Q3 2024 Primerica Inc Earnings Call
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Speaker Change: Greetings and welcome to the Primerica third quarter 2024 earnings call and webcast.
Speaker Change: At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicole Russell, Senior Vice President, Investor Relations. Thank you. You may begin.
Nicole Russell: Thank you for watching. I'm Russell. I'll see you next time.
Speaker Change: Joining our call today, our Chief Executive Officer, Glenn Williams, and our Chief Financial Officer, Tracy Tan.
Speaker Change: Our comments this morning may contain forward-looking statements in accordance with the safe harbor provision of the Securities Litigation Reform Act.
Speaker Change: We assume no obligation to update these statements to reflect new information.
Speaker Change: and refer you to our most recent Form 10-K filing, as may be modified by subsequent Forms 10-Q, for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied.
Speaker Change: We will also reference certain non-GAAP measures, which we believe will provide additional insight into the company's financial results.
Speaker Change: Reconciliation 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.
Thank you, Nicole, and thanks everyone for joining us today.
Glenn: Primerica reported another strong quarter with solid distribution momentum and double-digit growth and adjusted operating earnings. The appeal of our entrepreneurial business opportunity continues to resonate, supporting our ability to grow distribution and serve more middle income families in the U.S. and Canada.
Glenn: We continue to benefit from favorable equity markets that bolster investor confidence and drive strong results in our investment and savings business.
Glenn: while a revision to our actuarial assumptions added 23 million dollars to pre-tax income in the current quarter.
Glenn: In total, adjusted net operating income was $193 million at 21% compared to the prior year period, while diluted adjusted operating earnings per share of $5.68 increased 28%.
Glenn: Strong cash flow generation enabled us to repurchase $129 million of our common stock during the quarter and pay $31 million in regular dividends.
Glenn: Year-to-date, Primerica has returned a total of $463 million to stockholders through a combination of share repurchases and dividends.
Let's review our distribution results.
Glenn: The additional momentum that was generated by the July convention and our field leaders' ability to effectively communicate the attractiveness of Primerica's opportunity boosted our recruiting efforts.
Glenn: During the closing night of our convention, we announced a promotion that discounted our licensing fee for the remainder of July and the beginning of August. This initiative increased our already strong trajectory and helped us recruit over 142,000 individuals during the quarter.
Glenn: During the quarter, we licensed 14,349 individuals, a 17% increase compared to the prior year period. We attribute this growth to record recruiting combined with the improvements we've made in our licensing focus and process over the last few years.
Glenn: The sustained success in recruiting and licensing has fueled a 7% increase in the size of our life license sales force year-over-year to a total of 148,890 life license reps as of September 30, 2024.
Glenn: and, for the first time ever, to a milestone of over 150,000 licensed reps at the end of October. We project ending 2024 with full year growth and the size of our life license sales force at 5% is how recruiting historically drives strong licensing for several months.
Let's turn next to our term-life business.
Glenn: We issued 93,377 new term life policies during the quarter, a 5% increase compared to the prior year period, and added $31 billion of new term life protection for middle income families.
Glenn: Year over year, productivity remained unchanged at an average monthly rate of .21 new policies issued per life license rep.
Glenn: After factoring for the continued impact of cost of living pressures on middle-income families and strong sales volume in last year's fourth quarter, we continue to expect full-year life sales to grow around 3%.
Glenn: Looking at our investment and savings product business, sales continue to benefit from strong equity market returns, which serve as a key driver.
Glenn: This positive trend is complemented by improvements in our product offering, including more portfolio options in our managed accounts and attractive variable annuity choices.
Glenn: Additionally, our sales force in Canada is gaining experience with the new Mutual Fund product set introduced there last year.
Glenn: Sales of $2.9 billion during the quarter increased 34% compared to the prior year period, outpacing expectations.
Glenn: We saw solid year-over-year growth across all major product lines, including a 42% increase in variable annuity sales and a 23% increase in combined U.S. and Canada mutual fund sales.
Glenn: Sales of managed accounts were also robust as clients took advantage of the wider fund options available on the new custodial platform that was launched in the third quarter of 2023.
Glenn: Preliminary results in October show continued sales strength. As a result, we're raising our 2024 ISP sales forecast to a range of 22% to 25%.
Glenn: Client asset values have again benefited from strong equity market appreciation, ending the quarter at $111 billion, up 26% year-over-year. Net flows remain positive at $444 million during the quarter.
Glenn: In Canada, we recently entered into a new distribution agreement with Canada Life, which will give our reps access to a curated selection of Canada Life segregated funds.
Glenn: This not only expands product choice, but it also provides additional options to help address the needs of underserved Canadian families. The new funds are expected to be rolled out to our reps in phases beginning next year.
and the
Glenn: Sales volume in our mortgage business has also started to improve. This business is well positioned to help middle-income families obtain a new mortgage or refinance to consolidate consumer debt.
Glenn: We're licensed to do business in 33 states through more than 3,000 licensed representatives.
Glenn: Year-to-date, we've closed nearly $300 million in U.S. mortgage volume, up around 25 percent compared to the first nine months of 2023. We have great lending partners, and we are optimistic about the long-term potential for this business.
Glenn: We also have a mortgage referral program in Canada, bringing refinancing opportunities and new mortgages to our clients north of the border.
Glenn: We look to the future with confidence because of the important role Primerica plays in the lives of middle income families. Every day we provide our clients with much needed financial education and compel them to take action.
Speaker Change: I'm proud of what our sales force has accomplished and grateful to my teammates at the home office who support the field in their efforts. We remain committed to our mission as we grow distribution to best serve our clients. With that, I'll hand it over to Tracy.
Thank you, Glenn. Good morning, everyone.
Tracy Tan: As of September 30, 2024, Primerica has successfully exited its senior health business by abandoning e-Telequote Insurance Inc. and permanently surrendering and relinquishing all rights to e-Telequote.
Speaker Change: The segment's results are now recorded in this continued operation, and its performance measures have been excluded from all periods presented.
Glenn: In my comments today, I will cover the earnings results for each of our four segments, followed by a discussion of consolidated insurance and other operating expenses, and an update on our capital position.
Glenn: Starting with the term life segment, revenues of $450 million during the quarter increased 5% year-over-year, driven by 6% growth in adjusted direct premiums.
Glenn: Pre-tax income of $178 million rose 26%, due in part to a $28 million remeasurement gain recognized in the quarter.
Glenn: Under LVTI accounting rules, our term life margins are generally predictable given that they are not highly sensitive to last variances, while mortality variances are limited by our extensive use of reinsurance.
Glenn: When we make changes to the long-term actuarial assumption, the segment's results can be subject to some volatility, as was the case in this quarter during our annual assumption review.
Glenn: As a reminder, our assumptions are set, assess estimates, and reflect our long-term view of the future that avoids forecasting short-term volatility.
Glenn: As we disclose in our 2023 Form 10-K, filed in February of this year, disability incident rates under our waiver of premium rider have been falling since the pandemic.
Glenn: Unlike our mortality for last rate, which has had both favorable and unfavorable experience since 2020, the disability incident rate has declined and remained at similar levels.
Glenn: We reflected an improvement in our best estimate assumption and recognized a $27 million remeasurement gain in the current quarter.
Glenn: Because these waiver benefits are not debt benefits, it is not part of the YRT reinsurance program, which resulted in a disproportionate impact to our financial results.
Thank you for joining us. Thank you.
Speaker Change: We also made slight adjustments to our lab and mortality assumptions, neither of which had a meaningful impact to our financial results.
Glenn: In aggregate, these updates resulted in a $1 million remeasurement gain net of reinsurance.
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Glenn: We observed higher lapses and lower mortality from our updated assumptions which had an immaterial net impact in the remeasurement.
Glenn: We believe higher cost-of-living pressure on middle-income families remains a key contributor for elevated elastin across multiple durations.
Glenn: Persistency on policies issued over the last year remained largely in line with our assumptions.
We expect the overall persistency to normalize over time.
Glenn: While higher lapses can constrain future ADP growth under LBTI, lapses do not meaningfully impact our current key financial ratios.
Thank you.
Glenn: Looking at our key financial ratios, the remeasurement gain recorded in the current year period contributed a favorable 430 basis points to the benefits and claims ratio.
Glenn: Adjusting for this item, the benefits and claims ratio at 57.6% was largely in line with a prior year period.
Glenn: The debt amortization ratio at 11.9% and the insurance expense ratio at 7.4% remained consistent with a prior year period.
Glenn: Finally, after adjusting for the impact of the remeasurement gain, the revised operating margin of 23.1% was in line with the prior year period.
Thanks for watching. We'll see you next time.
Glenn: In the fourth quarter, we expect the benefit and claims ratio to be around 58 percent.
The DAC amortization ratio to be around 12%.
I will provide full year guidance for 2025 in February.
Glenn: Turning next to the results of our investment and savings product segment.
Glenn: which continues to benefit from strong product demand across nearly all product lines and favorable equity market conditions.
Glenn: During the quarter, revenues of $266 million increased 22% due to a combination of strong sales benefiting from client demand and higher average client asset values.
Pre-tax income of $80 million rose 24%.
Glenn: Revenue from sales-based commissions and fees of $96 million increased 32%, while revenue generating sales rose 29%.
Glenn: SalesFace commissioned the expenses generally roped in line with correlated sales.
Glenn: Asset-based revenue of $142 million, growth 19%. In line with 18% increase in average client asset value.
While associated commission expenses grew at a similar rate.
and the
The COVID and other distributions.
of the corporate and other distributed product segments.
Glenn: incurred a pre-tax operating loss of $5.7 million during the third quarter compared to pre-tax operating income of $3.1 million in the prior year period.
Glenn: The current quarter included a $5.2 million remeasurement loss due to a refinement in assumptions on the subset of a closed book of non-term life insurance business.
Glenn: The segment continues to benefit from a combination of higher-yielding investments and growth in size of the portfolio, which added $4 million to net investment income compared to the prior period.
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Glenn: Finally, Adjusted Consolidated Insurance and Other Operating Expenses were $145 million during the third quarter, up 13% year-over-year.
Glenn: The increase is primarily due to higher variable expenses resulting from the growth in recruiting and licensing, and rising sales and production in the ISP and term life segments.
Glenn: as well as higher employee-related costs due to a company's strong performance in 2024.
Glenn: As we look into the future, we expect fourth quarter insurance and other operating expenses to grow around 9% resulting in four-year growth of 9% or approximately 50 million dollars.
and the
Glenn: Our projection is above our previous guidance because of higher ISP, client, asset levels in 2024, and growth-related higher variable and employee costs.
Glenn: Moving to our capital position, the holding company had cash and invested assets of $383 million at the end of September 2024.
Glenn: During the third quarter, we purchased $129 million of common stock, and since the end of third quarter, we completed our current authorized repurchase program of $425 million.
Glenn: As of September 30, 2024, Primary to Life's estimated RBC ratio was 440%.
With that, Operator, I open the line for questions.
Thank you.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Glenn: The confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself 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, while we poll for your questions.
Thank you. Bye. Bye.
Thank you.
Speaker Change: Our first questions come from the line of Ryan Krueger with KBW. Please proceed with your questions.
Hey, good morning, Ryan.
Speaker Change: Hey, good morning. My first question is on the strong recruiting. I know some of it was influenced by the discounted fee. Can you give us some perspective on how recruiting has been following the expiration of the discounted fees, I guess since September and October?
Speaker Change: Sure, we were fortunate to have excellent momentum going into the convention and so the process of discounting those fees is just to add to the already great momentum going in and we believe it was sustainable going in and we are having good experience since.
the discounted fees.
Speaker Change: have expired, and so we continue to see strong growth in recruiting through the rest of the quarter and have had a good October, so we feel good about where we are. Clearly, it won't be at the levels of, you know, just as a reminder, it's the licensing fee that people who come to Prime America with no license pay. If you arrive with a license, there's no cost to affiliate with Prime America, but we discount that fee for a period of time just to generate some excitement, some good news, and a reason to talk to people, and it does have the impact of giving us a recruiting boost during that time, but we've got very strong underlying fundamentals, so we would continue recruiting to continue to be strong as well.
Speaker Change: Great, thanks. And then another just a quick clarification on the expense guidance. Just want to make sure it's on the same basis. So the the 9% increase or the 60 million full-year increase, that's relative to 2023. That no longer includes senior health, is that correct?
Speaker Change: Yes, so all the comparisons now exclude the senior house for all periods, yes.
Okay, great. Thank you.
Thank you.
Speaker Change: Thank you. Our next questions come from the line of Dan Bergman with TD Securities. Please proceed with your questions.
Morning, Dan.
Morning. Thanks.
Speaker Change: I guess I know you just touched on recruiting, but the sales first growth has also been really strong this year and it sounds like you'll likely end the year with mid-single-digit growth kind of above the initial 3% guidance you provided at the start of the year.
Glenn: I just wanted to see if you could give some details around.
Glenn: What have been the main drivers of the upside surprise relative to that initial guidance? And then looking forward, you know, is that mid-single-digit pace we've seen last year and this year sustainable? Or could there be some slowdown ahead for a period of time as you digest that recent strong growth?
Speaker Change: So let me start, Dan, if I could, with the ingredients. I mean, clearly the strong recruiting at the very front end of the pipeline is a significant factor.
Glenn: But at the same time, just as important, or perhaps even more important, are the improvements we've made over time in both our focus and our process.
Glenn: I've got to give the credit to our field leadership who has
Glenn: caught the vision of the importance of growing the size of the sales force. It benefits clients first of all, but it also benefits them as they build their business and obviously Primerica as a whole.
Glenn: And so our field leadership is focused on growing sales force size more so than I've ever seen them.
Glenn: And then, of course, we have worked hard, as we've discussed many times, on improving our process along the way.
Glenn: to make a fairly difficult exam administration and paperwork process as simple as we can make it. And we've seen benefits from all of that. So it's a combination of an effort to improve every part of the pipeline.
Glenn: And we do feel like our message is resonating. We feel like the conditions for our recruiting message...
Glenn: It was very strong, so from the previous question, we expect continued momentum there.
Glenn: And we do believe that, you know, as long as the circumstances of the environment are similar as they are today, we don't see any pending changes in that.
Glenn: But there are a lot of moving parts, and so if you have, you know, some sudden change in cost of living going against us...
that has both positives and negatives.
Glenn: opportunities, so there's a push and a pull there. You got regulatory change, you got state and province processing capabilities,
Glenn: There are a lot of things that could be adjusted, and fortunately most of those have been adjusted positively in the last few years.
Glenn: But we are always very sensitive to, there could be negatives out there on the horizon that we can't see, nor can we impact real time, probably.
Glenn: But for the things that we can control, we feel very good about our processes and feel like we've got the ability to continue some momentum in the future.
Russell, Alison Rand, Tracy Tan, Glenn Williams
Got it. Great, thanks.
Speaker Change: And then maybe just moving to the ISP business, while the redemption rate in that business had been drifting upward pretty steadily over the past year or two, both nominally and as a percent of beginning assets, it took a step down this quarter. I just wanted to see if you could give a little more color in what you're seeing in terms of that ISP redemption rate and any sense of whether there's seasonality or any impact from maybe a slowdown in inflation, just any other drivers and just thoughts of how that might trend going forward.
Speaker Change: I think you have to be careful quarter to quarter because you could have any odd occurrence happen in a 90-day period of time that could make the comparisons a little difficult. But I do think we are seeing, whether it's aging population and our clients getting to retirement age and needing to withdraw more in order to support their standard of living, or it is the continued kind of ongoing stress in people's budgets, both middle-income clients and in many cases, some of these are upper middle-income clients.
Speaker Change: So we're seeing some of all of that. I don't think either one of the trends, either the pressure up that you mentioned, nor the drop this most recent quarter is a significant sustainable trend. It should all average out to be about the same over the long term, but we are seeing a little pressure from the economic dynamics of our client base right now and the age of our clients that are probably putting a little upward pressure on the redemption rate.
Got it. Thanks so much.
Sure.
Speaker Change: Thank you. Our next questions come from the line of John Barnage with the Piper Sandler. Please proceed with your questions.
Well done.
Speaker Change: Good morning. Thanks for the opportunity. Can we talk about the Canada Life Opportunity? How large do you view that? I know it's a big brand in Canada and Prime America's operation is pretty sizable in that market. Certainly the Quebec team was loud at the convention, so we felt their presence. Love to hear more about that.
Speaker Change: Sure. Well, as you may be aware, John, we had our own segregated fund product set, which we have kind of run down, run off slowly over time due to some regulatory changes there.
Speaker Change: And you've seen that in our numbers over the last few quarters, probably three, four, or five quarters. And we've been looking for an alternative because we do believe there is a need for that product in Canada. It's the VA product, most similar to the US VA product, although with some pretty significant differences under the Canada tax regime.
Speaker Change: But it's an important product that fills an important need, and so we've been looking for an alternative rather than try to retool our own product.
Speaker Change: We decided it was to look for a larger provider that had more capabilities, more experience, and a broader product shelf than we could probably create in any reasonable period of time.
Speaker Change: And so we were excited about our relationship with Canada Life. We do believe it will replace the SegFund flow that we had. Maybe, you know, look back at our numbers from a couple of years ago and see maybe even a little before that because that business has been under pressure for quite some time.
Speaker Change: So we believe it puts us back in that game that we were pretty good at a few years ago. It's not the most significant part of our ISP business in Canada by any means, but it certainly plays an important role there across the country, and so we're excited to watch that grow and see what kind of opportunities it creates when it rolls out next year.
Thank you.
Thank you for that. My follow-up question...
Speaker Change: It seems like the Fed controls maybe more the short end of the curve than the long end and mortgage refinancing wave might not happen or it might. How do you view that opportunity to free up?
Speaker Change: dollars within your customers wallets in the backdrop of that cost of living increases you even highlighted in your comments. Thanks.
Thank you.
Speaker Change: Hopefully finding a lower average weighted interest rate so they get the benefit of a lower rate plus Accelerated payments and get them out of debt faster
Speaker Change: that just access other financial services that we offer and that are needed elsewhere. So clearly it's interest rate sensitive. However, we do find when interest rates go up, which is normally a headwind in the mortgage business, we find out that the interest rate on client's existing consumer debt goes up even more.
Speaker Change: And so, it's the difference between the two that's the conversation. When is the right time to consolidate and accelerate? It gives us an excellent discussion point. You know, I've called it sometimes the emotional lightning rod of people's finances is debt.
Speaker Change: And so they'll have a conversation about getting out of debt when they may not want to talk about other dynamics initially, and then we can have a broader conversation with them after we have the debt conversation.
Speaker Change: So it gives, it's a great door opener for us, it's a tremendous service, our approach is very different from most companies in the mortgage business, we're not out there just trying to
Speaker Change: Run up the score with as many mortgages as we can put in place. We're trying to study the client's debt situation
Speaker Change: So it's a very interesting dynamic. It's a fairly complicated business, and the U.S. has significant licensing requirements, so we're moving methodically and deliberately through it as we grow it.
Speaker Change: But we do think there's an opportunity out there. Hopefully, we'll see at some point both the Fed's rate go down and mortgage rates go down. Sometimes they're going in opposite directions for reasons now. But if we can get some consistent downturn in interest rates, I think it'll give that business a real tailwind and we'll start to see some real progress there.
Thank you.
certainly
Speaker Change: Thank you. Our next questions come from the line of Wilma Burtis with Raymond James. Please proceed with your questions.
Maureen Wilma
Speaker Change: Hey, good morning. Could you talk a little bit about what you're seeing on lapses, which ticked down a bit in 3Q versus the first half of the year? Do you think there's a story there behind what's happening with your customers, or has it just been a little bit noisy, and is there anything you expect going forward? Thanks.
Speaker Change: If you don't mind, I'm sorry, I missed the very first part of the question.
Good morning, Wilma.
Speaker Change: Good morning. When we look at the elapsed in persistency, we are seeing that the persistency starts to level last couple quarters and there might be a slight drop this quarter, but overall we still see the trend as elevated compared to our pre-pandemic experience.
Speaker Change: When I mean elevated, it is across multiple durations, with the exception of the most recent 12-month period.
policies that we wrote.
are within the expectation from pre-pandemic.
Speaker Change: Now, we really contribute that as a primary reason from the cost of living pressure that we continue to see, even though the interest rate has some relief for the middle-income families.
the cumulative impact from the last...
Speaker Change: for five years continue to put some stress so that their buying pattern has not yet returned.
Speaker Change: to pre-pandemic, even though in the Primerica's HPI, the Home Household Budget Index, we see that the purchasing power finally returning to 2019 levels, but we're not seeing that significant change in spending pattern.
Speaker Change: On the other hand, we also see that persistency during the pandemic.
Speaker Change: and they have been very, very strong. Very good. And after pandemic, there are some really pick up on lapses. So there's a, you know, from a cyclical standpoint, there's an up and down. Cumulatively, though, we're seeing the trend, you know,
over this period of time is relatively consistent.
Speaker Change: So, based on all the history and the facts and previous experience with financial hardship, we do expect that it will take a few years for it to return, but we do believe in the long run it will return to consistent expected levels.
Thank you for having me.
Speaker Change: Thank you. Any color on the unfavorable remeasurement gain in corporate? What drove that? And then just help us think through any changes from the remeasurement gains as well. Thanks.
Yes.
So the measurement loss that we experienced in the
Speaker Change: corporate, and other segments. It's on a closed book, a very small block of business that we're not growing. It's a runoff.
Speaker Change: And it was just a refinement in the annual assumption review that we corrected in terms of refining the assumption. So we don't expect that to be really a material impact, either the period or in the future.
Thank you.
Thank you.
Speaker Change: Thank you. Our next questions come from the line of Jeff Schmidt with the Billy and Blair. Please proceed with your questions.
Speaker Change: Hi Glenn, so given the strong growth in the sales force just from the new incentives that can bring in some agents you wouldn't have otherwise had you know do you see that having any effect on the life productivity over the next year?
Thank you. Bye.
Speaker Change: There are a lot of steps in between the recruiting process and getting down to licensed productivity, so really how people are recruited probably doesn't impact their productivity that much. There's always the conversation of the lower the commitment level is to start, how committed are you going to be down the road, but that's pretty hard to measure because of the steps in between. So far we're seeing productivity of newly licensed reps at the level that we're accustomed to within our normal corridor as we reported in the prepared comments.
Speaker Change: So, we're not saying that, we don't believe we're recruiting a lower level of quality or productivity. We're just getting, we're getting more people of the same productivity and always, you know, we believe we recruit very high quality candidates, so the same quality we would always expect. So, you know, as the sales force grows, you do get some downward pressure on that calculation.
Thanks for tuning in.
Speaker Change: Okay, understood. And then on the favorable trend in disability incidence rates, I may have missed it, but do you see that having kind of a longer term?
Speaker Change: impact on your benefit ratio? I mean it's 58% kind of still a good...
Speaker Change: run rate going forward, or do you see that moving down?
Good morning, Jeff.
So we experienced
Speaker Change: favorable disability incident rate as we had also mentioned in the 10k file. We have observed this trend in the past four years since 2020 and that's the main reason that we believe that using our best estimate in our annual review that this does represent the long-term trend which is the reason that we make this adjustment.
in terms of long-term
Speaker Change: trend obviously as time goes on things can change this at this point it is indeed our best estimate
Okay, got it. Thank you.
Thank you very much. Thank you.
Speaker Change: Thank you. Our next questions come from the line of Sunit Thomas with Jeffries. Please proceed with your question.
Hey Glenn, how are you?
Speaker Change: Hey, I wanted to start with the annuity sales. I mean, you've talked in your script about sales being very strong. I just want to get some color around sort of what's behind that. What's sort of funding those sales? Is it 401k withdrawals? Is it something else? Just some color would be helpful. Thanks.
Speaker Change: Yeah, thanks, and that's a great question because that does jump out when you see the success we're having in that product line.
Speaker Change: And I would attribute it to a number of things. Number one, our product providers are very good at keeping the products fresh, making sure that they're making the adjustments required for the products to be financially sound, but at the same time, adding the features that they know are attractive under the current circumstances.
Speaker Change: And, of course, particularly in the FASTRU and index-linked variable annuity business.
Speaker Change: people are attracted to them because they have the upside of the market gains with the protections underneath. Sometimes those protections vary with interest rates so there's you know as interest rates come down there's downward pressure on benefits sometime but usually at the same time you get an improving equity opportunity and they tend to offset each other.
Speaker Change: So, the products themselves are very attractive, very current to clients' needs, particularly clients who are kind of moving from the accumulation phase.
to the distribution phase.
Speaker Change: and making sure that they need to take the edge off of some risks. So we see people moving the VAs from more traditional, just mutual funds or other products, other investments they may have elsewhere with no guarantees in them.
Speaker Change: particularly if they're coming to the end of their kind of income earning period of their lives and need to take the edge off of some risk.
Speaker Change: So there's some advantages there. We do recognize that society and our client base is aging, so we have a larger percentage of people moving into the retirement or the decumulation phase, if you would. And then our representatives are getting better every day at combining the need with the solution.
Speaker Change: And so we see a number of factors that are growing. We also see that we're traveling in a pretty good pack with the industry. Our numbers are similar to industry numbers, as we understand them, probably slightly better than industry, but that's a strong dynamic that's happening across the financial services industry in the U.S., and we're properly positioned to take advantage of it.
Speaker Change: And when you think about the product providers, are you seeing any sort of
Speaker Change: you know irrational either pricing or features. I mean you guys should have a pretty good lens on that just given the your distribution. Just curious what you're seeing.
Speaker Change: When I complimented them on their quality, it includes their restraint.
Speaker Change: You know, this industry and the index annuity business went through some very tough times during the economic meltdown, you know, 15 years ago or so, and I think they learned a good lesson. But as we screen for the product providers, we are looking for the same sustainability dynamic that we get asked about all the time in our business. Is this success for a moment, or is this success where people are thinking ahead, planning for the future and not taking unreasonable risks?
Speaker Change: and we've got the highest quality partners in this business and so they're doing a great job of managing that. They're not taking unreasonable risks to try to capture a trend for the moment.
Speaker Change: Got it. And if I could just ask Tracy one, did you say in your prepared remarks that you have exhausted the $425 million authorization for buybacks, or is there still some piece of that left?
Tracy Tan: Good morning. Yes, we have completed our repurchase authorized for 425 million dollars by now. Yes. And so does that mean no more buybacks for the fourth quarter then?
Speaker Change: Yeah, we have completed for 2024 period authorized by the board. Very soon we're going to be discussing 2025 period and hopefully we can make a announcement shortly and we'll start that program at the beginning of 2025.
Got it. Thank you.
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: Thank you. Our next questions come from the line of Mark Hughes with Truist Securities. Please proceed with your questions.
Thanks for joining us, Mark.
Hey, Glenn!
Speaker Change: Tracy, the senior health exit, is there any tax consequence to that, any cash tax savings, anything like that?
Good morning, Mark. How are you doing?
I'm good. Thank you
Speaker Change: Seeing our health exit has generated a tax saving for us and it will be disclosing our TANQ file later today.
Speaker Change: and the overall benefit is going to be about 98 million dollars.
Speaker Change: and a majority of those, $192 million is going to be federal.
Speaker Change: So that saving is going to be benefiting our 2024 from a cash basis in terms of reducing our tax liabilities and payments.
Speaker Change: Will that tax benefit actually occur in calendar 2024 or is it next year on the 2024 tax year?
Speaker Change: Yes, so for third quarter, in terms of savings, we're going to be realizing about half of that federal piece, about $46 million or so, and the remainder ones will be realized in fourth quarter of 2024.
Thank you.
Speaker Change: Okay, very good. And then in the term life business, the YRT, seated premium,
Speaker Change: If you look at the ratio as a percentage of adjusted direct premium, it's up about 100 bps, kind of through the first three quarters.
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Russell: How should we think about that as we're contemplating 2025 or just you know kind of the what are the puts and takes that might lead us to
Speaker Change: I think that ratio should be higher, lower, steady, anything in the pricing, in the reinsurance market that influences that, just a couple thoughts would be great.
Speaker Change: Okay, so let me just clarify, Mark, you're asking about the other seeded premium, which is the YRT premium, correct?
Speaker Change: Yeah, that's right. And the number I'm looking at is kind of low 30s and it's that relative to adjusted direct premiums. And as I say, it's been up a little bit this year.
About a hundred bibs
Speaker Change: Okay, so YRT premium is essentially the premium that we have reinsurance for mortality risk.
Speaker Change: And YRT premium compared to direct premium have a different pattern. Direct premium is pretty much flat.
Speaker Change: over the period of the contracting duration versus YRT premium tracks
Speaker Change: with the age and the size of the risk because it is a premium that we expect to collect and recover in size correlating to the mortality risk.
Speaker Change: So you are going to see that the YRT premium, you know, is very well offset by the
Speaker Change: and I am here to talk about the growing size of the mortality risk. So from a ratio standpoint, it doesn't really change in terms of, you know, the seeded premium and the recoverable. They kind of, you know, are in line with the size of mortality.
Speaker Change: ratio of benefit and claims ratio. We expect that to continue to be around 58% as our guidance had provided for the year and I expect that to be around that ratio for fourth quarter as well.
Yeah, okay.
Speaker Change: You know, when I glanced down at my mobile, I noticed that. Okay. Okay. Thank you very much. Appreciate it. Okay.
Thank you.
Thank you for joining us.
Speaker Change: Thank you. Our next questions come from the line of Wilma Burtis with Raymond James. Please proceed with your questions.
Thanks for watching. Bye.
Speaker Change: Hey, just a quick follow-up to my earlier question. Just wondering if you could talk a little bit more about the block that you had the negative remeasurement loss on. Just what type of product it was when you wrote it. Just would be kind of curious on that. Thanks.
Okay, so that's Remedium and Loss is on a
Speaker Change: If I could jump in, this is going way back in the history of Primerica, but that product exists in our New York company, National Benefit Life.
Speaker Change: which are where most insurance companies have a New York sub as a result of the unique regulations in New York.
Speaker Change: And so that was a company that we inherited or began to use during our city days. It was not designed specifically for Primerica use.
Speaker Change: But it had some existing books of business, box of business that came when we took it over and started writing term business in New York under the National Benefit name.
Speaker Change: So, this is business that's been out there for quite some time. I believe it's student life business, life insurance is students matriculate through and exit college and begin their careers.
Speaker Change: And it's not something that we've sold in quite some time. But we do continue to maintain the block, and so we have to reassess it occasionally as we did during the quarter.
Okay, thank you.
Speaker Change: Thank you. There are no further questions at this time. And with that, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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