risk based capital ratio is estimated to be 420% at quarter end using the new NTIC bond factor approach.
We estimate that funding needed to support the senior health business in 2020 to be in the high $70 million range up from earlier expectations of the mix $3 million range.
The increase in negative cash flow is driven by lower than anticipated marketing development funds firm carriers elevated charge back on the 2020 AEP book of business is seen throughout the industry and higher agent related costs as described earlier.
Given anticipated growth in the in this business, we expect negative cash flows decline over time and approach breakeven in about six years.
Given our current liquidity and strong capital generation from our other businesses. This increase can be easily absorbed without any changes to our capital deployment plans core operations with.
With that operator, I'll open the lineup for questions.
Thank you very much if anyone would like to buy just a question. Please press star followed by one on your telephone keypad when preparing to ask a question. Please ensure you're on mute locally.
If you would like to withdraw your question. Please press star followed by <unk>.
Our first question comes from Brian Kruger from K B W. You Brian Your line is open. Please go ahead.
Hi, Thanks, good morning, good morning.
First question I was just.
At this point would you still anticipate resuming share repurchase in 2000 at the start of 2022.
Can you give us any sense of potential magnitude.
So at this point actually the timing is almost perfect. We're getting ready to meet with our board to review, our annual budget and part of that.
Reviewing what our plans for capital deployment will be so at this point I can't provide any further guidance I'll just reiterate.
Right, what I, what I close out with is that we do continue to look at our books of business and the capital generated by them, even with the capital needs of the senior health segment and believe that they are more than sufficiently adequate to be able to maintain all of our operating needs as well as maintain capital deployment plans.
Thanks.
And then I guess another question that.
I'm not sure if you've talked about yet is any preliminary thoughts on <unk>.
Would it potentially impact your termite business.
Yeah.
It's a very relevant question, we have not at this point starting to quantify any of those results. We have seen that a few folks in the space have given some very high level notes all of which is really the basis of what the LDP that LDP is with.
We definitely expect there to be contango and how earnings emerge on a GAAP basis, and what I will remind you and I think you've heard from others is that there is no impact from al DTI on either the true economics of the business or the statutory cash flows and obviously the statutory cash flows are what will drive what we can deploy.
Out of the life company, but the important things to note with <unk>. It does change from a lockean assumption to an annual reset of mortality and persistency.
We of course, while we will be exposed to that annual reset on mortality, we do lock in 90% of our mortality the why.
IRT reinsurance so the volatility will continue to be diminished because of that wire T program.
But clearly it will create some nuances and based on how actuals emerge you might see the timing of that impact change from what you would have had under at <unk> and also there are no provisions for adverse deviation. So that does also change the timing of earnings in fact, recognizing earnings a slight.
<unk> earlier pattern than you would have otherwise.
The DAC methodology and differentiated a straight line mechanism.
Mechanism for that will change the timing of earnings and but for US really the biggest thing and its consistent again I think you've heard from others is going to be the assumption you used for your discount rate.
<unk> is essentially we're moving.
Any correlation to your actual investment portfolio and how you will discount reserve and by the way, we don't accrete interest on the DAC anymore. So that's another change between the two accounting rules.
You are asking us or the guidance is the mid single a rated.
Right.
That I think what they believe a FASB believes is a positive of that is that there'll be consistency amongst the industry as to what the discount rate thing is that again is different than we've historically seen because historically that has been based on what we believe our investment.
Folio can achieve.
As you well know our investment portfolio does not we've said historically that we don't have a lot of asset liability matching issues.
So very strong cash flows out of our business. So we have never really used a very aggressive approach on our investment portfolio.
While I can't determine what other people have at their discount rates on their enforced book of business or have been I'd say relatively low when you just think about the fact that there based on what we expect to earn on our existing portfolio.
So we will definitely see a week that.
Based on the change in interest rates I would say if interest rates today are about as low as they've ever been.
But of course, those we set both initially and ongoing will go through OCI not floor income.
So I think that's a good way for you to be able to separate out something that is.
Believed to be really a timing type item or based on current activity and not indicative of the underlying profitability of the business itself.
That was a long winded answer to say we are actively looking at it we've had to change a lot of our systems to deal with the needs associated with the disclosure the disclosures will be far more in depth than we've seen in the past.
But we believe we're on track and we would expect to start sharing more details on financial results sometime next year.
Okay, Great. That's very helpful. Thank you.
Thanks, very much Ryan. Our next question comes from Andrew <unk> from Credit Suisse. Your line is open. Please go ahead.
Good morning, Andrew.
Good morning.
No.
Im looking at this rep count now it's around 130000.
For a few years.
After some big ramp ups in growth.
Prior to 2020.
Launching an event coming up in January then Theres the big meeting in June at the Mercedes Center.
Maybe talk to us a little bit about.
What what upcoming initiatives might be in place to move that rep count up significantly and what do you think that might happen.
Okay, well certainly it starts with our recruiting numbers, which we feel good about as I reported in my prepared remarks.
I looked through the Covid unusual peak of the numbers that you see that our recruit numbers continue to be strong historically.
We believe our business opportunity appeals.
Calls of our track record of success because of our success in dealing with the disruption of the pandemic in our business I think that aspiring entrepreneur is still look at us and so this is a great place to build the business.
Thank our recruiting gets a tailwind from the disruption in the labor market, we've talked about it in relationship to our business and it's actually impacting different parts of our business in different ways, but as people.
Become frustrated with their current opportunity or lack of opportunity and talk about moving and think about moving to a different career that actually.
Opens mines to considering being in business and being in a business like primary hurricane and with our success and track record. We believe that that provides a tailwind for us on the recruiting front. So I believe that recruiting is strong and healthy and Andrew as we've talked about for a number of quarters throughout COVID-19. The challenges what is the disruption of the screen.
And the pull through rate and so we continue to work on our licensing process to adapted to the expectations of kind of a post COVID-19 world.
We've always as I've said in my remarks.
Felt liked it online processes don't have the discipline and accountability and therefore completion rates suffer people start online and never finish where people come to class they tend to be more diligent in completing the class and therefore being prepared.
We often pass the exam.
I would tell you our experience and our licensing process is probably what.
Parents are seeing theyre experiencing sending their kids to school with more effective when kids are in class. It's more effective when returns are in class to get them licensed.
And so that's really I would say the area, where we've got the most aggressive focus right now in correct. In course is finding the new path post COVID-19 or licensing.
Just like you mentioned do drive the excitement levels increase something to recruit to and for people to plug in early and see the excitement success of primary Erika. So I do think being back in a cloud environment.
This fall <unk> done some live events to kind of practice, the new way of doing events safely and in a healthy way and are having good success. There. So we will be back to a near.
Near normal kind of rotation in 2022 and that will certainly help us.
As to answer when do you see suddenly the results emerge from all those efforts very difficult to project the headwinds created that I've described from Covid.
Tough to figure out exactly how long that might last and in many times in business you.
Do the right things for a period of time before you see success, but we do expect to start to regain ground and solidify the ground that we're on in store growth again next year.
I've been asked many times what is the limit to the size of the sales force and based on the need in the marketplace. Both for our financial solutions for families and for our business opportunity I believe we can be a lot bigger than we are today. So we're committed to figuring that out and getting.
Getting the growth.
Growth rates back to what we experienced.
<unk>, but I think just before Covid broke out we had a we had some good momentum going and unfortunately, the present cost of some of that but we think we can get that back and we're optimistic that 2022 is the year that begins.
That was very helpful. Glenn and then maybe just shifting over to tell a quote.
You indicated I think 20 million of earnings and the.
Fourth quarter of <unk>.
Course, coupled with the challenges that you've recently had.
Staffing up and training cetera, So I'm curious as to what may be the risk of falling short of that $20 million in the fourth quarter.
Do you have is that a number that you anticipated.
Acquired our quota.
Yes.
I'll leave it at that.
Okay. There's a few different questions in there I'll go ahead and address sort of.
The risk associated with it and I would tell you if I had the crystal ball for any of our businesses.
Beyond this call right now, but that would be okay anyway.
There's a lot that goes into that we have.
Definitely seeing the pressures are bringing says on we're about I'd say almost halfway through AEP until we're monitoring performance closely we're seeing the pressures from from bringing people on has been a negative.
And then positive associated with.
The productivity levels of the folks the people that we have have generally been people who are more tenured even though there aren't as many of them.
Which is always a good thing and the excitement that's being generated within primary.
This is new for us and so I'd say the biggest new is the primary aspect of it thus far.
Been a lot of engagement, which is which has been wonderful to see we need to keep working through AEP to see how that develops.
But I think otherwise they are monitoring the business daily to monitor both the cost and productivity and the like so.
I think the number is pretty good I can't guarantee you, it's perfect, but I don't think its going to be off by all that large of a magnitude one way or the other.
So I'll go would go with that.
Got it.
Is it trending where you thought when you bought it or is it a little more challenging.
Well as you know Andrew we spent a number of years after our strategic process identified the senior health market is something that we were interested in studying the market and we recognize that.
A number of variables in that business that drive it and that of course was prior to COVID-19. The grade's variable at all so we tried to have a broad understanding of the positives and negatives of the momentum of that business.
And then of course, we identified <unk> as the best fit for Primerica after taking quite a long look at them and studying them carefully doing diligence and so forth and so.
We have seen things that we didn't expect many of those have been totally driven things that I don't think we could have anticipated.
I would like to say that the cleanliness of theory is no match for the mess of reality and so now we're learning real time as a result of leaving that business in partnership with the very strong management team with the telcos had.
Since we acquired so there had been parts of it that have turned out much like we anticipated there have been some things that were a little different than we anticipated I would say the majority of those have been COVID-19.
Covid impacted in some way.
But overall, we're very pleased.
With the way things are turning out we're still excited about this industry segment believe theres huge opportunity in senior Hill and we also believe that <unk> is a strong player today youll be levered stronger player tomorrow, particularly with the added advantage that the primary relationship brings a new source of leads and referrals.
A different.
Dynamic within the industry that we believe is unique and we don't believe anyone else has access to what we have so there are a few things we're learning as we expected, but overall, we feel good about where we are and we're excited about the future.
Thanks, Glenn and Alison.
As a reminder, if anyone would like to register a question. Please press star followed by one or no tenant banking Pat.
Our next question comes from Mark Hughes from Truest molecule line is open. Please go ahead.
Thank you good morning, Glenn Good morning Allison.
Hello.
Q3 quarter.
<unk>.
In terms of.
To prove policies the 18004th quarter's 36 to 40.
We roughly speaking just from a seasonal perspective think about it Q1 or Q2, just trying to get the magnitude.
Yeah.
And in our normal pattern as we've always done on the next earnings call. The fourth quarter earnings call I will give some further insight for all of our businesses as to what we're expecting for the.
The upcoming year.
Typically like I described in my prepared comments, you would expect at the first quarter to not have as much volume as the fourth quarter that could still be a pretty sizable quarter.
The biggest thing here is it's definitely there is supply the question becomes how much of that supply via attempt to ingest and how fast do oil and gas and that is going to be based on a combination of the number of agents trained agents that we havent seen.
As well as the productivity of those agents. So the good thing about both the fourth quarter and the first quarter as there is ample supply.
The bigger constraint I would say we have.
As we head into first quarter is in fact can keep putting active people in seats that are productive not lose them keep hiring along to meet that supply.
So as Glenn was describing the labor market is really the biggest challenge and quite frankly, we do believe that has very much to do with Covid I think everybody is seeing it pretty much everywhere in life.
And so until that since side, it's a little bit difficult for us today, there's going to be a normal seasonality.
But to your exact question I can't give you an exact number but I will say the supply is there to be had and ingest. It in the first quarter and it's really a function of how many people we can actively get.
Working those leads.
And by supply Youre talking about leads.
Yes, there's a lot of at people actively looking in the first quarter because of the open enrollment period.
Yes, you have an estimate for how many of the 36 to <unk> 40 in the fourth quarter will be.
Leads from Primerica.
Yes.
Before we think we can get.
The targets that we've said is to get up to providing 10% of the leads and applications. The details of what's doing it's interesting the faster the details what was the harder. It is for the primary care segment to get 10% faster the Prime Erika segment rose the easier it is for us to get to 10% right now we're running into.
In the kind of four 5% range of what's happening there.
And so we've got a way to go but we do believe we're getting good positive reaction in our sales force we've had about a little over 20000 reps have certified there is a training and certification process to go through.
Most of those are like licensed some of those that have been certified or not yet like license, which was one of the vision. We have for this business is it's a business that new reps can get into quickly.
They build upon American business and that's an advantage of being there. So we've had we've been very pleased with the acceptance and excitement level within primary for we've been pleased that we're off to a reasonable start but we believe we can grow we got this up and running just before AEP started in a perfect world. The grades have had some experience, but we did want to.
Amidst the learning curve of AEP. So we wanted to have our referral process in place, but there's a lot of upside there that we're very excited about.
Allison, let me think about normalized back within the term life business, but I'd just kind of take this quarter.
Add back.
$11 million does that get to the run rate I know you said fourth quarter is still going to have some of these things.
<unk> impacts around back but.
Would that be one way.
Well, Yeah, I would remind you in this.
And we've seen some craziness overall over the last several quarters because of Covid, but there is some seasonality if you will.
Recall on persistency.
Some of the things to do on an annual basis of easy how your calendar is it by quarter is going to get a little hard to remember things like the first quarter I mean, the second quarter due to a very strong.
Persistency quarters for the GAAP ratio is typically a low quarter.
But putting that aside.
Do you continue to expect further normalization of.
So if youre talking specifically about the fourth quarter I think what I indicated was that overall net net I expect this persistency impact to be relatively consistent with the third quarter.
But over time, we do.
Do expect lapses to rise closer to what they were pre Covid. We are obviously hopeful and we do believe based on public sentiment that will land at a place where lapses are lower than they were prior to the pandemic, but how fast that happens still remains to be seen we are seeing some of it.
The newer policies.
People are less vested in their policy, because I hadn't been really paying the premiums that long.
Seeing very strong persistency said once you get past the first or second duration, where people sort of feel like theyre committed to the policy.
Yes.
LTV per policy, how does that.
Versus peers I assume you are aware of.
<unk>.
A decision they've made and what are some of the underlying assumptions are on longevity of the.
Policyholders.
Yes, that's a couple of different questions. There. Let me just start with one thing as we've done our research to think about what would be appropriate to disclose for this segment.
And how best to define our metrics. What we have found is there's very little consistency in how the metrics are defined there. Some level. We attempted to find any places a consistency that we could but that being said I will caution you that the way, we ultimately defined something in a way one of the other peers ultimately differ.
Something could be different.
So I don't necessarily want to look at things in relation to what other people are getting because I don't have full transparency into what what they are booked at that being said.
Everybody it should be doing consistently is looking at that.
Theres two components to the LTV there is the initial commission and the renewal commissions.
Initial commissions are paid upfront to find out really within the first 90 days for the most part whether youre going to keep that so you have pretty good visibility pretty quickly.
Matt.
On the renewables, obviously that happens every time you use historical persistency levels.
And within the guidelines of the appropriate revenue recognition accounting you do constrain zone.
So that you are most likely not going to end up in a situation, where we have the reverse something you've already booked.
I can't speak to the level of constraint other firms are using or what their persistency experience has been we are using our historical experience supplemented by information industry wide where needed.
Believe all the firms do you have the similar analysis as we do performed externally to look at those persistency curves. So I would think the basis that will all using is consistent whether their performance is the same as ours I cannot be too.
But the approach the mechanics of it I would say are fairly similar.
There are people can make different and what is your question.
Sorry.
Oh I'm sorry.
I was just going to ask if you had any specific numbers around one jeopardy or persistent.
We're able to share.
Nothing I can share its actually John based on individual cohort.
Which is a function of both the periods that the policy became effective as well as the carrier and it is different by carriers.
You seem to have different.
Persistency level also just as you have seen to the extent you've worked in the industry.
This particular year, the 2021 cohort of business have seen higher lap.
Last patients in charge backs some of that is believed to be because of COVID-19 and the level of agents.
Yeah.
Training levels and the quality of the agents that were available and last AEP.
But then again I don't want to say that is going to be typical for what will be in future periods, nor is it necessarily reflective of prior periods.
If you look at everything by an individual cohort.
Okay, then one final question.
Could you give the outlook for full year.
Who gets to.
Insurance and other operating expenses.
Yes.
Fourth quarter and I don't have the exact number but if you go back to February which is when I think I gave my annual I think we are coming in of a few million dollars lower than what we said in February.
But relatively speaking it's in the same general ballpark you know that's been something <unk> been favorable obviously less travel than we anticipated. We thought we can that can travel licensing costs are going down because of some of the things Glenn described.
But ed, but otherwise it's been pretty much in sync with our original expectation obviously all of that is without and telecom.
And what was the fourth quarter guide.
One.
Got it.
I think it was 129, but let me get $129 million.
Which includes <unk> of $8 million.
Okay great.
Great. Thank you very much.
Youre welcome. Thank you.
Thanks to everyone for joining today's call.
<unk> has now concluded you may now disconnect your lines and have a lovely day.
Okay.