Good morning, welcome to Primerica Q3 2021 Earnings Results Conference Call and Webcast. My name is Daisy and I'll be coordinating today's call. I’ll now hand over to your host Nicole Russell, Head of Investor Relations at Primerica to begin. You may please go ahead.

Thank you, Daisy, and good morning, everyone. Welcome to Primerica's third quarter earnings call. A copy of the press release along with materials that are relevant to today's call are posted on the Investor Relations section of our website. Joining our call today are our Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Alison Rand. Glenn and Alison will deliver prepared remarks, and then we will open the call up for questions. During our call, some of our comments may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. The company assumes no obligation to update these statements to reflect new information. We refer you to our most recent Form 10-K as modified by subsequent Forms 10-Q and the press release filed with our Form 8-K dated July 1, 2021, for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also reference certain non-GAAP measures, which we believe will provide additional insight into the company's operations. Reconciliations of non-GAAP measures to their respective GAAP numbers are included at the end of our press release and are available on our Investor Relations website. I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks everyone for joining us today. Our strong results continue to reflect our ability to adapt to the changing business environment. Since the emergence of COVID-19, Primerica has been educating and assisting clients in choosing the right protection products to meet their family's insurance needs. As a reaction to the pandemic phase, we are helping guide clients' investment decisions and assisting families as they prepare for a more financially secure future. These last 18 months are a perfect example of the balance and resilience of our business model. I'm proud of how quickly our sales force has adapted to a combination of virtual and in-person client interactions to continue serving middle-income families when they need us most. Over the same 18 months, we've delivered on our strategic goal of expanding our product offerings. We moved from pilot to full rollout of the new mortgage business, which continues to grow as we gain experience. We also launched our senior health referral program during the third quarter, further rounding out a balanced product platform to help clients through every financial step of their life journey. Looking at the third quarter, we continue to set new records with Investment and Savings sales, up more than 50% year-over-year. At $8.7 billion, total sales during the first nine months of 2021 have already eclipsed full-year 2020 levels and we're on pace to break $10 billion in annual sales for the first time in our history. As anticipated, sales in our Term Life segment have started to normalize versus their COVID peak, and while sales are down versus the record levels we forecast full-year sales to be about 10% above pre-pandemic levels. We also expect to surpass $900 billion of face amount in force by the end of the year, another milestone in our corporate history. Starting on slide 3, adjusted operating revenues of $692 million increased 22% compared to the third quarter of 2020, and diluted adjusted operating income per share of $2.98 increased 7%. These results include an adjusted net operating loss of $4.6 million or $0.12 per diluted adjusted operating earnings per share for our newly acquired interest in e-TeleQuote. Alison will expand on the financial impact of e-TeleQuote in her prepared remarks. ROAE at 24.1% during the quarter remained strong. Turning to slide 4. We added nearly 92,000 new recruits during the quarter, down from the third quarter of last year when focus and urgency driven by the pandemic created a tailwind. It's worth noting that recruiting remains strong compared to pre-pandemic levels. We believe our success and proven track record continue to make our business opportunity attractive to aspiring entrepreneurs. Disruption and discontent in the job market create more people looking for alternatives to their current career paths and these individuals may be interested in joining our business. Throughout the COVID-19 pandemic, the process for licensing new recruits has been impaired. Early on, the impact was overshadowed by states implementing short-term accommodations. Now that these programs have ended, current licensing numbers reflect the difficulties. Key among the issues is the difficulty in getting new recruits to complete training classes. In-person classroom training provides the greatest completion rates. However, distractions associated with the reopening of the economy and a degree of hesitancy from some to congregate in classrooms is impeding progress. Online training alternatives offer ease of access, but often do not have high completion rates due to their lack of discipline and accountability. We continue to adapt in order to overcome this dilemma by offering more classroom options that appeal to a variety of schedules, increasing our messaging and incentives, and better equipping our field leaders to overcome resistance. A total of 9,381 individuals obtained a new life license during the quarter, which is below our historical pull-through rate. We believe this is a reflection of the current COVID environment rather than an underlying challenge in our ability to get new recruits licensed. A key part of our messaging to the field leadership includes the importance of keeping new recruits engaged and moving toward a permanent license. We ended September with approximately 130,000 life licensed representatives, included in the total of about 800 individuals with either a co-contemporary license or a license with an extended renewal date. As we noted last quarter, we now expect the majority of these licenses to age out, placing the normalized size of the sales force around 129,200. Normalizing all periods to provide an apples-to-apples comparison, we ended June 2021 with 129,600 life licenses and December 2020 with 130,700 life licenses. At this time, we expect to end 2021 with a sales force size roughly equal to the prior year-end's normalized number, which would be a significant achievement given the numerous challenges we've navigated. Turning to the next slide to review our Life Insurance segment. While a pullback from COVID heightened sales levels was expected, we also believe that clients continue to place a higher value on financial protection for their families as sales remained above their pre-pandemic levels. During the third quarter, we issued nearly 76,000 new life insurance policies with productivity at 0.19 policies per life license representative per month, well within our historical range. Total face amount of $894 billion in force rose 6% year-over-year. We project fourth quarter sales to decline between 13% and 15% year-over-year. While full-year results would be down approximately 8% versus 2020's elevated levels, it will still represent more than a 10% increase over pre-COVID 2019 full-year results. Highlights from our Investment and Savings Products segment are presented on slide 6. Sales of $2.8 billion were up 52% year-over-year. The strength of equity markets continues to support investors' confidence to invest for the future. Solid demand persisted across all our investment products including mutual funds, annuities, and managed accounts. Net inflows of $1 billion during the quarter remained well above historical levels. Despite these robust inflows, significant equity market volatility during the quarter kept ending asset levels largely unchanged versus June levels. Barring an unexpected change in market sentiment, we expect the fourth quarter investment sales to grow between 20% and 25% year-over-year and more than 40% full-year 2021 versus 2020. As I noted earlier, we've made significant strides in expanding our product offering over the last two years. In our new mortgage business, we continue to make steady progress and are now actively doing business in 17 states through more than 1,200 license representatives. We have closed nearly $1 billion in US mortgage volume through the third quarter of this year, eclipsing the $442.5 million closed in the entire 12 months of 2020. During the third quarter, we started to roll out the senior health referral program to Primerica representatives. We've had broad acceptance of the launch from field leaders and Primerica reps are excited about how well the program serves their clients' needs. We're seeing encouraging lead generation results since the Medicare annual election period began in mid-October. After our first quarter of ownership, we are excited by the opportunities and are gaining experience in leading our senior health business. Current headwinds caused by labor market issues have caused e-TeleQuote to experience recruiting and retention issues with the Senior Health sales center employees. Given the lower staffing levels coming into AEP, we expect fourth quarter approved policy levels to be around 36,000 to 40,000 or approximately double third quarter levels. We believe this labor market imbalance is temporary and expect a return to more favorable conditions which will improve our ability to attract quality agents that are essential to scaling the e-TeleQuote business. We're investing in technology and talent, consistent with our pre-acquisition plans. We believe in the long-term attractiveness of both e-TeleQuote and the senior health industry, and we are positioning ourselves to take advantage of this growing market. As we look forward to 2022, we have confidence that we will continue to thrive in any business environment and be better positioned for ongoing success. Our plans for the New Year include a powerful live senior field leader event in early January to set an energetic tone for the year. In June, we returned to the Mercedes-Benz Stadium for our biannual convention and the opportunity to cast our vision for the future, introduce product improvements and recognize our success.

Thank you, Glenn and good morning, everyone. Today, I will take you through third quarter results including those for our new Senior Health segment and highlight key additions to our financial metrics and disclosures introduced as part of the acquisition of 80% of e-TeleQuote on July 1. Starting on Slide 7 with our Term Life segment, top-line growth remained strong with operating revenues up 12% to $401 million, driven by 13% growth in adjusted direct premiums. The compounding impact of 18 months strong sales and policy persistency continues to drive adjusted direct premium growth and added $12 million pre-tax income during the quarter. This compares to $5 million added in the prior year period. Third quarter net COVID-related death claims were $14 million, up from $8 million in the prior year period. This was above our prior estimate as the Delta variant led to higher COVID-related population deaths in the US and Canada. The rate of COVID mortality in our insured population also increased from around 11 million to 14 million per 100,000 deaths. The increased rate was largely driven by deaths impacting younger individuals, who are more heavily represented in our insured population and higher volume of claims in states where vaccination rates have been low. COVID claims continue to be linked to older policies with less than 1% of claims coming from policies issued since the onset of the pandemic. We incurred about $2 million of excess death claims in the quarter, not specifically identified as COVID but that we believe are indirectly tied to the pandemic either through delayed medical care, societal issues such as crime or the behavioral health crisis. We continue to monitor our experience for any emerging long-term trends. From a P&L perspective, this excess mortality was fully offset by a reduction in the reserves held for policy riders that provide for premiums to be waived if an individual becomes disabled. Main drivers of the reductions were higher death claims in the waived population along with expanding our third-party disability claims management to include Canada. During the third quarter, lapses remained around 25% to 30% lower than pre-COVID levels for all durations except duration one, which was about 15% lower. Compared to the pre-pandemic baseline, DAC amortization was favorable by $11 million, offset by $6 million in higher benefit reserves due to strong persistency for a net favorable impact of $5 million to pre-tax income. The third quarter of 2020 experienced record persistency with lapses around 35% lower than pre-COVID across all durations including duration one for a net contribution to pre-tax income of $14 million. Last year we highlighted that these levels were unsustainable and as such expected lapses to normalize over time. Year-over-year DAC amortization was higher by $11 million and benefit reserves were lower by $2 million due to persistency changes with the increase in DAC amortization largely driven by duration one. Given the higher COVID-related death claims and lower net contribution provided by persistency, pre-tax income growth was compressed to 2% year-over-year with margins remaining around 20%. Looking to the fourth quarter, we expect adjusted direct premiums to grow by approximately 12% year-over-year, and future growth rates to taper as we layer our new business and transact at pre-pandemic activity levels. COVID-related deaths are estimated at $14 million, based on 100,000 projected population deaths in the U.S. and Canada. We expect strong persistency to continue, with lapses that are 20% to 25% lower than pre-pandemic levels across all durations except duration one, where we expect lapses to be around 15% lower. This translates to a similar persistency-related impact as seen this quarter. We do not expect the new business assumption review performed annually in the fourth quarter to have a notable impact on earnings. Overall, we anticipate Term Life margins in the range of 19% to 20% for the fourth quarter. Turning next to the results of the ISP segment on slide 8, operating revenues of $233 million increased by $57 million or 32% year-over-year. Our pre-tax income of $69 million increased by 35%. Third quarter results continue to reflect the combined benefit of strong sales volumes across all products and the positive impact of equity market appreciation. Sales-based revenues increased 45%, slightly slowing the growth in revenue-generating sales due to a higher proportion of sales volumes in large dollar trades, which have a lower commission rate. Asset-based revenues increased 31%, reflecting a similar increase in average client asset value. Both sales and asset-based commission expenses increased in line with the associated revenue. As Glenn mentioned, we expect fourth quarter ISP sales to grow between 20% and 25% year-over-year. Based on the current sales mix, this would increase sales-based net revenue by approximately $4 million over the prior year period. Assuming no significant market movement during the quarter, average assets under management would be approximately 20% higher year-over-year, and asset-based net revenues would increase by $7 million. Turning to slide 9, this quarter we are introducing our Senior Health segment as a result of the acquisition of 80% of e-TeleQuote. The acquisition is being counted as a business combination in accordance with GAAP, which generally requires the purchase price in excess of the estimated fair values of net assets acquired to be recorded as goodwill. The table on slide 9 shows the preliminary purchase price allocation which is subject to change as the fair values of the net assets acquired are finalized. The most significant assets acquired were renewal commissions receivable for policies sold by e-TeleQuote prior to the acquisition date, and identified intangible assets. The key identified intangible asset is relationships with health insurance carriers of $159 million which will be amortized over its estimated useful life of 15 years. In the current period, we had intangible amortization expense of $2.9 million related to acquired intangible assets recognized in the operating results of our Senior Health segment. The e-TeleQuote purchase agreement provides for the payment of contingent consideration in the form of earn-out payments to the Term shareholders, based on e-TeleQuote's achieving earnings results as defined in the purchase agreement for the calendar year ending 2021 and 2022. Given the substantial earnings required to achieve the earn-out, we do not anticipate, nor did we expect, many payments to be made. As such, we have not recognized the liability for the earn-out in our preliminary purchase price allocation and do not anticipate recognizing any expense associated with it. We will acquire the remaining 20% interest in e-TeleQuote, which is held by or for the benefit of e-TeleQuote's management, through a series of puts and calls based on a formulaic price defined in the purchase agreement. We have recognized the remaining interest outstanding in the preliminary purchase price allocation in two categories. Redeemable non-controlling interest and liability classified share-based compensation based on the terms and conditions of the individual shares. Post-acquisition share-based compensation expense for the applicable shares as well as adjustments for changes in the fair market value of liability classified shares subsequent to the acquisitions are excluded from our operating results as they represent acquisition-related expenses that will not reoccur subsequent to the exercise of the protocol. The key areas of focus as we evaluate Senior Health performance going forward will be approved policies, commissions, and fees which includes both the lifetime commission revenues recognized at point of sale and any subsequent tail commission adjustments for changes in estimates on policies issued in previous periods and contract acquisition costs. Other drivers include marketing development revenues reflected in other revenues and other operating expenses. Each of these items is defined further on page 13 of the financial supplement, where we also highlight the non-controlling interest and other purchase-related accounting items discussed earlier. As the post-acquisition business matures, we plan to add cash collections by cohort to track the time it takes for the cohort of approved policies to become cash positive to our quarterly earnings discussion. The Senior Health business experiences some notable seasonality with the fourth quarter being the strongest due to the annual election period or AEP, which runs from mid-October to early December. AEP generally has peak levels of demand and as a result, e-TeleQuote has higher agent counts. The open enrollment period or OEP, during the first quarter is generally another strong period as individuals have an opportunity to switch between Medicare Advantage plans. The second quarter tends to be a period of focus on individuals qualifying for both Medicare and Medicaid, those who are allowed a special enrollment period and those aging into Medicare or coming from employer-sponsored plans. Volume of potential sales opportunities in the second quarter decreases relative to OEP and AEP, however, volumes are adequate to avoid laying off quality agents. The third quarter is typically the weakest quarter of the year financially, with growing agent counts leading into AEP and lower lead volume creating a basic supply and demand imbalance. During the quarter, the Senior Health segment had an adjusted operating loss before taxes of $6.6 million, including purchase accounting adjustments. As Glenn referenced, throughout COVID, there has been pressure around hiring and retaining the quality of agents e-TeleQuote typically attracted prior to COVID. While there are generally third quarter hiring and preparation for AEP, heightened turnover early in the year led to higher-than-usual levels of hiring, training, and licensing in the third quarter. The cost associated with this drove contract acquisition costs per approved policy up to $1,287, which when combined with the low supply of leads typical in the quarter resulted in a loss for the period. While staffing challenges remain in the fourth quarter, we believe the lead supply benefits of AEP, along with incremental Primerica generated leads, will provide a positive impact to profitability. We anticipate pre-tax operating earnings to be in the $20 million range for the fourth quarter, with lifetime value commissions around $1,170 and contract acquisition costs around $640 per approved policy. Moving next to slide 10 in our Corporate and Other Distributed Products segment, the adjusted operating loss increased by $1.5 million year-over-year to $13.5 million. Commissions and fee revenue were higher by $6 million, including $3.7 million from mortgage sales. This was partially offset by $3.7 million lower net investment income as portfolio yields were lower, and the allocation to the Term Life segment increased in support of the growing book of business. Adjusted benefits and expenses increased by $3.7 million largely due to the expansion of the mortgage program, including $2.6 million higher sales commissions and operating expenses. Operating results for the Corporate and Other segment exclude certain costs related to the acquisition of e-TeleQuote, most notably $9.6 million in transaction-related expenses. Turning to slide 11. Consolidated insurance and other operating expenses increased by $17.3 million, or 16% year-over-year with $7.5 million coming from Senior Health and the remainder due largely to growth in our businesses. Expenses were lower than projected last quarter in part due to the timing of certain technology projects, lower licensing costs, and savings on miscellaneous items. Looking ahead, we expect fourth quarter insurance and other operating expenses to be around $129 million, including the layering unit e-TeleQuote, other operating expenses of $8 million. Turning to slide 12. Consolidated net investment income was $20 million, down slightly from the prior year period due to lower effective yields, partially offset by an increase in the size of the portfolio. The portfolio had unrealized gains at the end of September of approximately $108 million, down slightly from the end of June, as rates rose during the quarter. The portfolio remains high quality and well diversified across sectors and issuers. On slide 13, liquidity at the holding company remains strong, with invested assets in cash of $192 million. The Primerica Life statutory risk-based capital ratio is estimated to be 420% at quarter end, using the new NAIC bond factor approach. We estimate that funding needed to support the Senior Health business in 2022 to be in the high $70 million range, up from earlier expectations of the mid-$40 million range. The increase in negative cash flow is driven by lower-than-anticipated marketing development funds from carriers, elevated chargebacks on the 2020 AEP book of business as seen throughout the industry, and higher agent-related costs as described earlier. Given anticipated growth in this business, we expect negative cash flow to decline over time and approach breakeven in about six years. Given our current liquidity and strong capital generation from our other businesses, this increase can be easily absorbed without any changes to our capital deployment plan for operations. With that operator, I'll open the line up for questions.

Thank you very much. Our first question comes from Ryan Krueger from KBW. Ryan, your line is open. Please go ahead.

Good morning, Ryan.

Hi, thanks, good morning. First question is, do you still expect to resume share repurchases at the beginning of 2022? Can you provide any indication of the potential scale?

So at this point, actually the timing is almost perfect. We're getting ready to meet with our Board to review our annual budgets and part of that is reviewing what our plans for capital deployment will be. So at this point, I can't provide any further guidance. I will just reiterate what I closed out with, is that, we do continue to look at our books of business and the capital generated by them, even with the capital needs of the Senior Health segment and believe that they are more than sufficiently adequate to be able to maintain all of our operating needs, as well as maintain capital deployment plans.

Thanks. And I guess another question that, I'm not sure, if you've talked about yet is any preliminary thoughts on LDTI and how it would potentially impact your Term Life business?

Yes, that is a very relevant question. We have not yet begun to quantify those results. We have noticed that a few companies in the industry have provided some high-level insights, which form the basis of what LDTI entails. We certainly anticipate some changes in how earnings are merged on a GAAP basis. It's important to emphasize that LDTI does not affect the actual economics of the business or the statutory cash flows. The statutory cash flows are what we rely on for deployment from the Life Company. Key to note about LDTI is that it shifts from a lock-in assumption to an annual reset of mortality and persistency. We will be subject to that annual reset on mortality, but we lock in 90% of our mortality through YRT reinsurance, which helps reduce volatility due to that program. There will be some nuances in how outcomes emerge, and you may notice shifts in the timing of impacts compared to the previous 60. Additionally, there are no provisions for adverse deviation, which alters the timing of earnings, recognizing them slightly earlier than before. The DAC methodology has changed to a straight-line mechanism, affecting the timing of earnings. For us, the most significant aspect, which others have also indicated, is the assumption for the discount rate. LDTI removes any link between your actual investment portfolio and the discounting of your reserves, and interest on the DAC is no longer included, marking another shift in the accounting rules. The guidance suggests using a mid-single A rated rate, which FASB believes will bring consistency across the industry regarding the discount rates applied. This contrasts with our historical approach, which was based on expected returns from our investment portfolio. Our investment portfolio does not face significant asset liability matching issues, resulting in strong cash flows. Therefore, we historically adopted a conservative stance on our investment portfolio. While I’m unsure about the discount rates others apply to their in-force business, ours have been relatively low, reflecting our expected earnings from the existing portfolio. We will witness a reset in line with changes in interest rates, which are currently at historic lows. Nonetheless, these resets will be reflected in AOCI rather than income, allowing you to distinguish between timing items based on current activity and the actual profitability of the business. To summarize, we are actively examining this, having made substantial changes to our systems to accommodate the new disclosure requirements. These disclosures will be much more comprehensive than before, and we believe we are on track to start sharing more details about financial results next year.

Okay, great. That's very helpful. Thank you.

Thank you very much Ryan. Our next question comes from Andrew Kligerman from Credit Suisse. Andrew, your line is open, please go ahead.

Hey Andrew.

Hey thanks and good morning. I'm looking at this rep count it's around 130,000. It's been there for a few years after some big ramp-ups in growth prior to 2020. You mentioned an event coming up in January, then there's the big meeting in June at the Mercedes Center. Maybe talk to us a little bit about what upcoming initiatives might be in place to move that rep count up significantly? And when do you think that might happen?

Okay. Well, certainly, it starts with our recruiting numbers which we feel good about as I reported in my prepared remarks. We've got to look through the COVID unusual peak of the numbers and you see that our recruit numbers continue to be strong historically. And we believe our business opportunity appeals because of our track record of success, because of our success in dealing with the disruption of the pandemic in our business, I think that aspiring entrepreneurs still look at us and say this is a great place to build a business. And I do think our recruiting gets a tailwind from the disruption in the labor market. We've talked about it in relationship to our business and it's actually impacting different parts of our business in different ways. But as people become frustrated with their current opportunity or lack of opportunity and talk about moving and think about moving to a different career, that actually opens minds to considering being in a business like Primerica. And with our success and track record, we believe that provides a tailwind for us on the recruiting front. So, I believe that recruiting is strong and healthy. And Andrew, as we've talked about for a number of quarters throughout COVID, the challenge is what is the disruption that's created in the pull-through rate. And so we continue to work on our licensing process to adapt it to the expectations of the post-COVID world. We've always, as I said in my remarks, felt like online processes don't have the discipline and accountability and therefore completion rates suffer. People start online and never finish, while people who come to class tend to be more diligent in completing the class and therefore, being prepared to attempt and pass the exam. I would say, our experience in our licensing process is probably what parents are seeing in their experience in sending their kids to school. It's more effective when kids are in class. It's more effective when recruits are in class to get them licensed. And so that's really, I would say, the area where we've got the most aggressive focus right now in correcting course is finding the new path post-COVID on licensing. Events like you mentioned do drive the excitement levels and create something to recruit to and for people to plug in early and see the excitement and success of Primerica. So, I do think being back in a wide environment, we have done some live events to kind of practice the new way of doing events safely and in a healthy way and are having good success there. So, we will be a near-normal kind of rotation in 2022, and that will certainly help us. And as to answer your question on when we might see results from all those efforts, it’s very difficult to project the headwinds created that I described from COVID. It's a little tough to figure out exactly how long that might last. In many times in business, you do the right things for a period of time before you see success. But we do expect to start to regain ground and solidify the ground that we're on and start growth again next year. I've been asked many times what is the limit to the size of the sales force, and based on the need in the marketplace for our financial solutions for families and our business opportunity, I believe we can be a lot bigger than we are today. So, we're committed to figuring that out and getting the growth rates back to what we experienced pre-COVID. I think just before COVID broke out, we had some good momentum going. Unfortunately, the pandemic cost us some of that but we think we can get that back, and we're optimistic that 2022 is the year that begins.

That was very helpful Glenn. And then maybe just shifting over to e-TeleQuote view. You've indicated, I think $20 million of earnings in the fourth quarter, of course, coupled with the challenges that you've recently had in staffing up and training, etc. So I'm curious as to what may be the risk of falling short of that $20 million in the fourth quarter. Is that a number that you anticipated, when you acquired e-TeleQuote, and I'll leave it at that.

Okay. There's a few different questions in there. I'll go ahead and address...

Yes.

Sort of the risk associated with it. And I will tell you, if I had the crystal ball for any of our businesses, I'm not sure beyond this call right now but that would be okay. Anyway, there's a lot that goes into that. We have definitely seen the pressures of bringing folks on. We are about, I say almost halfway through AEP, and so we're monitoring performance closely. We're seeing the pressures from bringing people on has been a negative. There's been positives associated with the productivity levels of the folks. The people that we have generally been people who are more tenured, even though there aren't as many of them, which is always a good thing. And the excitement that's been generated within Primerica, this is new for us. And so I'd say, the biggest news is the Primerica aspect of it. Thus far, there's been a lot of engagement, which has been wonderful to see. We need to keep working through AEP to see how that develops. But I think otherwise, they're monitoring the business daily to monitor both lead cost and productivity and the likes. So I think the number is pretty good. I can't guarantee you it's perfect, but I don't think it's going to be off by all that large of a magnitude, one way or the other. So I'll go with that.

Got it. And just is it trending where you thought when you bought it, or is it a little more challenging?

Well, as you know Andrew, we spent a number of years after our strategic process identified the Senior Health market is something that we were interested in studying the market. And we recognized that there are a number of variables in that business that drive it. And that, of course, was prior to COVID, the greatest variable of all. So we tried to have a broad understanding of the positives and negatives of the momentum of that business. And then, of course, we identified e-TeleQuote as the best fit for Primerica after taking quite a long look at them and studying them carefully doing diligence and so forth. And so we have seen things that we didn't expect. Many of those have been COVID-driven things that I don't think we could have anticipated. I'd like to say that the cleanliness of theory is no match for the mass of reality. And so now we're learning real-time as a result of leading that business in partnership with the very strong management team that e-TeleQuote had and has since we acquired them. So there have been parts of it that have turned out much like we anticipated. There have been some things that were a little different than we anticipated. I would say the majority of those have been COVID impacted in some way. But overall, we're very pleased with the way things are turning out. We're still excited about this industry segment. I believe there's huge opportunity in Senior Health. And we also believe that e-TeleQuote is a strong player today and will be an even stronger player tomorrow particularly with the added advantage that the Primerica relationship brings a new source of leads and referrals from a different dynamic within the industry that we believe is unique. And we don't believe anyone else has access to what we have. So yes, there are a few things to our learning as we expected. But overall, we feel good about where we are and we're excited about the future.

That explains everything.

Our next question comes from Mark Hughes from Truist. Mark, your line is open. Please go ahead.

Hello Mark.

Thank you. Good morning, Glenn. Good morning, Alison, good morning, Nicole. Alison, if the Q3 quarter is 18 in terms of approved policy 18,000 the fourth quarter is 36,000 to 40,000, would we roughly speaking just from a seasonal perspective think about Q1 or Q2? Just trying to get the magnitude?

Yes. In the next earnings call, I will provide further insight into our businesses and expectations for the upcoming year. Typically, the first quarter has less volume than the fourth quarter, but it could still be significant. The key issue is the available supply; the question is how much of that supply we can manage and the rate at which we can do so. This will depend on the number of trained agents we have and their productivity. Fortunately, both the fourth and first quarters have ample supply. The main challenge we face as we enter the first quarter is ensuring we can continue to place productive individuals in positions, retain them, and hire to meet the demand. As Glenn mentioned, the labor market poses the biggest challenge, which we believe is largely linked to COVID. This situation is evident across various sectors. Until this is resolved, it's hard to predict normal seasonal patterns. While I can't provide an exact number, I can say that the supply is available to be utilized in the first quarter, depending on our capacity to effectively engage with those leads.

And by supply you're talking about leads?

Leads. Yes, there's a lot of people actively looking in the first quarter because of the open enrollment period.

Yes. Give an estimate for how many of the 36 to 40 in the fourth quarter will be leads from Primerica?

Yes. We have previously mentioned our goal of reaching 10% of the leads and applications that e-TeleQuote is generating. It’s noteworthy that as e-TeleQuote expands rapidly, it becomes more challenging for the Primerica segment to achieve that 10%. Conversely, as the Primerica segment grows, meeting the 10% target becomes easier for us. Currently, we are around the 4% to 5% mark. We still have some progress to make, but we are encouraged by the positive feedback from our sales team. Over 20,000 representatives have completed the certification process, which includes training. Most of these individuals are life licensed, although some certified representatives have yet to obtain their licenses. This highlights one of our goals for this venture: enabling new reps to quickly enter the field while they build their Primerica business, which gives us a competitive edge. We are pleased with the enthusiasm and acceptance from Primerica, and while we have made a decent start, we believe there is significant potential for growth. We launched our referral process just before the annual enrollment period began; ideally, we would have liked some experience beforehand, but we didn't want to miss the opportunity to learn during AEP. There is a lot of potential that we are very excited about.

Yes. I just think the environment is ripe for the business as people are now looking for new opportunities. I mean that's where Primerica really thrives is providing that opportunity for new reps to come and build something.

Alison, when I think about normalized DAC within the Term Life business, should I just kind of take this quarter and add back $11 million? Does that get you the run rate? I know you said fourth quarter is still going to have some of these same favorable impacts around DAC, but would that be one way to look at it?

I would remind you that we've experienced significant fluctuations over the past several quarters due to COVID-19, but there is some seasonality regarding persistency. While planning annually is straightforward, organizing it quarterly is more complex. Typically, the second quarter is a strong persistency period, resulting in a lower DAC ratio. Nonetheless, we still anticipate a further normalization of DAC. Specifically for the fourth quarter, I indicated that the persistency impact should remain relatively consistent with the third quarter. Over time, we expect lapses to increase towards pre-COVID levels. However, we are hopeful that, based on public sentiment, lapses will ultimately be lower than they were before the pandemic, though the speed of this change is uncertain. We are observing this trend in newer policies, where individuals may feel less committed since they haven't been paying premiums for long. Nevertheless, persistency remains strong once people surpass the first or second duration, as they begin to feel more invested in their policies.

Can you compare the lifetime value per policy to that of your competitors? Are you aware of their decisions? What factors are influencing the longevity of your policyholders?

Yes, there are a couple of different questions there. Let me start with one point. In our research to determine what would be appropriate to disclose for this segment and how to define our metrics, we found that there is very little consistency in the definitions of these metrics. There are some levels of consistency we attempted to identify, but I want to caution that how we define something may differ from how our peers define it. Therefore, I don't want to compare our metrics to those of others since I lack full visibility into their bookings. However, what should be consistent across the board is the approach to the components of Lifetime Value (LTV). There are initial commissions and renewal commissions. The initial commissions are paid upfront, and you generally find out within the first 90 days whether you'll retain that value, offering good visibility early on. The renewals occur over time, and we base these on historical persistency levels. Within proper revenue recognition guidelines, we ensure that we do not end up in a situation where we'd have to reverse what we've already booked. I cannot comment on the constraints that other firms are using or their persistency experiences. We rely on our historical data, augmented by industry-wide information when necessary. I believe other firms conduct similar analyses to assess their persistency curves. Thus, the basis we all use is likely consistent, but I can't comment on whether their performance aligns with ours. However, I can say that the approach and mechanics appear to be quite similar.

And what is your...

Sorry.

I'm sorry, I was just going to ask if you had any specific numbers around longevity or persistency that you were able to share.

Nothing I can share. It's actually done based on individual cohorts, which is a function of both the periods that the policies became effective, as well as the carrier and it is different by carriers; and different carriers seem to have different persistency levels. Also, just as you have seen to the extent you've looked in the industry, this particular year, the 2021 cohort of business has seen higher lapsations and chargebacks. Some of that is believed to be because of COVID, and the level of agents, or the training levels, and the quality of the agents that were available in last AEP. But then again, I don't want to say that is going to be typical for what will be in future periods nor is it necessarily reflective of prior periods. So you have to look at everything by an individual cohort.

Okay. Then one final question. Could you give an outlook for full-year expenses, I guess, the insurance and other operating expenses?

Yes. I gave a fourth quarter and I don't have the exact number, but if you go back to February, which is when I think I gave my annual, I think we're coming in a few million dollars lower than what we said in February. But relatively speaking, it's in the same general ballpark.

Yes.

There's been some things that have been favorable, obviously, less travel than we anticipated. We thought we would add some travel licensing costs have been down because of some of the things Glenn's described. But otherwise, it's been pretty much in sync with our original expectation. Obviously, all of that is without e-TeleQuote.

And what was that fourth quarter guide?

I think it was $129 million, which includes e-TeleQuote of $8 million.

Okay. Great. Thank you very much.

You’re welcome.

Thank you.

Thank you everyone for joining today's call. The call has now concluded. You may now disconnect your lines, and have a lovely day.