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Primerica Inc. did well in the first quarter, and one of the most serious obstacles it faces now is delays in getting new life insurance agent recruits licensed.

Glenn Williams, the chief executive officer of the Duluth, Georgia-based life insurer, talked about the licensing delays Thursday, in a conference call the company held with securities analysts to go over first-quarter earnings.

Primerica focuses on issuing life insurance and related products for middle-income people in the United States and Canada, through a large network of career agents. It also sells financial services products for other companies.

Overall, in the long run, Primerica would prefer to operate in a thriving economy, with high levels of employment, than in an economy with high unemployment, Williams said.

Today, however, high unemployment is making attracting easier, he said.

Resources

“However, the stay-at-home orders did have a negative impact on the first quarter licensing totals due to the need to postpone live licensing preparation classes and testing providers closing their testing centers,” Williams said.

About half of the states are offering temporary licensing options, and a few have started to offer remote licensing exam options, Williams said.

He said Primerica has tried to make up for serious licensing exam obstacles in many states to improving its field training bonus program, which encourages recruits to start building their businesses even before they’re licensed.

Primerica is also encouraging recruits to sell products that can be sold without a license, and it has been asking states to add alternatives to the traditional licensing process, Williams said.

Earnings

Primerica is reporting $72 million in net income for the first quarter on $525 million in revenue, up from $79 million in net income on $495 million in revenue for the first quarter of 2019.

Primerica leaves premiums ceded to reinsurers out of the revenue totals. Ceded premiums fell to $387 million, from $390 million.

Distribution Performance

Here’s what the company earned from selling other companies’ products in the latest quarter, when compared with the amounts earned in the year-earlier quarter:

  • Sales-based compensation: $81 million (up from $67 million)
  • Asset-based comp: $81 million (up from $74 million)
  • Account-based: $21 million (up from $20 million)

Here’s how what the company paid to the people and entities selling its products changed, between the year-earlier quarter and the latest quarter:

  • Sales-based compensation: $57 million (up from $48 million)
  • Asset-based comp: $36 million (up from $32 million)

Here are how some of the company’s distribution indicator numbers changed, year-over year:

  • Year-end life-licensed sales force: 130,095 (up from 129,821)
  • Recruits: 84,762 (up/from 63,223)
  • Average number of policies sold per rep per month: 0.18 (up form 0.16)

Here’s how sales of certain types of products changed, year-over year:

  • Life insurance: 71,318 policies (down from 64,242 policies)
  • U.S. retail mutual funds: $921 million (up from $721 million)
  • Variable annuities: $601 million (up from $466 million)
  • Indexed annuities: $72 million (down from $81 million)

COVID-19 Response

Primerica has shifted about 90% of its employees to working from home, and earlier investments in technology have helped both home office operations and agents adapt to the shelter-in-place rules, Williams said.

Even before COVID-19 along, about 95% of the company’s business transactions, including applications for new agent recruits, were being submitted electronically, Williams said.

“While our representatives traditionally completed the sales process in person, the turbo app technology we use allows for remote electronic signatures and remote delivery of all required disclosure documents,” Williams said. “The digital transaction capability has been quickly combined with digital client interaction capability using web conference tools widely available to our sales force and the clients.

COVID-19 Claims

Allison Rand, Primerica’s chief financial officer, told analysts that Primerica reinsures much of the life insurance the company sells.

The company’s life policies paid about $1.4 billion in death benefits in 2019, but, after accounting for reinsurance, Primerica’s own net claims paid amounted to just $180 million, Rand said.

For Primerica, the average net amount paid on a life insurance claim in 2019, after reinsurance, was about $11,000, Rand said.

If COVID-19 were to cause 100,000 deaths in the United States and Canada, and the disease affected the working-age adults typically insured by Primerica policies as much as it affected older people, Primerica could get about 1,375 extra COVID-19-related life insurance claims, Rand estimated.

If the net amount paid on those claims, after reinsurance, was $11,000, Primerica itself could end up spending about $15 million on COVID-19-related death benefits, Rand said.

At this point, Rand said, Primerica believes it’s on track to pay roughly $5 million in death benefits for claims submitted through April, after taking reinsurance into account.

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