Term Life Face Amount Up 14% Year Over Year at Primerica

Some highlights from Primerica’s financial results for the quarter ended March 31, 2023, which were released this week:

  • Term Life face amount issued was up 14% year over year to $28.1 billion and estimated annualized issued term life premiums were $89 million, up 6%.
  • New life-licensed representatives were up 11% with life-licensed sales force ending the first quarter of 2023 at 136,430, up 5%.
  • Primerica’s Senior Health business made progress toward achieving profitability with a modest operating loss of $3.8 million recognized in the quarter down from a $19.0 million operating loss in the prior year period.

A press release announcing the first quarter results said they reflected the continued growth of adjusted direct premiums in the Term Life segment, the benefit of higher interest rates on net investment income in the Corporate and Other Distributed Products segment, and the company’s progress in improving the profitability of the Senior Health segment.

Economic uncertainty and equity market volatility continued to pressure sales and client asset values in the Investment and Savings Products segment.

“Our performance in the first quarter demonstrates the ongoing needs of middle-income families for financial guidance and solutions, along with Primerica’s unique ability to serve our market,” said CEO Glenn Williams. “This combination led to growth in our term life sales as well as strong results in building distribution. Positive net flows in our ISP business indicate that our clients continue in their commitment to saving for the future.”

Total revenues of $690.0 million were largely unchanged compared to the first quarter of 2022. Net income attributable to Primerica of $125.1 million increased 9%, while earnings per diluted share of $3.38 increased 16% compared to the same period in the prior year. ROE was 25.5% for the quarter.

What follows is a closer look at Q1 segment results, taken straight from the earnings release.

Life Insurance Licensed Sales Force

Recruiting increased 10% compared to the first quarter of 2022 as the Company continued to see a high degree of interest from people who are attracted to the flexibility provided by the Primerica business opportunity. Licensing momentum remained strong with more than 11,000 new life-licensed representatives added during the quarter, an 11% increase compared to the prior year period. As of March 31, 2023, the Company had a total of 136,430 independent life-licensed representatives, representing a 5% increase year-over-year.

Term Life Insurance

Sales remain robust with 84,561 new term life insurance policies issued during the quarter, up 2% compared to the estimated number of policies issued in the first quarter of 2022 as adjusted to reflect a comparable one life per policy basis. Issued term life face amount, which captures the number of policies issued and the face amount of both new policies issued and additions to in force policies, increased 14% to $28.1 billion compared to $24.8 billion in the prior year period. Policy lapses were modestly unfavorable compared to pre-pandemic levels, most likely due to the impact of a higher cost of living pressuring our marketplace.

First quarter revenues of $421.1 million and net premiums of $408.8 million grew 3% and 4%, respectively, year-over-year, while adjusted direct premiums increased 6%. Pre-tax income increased 7% to $126.7 million for the quarter. The benefits and claims ratio of 58.7% and the DAC amortization ratio of 11.8% were consistent with the prior year ratios, as expected under LDTI. The benefits and claims ratio was higher than projected during the fourth quarter earnings call, reflecting our finalization of LDTI processes. We expect the benefit and claims ratio to be in the high 58% range for 2023.

Investment and Savings Products

Total sales during the quarter were $2.3 billion, decreasing 25% compared to the first quarter of 2022 as equity markets continued to experience heightened volatility. Average client asset values for the quarter were $86.6 billion, decreasing 8% year-over-year. Nonetheless, clients remained focused on long-term goals as evidenced by net client inflows of $642 million during the quarter.

Revenues of $210.2 million decreased 13% year-over-year, while operating income of $56.1 million decreased 16%. Sales-based commission revenues and expenses each decreased 30%, largely in line with the change in revenue-generating sales. While average client asset values declined 8%, asset-based revenues benefited from a mix-shift toward products on which the Company earns higher asset-based fees and decreased only 1% compared to the prior year period. The change in asset-based commission expenses was consistent with asset-based revenues, excluding revenues on Canadian segregated funds. Expenses related to Canadian segregated funds are reflected in insurance commissions and amortization of DAC.

Senior Health

The Company continued to control sales levels in the Senior Health segment through the first quarter’s Open Enrollment Period, with an emphasis on agent and lead efficiency and the quality of business. Leads sourced by Primerica’s senior health certified representatives represented approximately 10% of total submitted volume and continued to exhibit favorable conversion and retention characteristics. The lifetime value of commissions per approved policy (“LTV”) was $856 and contract acquisition costs per approved policy (“CAC”) was $814, for an LTV/CAC ratio of 1.1x for the period.

The Company’s Senior Health business made progress toward achieving profitability with a modest operating loss of $3.8 million recognized in the quarter down from a $19.0 million operating loss in the prior year period. Chargebacks of policies approved during the Annual Election Period and policy renewal rates during the January 1st annual renewal cycle were largely in line with expectations. The Company does not anticipate a need to provide capital to the segment in 2023.

Primerica, Inc., headquartered in Duluth, Ga., is a leading provider of financial services to middle-income households in North America. Primerica insured over 5.7 million lives and had over 2.8 million client investment accounts on December 31, 2022.