Q4 2022 Primerica Inc Earnings Call
Greetings welcome to Primerica's fourth quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
I will now turn the conference over to Nicole Russell Senior Vice President of Investor Relations call you May now begin.
Thank you Rob and good morning, everyone. Welcome to primary <unk> fourth 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.
Joining our call today are our Chief Executive Officer, Glenn Williams and.
Our Chief Financial Officer, Alison Rand Glenn.
Glenn and Alison will deliver prepared remarks, and then we will open the call up for questions.
During our call some of our comments may contain forward looking statements in accordance with the Safe Harbor provisions of the Securities Litigation Reform Act.
The company assumes no obligation to update these statements to reflect new information.
We refer you to our most recent Form 10-K filing.
May be modified by subsequent Form 10-Q for a list of risks and uncertainties that could cause actual results to materially materially differ from those expressed or implied.
We will also reference certain non-GAAP measures during this call, 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 are available on our Investor Relations website.
I would now like to turn the call over to Glenn.
Yeah.
Thank you Nicole and thanks, everyone for joining us today.
Our primary 2022 was a year of progress as we adjusted to a post COVID-19 environment and advanced our position as one of the largest providers of financial education and guidance to middle income families in the U S and Canada.
Among our proudest achievements in 2022 was issuing over $100 billion of term life insurance protection for the third consecutive year, bringing our total face amount in force to $917 billion at year end.
In our ISP business, our investment licensed reps play an important role in helping our clients stay focused on long term goals, despite significant market volatility and economic uncertainty our clients continue to invest contributing $10 billion in new sales during 2022, and making this our second largest sales year.
Leading pre pandemic levels by more than 30%.
At year end, our life licensed sales force exceeded 135000 representatives, providing a solid foundation from which we can continue to meet the needs of our clients. Our success reflects the value that middle income families place on protecting their income saving for the future and the benefit of doing so in a face to face sitting with a prime Erika representative.
Turning our focus to fourth quarter results adjusted operating revenues of $685 million declined 5% year over year due to the negative impact of market volatility and client asset values and lower revenue generating investment product sales pressure from our ISP segment was offset by strong term line.
Segment results driven by low benefits and claims ratio, while the senior health business contributed $4 million to pre tax income.
Diluted adjusted operating income per share grew 19% year over year to $3 49, and ROE was very strong at 27, 1%.
Alison will provide more details on fourth quarter financial results later in the call.
Our distribution building capabilities remains strong more than 77000 individuals joined primerica during the fourth quarter, representing a 5% increase year over year as we continue to capitalize on the attractiveness and flexibility of our entrepreneurial opportunity are.
Our success through various disruptions in recent years and our efforts to improve field support and technology have further strengthened primary because appeal with new recruits.
We are gaining traction in licensing and it made good progress throughout the year during the fourth quarter of 2022 more than 11000 individuals obtained a new life insurance license, which represents a 20% increase compared to the same period in the prior year.
Licensing is always the most difficult part of building distribution. It takes constant focus to manage the process, which varies by state and province, we have made improvements to the licensing process over the last few years to remove as many pain points as possible and we continue to communicate the importance of licensing new recruits to our field leaders.
As always we remain committed to growing the size of our sales force and we ended the year with 135208 life license sales reps, which represents a four 4% increase year over year.
Looking ahead, we expect the sales force to grow at around 3% in 2023.
Turning next to the fourth quarter term life segment results.
Issued policies were down 4% year over year due to a slow start in October as reps anticipated and prepared for the launch of our new generation of insurance products.
Following a successful product launch we started to see improved sales volumes in November and December .
We also believe the increased cost of living negatively impacted sales to some degree during the period.
Productivity at one eight policies per life licensed reps per month remained within our historical range.
What are the changes we made Jordan product series involved how policies are structured in relation to individual lives.
Historically, two adult lives could be covered under a single policy by adding a spouse rider.
The usage of this rider has dramatically decreased over time.
Just prior to the launch of the new products in October only 15% of issued policies included a spouse rider.
To better match risk and pricing in our new product series, we eliminated this rider so that going forward each policy will cover only a single lie.
Given the timing of the new product launch and the time required to complete the underwriting process approximately two thirds of policies issued in the fourth quarter were from the old product series.
Results for the quarter reflected additional policies issued due to replacing the spouse rider with a separate policy and the new product series <unk>.
Adjusting to a consistent basis of lives per policy issued policies would be down around 7% for the quarter.
Beginning with 2023 virtually all policies issued will be from the new product series with a single life per policy.
To make 2023 year over year comparisons easier and more consistent we will provide an estimate of 2022 issued lives by quarter in our first quarter 2023 financial supplement along with the historically reported issue policies.
The change in relationship between lives and policies will also modestly change our productivity range to 0.20 to two four policies per life licensed representative per month going forward versus our historical range of one eight to two two.
As we look ahead, we believe the new product series will provide momentum for growth, while inflationary pressures will likely remain a headwind in the near term leading to a slow start to 2023, we believe momentum will build as the year progresses.
We expect first quarter sales to grow around 1% versus an adjusted policy count of approximately 83000 in the prior year period. Our current expectation is that full year 2023 term life issued policies will increase by mid single digits compared to the 2022 adjusted policy count of approximately 33000.
Turning to the investment and savings product segment for us.
The equity market volatility continued to pressure ISP results sales were $2 $1 billion during the fourth quarter declining 31% from a very strong fourth quarter in the prior year and ending client asset values declined 14% year over year to about $84 billion.
However, net flows remain positive at $649 million for the quarter, which we believe compares very favorably to industry industry trends.
Clients remain committed to their long term investment goals and we continue to see strong transaction volumes and little change in automatic monthly investments, which comprised about one quarter of mutual fund sales.
Likewise, we have not seen a notable rise in quarterly redemption rate during 2022.
Ongoing market volatility and uncertain economic conditions do put pressure on our larger trade activity.
We've historically seen these clients wanting to see a period of market recovery before re engaging in the market, making it difficult to project sales for 2023 <unk>.
Taking into consideration the current market conditions and the very strong first quarter sales last year, we believe year over year ISP sales could be down as much as 25% in the first quarter of 2023.
We expect that our license Representatives will continue to play an important role in education and keeping clients focused on the goal of a more financially secure future while improvements in CRM technology and apps such as my primary Gov allow clients and reps to get information and stay connected real time.
And our senior Health segment approved policies were down 35% compared to the 2021 AEP as a result of deliberately slowing senior health sales, while we wonder under with efforts to improve tax and stabilized ltvs.
Our focus has been on producing increased agents' efficiency driving our revised lead buying strategy and revising agent incentive compensation. These efforts combined with reducing our employee senior health agent count by approximately 50% resulted in a meaningful improvement in agent productivity compared to 2021.
Pete.
Productivity increased on average 25% across all agent tenure bands.
The ratio of approved as submitted policies was 90%, which is an improvement over the fourth quarter of 2021.
Contract acquisition costs per approved policy also declined 21% year over year to $722.
As it relates to Ltv's per approved policy the $888 recognized in the fourth quarter reflects our current best estimate of future Commission collections on a constrained basis, we'll have a better understanding of how 2022 AEP business performed as well as 2023 renewal levels by the end of the first quarter.
<unk> and we will adjust future ltvs as necessary.
We're encouraged by the emerging results the senior health business is producing and we recognize there is much work still to do our collective.
<unk> efforts are working toward achieving a sustainable and healthy business that will produce acceptable returns.
We're also committed to the long term opportunity in the mortgage business and continue to execute against our plan to expand our reach by Gratulate, adding more states and increasing the number of mortgage license Representatives. However, the current interest rate environment continued to put pressure on loan volumes.
As we look to 2023, we do so with confidence in our ability to grow the sales force and bring value to underserved middle income families. We are encouraged by the response to our new term life products as well as the emerging trends in the senior health business market volatility and economic uncertainty may continue to cause headwinds, especially in our ISP business.
We know the fundamental strengthen RSP business, which is focused on long term retirement savings will continue.
We have a high degree of confidence in our ability to create long term stockholder value now I'll turn it over to Allison. Thank.
Thank you, Brian and good morning, everyone.
Prepared remarks today will cover fourth quarter segment operating like all the implications adoption at the long duration targeted improvements our Lv Ti.
And our 2023 outlets for key financial measures.
So I think with the term life segment operating revenues of $430 million during the quarter, 5% every year, primarily driven by.
Growth in adjusted direct premiums, while pre tax income grew 23%.
And if we can create significant driver of term life pretax income.
Outpacing web fourth quarter weaker seasonal.
With 56.6%, 63% in the prior year period.
You get sweet items impacted each period.
Significant with $3 million of favorable claims experience this quarter compared to $19 million in excess claim in the prior year period largely related to Canada.
We attribute lower claims activity this quarter than normal volatility and why.
It's possible that we are seeing some benefit of COVID-19 and mortality profile and with nothing conclusive and we cannot say whether that will continue in 2023.
The quarter also included a $4 million reduction, Eric reflecting the positive impact of rising interest rate lock and new business assumption during the current quarter for policies issued in 2022.
Finally, we recognized a $2 million favorable impact from the administratively Pakistan.
Reinsurance transaction.
Turning next to that in the fourth quarter 2000, Twenty's DAC amortization ratio of 16, 6%, reflecting weaker seasonal persistency, while the prior year period ratio of 13, 1% benefited from the tailwind of lower lapse rates during the pandemic.
By the end of 2022 persistency had largely normalized in the aggregate, although we were still seeing higher lapses on policies issued at the height of the pandemic offset by favorable pregnant.
Policies issued prior to 2020.
Overall on a full year basis. The term life operating margin remained largely unchanged at 19, 6% versus 19, 5% in 2021.
As we move through 2023 historical results for 2021, and 2022 will be restated to reflect <unk> 16.
<unk> effective January one 2023, where the transition date of January 2021.
While L. DTI has no impact on the underlying economics of our business Cashway statutory capital requirement or our ability to return capital to stockholder and it does change have gas that project.
Our marriage.
As I provide a 2023 outlet for our key financial performance metrics on an LPTA basis I will do so in the current tax of what we expect those same metrics to look like for 2022.
And our Lv Ti.
All future year over year comparisons will be provided on an allergy ti basis only.
Planned to publish an updated fourth quarter financial supplement with restated unaudited 2022 adults prior to releasing second quarter results.
The new accounting literature does not impact the recognition of net premiums or adjusted direct premiums.
Do you mean, the mid single digit sales growth as Glenn discussed earlier, we expect ADP to grow by around 6% in 2023.
ADP growth is predictable given the size and stability of our inputs premium.
Additionally, our very popular increasing benefit rider, which allows policyholders to increase faced amount cartilage by 10% each year for a period of 10 years.
Acts as a buffer against any short term negative deviations in the cab.
Both DAC amortization and the benefits and claims and benefits in claims as a percentage of ADP will be lower under the new accounting literature.
Starting with Jack Deferrable expenses do not change I know al DTI, but we expect that to amortize slower than under the previous accounting literature.
Under Al DTI amortization will be recognized straight modeling based on a cohort current pacing out.
<unk> includes all policies issued in the year as well as policies that enter ended term after their initial level term period.
Directly jaquith amortize over the level premium paying period, only but <unk> user cohort and current base amount.
Actually decreases the pace of amortization.
The treatment of commissions on the increasing benefit rider I guess discussed also slipped back amortization.
Under historical GAAP the level commissions on these wires are capitalized and amortized in the same period, whereas on your L. DTI Theyre amortized straight line like other acquisition costs.
We expect the full year 'twenty, three DAC amortization ratio to be around 12% of adjusted direct premiums and therefore the ratio in 2022 under <unk> to be very similar.
Additionally, the use of cohorts and current face amount or largely eliminate if persistency related quarterly variability experienced under historical GAAP.
Currently <unk> will also eliminate volatility and the Canadian segregated fund DAC amortization that is recorded in the ISP segment.
<unk> fund DAC amortization will now be based on policy count as opposed to estimated gross profit, which was subject to market driven changes in client asset values.
Moving to benefits and claims we expect the ratio to be modestly lower on your album Ti.
Stuart.
Benefit reserve assumptions were locked in at issue were not updated for future assumption changes such as mortality improvement and included provisions for adverse deviation.
Under <unk> current best estimate or use each period, which are generally lower than what was used under historical GAAP.
We expect the benefits and claims ratio to be in the 58% range of ADP in 2023 and for the 2022, we stated range Andrew L DTI to be similar.
The benefits and claims ratio should be fairly stable from quarter to quarter.
Experienced bankers, which occur when actual cash flows were a cohort from executive cashless underlying north there will be partially recognized in the current period and partially expected future period, whereas under historical GAAP experience variances were generally fully recognized in the period incurred.
The closer we are to the transition date and more the experience variance will be spread to future years is all adjustments are applied prospectively from the date of transition under the modified retrospective adoption approach we are using.
<unk> requires assumptions underlying reserves the updated as necessary to current best estimate at least annually.
Any assumption change.
Would also be applied prospectively from the transition date, but would likely apply more cohort than a specific experiences and could create more earnings volatility.
The homogenous and predictable nature of our business and our significant use of reinsurance we do not expect large earthquake assumption changes to occur.
On adoption of the new standard will be required to re measure the benefit where there is each quarter you can current observable market rates based on an a rating at <unk>.
Difference it seem like Theyre under these way and the way that were locked in at the time of issue will be reflected in NCI.
As of the January one 2021 transition date, we estimate that <unk> will be reduced by $1 two to $1 5 billion net of income taxes.
Ever given the drastic increase in market rates. Since then we estimate the impact to ASE I at the transition date would have been between negative 150 and positive $150 million using current market rates.
Given that we are using the modified retrospective adoption approach the opening DAC and reserve balances on January one 2021 will be the same as historically reported.
There is one exception that impact an isolated group of older cohort and is expected to reduce opening retained earnings by less than $50 million.
While there will be no impact to net investment income on a consolidated basis, we plan to change how it is allocated across segments.
We currently allocate net investment income to term life segment, such that it offsets the net interest accreted to future policy benefit reserves less DAC and remainder is it reflected in corporate and other.
Since interest is no longer accretive to DAC <unk> and since we do not consider investment income to be a key driver of term life earnings we plan to record a 100% of net investment income in the corporate and other segment going forward.
<unk> historical results will be presented on this basis accordingly.
Overall, we expect the 2022 term life operating margin excluding allocated net investment income to be about 23% and the expected margin for 2023 will also be around 20.
2022, and 2023, well both be around 23%.
We believe the tenants at al DTI reinforce the predictable nature of our term life earnings.
Turning to the investment and savings products segment market volatility and economic uncertainty continues to create headwinds in this segment's results.
Operating revenues of $198 million and pre tax income of $57 million declined, 20% and 19%, respectively, driven by 35% lower sales based revenue generating sales and 12% lower average client asset values.
Sales based and asset based commission revenue and expenses generally declined in line with their respective drivers.
Note that the sales based net revenue ratio was lower in the prior year period, as we recorded a $4 million catch up the sales force and bonuses.
On a full year basis. The sales based net revenue ratio is consistent you know every year.
Equity market volatility makes it very difficult to forecast 2023, IFC sales and client asset values.
A good rule of thumb, you can estimate that a $100 million change in sales based revenue generating sales translates to approximately a $1 million team and sales based net revenue annually.
Wow.
Without sales based net revenue, while the $1 billion change in average client asset values translate to approximately a $2 million change in asset based net revenues annually.
Senior Health fourth fourth quarter operating revenues were $28 million versus $38 million in the prior year period, while adjusted pretax income with over 4 million versus adjusted pretax income attributable to primary <unk>, a <unk> 4 million last year.
Glenn covered most of the key aspects of our senior health results in his remarks, but let me quickly touch on two topics.
The fourth quarter included a $3 $8 million revenue adjustment largely to reflect the final first year Commission collection on policies that became effective in 2022 that were higher than assumed throughout the year.
We estimate increased first year Commission revenue to match the actual cash received during the year as these policies are no longer subject to charge that.
As anticipated the senior health business required no net capital contribution from Primerica can fund operations. During 2022 after considering the tax benefit from net operating tax losses utilized by the consolidated group.
We do not expect the senior health business, you acquire any significant capital on the parent in 2023 either.
We plan to provide a more detailed financial outlook for the senior House segment. When we report first quarter results in May.
Consolidated insurance and other operating expenses increased around 7% year over year in line with expectation.
Looking ahead to 2023, we expect insurance and other operating expenses to increase by about $22 million to $28 million or 4% to 5%.
$14 million of the increase comes from staffing related cost.
And by higher salaries, and employee benefits and efforts to reduce open position.
Supporting growth in our business will add around another $12 million, while ongoing technology technology initiatives, including infrastructure modernization, CRM and cyber security will add about $9 million.
The year over year car.
In comparison to 2022, 2020, threes expenses will benefit from returning to our typical cadence of field leadership event and a lower Canadian exchange rate.
By segment about 35% of the year over year increase is expected in ISP and about 45% in corporate and other.
Expense increases in termite and senior health being relatively minor.
Finally, our invested asset portfolio remains well diversified with an average rating of a and a duration of four seven years.
Rising interest rates and growth in the portfolio continued to provide.
Tailwind for the net investment income and we continue to look at opportunities to take advantage of higher rates.
During the quarter, we reinvested new money in our longer term insurance portfolio at a rate of 595%.
Assuming a stable rate environment in 2023, you expect net investment income to be approximately 25% higher than in 2022.
Liquidity at the holding company remained strong with invested assets in cash of $309 million in primary <unk> life statutory risk based capital ratio is estimated to be 475% as of year end.
We repurchased $32 million of our common stock during the quarter completing our prior authorization.
As announced in November we have received a new authorization for a $375 million share repurchase program that runs through the end of this year with that operator, I will open the lineup for questions.
Thank you we will now be conducting a question and answer session.
If you'd like to ask a question today. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Press Star two if you would like to move your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment. Please we poll for questions. Thank you.
Thank you and our first question comes from the line of Andrew Klingerman with Credit Suisse. Please proceed with your questions.
Good morning, Andrew.
Good morning, Thank you for taking my question.
On the term life segment, I'm trying to get a little better understanding of what this new product.
Constitutes.
It sounds like the previous product.
At a rider.
And then only 15% of the people use it and now you don't have the rider.
Just to make sure I understand the difference is the new product cheaper.
And why or why not do you think it will boost sales.
Going forward.
Yes, if I can take that in two parts Andrew.
Change of the rider is a relatively minor issue.
But as I explained historically, we had put two adults on the policy using this file for outerwear appropriate and over time due to client's desire to control their policies as individualized and other reasons.
Marriages that don't make it overtime those kinds of things people were using that less and less and just I think some of the change in the way households are created today versus decades ago, and so we felt like the flexibility of going to separate policies for separate lives get maximum flexibility to the client. It also.
It enabled us as we were adding.
Underwriting classes to be more specific and targeted in our pricing. So it had benefits for the client had benefits for the sales force and benefits for the company, but none of those were revolutionary and would create a real change in product sales other than the way we count policies is more favorable by doing it as individual lives. That's what I was trying to describe.
Overall.
As we've normally done historically, we identify as we go.
Things about our product said, we'd like to change at the next opportunity improvements, we'd like to make and we have a whole series of those that have built up over several years that we decided to all attack at one time, one was an effort to simplify everything about the life insurance process and product both the process for the client in Asia than the field too.
To us advancing technology and capabilities to make the application and issue process simpler and faster more technologically advanced we did all of that.
And then on the product construct itself well before I leave there was simplification, we even simplified the policy issued itself we've gone to much more electronic issue, where we still have a lot of clients are requesting a hard copy of a policy. That's done in a simplified language formats is much easier for middle income families to understand what they bought so it was a kind of a departure.
From the.
Technical view of insurance and the very legalistic way policies were written to a way that was much more consumer friendly in our opinion and then in addition to that we felt like we needed to target our pricing differently and that was the discussion we've had in the past where we move from three or four underwriting categories to 10.
We simply have more opportunities to match, a client's risk with our pricing more accurately and that does result in some price decreases in some areas and other areas. There are some price increases for example on smoker rates, we felt like we were.
Probably a little too low in our smoker right. So we increase them. So it was an adjustment of all of that a very broad set of changes that administered to the needs of all of our constituencies and overall has created a lot of excitement in our sales force and they believe like believes that we're much more competitive in the marketplace not just in our pricing accuracy.
But also in our process and just the customer experience and we've been in the past. So we're getting very positive reaction to the changes.
That's very helpful. Glen and then if I can think about a little bit.
The sales growth outlook, and I think what I heard in the prepared remarks was that youre likely to see about a 1%.
Kris in term sales in the first quarter and then there would be a pickup in the second half I want to make sure that because you were talking about using a different metrics. So I want to make sure that I understood that right and then also in the commentary you talked about cost of living pressures on sales.
So the first part of it is do I understand that right, 1% in the first quarter and then in the back half you might see a pick up and would that be despite cost of living pressures.
Yes, that's exactly right that takes into account both the.
Adjusted relationship of the way policies were accounted in the past versus today that gives us a tailwind the new counting method gives us a tailwind in policy count and we wanted to be very clear that we're not including that in our optimism of growth for the future. So the 1% first quarter mid single digits for the year includes both readjusting historically for the poll.
LC count change and also.
Taking into account the headwinds from inflation all of that included in those two numbers of 1% in the first quarter and mid single digits for the full year.
Got it very helpful. And then if I could just quickly sneak in one on on your senior health business.
So you cut the sales force in half.
Could you give a sense of how big the sales forces and do you feel like all of the adjusting that was needed is done in that.
And it sounds like Youre moving forward very positively.
And your competitors have seen a lot of improvement to so so do you feel like you're in a stable place and how big is the sales force.
Yes, Andrew as we described it was a very.
Deliberate action that we took place took place in reducing our sales force by not hiring up letting attrition take care of some of that and also eliminating some positions for some of our less effective effective defined as productive but also profitable representatives. So it was exactly the type of pruning mechanism that you described I believe.
Our sales force count right now is in the mid 300 range about 300 after those changes and of course, that's our employed sales force at <unk> not to be confused with our prime Erica independent contractor representatives, but it's about 300 right now after that activity has taken place.
Perfect. Thanks, a lot.
Gladhill.
The next question is from the line of Dan Bergman with Jefferies. Please proceed with your questions.
Good morning, Dan.
Thanks, Good morning.
My first question was just on capital return and free cash flow generation that I think combined with the recent dividend increase the 375 million buyback authorization applies nearly 475 or so of capital return in 2023.
Wanted to ask answer is that level sustainable.
Post this year or is it portion of it funded by a drawdown of the RBC and Holdco cash from the current elevated level, just just any thoughts on that and or the expected level of run rate.
Capital generation, particularly after one term lifestyles and senior house sales over back to growth would be helpful.
Sure I'll take that one Dan and yes, we believe it is sustainable.
The beauty of our term life business I talked about the predictability, we now have even more predictability on a GAAP basis, but we've always had pretty strong predictability on a cash flow basis, because the business is sell mature so homogenous so well reinsurer that is projected protected against a lot of anomalies. So.
We do believe that is very sustainable.
The current RBC I mentioned.
Typically asked but we actually are a little overstated on RBC ratio versus what we would say our target is but that has to do with the specific rules that are out there.
With regard to the Max I mean, you can take out in any given year, we were capped out.
This year based on 2021 statutory earnings which were actually a little bit lower than normal for two reasons. One was because of COVID-19 going into high claims and quite frankly, the high sales, which cost us a lot of statutory earnings.
You don't get to deal with the deferral ability of DAC.
And then also we had some nuances when some of our our financing transactions, our reinsurance findings transactions, where they were in their life cycle, but we do see that there was the cash flow generation out of Primerica life was very robust in 2022, we will continue to be very robust in 2023.
Hey.
And we do not foresee any major headwinds coming out of that operating cash flow.
Got it that's really helpful and then.
Maybe just shifting gears, if I got the numbers right from the prepared remarks, it sounded like youre guiding to about 3% growth.
Life license sales force in 2023, so if that's right just any color you can give on.
Kind of the main drivers are assumptions in the outlook and it sounds like maybe it's moderating a little bit year over year, but also just curious to know what does that assume as far as the macroeconomic backdrop and if there is a potential recession later this year or in 2024 would that have any impact one way or the other on.
Look for the sales force growth.
Sure Dan I do think we benefited in 2022 from a little catch up from several years of being flat or flattish or at least distracted by all of the challenges at.
At the state and provincial licensing levels of Covid, So that probably gave us a tailwind last year, we're projecting more of a normalized year for 2023, which gives us kind of that 3% number and once again that's all in.
Stronger stronger momentum than that in 2022.
And so that's taking into consideration that may have been.
We may have had that tell you when that may not exist or little conservatism from that point.
Taking into consideration the economic disruptions as we've talked about many times.
People that are have lost jobs or probably not.
The prime target for our prime Erika opportunity because they need to be redeployed quickly and have an income for their families. But those that are concerned about losing their jobs are probably the perfect potential recruit for prime Erica unfortunate I think there's going to be a lot of both probably this year, but we do think that the recruiting top line numbers.
<unk>.
We're going to remain strong during the year and then it's just going to be that day to day battle in every state in province level of cooling recruits through to licenses, which we've made progress, but we're very realistic that that's every day you have to work with every state and every province on their process and our reps and recruits to pull people through so we don't want to be overly optimistic about that either so.
It kind of takes all of that realism into account in coming up with with that number.
We are anticipating we certainly don't have a crystal ball, but we are anticipating continued cost of living pressures. This year continued disruption in the employment market, which as I say it has both positives and negatives for our business, but we're trying to take all put all of that in the recipe when we give those numbers.
That's what's behind our thinking.
Got it that's super helpful. Thank you.
Certainly.
Our next question is from the line of Ryan Krueger with <unk>. Please proceed.
Jim.
Hey, Thanks, good morning.
Thanks for all the detail on <unk>, maybe just to put it all together.
Wanted to see if you agree with it seems like maybe LPTA and resulting in about an $80 million pre tax, earning uplift is that in the right ballpark.
So.
We Havent reported 2022, yet so I don't want to say my my controller and my my auditors would be very reluctant for me to give a number we will give that number like I said prior to.
Fourth quarter, I mean, the first quarter.
In SAP coming out.
Let me just I mean, I know, what you're getting at I do want to just caution from here on forward all of our comparisons will only be on an album Ti basis, and an $80 million, you're talking about or whatever the number turns out to be.
Miraculously come from where we are today to where youre going to a new starting point will be but I would caution everybody well I think it's positive that <unk> isn't going to hurt our financial results I'd really focus on the fact that what it does for US moving forward is it makes our results even more.
Victor Volant stable than they've been in the past because the swings associated with persistency around that really get minimized and any kind of period related variability in claims largely get spread to multiple periods. So that would be my focus for you earnings will.
The higher on your <unk>, but then you stated 22 earnings will also be higher under <unk>.
Okay understood.
Separately on persistency.
I guess using the term life face amount.
Roll forward it looked like maybe persistency deteriorated some that I know thats not a perfect measure. So I was just hoping you could provide some additional detail.
What you saw in persistency at this point.
Sure and I don't know, if you're comparing to last year or the previous quarter, what I would say to the pre any previous quarter is the fourth quarter has typically been a week.
Hi, last period or a week persistent tea season for us. So we have typically seen higher DAC ratio in the fourth quarter vis vis other quarters.
And then if you're talking about specifically year over year last year as I described in my prepared remarks is still we're getting a fair amount of tailwind from the benefits from the pandemic.
Our wisely needed at this point.
Thanks, if I could sneak one last one in have you now that I guess.
And what emerged from the pandemic in there and more of an endemic phase have you seen any changes from reinsurers in terms of pricing or if things remain pretty stable.
Yeah, I think they're actually remain stable I know that's been a big area of question.
As Glenn described we did we launch a product we launched it gets this last October as part of that we had to go to all of our reinsurers and we get.
I've stated pricing they have obviously, they they needed to see what the product design the underwriting side was going to be to get the pricing.
And we landed and I say, a very good state with all of our reinsurers, we were able to keep all of our key players in our pool.
Did see.
What we did see was it put aside COVID-19 there had been some deterioration in mortality improvements just in the normal course.
Over the last several years. So there was some of that but in some places we actually saw improvement in rates.
Blood tested business, where we are getting more and more information.
Our testing process. So net net we didn't see COVID-19 per se as having any impact on those rates and we think that the rates. We got appropriately reflect what we believe the underlying risk exposure in our portfolio and our new business.
Great. Thanks, a lot.
Thank you.
Mind, you and ask a question you May Press Star one. The next question is from the line of Maxwell for sure with <unk> Securities. Please proceed with your questions.
Good morning Maxwell.
Good morning, I'm, calling on behalf of Mark Hughes.
I know you mentioned you don't have a crystal ball, but when youre looking at the interest rate for.
The rest of the year.
Are you assuming that the interest rate is going to stay elevated throughout the whole year and if so is that going to have.
Another favorable impact when you look at the new year's business that you've locked in.
Okay. So I thought you were asking about net investment income so just to be clear that whole locking in dynamics that I described under the benefit ratio for <unk> pretty much goes away under <unk>, because we'll be using.
We'll be using current rates I guess theoretically locking them, but all of our assumptions that we've made.
Our new business in 2023 assumed a rate environment, that's consistent with where it is now so all of our forecast all of the information I provided I would say already has a stable rate environment embedded in it but it doesn't have is a massively changing either up or down.
At rate environment. So I'd say when you talk about NII, specifically again, we are assuming a pretty stable rate environment realistically short term rates have been extreme rural favorable don't know if that got a laugh per se, but right now we've been able to take advantage of.
Attracting really nice yield without having to go out on the curve as those ships as the yield curve shifts we may have to go a little further out but again nothing beyond our normal range. So I.
I think we think all the projections I've given you have taken into account our expectations, which is largely an overall stable yield environment.
Okay. That's very helpful. Thank you and for the average premium per policy, we saw that was down a little bit in the fourth quarter or is that due to the new product uptake or four customers buying less coverage, maybe due to some financial pressures.
I wouldn't I wouldn't attribute it to much of anything we've had and then we had lower Canadian exchange rate that works. So it impact our Canadian witness there had been a little bit of transitioning going on we do so.
When all is said and done I wouldn't read much into it specifically for the fourth quarter that is a statistic and specifically the annualized issued premium rather than the premium per policy is going to be something that we'll be focusing on next year, especially given the change we had in our the way policies are getting counted but theres nothing specific.
About what happened in the fourth quarter that we would say is an emerging trend.
Okay. Thank you.
Thank you we've reached the end of our question and answer session that will also conclude today's conference. You may now disconnect. Your lines at this time and we thank you for your participation and have a wonderful day.
Yeah.