Primerica Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
PRI$290.58+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000950170-24-093765
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000950170-24-123110
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 273 previous paragraphs and 225 current paragraphs.
163 unchanged; 49 reworded; 12 added; 60 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
The Company previously reported a Senior Health segment, which consisted of e-TeleQuote Insurance, Inc. and subsidiaries, a marketer of Medicare-related insurance products underwritten by third-party health insurance carriers to eligible Medicare beneficiaries (the “Senior Health business”) that was disposed of as of September 30, 2024, and is now reported in discontinued operations for all periods presented. Refer to Note 2 (Discontinued Operations) to our unaudited condensed consolidated financial statements included elsewhere in this report for further details.
Current report
Income taxes. Our effective income tax rate from continuing operations of 23.5% for the three months ended September 30, 2024 was largely consistent compared to 23.7% for the three months ended September 30, 2023. Refer to Note 18 (Income Taxes) to our unaudited condensed consolidated financial statements included elsewhere in this report for a comparison of the year-over-year effective income tax rate.
Current report
Loss from discontinued operations, net of income taxes. Loss from discontinued operations, net of income taxes relates to the Senior Health business, which was disposed of as of September 30, 2024 and is reported in discontinued operations for all periods presented. Refer to Note 2 (Discontinued Operations) to our unaudited condensed consolidated financial statements included elsewhere in this report for further details.
Current report
Total revenues. Total revenues increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the same factors as described in the three month comparison as well as a $50.0 million gain recognized within other, net revenue in our Corporate and Other Distributed Products segment related to payments received under a Representation and Warranty insurance policy in the second quarter of 2024.
Current report
Total benefits and expenses. Total benefits and expenses increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the same factors as described in the three month comparison.
Current report
Income taxes. Our effective income tax rate from continuing operations of 23.3% for the nine months ended September 30, 2024 was largely consistent compared to 23.5% for the nine months ended September 30, 2023. Refer to Note 18 (Income Taxes) to our unaudited condensed consolidated financial statements included elsewhere in this report for a comparison of the year-over-year effective income tax rate.
Current report
Loss from discontinued operations, net of income taxes. Loss from discontinued operations, net of income taxes relates to the Senior Health business, which was disposed of as of September 30, 2024 and is reported in discontinued operations for all periods presented. Refer to Note 2 (Discontinued Operations) to our unaudited condensed consolidated financial statements included elsewhere in this report for further details.
Current report
Insurance expenses. Insurance expenses increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 due to higher costs resulting from growth in the business, employee-related costs, and higher variable expenses to support recruiting and licensing.
Current report
Insurance expenses. Insurance expenses increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Current report
Total benefits and expenses. Total benefits and expenses increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 due to a future policy benefits remeasurement loss in the third quarter of 2024 recorded in connection with the refinement of assumptions on a closed block of non-term life insurance as well as higher employee-related costs, infrastructure technology investments, legal expenses and corporate restructuring charges associated with the decision to exit the Senior Health business.
Current report
effect on our business.
Current report
effect on our business.
Removed paragraphs (60)
Previous report
Senior Health. In the United States, we distribute Medicare-related insurance products to eligible Medicare beneficiaries and enroll eligible Medicare beneficiaries in insurance coverage utilizing licensed health insurance agents through our subsidiary, e-TeleQuote Insurance, Inc. (“e-TeleQuote”) (dba easyMed Insurance Services). The health insurance products we distribute are underwritten and administered by third-party health insurance carriers and primarily consist of Medicare Advantage enrollments. Contract acquisition costs are incurred up front when policy applications are approved and include costs associated with generating or acquiring leads, as well as fees paid to Primerica Senior Health certified independent sales representatives, and compensation, licensing, and training costs incurred for e-TeleQuote’s workforce of licensed health insurance agents. e-TeleQuote’s licensed health insurance agents are employees of the Company. We receive compensation from the third-party health insurance carriers in the form of initial commissions when eligible Medicare beneficiaries are enrolled and renewal commissions upon the anniversary of the effective date of the policy, for as long as policies remain in-force. We expect to incur restructuring costs, the extent of which are yet to be determined, in the third quarter of 2024 associated with our exit of the senior health business.
Previous report
Senior Health Key Performance Indicators.
Previous report
Submitted Policies, Approved Policies and Policies Sourced by Primerica Independent Sales Representatives
Previous report
Submitted policies. Submitted policies represent the number of completed applications that the applicants have authorized e-TeleQuote to submit to the health insurance carriers. The applicant may need to take additional action, including providing subsequent information, before the application is reviewed by the health insurance carrier.
Previous report
Approved policies. Approved policies represent an estimate of submitted policies approved by the health insurance carriers for the identified product during the indicated period. Not all approved policies will go in force. In general, the relationship between submitted policies and approved policies has been seasonally consistent. Therefore, factors impacting the number of submitted policies generally impact the number of approved policies.
Previous report
Policies sourced by Primerica independent sales representatives. Primerica independent sales representatives become certified to refer eligible Medicare participants to e-TeleQuote licensed health insurance agents for potential enrollment in policies distributed by e-TeleQuote after completion of a brief certification course offered by Primerica. The number of submitted policies sourced by Primerica independent sales representatives measures the number of Senior Health policies submitted by e-TeleQuote to its third-party health insurance carriers that originated through the Primerica independent sales force.
Previous report
The number of Senior Health submitted policies, approved policies, and submitted policies sourced by Primerica independent sales representatives were as follows:
Previous report
The Senior Health segment experiences notable seasonality with the strongest demand occurring in the fourth quarter due to the Medicare Annual Election Period (“AEP”) from October 15 th to December 7 th. It also experiences seasonally higher demand in the first quarter due to the Medicare Open Enrollment Period (“OEP”) from January 1 st to March 31 st, which allows individuals to switch Medicare Advantage plans. Meanwhile, the second and third quarters experience seasonally lower demand as the focus for submitted policies is limited to beneficiaries that are dual eligible (Medicare and Medicaid), qualify for a special enrollment period, recently aged into Medicare or are enrolling off of an employer-sponsored plan, and other less common situations.
Previous report
During the three months ended June 30, 2024, the number of submitted and approved policies increased compared with the three months ended June 30, 2023 primarily due to an increase in the average number of licensed health insurance agents. During the six months ended June 30, 2024, the number of submitted and approved policies decreased compared with the six months ended June 30, 2023 primarily due to the headwinds encountered in the first quarter of 2024 that included a year-over-year decline in the number of licensed health insurance agents and the effect of an industry-wide service disruption at a thirty-party service provider that impacted the ability of our licensed health insurance agents to verify certain plan eligibility and levels, which negatively impacted productivity. The number of submitted policies sourced by Primerica independent sales representatives did not change meaningfully during the three and six months ended June 30, 2024 compared to the same periods in 2023.
Previous report
Lifetime Value of Commissions and Contract Acquisition Costs
Previous report
Lifetime value of commissions (“LTV”). LTV represents the cumulative total of commissions and administrative fees estimated to be collected over the expected life of a policy for policies approved during the period. For more information on LTV, refer to Note 19 (Revenue from Contracts with Customers) of our consolidated financial statements within our 2023 Annual Report and the Factors Affecting our Results – Senior Health Segment section of MD&A included elsewhere in this report.
Previous report
Contract acquisition costs (“CAC”). CAC represents the total direct costs incurred to acquire approved policies. CAC are primarily comprised of the costs associated with generating or acquiring leads, including fees paid to Primerica Senior Health certified independent sales representatives, as well as compensation, licensing, and training costs associated with our team of e-TeleQuote licensed health insurance agents in addition to per policy technology costs. The number of e-TeleQuote licensed health insurance agents, agent tenure, attrition rate and productivity all impact CAC. Other than costs incurred to assist beneficiaries who are switching plans with the same health insurance carrier, we incur the entire cost of approved policies prior to enrollment and prior to receiving our first commission-related payment.
Previous report
Per policy metrics for LTV and CAC measure our ability to profitably distribute Senior Health insurance products.
Previous report
The LTV per approved policy, CAC per approved policy, and ratio of LTV to CAC per approved policy were as follows:
Previous report
LTV per approved policy reflects current estimates for renewal rates, policy retention and chargeback activity taking into consideration the most recent experience through June 30, 2024. LTV per approved policy increased during the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to the inclusion of the majority of marketing development revenue in LTV due to changes in carrier contracts, as well as higher commission rates from annual rate increases. Prior to the fourth quarter of 2023, all marketing development revenue received from carriers was recognized in Other, net revenue. The increases in LTV were partially offset by lower renewal retention rates experienced during the three and six months ended June 30, 2024 due to an increased number of beneficiaries who changed plans, likely driven by improved plan offerings by certain carriers.
Previous report
CAC per approved policy increased during the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to additional investments in onboarding and training new agents in preparation for the upcoming enrollment periods.
Previous report
Senior Health Segment. The Senior Health segment results are primarily driven by the number of approved policies, LTV per approved policy and tail revenue adjustments, CAC per approved policy, and other revenue. In addition, our results for the three and six months ended June 30, 2024 include the impairment of goodwill and long-lived assets. Refer to Note 17 (Impairment of Goodwill and Other Long-lived Assets) to our unaudited condensed consolidated financial statements included elsewhere in this report for more information on the impairment charges.
Previous report
Approved policies. Approved policies represent an estimate of submitted policies approved by the health insurance carriers for the identified product during the indicated period. Not all approved policies will go in force. In general, the relationship between the number of submitted policies and approved policies has been seasonally consistent. Therefore, factors impacting the number of submitted policies generally impact the number of approved policies. Revenue is primarily generated from approved policies and LTVs are recorded when the enrollment is approved by the applicable health insurance carrier. Medicare Advantage plans make up nearly all of the approved policies we distribute. The number of approved policies is influenced by the following:
Previous report
the number and tenure of our licensed health insurance agents;
Previous report
our ability to hire and train our team of e-TeleQuote licensed health insurance agents to manage leads and help eligible Medicare beneficiaries through the enrollment process;
Previous report
our ability to generate and obtain leads for our team of e-TeleQuote licensed health insurance agents;
Previous report
the size and growth of the population of senior citizens in the United States;
Previous report
the appeal of government-funded Medicare Advantage plans that provide privately administered healthcare coverage with enhanced benefits relative to traditional Medicare;
Previous report
our health insurance carrier relationships that allow us to offer plans that most appropriately meet eligible Medicare beneficiaries’ needs; and
Previous report
our ability to compete with national direct to consumer brokers, health insurance carriers that directly market to beneficiaries and other independent brokers.
Previous report
LTV per approved policy and tail revenue adjustments. When a policy is approved by the health insurance carrier, commission revenue is recognized based on an estimated LTV per approved policy. LTV per approved policy is the cumulative total of commissions (including administrative and marketing development payments received on a per approved policy basis) estimated to be collected over the expected life of a policy, subject to constraints applied in accordance with our revenue recognition policy. Specifically, LTV per approved policy is equal to the sum of the initial commissions and payments, less an estimate of chargebacks for paid policies that are disenrolled during the first policy year, plus forecasted renewal commissions. This estimate is driven by several factors including, but not limited to, commission rates from health insurance carriers, expected policy turnover, emerging chargeback activity and applied constraints. These factors may result in varying values from period to period.
Previous report
We recognize adjustments to revenue outside of LTV for approved policies from prior periods when our cash collections are, or are expected to be, different from the estimated constrained LTVs, which we refer to as tail revenue adjustments. The recognition of tail revenue adjustments results from a change in the estimate of expected cash collections when actual cash collections or communicated rate increases have indicated a trend that is different from the estimated constrained LTV. Tail revenue adjustments can be positive or negative and we recognize positive adjustments to revenue when we do not believe it is probable that a significant reversal of cumulative revenue will occur.
Previous report
CAC per approved policy. Results are also driven by the costs of acquisition, which is defined as the total direct costs incurred per approved policy. Our costs of acquisition are primarily comprised of the cost to generate and acquire leads, including fees paid to Primerica Senior Health certified independent sales representatives, and the labor, benefits, bonus compensation, licensing and training costs associated with our team of e-TeleQuote licensed health insurance agents. Other than costs incurred to assist beneficiaries with switching plans within the same carrier, we incur our entire cost of approved policies prior to enrollment and prior to receiving our first commission related payment. Factors that impact our costs of acquisition per approved policy include:
Previous report
the market price of externally-generated leads;
Previous report
our ability to efficiently procure internally-generated leads; and
Previous report
the productivity of our e-TeleQuote licensed health insurance agents in converting procured leads into approved policies.
Previous report
Other revenue. Other revenue recognized in the Senior Health segment includes other revenue received for providing marketing services and health risk assessment services on behalf of certain health insurance carriers. Marketing development revenue is based on agreed-upon objectives with certain health insurance carriers. Marketing development revenue serves to offset contract acquisition costs associated with the distribution of approved policies. Agreements for marketing development revenue are generally short-term in nature and can vary from period to period. Marketing development payments received on a per approved policy basis are recognized in commissions and fees revenue. Health risk assessment services generate revenue from health insurance carriers by collecting information from beneficiaries during the enrollment process.
Previous report
During the three months ended June 30, 2024, there were no changes in the accounting methodology for our critical accounting estimates with the exception of goodwill. As of June 30, 2024, the Company determined that goodwill that had been allocated solely to the Senior Health segment was impaired and the goodwill balance was reduced to $0. Based on the triggering events identified during the second quarter ended June 30, 2024, we performed a quantitative goodwill impairment analysis that relied on a market approach using the due diligence performed to evaluate exit plans for the senior health business during the current period as described further in Note 17 (Impairment of Goodwill and Other Long-lived Assets) to our unaudited condensed consolidated financial statements included elsewhere in this report. We had previously utilized an income approach to perform the quantitative goodwill impairment analysis as of the latest annual testing date of July 1, 2023 as described in further detail in the Critical Accounting Estimates section of MD&A included in our 2023 Annual Report.
Previous report
For additional information regarding our other critical accounting estimates, see the Critical Accounting Estimates section of MD&A included in our 2023 Annual Report.
Previous report
Income taxes. Our effective income tax rate for the three months ended June 30, 2024 was 85.0% compared to 23.5% for the three months ended June 30, 2023. The increase in the effective tax rate during the second quarter of 2024 was primarily driven by the non-cash goodwill impairment charge that is not deductible for income tax purposes and a valuation allowance established against e-TeleQuote state net operating losses. The impact of those two items was partially offset by the Representation and Warranty insurance proceeds, which will be excluded from taxable income, and the write-off of deferred tax liabilities on the intangible assets that were fully impaired in the quarter. Excluding the impact of the four aforementioned items, the effective tax rate for the three months ended June 30, 2024 would have been 23.3%.
Previous report
Total revenues. Total revenues increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to the same factors as described in the three month comparison.
Previous report
Total benefits and expenses. Total benefits and expenses increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to the same factors as described in the three month comparison.
Previous report
Income taxes. Our effective income tax rate for the six months ended June 30, 2024 was 25.6% compared to 23.4% for the six months ended June 30, 2023. The increase in the effective tax rate during the 2024 period was primarily driven by the same factors as described in the three month comparison. Excluding the impact of the four aforementioned items, the effective tax rate for the six months ended June 30, 2024 would have been 23.2%.
Previous report
Insurance expenses. Insurance expenses increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to higher growth-related and employee-related costs. These increases were partially offset by lower technology costs for the segment as the 2023 period included technology spending associated with the launch of our new term life insurance products.
Previous report
Insurance expenses. Insurance expenses increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
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Reworded paragraphs (49)
Previous wording
We are a leading provider of financial products and services to middle-income households in the United States and Canada primarily through a network of independent contractor sales representatives (“independent sales representatives” or “independent sales force”). We assist our clients in meeting their needs for term life insurance, which we underwrite, and mutual funds, annuities, managed investments, Medicare-related insurance products and other financial products, which we distribute primarily on behalf of third parties. We have three primary operating segments, Term Life Insurance, Investment and Savings Products, and Senior Health, and a fourth segment, Corporate and Other Distributed Products.
Current wording
We are a leading provider of financial products and services to middle-income households in the United States and Canada primarily through a network of independent contractor sales representatives (“independent sales representatives” or “independent sales force”). We assist our clients in meeting their needs for term life insurance, which we underwrite, and mutual funds, annuities, managed investments, and other financial products, which we distribute primarily on behalf of third parties. We have two primary operating segments, Term Life Insurance and Investment and Savings Products, and a third segment, Corporate and Other Distributed Products.
Previous wording
The relative strength and stability of the financial markets and economies in the United States and Canada affect our growth and profitability. Our business is, and we expect will continue to be, influenced by a number of industry-wide and product-specific trends and conditions. Economic conditions, including unemployment levels and consumer confidence, influence investment and spending decisions by middle-income consumers, who are generally our primary clients. These conditions and factors also impact prospective recruits’ perceptions of the business opportunity that becoming an independent sales representative offers, which can drive or dampen recruiting. Consumer spending and borrowing levels affect how consumers evaluate their savings and debt management plans. In addition, interest rates and equity market returns impact consumer demand for the savings and investment products we distribute. Our customers’ perception of the strength of the capital markets may also influence their decisions to invest in the investment and savings products we distribute.
Current wording
The relative strength and stability of the financial markets and economies in the United States and Canada affect our growth and profitability. Our business is, and we expect will continue to be, influenced by a number of industry-wide and product-specific trends and conditions. Economic conditions, including unemployment levels and consumer confidence, influence investment and spending decisions by middle-income consumers, who are generally our primary clients. These conditions and factors also impact prospective recruits’ perceptions of the business opportunity that becoming an independent sales representative offers, which can drive or dampen recruiting. Consumer spending and borrowing levels affect how consumers evaluate their savings and debt management plans. In addition, equity market returns and interest rates impact consumer demand for the investment and savings products we distribute. Our customers’ perception of the strength of the capital markets may also influence their decisions to invest in the investment and savings products we distribute.
Previous wording
Significant volatility in capital markets in recent periods has continued to impact our business. Volatility in capital markets has influenced product sales and client asset values that drive revenue in the Investment and Savings Products segment. In addition, the sharp rise in market interest rates during 2022 has largely driven the unrealized losses that have accumulated in our investment portfolio. We have not recognized losses caused by interest rate volatility in the income statement as we have the ability to hold these investments until maturity or a market price recovery, and we have no present intention to dispose of them. Increased interest rates have also led to increases in net investment income as we are able to earn higher returns on our new debt securities purchases and cash balances.
Current wording
Volatility in capital markets in recent periods has continued to impact our business. Strong equity market performance has influenced product sales and client asset values that drive revenue in the Investment and Savings Products segment. In addition, the sharp rise in market interest rates during 2022 has largely driven the unrealized losses that have accumulated in our investment portfolio. We have not recognized losses caused by interest rate volatility in the income statement for securities where we have no present intention to dispose of them and we have the ability to hold these investments until maturity or a market price recovery. Elevated interest rates have also led to increases in net investment income as we are able to earn higher returns on our new debt securities purchases and cash balances.
Previous wording
Significant inflation that followed the peak of the COVID-19 pandemic has led to an elevated cost of living for middle-income families. We believe that the elevated cost of living has adversely impacted persistency for term life insurance policies. While the rate of inflation has been normalizing from its peak in 2022, lapses of term life insurance policies have remained above long-term historical levels. The continuation of the elevated cost of living could adversely impact demand for our products.
Current wording
Significant inflation that followed the peak of the COVID-19 pandemic has led to an elevated cost of living for middle-income families. We believe that the higher cost of living has adversely impacted persistency for term life insurance policies. While the rate of inflation has been normalizing from its peak in 2022, lapses of term life insurance policies have remained above long-term historical levels. The continuation of the elevated cost of living could adversely impact demand for our products.
Previous wording
The number of new recruits increased during the three and six months ended June 30, 2024 compared to the same periods in 2023. The Company has experienced increased recruiting as the size of the sales force has grown with the excitement leading up to our biennial convention in July 2024. In addition, positive sentiment regarding interest in our business opportunity along with the demand for supplemental income likely contributed to the increase in recruiting.
Current wording
The number of new recruits increased during the three and nine months ended September 30, 2024 compared to the same periods in 2023. The year-over-year increase was primarily driven by the momentum following our biennial convention held in July 2024 and special recruiting incentives that were offered in connection with the convention. Approximately 81,000 individuals were recruited while the special incentives were in place. In addition, positive sentiment regarding interest in our business opportunity along with the demand for supplemental income likely contributed to the increase in recruiting.
Previous wording
New life-licensed independent sales representatives increased during the three and six months ended June 30, 2024 compared to the same periods in 2023 as the pipeline of recruits has increased year-over-year.
Current wording
New life-licensed independent sales representatives increased during the three and nine months ended September 30, 2024 compared to the same periods in 2023 as the pipeline of recruits has increased year-over-year.
Previous wording
The number of life-licensed independent sales representatives increased as of June 30, 2024, reflecting the strong recruiting and licensing activity discussed above.
Current wording
The increased number of life-licensed independent sales representatives as of September 30, 2024 reflects the strong recruiting and licensing activity discussed above.
Previous wording
The average number of life-licensed independent sales representatives increased for the three and six months ended June 30, 2024 from the same periods in 2023 as a result of strong recruiting and licensing activity that drove growth in the size of the sales force as discussed above.
Current wording
The average number of life-licensed independent sales representatives increased for the three and nine months ended September 30, 2024 from the same periods in 2023 as a result of strong recruiting and licensing activity that drove growth in the size of the independent sales force as discussed above.
Previous wording
New policies issued during the three and six months ended June 30, 2024 increased compared to the same periods in 2023 primarily due to year-over-year growth in the number of life-licensed independent sales representatives.
Current wording
New policies issued during the three and nine months ended September 30, 2024 increased compared to the same periods in 2023 primarily due to year-over-year growth in the number of life-licensed independent sales representatives.
Previous wording
Productivity in the three and six months ended June 30, 2024 and 2023, measured by the average monthly rate of new policies issued per life-licensed independent sales representative, was in line with our historical range.
Current wording
Productivity in the three and nine months ended September 30, 2024 and 2023, measured by the average monthly rate of new policies issued per life-licensed independent sales representative, was in line with our historical range.
Previous wording
The face amount of term life insurance policies in-force increased for the three and six months ended June 30, 2024 as the face amount issued continued to exceed the face amount terminated. Issued face amount during the three and six months ended June 30, 2024 increased due to the increase in the number of new policies issued as discussed above. Policy terminations increased year-over-year but were consistent when measured as a percentage of beginning face amount in force. Policy terminations were elevated in all periods with the high cost of living a likely key contributing factor.
Current wording
The face amount of term life insurance policies in-force increased for the three and nine months ended September 30, 2024 as the face amount issued continued to exceed the face amount terminated. Issued face amount during the three and nine months ended September 30, 2024 increased due to the increase in the number of new policies issued as discussed above. Policy terminations increased year-over-year but were consistent when measured as a percentage of beginning face amount in-force. Policy terminations were elevated in all periods with the high cost of living a likely key contributing factor.
Previous wording
Product sales. Investment and savings product sales increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to increased demand across all product lines except for Canadian segregated funds. The increase in demand by investors is likely driven by strong equity market performance in the period leading up to and including the first half of 2024. In particular, variable annuity product sales led the growth in sales as the guarantees offered by these products have become more appealing to investors given strong equity market performance and higher interest rates. Marginally offsetting the increase in product sales were lower year-over-year sales of Canadian segregated funds, as the Company discontinued sales of investments in new Canadian segregated funds accounts in 2023 due to new regulations in Canada. Refer to the MD&A section of the 2023 Annual Report for more information on regulations impacting Canadian segregated funds.
Current wording
Product sales. Investment and savings product sales increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to our ability to leverage increased demand across all product lines except for Canadian segregated funds. The increase in demand was driven by strong equity market performance in the period leading up to and including the first nine months of 2024. In particular, variable annuity product sales continued to lead the growth in sales as the guarantees offered by these products have become more appealing to investors given strong equity market performance and elevated interest rates. The increase in product sales for managed investments was also impacted by a favorable comparison to the prior year. Sales during the third quarter of 2023 were temporarily disrupted by the transition of our managed accounts platform to a different third-party clearing broker. Marginally offsetting the increase in product sales were lower year-over-year sales of Canadian segregated funds as sales of investments in new Canadian segregated funds accounts have effectively been discontinued after May 2023 due to new regulations in Canada. Refer to the MD&A section of the 2023 Annual Report for more information on regulations impacting Canadian segregated funds.
Previous wording
Rollforward of client asset values. Ending client asset values increased during the three months ended June 30, 2024 and the three months ended June 30, 2023 primarily due to the difference in market performance during each respective period.
Current wording
Rollforward of client asset values. Ending client asset values increased during the three months ended September 30, 2024 and decreased during the three months ended September 30, 2023 primarily due to the difference in market performance during each respective period.
Previous wording
Average client asset values. Average client asset values increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 driven by the timing and changes in market conditions that affected the balance of client assets during each period.
Current wording
Average client asset values. Average client asset values were higher for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 driven by the cumulative effect of market increases and net client inflows.
Previous wording
Average number of fee-generating positions. The average number of fee-generating positions increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to the cumulative effect of retail mutual fund sales in recent periods that led to an increase in the number of retail mutual fund positions serviced on our transfer agent recordkeeping platform.
Current wording
Average number of fee-generating positions. The average number of fee-generating positions was higher during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to the cumulative effect of retail mutual fund sales in recent periods that led to an increase in the number of retail mutual fund positions serviced on our transfer agent recordkeeping platform.
Previous wording
Changes in Investment and Savings Product Sales, Asset Values and Accounts/Positions During the Six Months Ended June 30, 2024
Current wording
Changes in Investment and Savings Product Sales, Asset Values and Accounts/Positions During the Nine Months Ended September 30, 2024
Previous wording
Product sales. Investment and savings product sales increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to the same factors as described in the three month comparison.
Current wording
Product sales. Investment and savings product sales increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the same factors as described in the three month comparison.
Previous wording
Rollforward of client asset values. Ending client asset values increased during the six months ended June 30, 2024 and the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Rollforward of client asset values. Ending client asset values increased during the nine months ended September 30, 2024 and the nine months ended September 30, 2023 primarily due to market performance during each respective period.
Previous wording
Average client asset values. Average client asset values increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was due to the same factors as described in the three month comparison.
Current wording
Average client asset values. Average client asset values was higher for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was due to the same factors as described in the three month comparison.
Previous wording
Average number of fee-generating positions. The average number of fee-generating positions increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to the same factors as described in the three month comparison.
Current wording
Average number of fee-generating positions. The average number of fee-generating positions was higher during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the same factors as described in the three month comparison.
Previous wording
Actuarial assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of mortality, persistency, disability, and interest rates. Our results will be affected to the extent there is a variance between our actuarial assumptions and actual experience. These variances will be reflected in our financial results by unlocking assumptions and cash flows underlying the liability for future policy benefits (“LFPB”) and ceded reserves that are part of the reinsurance recoverables. See Note 9 (Future Policy Benefits) for more information on LFPB. The variances are also reflected in the projection of future face amount that is the basis for amortizing deferred policy acquisition costs (“DAC”).
Current wording
Actuarial assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of mortality, persistency, disability, and interest rates. Our results will be affected to the extent there is a variance between our actuarial assumptions and actual experience. These variances will be reflected in our financial results by unlocking assumptions and cash flows underlying the liability for future policy benefits (“LFPB”) and ceded reserves that are part of the reinsurance recoverables. See Note 10 (Future Policy Benefits) to our unaudited condensed consolidated financial statements included elsewhere in this report for more information on LFPB. The variances are also reflected in the projection of future face amount that is the basis for amortizing deferred policy acquisition costs (“DAC”).
Previous wording
Disability. Our profitability will fluctuate to the extent actual disability rates underlying our waiver benefits, including recovery rates for individuals currently disabled, differ from actuarial assumptions. The waiver benefit is secondary to the death benefit coverage provided. However, the waiver benefit is not reinsured on a yearly renewable term (“YRT”) basis and material changes in assumptions compared to expectations can have a disproportionate impact on our financial results.
Current wording
Disability. Our profitability will fluctuate to the extent actual disability rates underlying our waiver of premium benefits, including recovery rates for individuals currently disabled, differ from actuarial assumptions. The waiver of premium benefit is secondary to the death benefit coverage provided. However, the waiver of premium benefit is not reinsured on a yearly renewable term (“YRT”) basis and material changes in assumptions compared to expectations can have a disproportionate impact on our financial results.
Previous wording
The Corporate and Other Distributed Products segment also includes corporate income and expenses not allocated to our other segments, general and administrative expenses (other than expenses that are allocated to the Term Life Insurance, Investment and Savings Products, or Senior Health segments), interest expense on notes payable, a redundant reserve financing transaction and our revolving credit facility (“Revolving Credit Facility”), as well as realized gains and losses on our invested asset portfolio.
Current wording
The Corporate and Other Distributed Products segment also includes corporate income and expenses not allocated to our other segments, general and administrative expenses (other than expenses that are allocated to the Term Life Insurance and Investment and Savings Products segments), interest expense on notes payable, a redundant reserve financing transaction and our revolving credit facility (“Revolving Credit Facility”), as well as realized gains and losses on our invested asset portfolio.
Previous wording
The estimates that we deem to be most critical to an understanding of our results of operations and financial position are those related to DAC, future policy benefit reserves and corresponding amounts recoverable from reinsurers, income taxes, renewal commissions receivable, goodwill and the valuation of investments. The preparation and evaluation of these critical accounting estimates involve the use of various assumptions developed from management’s analyses and judgments. Subsequent experience or use of other assumptions could produce significantly different results.
Current wording
The estimates that we deem to be most critical to an understanding of our results of operations and financial position are those related to DAC, future policy benefit reserves and corresponding amounts recoverable from reinsurers, income taxes, and the valuation of investments. The preparation and evaluation of these critical accounting estimates involve the use of various assumptions developed from management’s analyses and judgments. Subsequent experience or use of other assumptions could produce significantly different results.
Previous wording
Total revenues. Total revenues increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to increases in net premiums earned in our Term Life Insurance segment, commissions and fees earned in our Investment and Savings Products segment, net investment income and investment gains earned in our Corporate and Other Distributed Products segment, and a $50.0 million gain recognized within other, net revenue in our Corporate and Other Distributed Products segment. These movements are further discussed in detail in the Segment Results sections below.
Current wording
Total revenues. Total revenues increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to increases in commissions and fees earned in our Investment and Savings Products segment, net premiums earned in our Term Life Insurance segment, and net investment income and investment gains earned in our Corporate and Other Distributed Products segment. These movements are further discussed in detail in the Segment Results sections below.
Previous wording
Total benefits and expenses. Total benefits and expenses increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 largely due to the impairment of goodwill and other long-lived assets, higher sales commissions in our Investment and Savings Products segment, and higher other operating expenses. Also contributing to the year-over-year increase are higher benefits and claims and DAC amortization in our Term Life Insurance segment. These movements are discussed in further detail in the Segment Results section below.
Current wording
Total benefits and expenses. Total benefits and expenses increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 largely due to higher sales commissions in our Investment and Savings Products segment, and higher insurance expenses and other operating expenses. Insurance expenses and other operating expenses were higher in the three months ended September 30, 2024 due to higher variable growth-related costs, infrastructure technology investments, and employee-related costs, which includes higher incentive compensation given current year results. Also contributing to the year-over-year increase are higher benefits and claims and amortization of DAC in our Term Life Insurance segment. Partially offsetting these increases was a future policy benefits remeasurement gain compared to a small remeasurement loss in the comparative period. These movements are discussed in further detail in the Segment Results section below.
Previous wording
Net premiums. Direct premiums increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 largely due to the layering effect of new policy sales that contributed to growth in the in-force book of business. This increase was partially offset by an increase in ceded premiums, which includes $8.8 million in higher non-level YRT reinsurance ceded premiums as business not subject to the IPO coinsurance transactions ages, reduced by $6.1 million in lower coinsurance ceded premiums due to the run-off of business subject to the IPO coinsurance transactions.
Current wording
Net premiums. Direct premiums increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 largely due to the layering effect of new policy sales that contributed to growth in the in-force book of business. This increase was partially offset by an increase in ceded premiums, which includes $6.2 million in higher non-level YRT reinsurance ceded premiums as business not subject to the IPO coinsurance transactions ages, reduced by $4.5 million in lower coinsurance ceded premiums due to the run-off of business subject to the IPO coinsurance transactions.
Previous wording
Future policy benefits remeasurement (gain) loss. Future policy benefits remeasurement gain increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and represents differences in experience variances that occurred in each period. The gain recognized in the 2024 period is primarily due to favorable mortality experience.
Current wording
Future policy benefits remeasurement (gain) loss. Future policy benefits remeasurement gain increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 and represents the impact of long-term assumption changes made during the third quarter in connection with the annual assumption review as well as differences in experience variances that occurred in each period. The gain recognized in the 2024 period is primarily due to an assumption change related to the reduction of the expected cost of waiver of premium benefits. Refer to Note 10 (Future Policy Benefits) to our unaudited condensed consolidated financial statements included elsewhere in this report for further details.
Previous wording
Net premiums. Direct premiums increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 largely due to the layering effect of new policy sales that contributed to growth in the in-force book of business. This increase was partially offset by an increase in ceded premiums, which includes $20.7 million in higher non-level YRT reinsurance ceded premiums as business not subject to the IPO coinsurance transactions ages, reduced by $13.5 million in lower coinsurance ceded premiums due to the run-off of business subject to the IPO coinsurance transactions.
Current wording
Net premiums. Direct premiums increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 largely due to the layering effect of new policy sales that contributed to growth in the in-force book of business. This increase was partially offset by an increase in ceded premiums, which includes $26.9 million in higher non-level YRT reinsurance ceded premiums as business not subject to the IPO coinsurance transactions ages, reduced by $18.0 million in lower coinsurance ceded premiums due to the run-off of business subject to the IPO coinsurance transactions.
Previous wording
Benefits and claims. Benefits and claims increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Benefits and claims. Benefits and claims increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Previous wording
Future policy benefits remeasurement (gain) loss. Future policy benefits remeasurement gain increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Future policy benefits remeasurement (gain) loss. Future policy benefits remeasurement gain increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Previous wording
Amortization of DAC. The amortization of DAC increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Amortization of DAC. The amortization of DAC increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Previous wording
Commissions and fees. Commissions and fees increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 driven by higher sales-based and asset-based revenues. The increase in sales-based revenue was largely the result of higher product sales for variable annuities and U.S. mutual fund product sales. Higher asset-based revenues were driven by an increase in average client assets in the 2024 period versus the prior year period.
Current wording
Commissions and fees. Commissions and fees increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily driven by higher sales-based and asset-based revenues. The increase in sales-based revenue was largely the result of higher product sales for variable annuities and U.S. mutual fund product sales. Higher asset-based revenues were driven by an increase in average client assets in the 2024 period versus the prior year period.
Previous wording
Other operating expenses. Other operating expenses for the three months ended June 30, 2024 increased compared to the three months ended June 30, 2023 primarily due to higher growth-related and employee-related costs.
Current wording
Other operating expenses. Other operating expenses for the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 primarily due to higher growth-related costs and employee-related costs.
Previous wording
Commissions and fees. Commissions and fees increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Commissions and fees. Commissions and fees increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Previous wording
Sales commissions. Sales commissions increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Sales commissions. Sales commissions increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Previous wording
Other operating expenses. Other operating expenses for the six months ended June 30, 2024 increased compared to the six months ended June 30, 2023 due to the same factors as described in the three month comparison.
Current wording
Other operating expenses. Other operating expenses for the nine months ended September 30, 2024 increased compared to the nine months ended September 30, 2023 due to the same factors as described in the three month comparison.
Previous wording
Total revenues. Total revenues increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to higher net investment income and investment gains, and a $50.0 million gain within other, net revenue related to payments received under a Representation and Warranty insurance policy. Net investment income increased $2.5 million from higher yields in the invested asset portfolio, $2.0 million from a larger invested asset portfolio, and a $0.8 million higher total return on the deposit asset backing our 10% coinsurance agreement compared to the same period in the prior year. Investment income net of investment expenses includes interest earned on our held-to-maturity asset, which is offset by interest expense on the surplus note (“Surplus Note”), thereby eliminating any impact on net investment income. Amounts recognized for each line item will remain offsetting and will fluctuate from period to period along with the principal amounts of the held-to-maturity asset and the Surplus Note based on the balance of reserves being contractually supported under a redundant reserve financing transaction used by Vidalia Re, Inc. (“Vidalia Re”). For more information on the Surplus Note, see Note 3 (Investments) and Note 15 (Debt) to our unaudited condensed consolidated financial statements included elsewhere in this report. For more information on the gain related to payments received under the Representation and Warranty insurance policy, refer to Note 2 (Segment and Geographical Information) to our unaudited condensed consolidated financial statements included elsewhere in this report.
Current wording
Total revenues. Total revenues increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to higher net investment income and investment gains. Net investment income increased $2.2 million from higher yields in the invested asset portfolio, $2.0 million from a larger invested asset portfolio, and a $1.9 million higher total return on the deposit asset backing our 10% coinsurance agreement compared to the same period in the prior year. Investment income net of investment expenses includes interest earned on our held-to-maturity asset, which is offset by interest expense on the surplus note (“Surplus Note”), thereby eliminating any impact on net investment income. Amounts recognized for each line item will remain offsetting and will fluctuate from period to period along with the principal amounts of the held-to-maturity asset and the Surplus Note based on the balance of reserves being contractually supported under a redundant reserve financing transaction used by Vidalia Re, Inc. (“Vidalia Re”). For more information on the Surplus Note, see Note 4 (Investments) and Note 16 (Debt) to our unaudited condensed consolidated financial statements included elsewhere in this report.
Previous wording
Investment gains increased during the six months ended June 30, 2024 compared to investment losses during the six months ended June 30, 2023 primarily due to a $0.6 million positive mark-to-market adjustment on equity securities held within our investment portfolio during the 2024 period compared to a $2.1 million negative mark-to-market adjustment during the 2023 period. In addition, there was a $2.2 million credit loss recognized for debt securities associated with a specific issuer that we had designated our intent to sell, partially offset by a $0.4 million gain from the subsequent sale of these securities during the 2023 period.
Current wording
The Company recorded investment gains during the three months ended September 30, 2024 compared to investment losses during the three months ended September 30, 2023 primarily due to a $2.3 million positive mark-to-market adjustment on equity securities held within our investment portfolio during the 2024 period compared to a $1.8 million negative mark-to-market adjustment during the 2023 period. Partially offsetting these changes was lower commission revenue from other distributed products.
Previous wording
Total revenues. Total revenues increased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 also due to higher net investment income and investment gains and the $50.0 million gain within other, net revenue related to payments received under a Representation and Warranty insurance policy. Net investment income increased $6.2 million from higher yields in the invested asset portfolio, $4.0 million from a larger invested asset portfolio, and a $0.9 million higher total return on the deposit asset backing our 10% coinsurance agreement compared to the same period in the prior year.
Current wording
Total revenues. Total revenues increased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 also due to higher net investment income, higher investment gains, and the $50.0 million gain within other, net revenue related to payments received under a Representation and Warranty insurance policy. Net investment income increased $8.4 million from higher yields in the invested asset portfolio, $6.0 million from a larger invested asset portfolio, and $2.8 million from higher total returns on the deposit asset backing our 10% coinsurance agreement compared to the prior year period. For more information on the gain related to payments received under the Representation and Warranty insurance policy, refer to Note 3 (Segment and Geographical Information) to our unaudited condensed consolidated financial statements included elsewhere in this report.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The Company recorded investment gains during the nine months ended September 30, 2024 compared to investment losses during the nine months ended September 30, 2023 primarily due to a $3.0 million positive mark-to-market adjustment on equity securities held within our investment portfolio during the 2024 period compared to a $3.9 million negative mark-to-market adjustment during the 2023 period. Partially offsetting these changes was lower commission revenue from other distributed products.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In July 2024, the Board of Directors of the Company committed to an exit of the senior health business. Refer to Note 1 (Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies) to our unaudited condensed consolidated financial statements included elsewhere in this report for further details.