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Work-From-Home Medicare Agents' Productivity Is Falling: Primerica

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What You Need to Know

  • The company, which is a major term life issuer, generated $35 million in net income in the fourth quarter, despite COVID-19.
  • Commission spending increased to $140 million, from $103 million in the fourth quarter of 2020.
  • Life and annuity sales were strong.

Primerica executives acknowledged Tuesday that selling Medicare plans turned out to be tougher than they had expected — and that one reason is that the shift to remote work was not good for agent sales performance.

The Duluth, Georgia-based company is best known for selling term life insurance, annuities and related products to middle-market consumers through a large network of career agents.

It acquired e-TeleQuote, a Medicare plan distributor, last year in an effort to jump into the Medicare market in time for the Medicare Advantage and Medicare Part D prescription drug plan annual election period for 2022 coverage, which ran from Oct. 15 through Dec. 7, 2021.

Primerica paid $360 million for an 80% stake in the company, refinanced $150 million in e-TeleQuote debt, provided a $15 million seller’s note, and agreed to pay an additional $50 million if the business met performance expectations.

Primerica announced Monday, when it released earnings for the fourth quarter of 2021, that the 2022 annual election period sales were weaker than projected, and that it’s taking a $76 million charge for the quarter to reflect its new view of e-TeleQuote’s value.

Company executives gave more details Tuesday, when they held a conference call to go over the latest results with securities analysts.

Primerica had hoped to sell at least 36,000 Medicare policies but sold only about 32,000, and the ratio of lifetime policy value per approved policy was just 20% higher than the cost of acquiring each policy, according to CEO Glenn Williams.

Primerica had expected the average policy value to be 80% higher than the policy acquisition cost.

Alison Rand, the company’s chief financial officer, said projections show that Primerica is unlikely to have to pay the sellers of e-TeleQuote the $50 million amount linked to meeting performance goals.

The Reasons

Williams said Medicare market challenges included new Medicare program marketing materials approval rules that led to sales effort delays, consumers’ increased awareness of the need to shop for coverage, a higher level of competition, and Medicare plans that fail to meet consumer expectations and push a high percentage of enrollees back into the market.

Williams said Primerica also faced its own problems with managing marketing and sales efforts.

One was working with outside lead-generation organizations.

“While we actively manage lead sources and mix, some sources proved less attractive than anticipated,” Williams said.

Because of the tight labor market, Primerica also entered the annual enrollment period with fewer agents than it had wanted, and the percentage of agents who quit during the enrollment period was higher than expected.

In addition, “we continue to see a falloff in productivity with our agents operating in a work-from-home environment,” Williams said.

Primerica is trying to address the work-from-home problems by changing how it hires, trains and pays Medicare agents, Williams said.

In the long run, he said, Primerica is still happy with the decision to enter the Medicare plan market, because the company believes its middle-market customers need more help with health coverage, and offering health coverage will build a stronger relationship between the agents and the customers.

The Earnings

Primerica is reporting $35 million in net income for the latest quarter on $724 million in revenue, compared with $100 million in net income on $598 million in revenue for the fourth quarter of 2020.

The number of term life policies issued was 75,200. That was down from 87,300 in the year-earlier quarter but above the total of 71,500 recorded in the fourth quarter of 2020, before the COVID-19 pandemic increased consumers’ interest in life insurance.

Sales of annuities and other invest products increased to $3 billion, from $2 billion in the year-earlier quarter.

The Agents

The number of new life-licensed Primerica sales representatives fell 23%, to 9,296.

“The licensing process remained constrained by many of the challenges we discussed in the past, including various limitations from state and provincial social distancing measures, and individual comfort level when it comes to congregating in larger groups,” Williams said. “Initially, we were encouraged when restrictions began to ease.

”However, our progress was again delayed with the reemergence of a new COVID variant. We believe that could take several more quarters before the licensing process returns to its pre-pandemic levels and suspect that our licensing results will remain under pressure through the first half of 2022, before gradually improving later in the year.”

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(Image: Adobe Stock)