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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34680

img186804487_0.jpg 

Primerica, Inc.

(Exact name of registrant as specified in its charter)

Delaware

27-1204330

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1 Primerica Parkway

Duluth, Georgia

30099

(Address of principal executive offices)

(ZIP Code)

(770) 381-1000

(Registrant’s telephone number, including area code)

Not applicable.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

PRI

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer



Accelerated filer

Non-accelerated filer



Smaller reporting company

Emerging growth company



 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 30, 2024, the registrant had 34,411,172 shares of common stock, $0.01 par value per share, outstanding.

 

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

2

Item 1. Financial Statements (unaudited).

 

2

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

 

2

Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023

 

3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023

 

4

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

 

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

 

6

Notes to Condensed Consolidated Financial Statements

 

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

45

Item 4. Controls and Procedures.

 

45

 

PART II – OTHER INFORMATION

 

45

Item 1. Legal Proceedings.

 

45

Item 1A. Risk Factors.

 

45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

46

Item 5. Other Information

 

47

Item 6. Exhibits.

 

47

Signatures

 

48

 

 

i


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

(Unaudited)

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(In thousands, except per-share amounts)

 

Assets:

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $3,012,735 in 2024
   and $
2,935,212 in 2023)

 

$

2,782,140

 

 

$

2,719,467

 

Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,299,228 in 2024 and
   $
1,334,892 in 2023)

 

 

1,376,400

 

 

 

1,386,980

 

Short-term investments available-for-sale, at fair value (amortized cost: $271 in 2024
   and $
276 in 2023)

 

 

271

 

 

 

276

 

Equity securities, at fair value (historical cost: $22,775 in 2024 and $27,106 in 2023)

 

 

26,647

 

 

 

29,680

 

Trading securities, at fair value (cost: $3,800 in 2024 and $18,761 in 2023)

 

 

3,253

 

 

 

18,383

 

Policy loans and other invested assets

 

 

50,835

 

 

 

51,175

 

Total investments

 

 

4,239,546

 

 

 

4,205,961

 

Cash and cash equivalents

 

 

593,399

 

 

 

613,148

 

Accrued investment income

 

 

24,991

 

 

 

23,958

 

Reinsurance recoverables

 

 

2,920,417

 

 

 

3,015,777

 

Deferred policy acquisition costs, net

 

 

3,503,940

 

 

 

3,447,234

 

Renewal commissions receivable

 

 

176,298

 

 

 

190,258

 

Agent balances, due premiums and other receivables

 

 

287,459

 

 

 

273,066

 

Goodwill

 

 

127,707

 

 

 

127,707

 

Intangible assets, net (accumulated amortization: $28,875 in 2024 and $26,250 in 2023)

 

 

172,400

 

 

 

175,025

 

Income taxes

 

 

120,126

 

 

 

123,514

 

Operating lease right-of-use assets

 

 

52,135

 

 

 

53,693

 

Other assets

 

 

356,025

 

 

 

382,549

 

Separate account assets

 

 

2,334,911

 

 

 

2,395,842

 

Total assets

 

$

14,909,354

 

 

$

15,027,732

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity:

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Future policy benefits

 

$

6,548,050

 

 

$

6,742,025

 

Unearned and advance premiums

 

 

15,855

 

 

 

14,876

 

Policy claims and other benefits payable

 

 

517,468

 

 

 

513,803

 

Other policyholders’ funds

 

 

421,027

 

 

 

435,094

 

Note payable

 

 

593,909

 

 

 

593,709

 

Surplus note

 

 

1,376,028

 

 

 

1,386,592

 

Income taxes

 

 

197,714

 

 

 

135,247

 

Operating lease liabilities

 

 

60,494

 

 

 

61,358

 

Other liabilities

 

 

581,342

 

 

 

583,434

 

Payable under securities lending

 

 

76,648

 

 

 

99,785

 

Separate account liabilities

 

 

2,334,911

 

 

 

2,395,842

 

Commitments and contingent liabilities (see Commitments and Contingent Liabilities note)

 

 

 

 

 

 

Total liabilities

 

 

12,723,446

 

 

 

12,961,765

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock ($0.01 par value; authorized 500,000 shares in 2024 and 2023; issued and
   outstanding
34,609 shares in 2024 and 34,996 shares in 2023)

 

 

346

 

 

 

350

 

Paid-in capital

 

 

-

 

 

 

-

 

Retained earnings

 

 

2,285,937

 

 

 

2,276,946

 

Accumulated other comprehensive income (loss), net of income tax:

 

 

 

 

 

 

Effect of change in discount rate assumptions on the liability for future policy benefits

 

 

92,853

 

 

 

(39,086

)

Unrealized foreign currency translation gains (losses)

 

 

(11,691

)

 

 

(2,235

)

Net unrealized investment gains (losses) on available-for-sale securities

 

 

(181,537

)

 

 

(170,008

)

Total stockholders’ equity

 

 

2,185,908

 

 

 

2,065,967

 

Total liabilities and stockholders’ equity

 

$

14,909,354

 

 

$

15,027,732

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income – Unaudited

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

(In thousands, except per-share amounts)

Revenues:

 

 

 

 

 

 

 

Direct premiums

 

$

841,047

 

 

$

817,872

 

 

Ceded premiums

 

 

(409,764

)

 

 

(405,347

)

 

Net premiums

 

 

431,283

 

 

 

412,525

 

 

Commissions and fees

 

 

255,021

 

 

 

231,547

 

 

Investment income net of investment expenses

 

 

53,591

 

 

 

47,500

 

 

Interest expense on surplus note

 

 

(15,785

)

 

 

(16,435

)

 

Net investment income

 

 

37,806

 

 

 

31,065

 

 

Realized investment gains (losses)

 

 

7

 

 

 

(985

)

 

Other investment gains (losses)

 

 

1,298

 

 

 

(3,623

)

 

Investment gains (losses)

 

 

1,305

 

 

 

(4,608

)

 

Other, net

 

 

17,415

 

 

 

19,507

 

 

Total revenues

 

 

742,830

 

 

 

690,036

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

Benefits and claims

 

 

166,321

 

 

 

163,265

 

 

Future policy benefits remeasurement (gain) loss

 

 

55

 

 

 

559

 

 

Amortization of deferred policy acquisition costs

 

 

72,049

 

 

 

67,923

 

 

Sales commissions

 

 

131,138

 

 

 

110,874

 

 

Insurance expenses

 

 

63,149

 

 

 

61,125

 

 

Insurance commissions

 

 

9,634

 

 

 

8,138

 

 

Contract acquisition costs

 

 

13,533

 

 

 

14,984

 

 

Interest expense

 

 

6,771

 

 

 

6,690

 

 

Other operating expenses

 

 

100,944

 

 

 

89,536

 

 

Total benefits and expenses

 

 

563,594

 

 

 

523,094

 

 

Income before income taxes

 

 

179,236

 

 

 

166,942

 

 

Income taxes

 

 

41,332

 

 

 

38,843

 

 

Net income

 

$

137,904

 

 

$

128,099

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic earnings per share

 

$

3.94

 

 

$

3.47

 

 

Diluted earnings per share

 

$

3.93

 

 

$

3.46

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings
   per share:

 

 

 

 

 

 

 

Basic

 

 

34,883

 

 

 

36,710

 

 

Diluted

 

 

34,937

 

 

 

36,804

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3


 

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

(In thousands)

Net income

 

$

137,904

 

 

$

128,099

 

 

Other comprehensive income (loss) before income taxes:

 

 

 

 

 

 

 

Unrealized investment gains (losses) on available-for-sale securities:

 

 

 

 

 

 

 

Change in unrealized holding gains (losses) on available-for-sale securities

 

 

(14,843

)

 

 

38,549

 

 

Reclassification adjustment for investment (gains) losses included in net income

 

 

(7

)

 

 

3,137

 

 

Effect of change in discount rate assumptions on the liability for future policy benefits

 

 

168,086

 

 

 

(181,281

)

 

Foreign currency translation adjustments:

 

 

 

 

 

 

 

Change in unrealized foreign currency translation gains (losses)

 

 

(9,456

)

 

 

1,020

 

 

Total other comprehensive income (loss) before income taxes

 

 

143,780

 

 

 

(138,575

)

 

Income tax expense (benefit) related to items of other comprehensive income (loss)

 

 

32,826

 

 

 

(29,924

)

 

Other comprehensive income (loss), net of income taxes

 

 

110,954

 

 

 

(108,651

)

 

Total comprehensive income (loss)

 

$

248,858

 

 

$

19,448

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity – Unaudited

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

(In thousands, except per-share amounts)

Equity

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

Balance, beginning of period

 

$

350

 

 

$

368

 

 

Repurchases of common stock

 

 

(5

)

 

 

(6

)

 

Net issuance of common stock

 

 

1

 

 

 

2

 

 

Balance, end of period

 

 

346

 

 

 

364

 

 

 

 

 

 

 

 

 

 

Paid-in capital:

 

 

 

 

 

 

 

Balance, beginning of period

 

 

-

 

 

 

-

 

 

Share-based compensation

 

 

14,813

 

 

 

16,622

 

 

Net issuance of common stock

 

 

(1

)

 

 

(2

)

 

Repurchases of common stock

 

 

(14,812

)

 

 

(16,620

)

 

Balance, end of period

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

Balance, beginning of period

 

 

2,276,946

 

 

 

2,153,617

 

 

Net income

 

 

137,904

 

 

 

128,099

 

 

Dividends

 

 

(26,256

)

 

 

(23,910

)

 

Repurchases of common stock

 

 

(102,657

)

 

 

(80,378

)

 

Balance, end of period

 

 

2,285,937

 

 

 

2,177,428

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss), net of income tax:

 

 

 

 

 

 

 

Balance, beginning of period

 

 

(211,329

)

 

 

(122,731

)

 

Effect of change in discount rate assumptions on the liability for future policy benefits

 

 

131,939

 

 

 

(142,382

)

 

Change in foreign currency translation adjustment

 

 

(9,456

)

 

 

1,020

 

 

Change in net unrealized investment gains (losses) during the period

 

 

(11,529

)

 

 

32,711

 

 

Balance, end of period

 

 

(100,375

)

 

 

(231,382

)

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

$

2,185,908

 

 

$

1,946,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.75

 

 

$

0.65

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows – Unaudited

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

137,904

 

 

$

128,099

 

Adjustments to reconcile net income to cash provided by (used in) operating activities:

 

 

 

 

 

 

Change in future policy benefits and other policy liabilities

 

 

19,794

 

 

 

(9,799

)

Deferral of policy acquisition costs

 

 

(134,768

)

 

 

(126,640

)

Amortization of deferred policy acquisition costs

 

 

72,049

 

 

 

67,923

 

Change in income taxes

 

 

30,335

 

 

 

19,524

 

Investment (gains) losses

 

 

(1,305

)

 

 

4,608

 

Accretion and amortization of investments

 

 

(1,040

)

 

 

(309

)

Depreciation and amortization

 

 

7,165

 

 

 

8,547

 

Change in reinsurance recoverables

 

 

47,987

 

 

 

43,397

 

Change in agent balances, due premiums and other receivables

 

 

(13,444

)

 

 

(5,486

)

Change in renewal commissions receivable

 

 

13,961

 

 

 

5,634

 

Trading securities sold, matured, or called (acquired), net

 

 

15,084

 

 

 

(14,808

)

Share-based compensation

 

 

12,614

 

 

 

12,129

 

Change in other operating assets and liabilities, net

 

 

4,562

 

 

 

43,127

 

Net cash provided by (used in) operating activities

 

 

210,898

 

 

 

175,946

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Available-for-sale investments sold, matured or called:

 

 

 

 

 

 

Fixed-maturity securities — sold

 

 

-

 

 

 

5,179

 

Fixed-maturity securities — matured or called

 

 

86,418

 

 

 

80,251

 

Equity securities — sold

 

 

-

 

 

 

5

 

Equity securities — matured or called

 

 

4,324

 

 

 

-

 

Available-for-sale investments acquired:

 

 

 

 

 

 

Fixed-maturity securities

 

 

(168,644

)

 

 

(108,713

)

Equity securities — acquired

 

 

-

 

 

 

(47

)

Purchases of property and equipment and other investing activities, net

 

 

(8,386

)

 

 

(7,861

)

Cash collateral received (returned) on loaned securities, net

 

 

(23,136

)

 

 

(26,486

)

Sales (purchases) of short-term investments using securities lending collateral, net

 

 

23,136

 

 

 

26,486

 

Net cash provided by (used in) investing activities

 

 

(86,288

)

 

 

(31,186

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Dividends paid

 

 

(26,256

)

 

 

(23,910

)

Common stock repurchased

 

 

(109,109

)

 

 

(85,275

)

Tax withholdings on share-based compensation

 

 

(7,460

)

 

 

(9,739

)

Finance leases

 

 

(65

)

 

 

(68

)

Net cash provided by (used in) financing activities

 

 

(142,890

)

 

 

(118,992

)

Effect of foreign exchange rate changes on cash

 

 

(1,469

)

 

 

82

 

   Change in cash and cash equivalents

 

 

(19,749

)

 

 

25,850

 

Cash and cash equivalents, beginning of period

 

 

613,148

 

 

 

489,240

 

Cash and cash equivalents, end of period

 

$

593,399

 

 

$

515,090

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

PRIMERICA, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — Unaudited

(1) Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies

Description of Business. Primerica, Inc. (the “Parent Company”), together with its subsidiaries (collectively, “we”, “us” or the “Company”), is a leading provider of financial products and services to middle-income households in the United States and Canada 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. Our primary subsidiaries include the following entities: Primerica Financial Services, LLC, a general agency and marketing company; Primerica Life Insurance Company (“Primerica Life”), our principal life insurance company; Primerica Financial Services (Canada) Ltd., a holding company for our Canadian operations, which includes Primerica Life Insurance Company of Canada (“Primerica Life Canada”) and PFSL Investments Canada Ltd.; PFS Investments Inc., an investment products company and broker-dealer; and Primerica Health, Inc, a holding company for our senior health operations, which includes e-TeleQuote Insurance, Inc. and subsidiaries (collectively, “e-TeleQuote”), which markets Medicare-related insurance products underwritten by third-party health insurance carriers to eligible Medicare beneficiaries through its licensed health insurance agents. Primerica Life, domiciled in Tennessee, owns National Benefit Life Insurance Company, a New York insurance company. Vidalia Re, Inc. (“Vidalia Re”) is a special purpose financial captive insurance company and wholly owned subsidiary of Primerica Life. Vidalia Re has entered into a separate coinsurance agreement with Primerica Life whereby Primerica Life has ceded certain level-premium term life insurance policies to Vidalia Re (the “Vidalia Re Coinsurance Agreement”).

Basis of Presentation. We prepare our financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles are established primarily by the Financial Accounting Standards Board (“FASB”).

The accompanying unaudited condensed consolidated financial statements contain all adjustments, generally consisting of normal recurring accruals, which are necessary to fairly present the balance sheets as of March 31, 2024 and December 31, 2023, the statements of income, comprehensive income, and stockholders’ equity for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. Results of operations for interim periods are not necessarily indicative of results for the entire year or of the results to be expected in future periods.

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are sufficient to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report”).

Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect financial statement balances, revenues and expenses and cash flows, as well as the disclosure of contingent assets and liabilities. Management considers available facts and knowledge of existing circumstances when establishing the estimates included in our financial statements. The most significant items that involve a greater degree of accounting estimates and actuarial determinations subject to change in the future are the valuation of investments, deferred policy acquisition costs (“DAC”), liability for future policy benefits (“LFPB”) and corresponding amounts recoverable from reinsurers, renewal commissions receivable, income taxes, and valuation of intangible assets and goodwill. Estimates for these and other items are subject to change and are reassessed by management in accordance with U.S. GAAP. Actual results could differ from those estimates.

Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and those entities required to be consolidated under U.S. GAAP. All material intercompany profits, transactions, and balances among the consolidated entities have been eliminated.

Changes to Accounting Policies. All significant accounting policies remain unchanged from the 2023 Annual Report unless otherwise described.

Reclassifications. Certain reclassifications have been made to prior period amounts to conform to current period reporting classifications. These reclassifications had no impact on net income or total stockholders’ equity.

Correction of Immaterial Errors on Previously Issued Financial Statements. As previously disclosed in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, the Company identified immaterial errors in amounts presented in the unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (“Previously-reported Financial Statements”) related to the measurement of reinsurance recoverables and DAC in conjunction with the adoption of Accounting Standard Update No. 2018-12, Financial Services—Insurance (Topic 944)—Targeted Improvements to the Accounting for Long-Duration Contracts (“LDTI”). The resulting impact to our unaudited condensed

 

7


 

consolidated statement of income for the three months ended March 31, 2023 was an overstatement of benefits and claims, an understatement of future policy benefits remeasurement loss and an understatement of DAC amortization along with the related income tax impact that netted to cause an understatement of net income.

In accordance with FASB ASC 250, Accounting Changes and Error Corrections, the Company evaluated the materiality of these errors quantitatively and qualitatively and concluded that these prior period errors were immaterial to the Previously-reported Financial Statements. As such, the Company revised the prior period financial information included in the accompanying unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, initially presented in the Previously-reported Financial Statements, to correct these errors. The revisions resulted in an increase to net income of $3.0 million, or 2.4%, and increases to each of basic and diluted earnings per share of $0.08, or 2.4% in the accompanying unaudited condensed consolidated statement of income for the three months ended March 31, 2023 compared with the Previously-reported Financial Statements. Prior period information included in the notes herein to the accompanying unaudited condensed consolidated financial statements have also been revised as needed.

These errors were specifically related to the Company’s accounting estimates under LDTI and no financial statements prior to the adoption of LDTI were affected. Management detected and corrected these errors during the second quarter of 2023 as previously disclosed, and the errors do not affect financial information subsequent to the date of the Previously-reported Financial Statements.

New Accounting Standards Not Yet Adopted.

 

Accounting standard

Adoption date

Description

Effects on the financial statements

Segment Reporting (Topic 280)— Improvements to Reportable Segment Disclosures

ASU 2023-07

Annual periods beginning after December 15, 2023 and interim periods thereafter. Early adoption is permitted. Retrospective transition for all periods presented.

In November 2023, the FASB issued the ASU to enhance segment disclosures. The amendments (1) require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (2) require disclosure of “other segment items” by reportable segment, which is the difference between segment revenue and significant segment expenses; (3) require annual segment disclosures to be included in interim financial statements; (4) clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures; and (5) require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

 

We do not believe the adoption of the standard will have a material impact on our consolidated financial statements. We will revise disclosures in accordance with the new standard in our annual 2024 financial statements and for interim periods thereafter.

Income Taxes (Topic 740)—Improvements to Income Tax Disclosures

ASU 2023-09

Annual periods beginning after December 15, 2024. Early adoption is permitted. Prospective transition, although retrospective transition is permitted.

In December 2023, the FASB issued the ASU to increase income tax transparency through improvements primarily related to the existing rate reconciliation and income taxes paid disclosures. The amendments require (1) consistent categories and greater disaggregation of information in the rate reconciliation; and (2) income taxes paid disaggregated by jurisdiction.

 

The ASU also removes certain disclosure requirements, such as reasonably possible significant changes in the total amount of unrecognized tax benefits within 12 months of the reporting date.

 

We do not believe the adoption of the standard will have a material impact on our consolidated financial statements. We will revise disclosures in accordance with the new standard in our annual 2025 financial statements.

 

 

8


 

In addition, in March 2024, the SEC issued final rules that include updates to Regulation S-X for climate-related disclosures (the “Climate-Related Disclosures rule”). The Climate-Related Disclosures rule is currently stayed pending the completion of judicial review. The Climate-Related Disclosures rule requires a registrant to disclose in the notes to the financial statements (1) expenditures and losses, and capitalized costs and charges in each case excluding recoveries, incurred or recognized during a fiscal year as a result of severe weather events and other natural conditions; and (2) where material to a company's plan to achieve disclosed climate-related targets or goals, information regarding carbon offsets and renewable energy credits. The adoption of the Climate-Related Disclosures rule will impact our disclosures and may require changes to certain of our processes, systems, and controls. We are currently evaluating existing processes and data to determine what changes may be necessary. If the stay is lifted, the updates to Regulation S-X included in the Climate-Related Disclosures rule would be effective for the Company’s Form 10-K for the fiscal year ending December 31, 2025.

Recently issued accounting guidance not discussed above is not applicable, is immaterial to our consolidated financial statements, or did not or is not expected to have a material impact on our business.

(2) Segment and Geographical Information

Segments. We have three primary operating segments – Term Life Insurance, Investment and Savings Products, and Senior Health. We also have a Corporate and Other Distributed Products segment.

Notable information included in profit or loss by segment was as follows:

 

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

Term life insurance segment

 

$

440,412

 

 

$

421,069

 

 

Investment and savings products segment

 

 

243,716

 

 

 

210,202

 

 

Senior health segment

 

 

6,880

 

 

 

18,710

 

 

Corporate and other distributed products segment

 

 

51,822

 

 

 

40,055

 

 

Total revenues

 

$

742,830

 

 

$

690,036

 

 

 

 

 

 

 

 

 

 

Net investment income:

 

 

 

 

 

 

 

Term life insurance segment

 

$

-

 

 

$

-

 

 

Investment and savings products segment

 

 

-

 

 

 

-

 

 

Senior health segment

 

 

-

 

 

 

-

 

 

Corporate and other distributed products segment

 

 

37,806

 

 

 

31,065

 

 

Total net investment income

 

$

37,806

 

 

$

31,065

 

 

 

 

 

 

 

 

 

 

Amortization of DAC:

 

 

 

 

 

 

 

Term life insurance segment

 

$

70,491

 

 

$

66,068

 

 

Investment and savings products segment

 

 

1,201

 

 

 

1,493

 

 

Senior health segment

 

 

-

 

 

 

-

 

 

Corporate and other distributed products segment

 

 

357

 

 

 

362

 

 

Total amortization of DAC

 

$

72,049

 

 

$

67,923

 

 

 

 

 

 

 

 

 

 

Non-cash share-based compensation expense:

 

 

 

 

 

 

 

Term life insurance segment

 

$

2,142

 

 

$

1,850

 

 

Investment and savings products segment

 

 

1,039

 

 

 

993

 

 

Senior health segment

 

 

99

 

 

 

160

 

 

Corporate and other distributed products segment

 

 

9,334

 

 

 

9,071

 

 

Total non-cash share-based compensation expense

 

$

12,614

 

 

$

12,074

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes:

 

 

 

 

 

 

 

Term life insurance segment

 

$

138,367

 

 

$

130,541

 

 

Investment and savings products segment

 

 

65,562

 

 

 

56,106

 

 

Senior health segment

 

 

(14,153

)

 

 

(3,762

)

 

Corporate and other distributed products segment

 

 

(10,540

)

 

 

(15,943

)

 

Total income (loss) before income taxes

 

$

179,236

 

 

$

166,942

 

 

 

 

9


 

Total assets by segment were as follows:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

Term life insurance segment

 

$

6,514,070

 

 

$

6,543,923

 

Investment and savings products segment (1)

 

 

2,484,768

 

 

 

2,537,079

 

Senior health segment

 

 

404,888

 

 

 

419,110

 

Corporate and other distributed products segment

 

 

5,505,628

 

 

 

5,527,620

 

Total assets

 

$

14,909,354

 

 

$

15,027,732

 

(1)
The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the Investment and Savings Products segment assets were $149.9 million and $141.3 million as of March 31, 2024 and December 31, 2023, respectively.

Geographical Information. Results of operations by country and long-lived assets – primarily tangible assets reported in other assets in our unaudited condensed consolidated balance sheets – were as follows:

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

(In thousands)

Revenues by country:

 

 

 

 

 

 

 

United States

 

$

647,342

 

 

$

603,850

 

 

Canada

 

 

95,488

 

 

 

86,186

 

 

Total revenues

 

$

742,830

 

 

$

690,036

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(In thousands)

 

Long-lived assets by country:

 

 

 

 

 

 

United States

 

$

38,575

 

 

$

35,434

 

Canada

 

 

2,490

 

 

 

2,636

 

Other

 

 

188

 

 

 

197

 

Total long-lived assets

 

$

41,253

 

 

$

38,267

 

 

(3) Investments

Available-for-sale Securities. The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale (“AFS”) securities were as follows:

 

 

March 31, 2024

 

 

 

Amortized cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair value

 

 

 

(In thousands)

 

Securities available-for-sale, carried at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agencies

 

$

10,378

 

 

$

11

 

 

$

(514

)

 

$

9,875

 

Foreign government

 

 

168,671

 

 

 

656

 

 

 

(10,507

)

 

 

158,820

 

States and political subdivisions

 

 

144,543

 

 

 

575

 

 

 

(14,894

)

 

 

130,224

 

Corporates

 

 

1,778,147

 

 

 

10,844

 

 

 

(126,858

)

 

 

1,662,133

 

Residential mortgage-backed securities

 

 

513,935

 

 

 

1,089

 

 

 

(68,039

)

 

 

446,985

 

Commercial mortgage-backed securities

 

 

123,895

 

 

 

120

 

 

 

(12,911

)

 

 

111,104

 

Other asset-backed securities

 

 

273,166

 

 

 

1,039

 

 

 

(11,206

)

 

 

262,999

 

Total fixed-maturity securities

 

 

3,012,735

 

 

 

14,334

 

 

 

(244,929

)

 

 

2,782,140

 

Short-term investments

 

 

271

 

 

 

-

 

 

 

-

 

 

 

271

 

Total fixed-maturity and short-term investments

 

$

3,013,006

 

 

$

14,334

 

 

$

(244,929

)

 

$

2,782,411

 

 

 

10


 

 

 

December 31, 2023

 

 

 

Amortized cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair value

 

 

 

(In thousands)

 

Securities available-for-sale, carried at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agencies

 

$

9,974

 

 

$

18

 

 

$

(476

)