10-Q

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, 2023


☐	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

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, 2023, the registrant had 36,226,210 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, 2023 and December 31, 2022		2
Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022		3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022		4
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022		5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		33
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		52
Item 4. Controls and Procedures.		52
PART II – OTHER INFORMATION		52
Item 1. Legal Proceedings.		52
Item 1A. Risk Factors.		52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		53
Item 5. Other Information		53
Item 6. Exhibits.		53
Signatures		55

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets – Unaudited


	March 31, 2023			December 31, 2022
	(In thousands)
Assets:
Investments:
Fixed-maturity securities available-for-sale, at fair value (amortized cost: $2,822,996 in 2023 and $2,801,415 in 2022)	$	2,558,626		$	2,495,456
Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,388,411 in 2023 and $1,340,265 in 2022)		1,460,000			1,444,920
Short-term investments available-for-sale, at fair value (amortized cost: $70,185 in 2023 and $69,393 in 2022)		70,187			69,406
Equity securities, at fair value (historical cost: $29,475 in 2023 and $29,430 in 2022)		33,984			35,404
Trading securities, at fair value (cost: $19,033 in 2023 and $4,229 in 2022)		18,497			3,698
Policy loans and other invested assets		50,003			48,713
Total investments		4,191,297			4,097,597
Cash and cash equivalents		515,090			489,240
Accrued investment income		22,153			20,885
Reinsurance recoverables		3,179,074			3,176,397
Deferred policy acquisition costs, net		3,256,845			3,194,029
Renewal commissions receivable		194,409			200,043
Agent balances, due premiums and other receivables		259,759			254,276
Goodwill		127,707			127,707
Intangible assets, net (accumulated amortization: $18,375 in 2023 and $15,750 in 2022)		182,900			185,525
Income taxes		106,310			97,972
Operating lease right-of-use assets		38,575			40,500
Other assets		391,605			428,259
Separate account assets		2,329,968			2,305,717
Total assets	$	14,795,692		$	14,618,147

Liabilities and Stockholders’ Equity:
Liabilities:
Future policy benefits	$	6,561,624		$	6,297,906
Unearned and advance premiums		16,703			15,422
Policy claims and other benefits payable		498,483			538,250
Other policyholders’ funds		481,561			483,769
Note payable		593,106			592,905
Surplus note		1,459,565			1,444,469
Income taxes		199,394			202,462
Operating lease liabilities		43,955			45,995
Other liabilities		615,780			580,780
Payable under securities lending		74,452			100,938
Separate account liabilities		2,329,968			2,305,717
Commitments and contingent liabilities (see Commitments and Contingent Liabilities note)
Total liabilities		12,874,591			12,608,613

Temporary Stockholders’ Equity
Redeemable noncontrolling interests in consolidated entities		-			-
Permanent Stockholders’ Equity
Equity attributable to Primerica, Inc.:
Common stock ($0.01 par value; authorized 500,000 shares in 2023 and 2022; issued and outstanding 36,407 shares in 2023 and 36,824 shares in 2022)		364			368
Paid-in capital		-			-
Retained earnings		2,151,771			2,130,935
Accumulated other comprehensive income (loss), net of income tax:
Effect of change in discount rate assumptions on the liability for future policy benefits		(11,679	)		131,295
Unrealized foreign currency translation gains (losses)		(11,198	)		(12,196	)
Net unrealized investment gains (losses) on available-for-sale securities		(208,157	)		(240,868	)
Total permanent stockholders’ equity		1,921,101			2,009,534
Total liabilities and temporary and permanent stockholders’ equity	$	14,795,692		$	14,618,147

Prior year amounts related to long-duration insurance contracts have been adjusted for the adoption of accounting guidance on January 1, 2023.

See accompanying notes to condensed consolidated financial statements.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income – Unaudited


	Three months ended March 31,
	2023			2022
	(In thousands, except per-share amounts)
Revenues:
Direct premiums	$	817,872		$	798,666
Ceded premiums		(405,347	)		(399,885	)
Net premiums		412,525			398,781
Commissions and fees		231,547			251,800
Investment income net of investment expenses		47,500			34,420
Interest expense on surplus note		(16,435	)		(15,515	)
Net investment income		31,065			18,905
Realized investment gains (losses)		(985	)		577
Other investment gains (losses)		(3,623	)		174
Investment gains (losses)		(4,608	)		751
Other, net		19,507			20,989
Total revenues		690,036			691,226

Benefits and expenses:
Benefits and claims		168,702			168,288
Future policy benefits remeasurement (gain) loss		(508	)		(1,272	)
Amortization of deferred policy acquisition costs		67,358			63,223
Sales commissions		110,874			133,924
Insurance expenses		61,125			59,509
Insurance commissions		8,138			7,721
Contract acquisition costs		14,984			20,649
Interest expense		6,690			6,853
Other operating expenses		89,536			86,435
Total benefits and expenses		526,899			545,330
Income before income taxes		163,137			145,896
Income taxes		38,031			33,512
Net income		125,106			112,384
Net income (loss) attributable to noncontrolling interests		-			(2,655	)
Net income attributable to Primerica, Inc.	$	125,106		$	115,039

Earnings per share attributable to common stockholders:
Basic earnings per share	$	3.39		$	2.92
Diluted earnings per share	$	3.38		$	2.91

Weighted-average shares used in computing earnings per share:
Basic		36,710			39,221
Diluted		36,804			39,332

Prior year amounts related to long-duration insurance contracts have been adjusted for the adoption of accounting guidance on January 1, 2023.

See accompanying notes to condensed consolidated financial statements.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited


		Three months ended March 31,
		2023			2022
	(In thousands)
Net income		$	125,106		$	112,384
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			38,549			(164,937	)
Reclassification adjustment for investment (gains) losses included in net income			3,137			(658	)
Effect of change in discount rate assumptions on the liability for future policy benefits			(182,045	)		821,904
Foreign currency translation adjustments:
Change in unrealized foreign currency translation gains (losses)			998			3,289
Total other comprehensive income (loss) before income taxes			(139,361	)		659,598
Income tax expense (benefit) related to items of other comprehensive income (loss)			(30,096	)		140,384
Other comprehensive income (loss), net of income taxes			(109,265	)		519,214
Total comprehensive income (loss)			15,841			631,598
Net income (loss) attributable to noncontrolling interests			-			(2,655	)
Comprehensive income (loss) attributable to Primerica, Inc.		$	15,841		$	634,253

Prior year amounts related to long-duration insurance contracts have been adjusted for the adoption of accounting guidance on January 1, 2023.

See accompanying notes to condensed consolidated financial statements.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity– Unaudited


	Three months ended March 31,
	2023			2022
	(In thousands)
Equity attributable to Primerica, Inc./Permanent stockholders’ equity
Common stock:
Balance, beginning of period	$	368		$	394
Repurchases of common stock		(6	)		(7	)
Net issuance of common stock		2			1
Balance, end of period		364			388

Paid-in capital:
Balance, beginning of period		-			5,224
Share-based compensation		16,622			14,820
Net issuance of common stock		(2	)		(1	)
Repurchases of common stock		(16,620	)		(20,043	)
Balance, end of period		-			-

Retained earnings:
Adjusted balance, beginning of period		2,130,935			2,074,111
Net income attributable to Primerica, Inc.		125,106			115,039
Dividends		(23,910	)		(21,645	)
Repurchases of common stock		(80,360	)		(83,813	)
Balance, end of period		2,151,771			2,083,692

Accumulated other comprehensive income (loss), net of income tax:
Adjusted balance, beginning of period		(121,769	)		(1,168,399	)
Effect of change in discount rate assumptions on the liability for future policy benefits		(142,974	)		646,141
Change in foreign currency translation adjustment		998			3,289
Change in net unrealized investment gains (losses) during the period		32,711			(130,216	)
Balance, end of period		(231,034	)		(649,185	)

Total permanent stockholders’ equity	$	1,921,101		$	1,434,895

Redeemable noncontrolling interests in consolidated entities/Temporary stockholders’ equity
Balance, beginning of period	$	-		$	7,271
Net income (loss) attributable to noncontrolling interests		-			(2,655	)
Balance, end of period	$	-		$	4,616

Dividends declared per share	$	0.65		$	0.55

Prior year amounts related to long-duration insurance contracts have been adjusted for the adoption of accounting guidance on January 1, 2023.

See accompanying notes to condensed consolidated financial statements.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows – Unaudited


	Three months ended March 31,
	2023			2022
	(In thousands)
Cash flows from operating activities:
Net income	$	125,106		$	112,384
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Change in future policy benefits and other policy liabilities		(9,799	)		(161,385	)
Deferral of policy acquisition costs		(126,640	)		(130,881	)
Amortization of deferred policy acquisition costs		67,358			63,223
Change in income taxes		18,713			14,171
Investment (gains) losses		4,608			(751	)
Accretion and amortization of investments		(309	)		1,356
Depreciation and amortization		8,547			8,688
Change in reinsurance recoverables		47,766			248,511
Change in agent balances, due premiums and other receivables		(5,486	)		2,245
Change in renewal commissions receivable		5,634			18,576
Trading securities sold, matured, or called (acquired), net		(14,808	)		11,273
Share-based compensation		12,129			12,437
Change in other operating assets and liabilities, net		43,127			14,452
Net cash provided by (used in) operating activities		175,946			214,299

Cash flows from investing activities:
Available-for-sale investments sold, matured or called:
Fixed-maturity securities — sold		5,179			1,227
Fixed-maturity securities — matured or called		80,251			96,336
Short-term investments — matured or called		-			41,550
Equity securities — sold		5			-
Equity securities — matured or called		-			3,000
Available-for-sale investments acquired:
Fixed-maturity securities		(108,713	)		(250,932	)
Equity securities — acquired		(47	)		(44	)
Purchases of property and equipment and other investing activities, net		(7,861	)		(7,676	)
Cash collateral received (returned) on loaned securities, net		(26,486	)		(1,358	)
Sales (purchases) of short-term investments using securities lending collateral, net		26,486			1,358
Purchase of business, net of cash acquired		-			3,867
Net cash provided by (used in) investing activities		(31,186	)		(112,672	)

Cash flows from financing activities:
Dividends paid		(23,910	)		(21,645	)
Common stock repurchased		(85,275	)		(99,010	)
Payment on note issued to seller of business		-			(9,000	)
Tax withholdings on share-based compensation		(9,739	)		(4,852	)
Finance leases		(68	)		(64	)
Net cash provided by (used in) financing activities		(118,992	)		(134,571	)
Effect of foreign exchange rate changes on cash		82			222
Change in cash and cash equivalents		25,850			(32,722	)
Cash and cash equivalents, beginning of period		489,240			392,501
Cash and cash equivalents, end of period	$	515,090		$	359,779

Prior year amounts related to long-duration insurance contracts have been adjusted for the adoption of accounting guidance on January 1, 2023.

See accompanying notes to condensed consolidated financial statements.

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 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. We acquired 80% of e-TeleQuote Insurance, Inc. and subsidiaries (collectively, “e-TeleQuote”) through our subsidiary, Primerica Health, Inc. (“Primerica Health”) on July 1, 2021 and the remaining 20% of e-TeleQuote on July 1, 2022. e-TeleQuote markets Medicare-related insurance products underwritten by third-party health insurance carriers to eligible Medicare participants through its licensed health insurance agents. Our other 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.; and PFS Investments Inc., an investment products company and broker-dealer. Primerica Life, domiciled in Tennessee, owns National Benefit Life Insurance Company, a New York insurance company. Peach Re, Inc. (“Peach Re”) and Vidalia Re, Inc. (“Vidalia Re”) are special purpose financial captive insurance companies and wholly owned subsidiaries of Primerica Life. Peach Re and Vidalia Re have each entered into separate coinsurance agreements with Primerica Life whereby Primerica Life has ceded certain level-premium term life insurance policies to Peach Re and Vidalia Re (respectively, the “Peach Re Coinsurance Agreement” and 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, 2023 and December 31, 2022, the statements of income, comprehensive income, and stockholders’ equity for the three months ended March 31, 2023 and 2022, and cash flows for the three months ended March 31, 2023 and 2022. 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. 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, 2022 (“2022 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”), future policy benefit reserves 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.

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.

New Accounting Principles. In August 2018, the FASB issued Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944) — Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12” or “LDTI”). The amendments in this update change accounting guidance for insurance companies that issue long-duration contracts, such as term life insurance and segregated funds products. ASU 2018-12 requires companies that issue long-duration insurance contracts to update assumptions used in measuring the liability for future policy benefits (“LFPB”) and DAC, including mortality, disability, and persistency, at least annually instead of locking those assumptions at contract inception and reflecting differences in assumptions and actual performance as the experience occurs. ASU 2018-12 also changes how insurance companies that issue long-duration contracts

amortize DAC and determine and update the discount rate assumptions used in measuring both the LFPB and ceded reserves that are part of reinsurance recoverables while increasing the level of financial statement disclosures required.

The Company adopted ASU 2018-12 on January 1, 2023 through the modified retrospective method, which applies the provisions of the standard by pivoting off the historical December 31, 2020 liability for future policy benefits (“Pre-transition Reserve”) and DAC balances just prior to January 1, 2021 (the “Transition Date”). Upon adoption, the Company recorded the following adjustments to its consolidated balance sheet as of the Transition Date.

•

LDTI requires entities to use market observable rates, based on an upper-medium grade fixed income instrument yield, to measure future policy benefits reserves each period. The difference between the LFPB calculated using market observable rates and the Pre-transition Reserve was recognized as part of accumulated other comprehensive income (“AOCI”) at the Transition Date. Given how low market observable rates were at the Transition Date, we recorded a reduction to AOCI of approximately $1.5 billion, net of income tax, as of January 1, 2021. Market observable rates have increased since the Transition Date, which resulted in a cumulative decrease to AOCI of $11.7 million as of March 31, 2023.

•

Under LDTI, policies are grouped into cohorts and the net premium ratio for each policy cohort is used to calculate the LFPB. At the Transition Date, the “Net Premium Ratio” is defined as the present value of future benefits, which includes claim settlement expenses less the Pre-transition Reserve divided by the present value of the gross premiums. Expected future benefits and gross premiums use best estimate cash flow assumptions and the locked-in discount rate at the Transition Date is used in the calculation. Under LDTI, a cohort’s Net Premium Ratio is capped at 100%. The adjustment necessary at the Transition Date to cap the Net Premium Ratio for cohorts at 100% was approximately $23 million, which was recognized as a reduction to retained earnings as of January 1, 2021. The identified impact from capping the Net Premium Ratio at 100% was solely attributable to a limited amount of older policy year cohorts.

All prior period financial information included in the accompanying condensed consolidated financial statements has been restated to reflect the adoption of ASU 2018-12.

The Company's restated permanent and temporary stockholders' equity from the date of adoption through December 31, 2022 is as follows:


	Year ended December 31,
	2022			2021
	(Unaudited)			(Unaudited)
	(In thousands)
Equity attributable to Primerica, Inc./Permanent stockholders’ equity
Common stock:
Balance, beginning of period	$	394		$	393
Repurchases of common stock		(28	)		(1	)
Net issuance of common stock		2			2
Balance, end of period		368			394

Paid-in capital:
Balance, beginning of period		5,224			-
Share-based compensation		33,624			31,043
Net issuance of common stock		(2	)		(2	)
Repurchases of common stock		(41,079	)		(25,817	)
Redemption of noncontrolling interest in consolidated entities		2,233			-
Balance, end of period		-			5,224

Retained earnings:
Balance, beginning of period		2,074,111			1,705,786
Cumulative effect of adoption of new accounting standards - ASU 2018-12, net of income tax		-			(22,847	)
Adjusted balance		2,074,111			1,682,939
Net income		460,939			465,808
Dividends		(83,783	)		(74,636	)
Repurchases of common stock		(320,332	)		-
Balance, end of period		2,130,935			2,074,111

Accumulated other comprehensive income (loss), net of income tax:
Balance, beginning of period		(1,168,399	)		129,706
Cumulative effect of adoption of new accounting standards - ASU 2018-12		-			(1,510,618	)
Adjusted balance		(1,168,399	)		(1,380,912	)
Effect of change in discount rate assumptions on the liability for future policy benefits		1,372,022			269,895
Change in foreign currency translation adjustment		(20,747	)		6,973
Change in net unrealized investment gains (losses) during the period:		(304,645	)		(64,355	)
Balance, end of period		(121,769	)		(1,168,399	)
Total permanent stockholders’ equity	$	2,009,534		$	911,330

Redeemable noncontrolling interests in consolidated entities/Temporary stockholders’ equity
Balance, beginning of period	$	7,271		$	-
Acquisition of noncontrolling interest		-			8,438
Net income (loss) attributable to noncontrolling interests		(5,038	)		(1,377	)
Changes in noncontrolling interests in consolidated entities, net		-			210
Redemption of noncontrolling interest in consolidated entities		(2,233	)
Balance, end of period	$	-		$	7,271

The impact on the Company's previously reported consolidated balance sheet as of December 31, 2022 is as follows:


Consolidated Balance Sheet
December 31, 2022

	As Previously Reported			Adoption Impacts (Unaudited)			As Adjusted (Unaudited)
	(In thousands)
Assets:
Investments:
Fixed-maturity securities available-for-sale, at fair value (amortized cost: $2,801,415)	$	2,495,456		$	-		$	2,495,456
Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,340,265)		1,444,920			-			1,444,920
Short-term investments available-for-sale, at fair value (amortized cost: $69,393)		69,406			-			69,406
Equity securities, at fair value (historical cost: $29,430)		35,404			-			35,404
Trading securities, at fair value (cost: $4,229)		3,698			-			3,698
Policy loans and other invested assets		48,713			-			48,713
Total investments		4,097,597			-			4,097,597
Cash and cash equivalents		489,240			-			489,240
Accrued investment income		20,885			-			20,885
Reinsurance recoverables		4,015,909			(839,512	)		3,176,397
Deferred policy acquisition costs, net		3,081,886			112,143			3,194,029
Renewal commissions receivable		200,043			-			200,043
Agent balances, due premiums and other receivables		254,276			-			254,276
Goodwill		127,707			-			127,707
Intangible assets		185,525			-			185,525
Deferred income taxes		101,333			(3,361	)		97,972
Operating lease right-of-use assets		40,500			-			40,500
Other assets		428,259			-			428,259
Separate account assets		2,305,717			-			2,305,717
Total assets	$	15,348,877		$	(730,730	)	$	14,618,147

Liabilities and Stockholders’ Equity:
Liabilities:
Future policy benefits	$	7,390,800		$	(1,092,894	)	$	6,297,906
Unearned and advance premiums		15,422			-			15,422
Policy claims and other benefits payable		538,250			-			538,250
Other policyholders’ funds		483,769			-			483,769
Note payable		592,905			-			592,905
Surplus note		1,444,469			-			1,444,469
Income tax payable		36,876			-			36,876
Deferred income taxes		91,457			74,129			165,586
Operating lease liabilities		45,995			-			45,995
Other liabilities		580,780			-			580,780
Payable under securities lending		100,938			-			100,938
Separate account liabilities		2,305,717			-			2,305,717
Commitments and contingent liabilities (see Commitments and Contingent Liabilities note)
Total liabilities		13,627,378			(1,018,765	)		12,608,613

Temporary Stockholders’ Equity
Redeemable noncontrolling interests in consolidated entities		-			-			-
Permanent Stockholders’ Equity
Equity attributable to Primerica, Inc.:
Common stock ($0.01 par value; authorized 500,000 shares; issued and outstanding 36,824)		368			-			368
Paid-in capital		-			-			-
Retained earnings		1,973,403			157,532			2,130,935
Accumulated other comprehensive income (loss), net of income tax:
Effect of change in discount rate assumptions on the liability for future policy benefits		-			131,295			131,295
Unrealized foreign currency translation gains (losses)		(11,404	)		(792	)		(12,196	)
Net unrealized investment gains (losses) on available-for-sale securities		(240,868	)		-			(240,868	)
Total permanent stockholders’ equity		1,721,499			288,035			2,009,534
Total liabilities and temporary and permanent stockholders’ equity	$	15,348,877		$	(730,730	)	$	14,618,147

The impact on the Company's previously reported condensed consolidated statement of income for the three months ended March 31, 2022 is as follows:


Condensed Consolidated Statement of Income
Three months ended March 31, 2022

	As Previously Reported (Unaudited)			Adoption Impacts (Unaudited)			As Adjusted (Unaudited)
	(In thousands)
Revenues:
Direct premiums	$	798,666		$	-		$	798,666
Ceded premiums		(399,885	)		-			(399,885	)
Net premiums		398,781			-			398,781
Commissions and fees		251,800			-			251,800
Investment income net of investment expenses		34,420			-			34,420
Interest expense on surplus note		(15,515	)		-			(15,515	)
Net investment income		18,905			-			18,905
Realized investment gains (losses)		577			-			577
Other investment gains (losses)		174			-			174
Investment gains (losses)		751			-			751
Other, net		20,989			-			20,989
Total revenues		691,226			-			691,226

Benefits and expenses:
Benefits and claims		187,069			(18,781	)		168,288
Future policy benefits remeasurement (gain) loss		-			(1,272	)		(1,272	)
Amortization of deferred policy acquisition costs		86,063			(22,840	)		63,223
Sales commissions		133,924			-			133,924
Insurance expenses		59,509			-			59,509
Insurance commissions		7,721			-			7,721
Contract acquisition costs		20,649			-			20,649
Interest expense		6,853			-			6,853
Other operating expenses		86,435			-			86,435
Total benefits and expenses		588,223			(42,893	)		545,330
Income before income taxes		103,003			42,893			145,896
Income taxes		24,239			9,273			33,512
Net income		78,764			33,620			112,384
Net income (loss) attributable to noncontrolling interests		(2,655	)		-			(2,655	)
Net income attributable to Primerica, Inc.	$	81,419		$	33,620		$	115,039

Earnings per share attributable to common stockholders:
Basic earnings per share	$	2.07		$	0.85		$	2.92
Diluted earnings per share	$	2.06		$	0.85		$	2.91

Weighted-average shares used in computing earnings per share:
Basic		39,221			-			39,221
Diluted		39,332			-			39,332

Transition Impact on the Liability for Future Policy Benefits.

The Company adopted ASU 2018-12 using the modified retrospective transition method. As part of the transition disclosures ASU 2018-12 requires a reconciliation of the adoption impacts to the Company’s LFPB, separated between the changes in the present value of expected net premiums and the present value of expected future policy benefits as of the Transition Date. Theses balances are presented before reinsurance and income taxes for the Term Life Insurance segment, which makes up the substantial portion of the Company's long-duration insurance contract liabilities.


	Transition Impact at January 1, 2021
	(In thousands)
Present Value of Expected Premiums	Term Life
Balance at December 31, 2020	$	10,867,358
Impact to retained earnings from capping Transition Date net premium ratio		(137,112	)
Balance at original discount rate		10,730,246
Effect of changes in discount rate assumptions		2,774,082
Balance at January 1, 2021	$	13,504,328

Present Value of Expected Future Policy Benefits
Balance at December 31, 2020	$	17,445,700
Effect of changes in discount rate assumptions		5,624,494
Balance at January 1, 2021	$	23,070,194

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

Changes to Accounting Policies. All significant accounting policies remain unchanged from the 2022 Annual Report except for the following:

DAC. We defer incremental direct costs of successful contract acquisitions that result from and are essential to the contract transaction(s) and that would not have been incurred had the contract transaction(s) not occurred. These deferred policy acquisition costs mainly include commissions, underwriting costs and certain other policy issuance expenses associated with successful contract acquisitions. All other acquisition-related costs, including unsuccessful acquisition and renewal efforts, are charged to expense as incurred. Also, administrative costs, rent, depreciation, occupancy, equipment, and all other general overhead costs are considered indirect costs and are charged to expense as incurred.

DAC for term life insurance policies is amortized on a constant-level basis over the expected term of the contracts using face amount as the unit of measure. Contracts are grouped by cohorts consistent with the grouping used in estimating the LFPB. The cohorts are defined by the legal entity that issued the policy and the year the policy was issued. Assumptions of face amounts used to amortize DAC for term life insurance policies, including persistency and mortality, are consistent with the assumptions used in estimating the LFPB.

DAC for Canadian segregated funds is amortized on a constant-level basis over the expected term of the contracts using policy count as the unit of measure. Contracts are grouped by cohorts based on the issue year of the policy.

Interest is not accrued on unamortized DAC balances and DAC is not subject to impairment testing.

Separate Accounts. The separate accounts are primarily comprised of contracts issued by the Company through its subsidiary, Primerica Life Canada, pursuant to the Insurance Companies Act (Canada). The Insurance Companies Act authorizes Primerica Life Canada to establish the separate accounts.

The separate accounts are represented by individual variable insurance contracts. Purchasers of variable insurance contracts issued by Primerica Life Canada have a direct claim to the benefits of the contract that entitles the holder to units in one or more investment funds (the “Funds”) maintained by Primerica Life Canada. The Funds invest in assets that are held for the benefit of the owners of the contracts. The Funds’ assets are administered by Primerica Life Canada and are held separate and apart from the general assets of the Company. The liabilities reflect the variable insurance contract holders’ interests in the Funds’ net assets based upon actual investment performance of the respective Funds.

These Funds primarily consist of a series of branded investment funds known as the Asset Builder Funds, a registered retirement fund known as the Strategic Retirement Income Fund (“SRIF”), and a money market fund known as the Cash Management Fund. The principal investment objective of the Asset Builder Funds is to achieve long-term growth while preserving capital. The principal objective of the SRIF is to provide a stream of investment income during retirement plus the opportunity for modest capital appreciation. The Asset Builder Funds and the SRIF use diversified portfolios of publicly-traded Canadian stocks, investment-grade corporate bonds, Government of Canada bonds, and foreign equity investments to achieve their objectives. The Cash Management Fund invests in government guaranteed short-term bonds and short-term commercial and bank papers, with the principal investment objective being the provision of interest income while maintaining liquidity and preserving capital.

Under these contract offerings, benefit payments to contract holders or their designated beneficiaries are only due upon death of the annuitant or upon reaching a specific maturity date. Benefit payments are based on the value of the contract holder’s units in the portfolio at the payment date, but are guaranteed to be no less than 75% of the contract holder’s contribution, adjusted for withdrawals. Account values are not guaranteed for withdrawn units if contract holders make withdrawals prior to the maturity dates.

Maturity dates for contracts investing in the Asset Builder Funds and Cash Management Fund vary by contract and range from 10 years from the contract issuance date to December 31, 2070. Contracts investing in the SRIF mature when the policyholder reaches age 100, which is a minimum of 20 years after issue. The SRIF is designed to provide periodic retirement income payments and as such, regular withdrawals, subject to legislated minimums, are anticipated. The cumulative effects of the periodic withdrawals are expected to substantially reduce both account and minimum guaranteed values prior to maturity.

Both the asset and the liability for the separate accounts reflect the net value of the underlying assets in the portfolio as of the reporting date. Primerica Life Canada’s exposure to losses under the guarantee at the time of account maturity is limited to contract holder accounts that have declined in value more than 25%, adjusted for withdrawals since the contribution date, prior to maturity. As maturity dates are of a long-term nature, the likelihood that guarantee payments will be required at any given point is very small. Additionally, the portfolios consist of a very large number of individual contracts, further spreading the risk related to the guarantee. The length of the contract terms provides significant opportunity for the underlying portfolios to recover any short-term losses prior to maturity or the death of the contract holder. The Company has estimated the fair value associated with the market risk benefits provided by these limited guarantees to be immaterial. Furthermore, the Funds investment allocations are aligned with the maturity risks of the related contracts and include investments in Government Strip Bonds and floating-rate notes.

Future Policy Benefits. The LFPB on traditional life insurance products is established for future policy benefits, which includes death benefits, waiver of premium benefits and claim settlement expenses. The LFPB is calculated as the present value of expected future benefits less the present value of expected future net premiums receivable under the contracts. Net premiums are defined as the portion of the gross premiums received from policyholders that are needed to pay for all benefits.

The assumptions underlying the LFPB include mortality, persistency, disability rates, and other assumptions that reflect our best estimate based on our historical experience and modified, as necessary, to reflect non-recurring and/or anticipated trends.

The LFPB is estimated by grouping insurance policies into cohorts. Policy cohorts for the Term Life Insurance segment are based on the legal entity that issued the policy and the year the policy was issued.

The cash flows and assumptions underlying the LFPB are unlocked each quarter to reflect differences between actual and expected experience. In general, assumption changes, to the extent necessary, are expected to only occur during the third quarter when we update our experience studies. However, they may occur at any time based on emerging experience.

The impact of unlocking will be partly reflected in the current period and partly spread to future periods based on the remaining duration of the impacted cohort(s). The catch-up is retroactive back to the later of the Transition Date or issue date, after reinsurance recoverables and is recognized as a remeasurement gain or loss as a separate component of benefits and claims expense in the consolidated statements of income.

The ceded reserve balances included in reinsurance recoverables are calculated in the same manner as the LFPB by cohort and apply best estimate assumptions and quarterly unlocking.

The Company uses discount rates applied by country to align with local currency cash flows. Discount rates consist of yield curves that are developed using Bloomberg’s Evaluated Pricing Product (BVAL) based on senior unsecured fixed rate bonds ratings of A+, A or A-. The discount rate assumption is updated quarterly and the impact of remeasuring the net LFPB, after reinsurance recoverables from changes in the locked-in discount rate assumption is reflected in other comprehensive income in the consolidated statements of comprehensive income.

The LFPB we establish are necessarily based on estimates, assumptions and our analysis of historical experience. Our results depend upon the extent to which our actual experience is consistent with the assumptions we use in determining the LFPB. The assumptions and estimates underlying the LFPB require significant judgment and, therefore, are inherently uncertain.

(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,
	2023			2022
	(In thousands)
Revenues:
Term life insurance segment	$	421,069		$	406,983
Investment and savings products segment		210,202			241,039
Senior health segment		18,710			5,831
Corporate and other distributed products segment		40,055			37,373
Total revenues	$	690,036		$	691,226

Net investment income:
Term life insurance segment	$	-		$	-
Investment and savings products segment		-			-
Senior health segment		-			-
Corporate and other distributed products segment		31,065			18,905
Total net investment income	$	31,065		$	18,905

Amortization of DAC:
Term life insurance segment	$	65,503		$	61,369
Investment and savings products segment		1,493			1,446
Senior health segment		-			-
Corporate and other distributed products segment		362			408
Total amortization of DAC	$	67,358		$	63,223

Non-cash share-based compensation expense:
Term life insurance segment	$	1,850		$	2,125
Investment and savings products segment		993			1,204
Senior health segment		160			-
Corporate and other distributed products segment		9,071			9,108
Total non-cash share-based compensation expense	$	12,074		$	12,437

Income (loss) before income taxes:
Term life insurance segment	$	126,736		$	118,576
Investment and savings products segment		56,106			67,039
Senior health segment		(3,762	)		(23,085	)
Corporate and other distributed products segment		(15,943	)		(16,634	)
Total income (loss) before income taxes	$	163,137		$	145,896

Total assets by segment were as follows:


	March 31, 2023		December 31, 2022
	(In thousands)
Assets:
Term life insurance segment	$	6,506,068	$	6,433,880
Investment and savings products segment (1)		2,454,810		2,424,256
Senior health segment		429,884		431,993
Corporate and other distributed products segment		5,404,930		5,328,018
Total assets	$	14,795,692	$	14,618,147

(1) The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the Investment and Savings Products segment assets were $124.9 million and $118.5 million as of March 31, 2023 and December 31, 2022, 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 and condensed consolidated statements of income, were as follows:


	Three months ended March 31,
	2023		2022
	(In thousands)
Revenues by country:
United States	$	603,850	$	586,153
Canada		86,186		105,073
Total revenues	$	690,036	$	691,226


	March 31, 2023		December 31, 2022
	(In thousands)
Long-lived assets by country:
United States	$	48,835	$	49,637
Canada		2,689		2,803
Other		215		217
Total long-lived assets	$	51,739	$	52,657

(3) Investments

Available-for-sale Securities. The period-end amortized cost, gross unrealized gains and losses, and fair value of available-for-sale securities were as follows:


	March 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	$	9,976	$	26	$	(571	)	$	9,431
Foreign government		157,424		1,234		(9,053	)		149,605
States and political subdivisions		138,835		239		(15,799	)		123,275
Corporates		1,701,254		5,056		(148,291	)		1,558,019
Residential mortgage-backed securities		476,070		456		(67,980	)		408,546
Commercial mortgage-backed securities		142,789		43		(15,114	)		127,718
Other asset-backed securities		196,648		410		(15,026	)		182,032
Total fixed-maturity securities		2,822,996		7,464		(271,834	)		2,558,626
Short-term investments		70,185		7		(5	)		70,187
Total fixed-maturity and short-term investments	$	2,893,181	$	7,471	$	(271,839	)	$	2,628,813


	December 31, 2022
	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	$	31,217	$	18	$	(767	)	$	30,468
Foreign government		163,725		780		(11,590	)		152,915
States and political subdivisions		142,189		112		(20,056	)		122,245
Corporates		1,665,962		2,439		(171,552	)		1,496,849
Residential mortgage-backed securities		473,309		370		(71,949	)		401,730
Commercial mortgage-backed securities		139,306		3		(16,342	)		122,967
Other asset-backed securities		185,707		108		(17,533	)		168,282
Total fixed-maturity securities		2,801,415		3,830		(309,789	)		2,495,456
Short-term investments		69,393		20		(7	)		69,406
Total fixed-maturity and short-term investments	$	2,870,808	$	3,850	$	(309,796	)	$	2,564,862

All of our available-for-sale mortgage- and asset-backed securities represent variable interests in variable interest entities (“VIEs”). We are not the primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact the entities’ economic performance. The maximum exposure to loss as a result of our involvement in these VIEs equals the carrying value of the securities.

The scheduled maturity distribution of the available-for-sale (“AFS”) fixed-maturity portfolio as of March 31, 2023 was as follows:


	Amortized cost		Fair value
	(In thousands)
Due in one year or less	$	154,148	$	152,676
Due after one year through five years		770,897		733,708
Due after five years through 10 years		783,681		697,131
Due after 10 years		298,763		256,815
		2,007,489		1,840,330
Mortgage- and asset-backed securities		815,507		718,296
Total AFS fixed-maturity securities	$	2,822,996	$	2,558,626

Expected maturities may differ from scheduled contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.

Trading Securities. The cost and fair value of the securities classified as trading securities were as follows:


	March 31, 2023				December 31, 2022
	Cost		Fair value		Cost		Fair value
	(In thousands)
Fixed-maturity securities	$	19,033	$	18,497	$	4,229	$	3,698

Held-to-maturity Security. Concurrent with the execution of the Vidalia Re Coinsurance Agreement, Vidalia Re entered into a Surplus Note Purchase Agreement (the “Surplus Note Purchase Agreement”) with Hannover Life Reassurance Company of America and certain of its affiliates (collectively, “Hannover Re”) and a newly formed limited liability company (the “LLC”) owned by a third- party service provider. Under the Surplus Note Purchase Agreement, Vidalia Re issued a surplus note (the “Surplus Note”) to the LLC in exchange for a credit enhanced note from the LLC with an equal principal amount (the “LLC Note”). The principal amount of both the LLC Note and the Surplus Note will fluctuate over time to coincide with the amount of reserves contractually supported under the Vidalia Re Coinsurance Agreement. Both the LLC Note and the Surplus Note mature on December 31, 2030 and bear interest at an annual interest rate of 4.50%. The LLC Note is guaranteed by Hannover Re through a credit enhancement feature in exchange for a fee, which is reflected in interest expense on our unaudited condensed consolidated statements of income.

The LLC is a VIE as its owner does not have an equity investment at risk that is sufficient to permit the LLC to finance its activities without Vidalia Re or Hannover Re. The Parent Company, Primerica Life, and Vidalia Re share the power to direct the activities of the LLC with Hannover Re, but do not have the obligation to absorb losses or the right to receive any residual returns related to the LLC’s primary risks or sources of variability. Through the credit enhancement feature, Hannover Re is the ultimate risk taker in this transaction and bears the obligation to absorb the LLC’s losses in the event of a Surplus Note default in exchange for the fee. Accordingly, the Company is not the primary beneficiary of the LLC and does not consolidate the LLC within its unaudited condensed consolidated financial statements. See Note 5 (Reinsurance) for Hannover Re’s financial strength rating.

The LLC Note is classified as a fixed-maturity held-to-maturity security in the Company’s invested asset portfolio as we have the positive intent and ability to hold the security until maturity. As of March 31, 2023, the LLC Note had an estimated unrealized holding loss of $71.6 million based on its amortized cost and estimated fair value. The estimated fair value of the LLC Note is expected to be at least equal to the estimated fair value of the offsetting Surplus Note. See Note 15 (Debt) for more information on the Surplus Note.

As of March 31, 2023, no credit losses have been recognized on the LLC Note.

Investments on Deposit with Governmental Authorities. As required by law, we have investments on deposit with governmental authorities and banks for the protection of policyholders. The fair values of investments on deposit were $7.1 million and $7.1 million as of March 31, 2023 and December 31, 2022, respectively.

Securities Lending Transactions. We participate in securities lending transactions with broker-dealers and other financial institutions to increase investment income with minimal risk. We require minimum collateral on securities loaned equal to 102% of the fair value of the loaned securities. We accept collateral in the form of securities, which we are not able to sell or encumber, and to the extent the collateral declines in value below 100%, we require additional collateral from the borrower. Any securities collateral received is not reflected on our unaudited condensed consolidated balance sheets. We also accept collateral in the form of cash, all of which we reinvest. For loans involving unrestricted cash collateral, the collateral is reported as an asset with a corresponding liability representing our obligation to return the collateral. We continue to carry the loaned securities as invested assets on our unaudited condensed consolidated balance sheets during the terms of the loans, and we do not report them as sales. Cash collateral received and reinvested was $74.5 million and $100.9 million as of March 31, 2023 and December 31, 2022, respectively.

Investment Income. The components of net investment income were as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Fixed-maturity securities (available-for-sale)	$	25,806		$	20,889
Fixed-maturity security (held-to-maturity)		16,435			15,515
Equity securities		380			387
Policy loans and other invested assets		(71	)		102
Cash and cash equivalents		5,128			125
Total return on deposit asset underlying 10% coinsurance agreement(1)		2,049			(1,510	)
Gross investment income		49,727			35,508
Investment expenses		(2,227	)		(1,088	)
Investment income net of investment expenses		47,500			34,420
Interest expense on surplus note		(16,435	)		(15,515	)
Net investment income	$	31,065		$	18,905

(1)

Includes ($0.3) million and $(2.1) million of net gains (losses) recognized for the change in fair value of the deposit asset underlying the 10% coinsurance agreement for the three months ended March 31, 2023 and 2022, respectively.

The components of investment gains (losses), as well as details on gross realized investment gains (losses) and other investment gains (losses) were as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Realized investment gains (losses):
Gross gains from sales of available-for-sale securities fixed maturity securities	$	49		$	602
Gross losses from sales of available-for-sale fixed maturity securities		(1,034	)		(25	)
Net realized investment gains (losses):		(985	)		577
Other investment gains (losses):
Credit losses impairment of available-for-sale securities		(2,160	)		81
Market gains (losses) recognized in net income during the period on equity securities		(1,475	)		115
Gains (losses) from bifurcated options		8			-
Gains (losses) on trading securities		4			(22	)
Other investment gains (losses):		(3,623	)		174
Investment gains (losses)	$	(4,608	)	$	751

The proceeds from sales or other redemptions of available-for-sale securities were as follows:


	Three months ended March 31,
	2023		2022
	(In thousands)
Proceeds from sales or other redemptions	$	85,430	$	139,113

Accrued Interest. Accrued interest is recorded in accordance with the original interest schedule of the underlying security. In the event of default, the Company’s policy is to no longer accrue interest on these securities and any remaining accrued interest will be written off. As a result, the Company has made the policy election to not record an allowance for credit losses on accrued interest.

Credit Losses for Available-for-sale Securities. The following table summarizes all available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of March 31, 2023, aggregated by major security type and length of time such securities have continuously been in an unrealized loss position:


	March 31, 2023
	Less than 12 months					12 months or longer
	Fair value		Unrealized losses			Fair value		Unrealized losses
	(Dollars in thousands)
Fixed-maturity securities:
U.S. government and agencies	$	3,920	$	(99	)	$	5,173	$	(472	)
Foreign government		30,377		(399	)		91,887		(8,654	)
States and political subdivisions		10,178		(277	)		102,623		(15,522	)
Corporates		457,448		(12,678	)		926,057		(135,613	)
Residential mortgage-backed securities		40,398		(3,342	)		348,490		(64,638	)
Commercial mortgage-backed securities		27,240		(884	)		95,244		(14,230	)
Other asset-backed securities		29,901		(1,243	)		117,076		(13,783	)
Total fixed-maturity securities		599,462		(18,922	)		1,686,550		(252,912	)
Short-term investments:
U.S. government and agencies		15,835		(4	)		-		-
Foreign government		1,756		(1	)		-		-
Total short-term investments		17,591		(5	)		-		-
Total fixed-maturity securities and short-term investments	$	617,053	$	(18,927	)	$	1,686,550	$	(252,912	)


	December 31, 2022
	Less than 12 months					12 months or longer
	Fair value		Unrealized losses			Fair value		Unrealized losses
	(Dollars in thousands)
Fixed-maturity securities:
U.S. government and agencies	$	4,927	$	(204	)	$	25,209	$	(563	)
Foreign government		97,094		(4,430	)		38,085		(7,160	)
States and political subdivisions		71,131		(10,666	)		44,324		(9,390	)
Corporates		974,931		(69,726	)		452,541		(101,826	)
Residential mortgage-backed securities		187,158		(22,171	)		201,595		(49,778	)
Commercial mortgage-backed securities		65,165		(5,069	)		56,799		(11,273	)
Other asset-backed securities		81,907		(5,807	)		72,977		(11,726	)
Total fixed-maturity securities		1,482,313		(118,073	)		891,530		(191,716	)
Short-term investments:
U.S. government and agencies		28,379		(5	)		-		-
Foreign government		1,744		(2	)		-		-
Total short-term investments		30,123		(7	)		-		-
Total fixed-maturity securities and short-term investments	$	1,512,436	$	(118,080	)	$	891,530	$	(191,716	)

The amortized cost of available-for-sale fixed-maturity securities with a cost basis in excess of their fair values were $2,575.4 million and $2,713.8 million as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, we did not recognize credit losses in the unaudited condensed consolidated statements of income on available-for-sale securities with unrealized losses that were due to interest rate sensitivity and changes in credit spreads. We believe that fluctuations caused by movement in interest rates and credit spreads generally have little bearing on the recoverability of our investments. We recognized credit losses in the unaudited condensed consolidated statements of income on available-for-sale securities that are in an unrealized loss position that we have the intent to sell. For those that remain in an unrealized loss position we have the ability to hold these investments until maturity or a market price recovery, and we have no present intention to dispose them. The sharp increase in interest rates over the last 12 months was the primary driver of the increase in unrealized losses on available-for-sale securities.

For the three months ended March 31, 2023 and 2022, we recognized $2.2 million and $(0.1) million, respectively, for credit (gains) losses on available-for-sale securities in the unaudited condensed consolidated statements of income. We recognized credit losses on securities due to: (i) our intent to sell them; (ii) adverse credit events indicating that we will not receive the security’s contractual cash flows when contractually due, such as news of an impending filing for bankruptcy; (iii) analyses of the issuer’s most recent financial statements or other information indicating that significant liquidity deficiencies, significant losses and large declines in capitalization exist; and (iv) analyses of rating agency information for issuances with severe ratings downgrades indicating a significant increase in the possibility of default.

The rollforward of the allowance for credit losses on available-for-sale securities was as follows:


	Three months ended March 31,
	2023		2022
	(In thousands)
Allowance for credit losses, beginning of period	$	-	$	816
Additions to the allowance for credit losses on securities for which credit losses were not previously recorded		-		-
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period		-		(81	)
Write-offs charged against the allowance, if any		-		-
Allowance for credit losses, end of period	$	-	$	735

Derivatives. We carry a deferred loss related to closed forward contracts, which were settled several years ago, that were used to mitigate our exposure to foreign currency exchange rates that resulted from the net investment in our Canadian operations. The amount of deferred loss included in accumulated other comprehensive income was $26.4 million as of March 31, 2023 and December 31, 2022. These deferred losses will not be recognized until such time as we sell or substantially liquidate our Canadian operations. We have no such intention.

(4) Fair Value of Financial Instruments

Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Invested assets recorded at fair value are measured and classified in accordance with a

three-tier fair value hierarchy based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We classify and disclose all invested assets carried at fair value in one of the following three levels:

•

Level 1. Quoted prices for identical instruments in active markets. Level 1 consists of financial instruments whose value is based on quoted market prices in active markets, such as cash, cash equivalents in money market funds, exchange-traded common stocks and actively traded mutual fund investments;

•

Level 2. Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 2 includes those financial instruments that are valued using industry-standard pricing methodologies, models or other valuation methodologies. Various inputs are considered in deriving the fair value of the underlying financial instrument, including interest rate and yield curves, credit spread, and foreign exchange rates. All significant inputs are observable, or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include: cash equivalents and short-term investments in U.S. treasury securities, certain public and private corporate fixed-maturity and equity securities; government or agency securities; and certain mortgage- and asset-backed securities; and

•

Level 3. Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Level 3 consists of financial instruments whose fair value is estimated based on industry-standard pricing methodologies and models using significant inputs not based on, nor corroborated by, readily available market information. Valuations for this category primarily consist of non-binding broker quotes. Financial instruments in this category primarily include less liquid mortgage- and asset-backed securities and equity securities.

As of each reporting period, all assets and liabilities recorded at fair value are classified in their entirety based on the lowest level of input (Level 3 being the lowest in the hierarchy) that is significant to the fair value measurement. Significant levels of estimation and judgment are required to determine the fair value of certain of our investments. The factors influencing these estimations and judgments are subject to change in subsequent reporting periods.

The estimated fair value and hierarchy classifications for assets and liabilities that are measured at fair value on a recurring basis were as follows:


	March 31, 2023
	Level 1		Level 2		Level 3		Total
	(In thousands)
Fair value assets:
Available-for-sale fixed-maturity securities:
U.S. government and agencies	$	-	$	9,431	$	-	$	9,431
Foreign government		-		149,605		-		149,605
States and political subdivisions		-		123,275		-		123,275
Corporates		3,960		1,554,059		-		1,558,019
Mortgage- and asset-backed securities:
Residential mortgage-backed securities		-		408,546		-		408,546
Commercial mortgage-backed securities		-		127,718		-		127,718
Other asset-backed securities		-		179,716		2,316		182,032
Total available-for-sale fixed-maturity securities		3,960		2,552,350		2,316		2,558,626
Short-term investments		-		70,187		-		70,187
Total available-for-sale securities		3,960		2,622,537		2,316		2,628,813
Equity securities		31,305		986		1,693		33,984
Trading securities		-		18,497		-		18,497
Cash and cash equivalents		494,093		20,997		-		515,090
Separate accounts		-		2,329,968		-		2,329,968
Total fair value assets	$	529,358	$	4,992,985	$	4,009	$	5,526,352
Fair value liabilities:
Separate accounts	$	-	$	2,329,968	$	-	$	2,329,968
Total fair value liabilities	$	-	$	2,329,968	$	-	$	2,329,968


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In thousands)
Fair value assets:
Available-for-sale fixed-maturity securities:
U.S. government and agencies	$	-	$	30,468	$	-	$	30,468
Foreign government		-		152,915		-		152,915
States and political subdivisions		-		122,245		-		122,245
Corporates		3,586		1,493,263		-		1,496,849
Mortgage-and asset-backed securities:
Residential mortgage-backed securities		-		401,730		-		401,730
Commercial mortgage-backed securities		-		122,967		-		122,967
Other asset-backed securities		-		168,282		-		168,282
Total available-for-sale fixed-maturity securities		3,586		2,491,870		-		2,495,456
Short-term investments		-		69,406		-		69,406
Total available-for-sale securities		3,586		2,561,276		-		2,564,862
Equity securities		32,727		967		1,710		35,404
Trading securities		-		3,698		-		3,698
Cash and cash equivalents		489,240		-		-		489,240
Separate accounts		-		2,305,717		-		2,305,717
Total fair value assets	$	525,553	$	4,871,658	$	1,710	$	5,398,921
Fair value liabilities:
Separate accounts	$	-	$	2,305,717	$	-	$	2,305,717
Total fair value liabilities	$	-	$	2,305,717	$	-	$	2,305,717

In estimating fair value of our investments, we use a third-party pricing service for approximately all of our securities that are measured at fair value on a recurring basis. The remaining securities are primarily thinly-traded securities, such as private placements, and are valued using models based on observable inputs on public corporate spreads having similar characteristics (e.g., sector, average life and quality rating), liquidity and yield based on quality rating, average life and U.S. Treasury yields. All observable data inputs are corroborated by independent third-party data. We also corroborate pricing information provided by our third-party pricing service by performing a review of selected securities. Our review activities include: obtaining detailed information about the assumptions, inputs and methodologies used in pricing the security; documenting this information; and corroborating it by comparison to independently obtained prices and/or independently developed pricing methodologies.

Furthermore, we perform internal reasonableness assessments on fair value determinations within our portfolio throughout the year and as of year-end, including pricing variance analyses and comparisons to alternative pricing sources and benchmark returns. If a fair value appears unusual relative to these assessments, we will re-examine the inputs and may challenge a fair value assessment made by the pricing service. If there is a known pricing error, we will request a reassessment by the pricing service. If the pricing service is unable to perform the reassessment on a timely basis, we will determine the appropriate price by requesting a reassessment from an alternative pricing service or other qualified source as necessary. We do not adjust quotes or prices except in a rare circumstance to resolve a known error.

Because many fixed-maturity securities do not trade on a daily basis, third-party pricing services generally determine fair value using industry-standard methodologies, which vary by asset class. For corporates, governments, and agency securities, these methodologies include developing prices by incorporating available market information such as U.S. Treasury curves, benchmarking of similar securities including new issues, sector groupings, quotes from market participants and matrix pricing. Observable information is compiled and integrates relevant credit information, perceived market movements and sector news. Additionally, security prices are periodically back-tested to validate and/or refine models as conditions warrant. Market indicators and industry and economic events are also monitored as triggers to obtain additional data. For certain structured securities (such as mortgage- and asset-backed securities) with limited trading activity, third-party pricing services generally use industry-standard pricing methodologies that incorporate market information, such as index prices or discounting expected future cash flows based on underlying collateral, and quotes from market participants, to estimate fair value. If one or more of these input measures are not deemed observable for a particular security, the security will be classified as Level 3 in the fair value hierarchy.

Where specific market information is unavailable for certain securities, pricing models produce estimates of fair value primarily using Level 2 inputs along with certain Level 3 inputs. These models include matrix pricing. The pricing matrix uses current U.S. Treasury rates and credit spreads received from third-party sources to estimate fair value. The credit spreads incorporate the issuer’s industry- or issuer-specific credit characteristics and the security’s time to maturity, if warranted. Remaining unpriced securities are valued using an estimate of fair value based on indicative market prices that include significant unobservable inputs not based on, nor corroborated by, market information, including the utilization of non-binding broker quotes.

The roll-forward of the Level 3 assets measured at fair value on a recurring basis was as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Level 3 assets, beginning of period	$	1,710		$	3,596
Net unrealized gains (losses) included in other comprehensive income		-			(2	)
Realized gains (losses) and accretion (amortization) recognized in earnings		(17	)		(207	)
Purchases		2,316			5,903
Sales		-			-
Settlements		-			-
Transfers into Level 3		-			1,399
Transfers out of Level 3		-			-
Level 3 assets, end of period	$	4,009		$	10,689

We obtain independent pricing quotes based on observable inputs as of the end of the reporting period for all securities in Level 2. Those inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers, quoted prices for similar instruments in markets that are not active, and other relevant data. We monitor these inputs for market indicators, industry and economic events. There were no material transfers between Level 1 and Level 3 during the three months ended March 31, 2023 and 2022.

The carrying values and estimated fair values of our financial instruments were as follows:


	March 31, 2023				December 31, 2022
	Carrying value		Estimated fair value		Carrying value		Estimated fair value
	(In thousands)
Assets:
Fixed-maturity securities (available-for-sale)	$	2,558,626	$	2,558,626	$	2,495,456	$	2,495,456
Fixed-maturity security (held-to-maturity) (3)		1,460,000		1,388,411		1,444,920		1,340,265
Short-term investments (available-for-sale)		70,187		70,187		69,406		69,406
Equity securities		33,984		33,984		35,404		35,404
Trading securities		18,497		18,497		3,698		3,698
Policy loans (3)		37,554		37,554		35,940		35,940
Deposit asset underlying 10% coinsurance agreement (3)		215,871		215,871		224,371		224,371
Separate accounts		2,329,968		2,329,968		2,305,717		2,305,717
Liabilities:
Notes payable (1) (2)	$	593,106	$	496,098	$	592,905	$	491,753
Surplus note (1) (3)		1,459,565		1,380,029		1,444,469		1,333,047
Separate accounts		2,329,968		2,329,968		2,305,717		2,305,717

(1)

Carrying value amounts shown are net of issuance costs.

(2)

Classified as a Level 2 fair value measurement.

(3)

Classified as a Level 3 fair value measurement.

The fair values of financial instruments presented above are estimates of the fair values at a specific point in time using various sources and methods, including market quotations and a complex matrix system that takes into account issuer sector, quality, and spreads in the current marketplace.

Financial Instruments Recognized at Fair Value in the Balance Sheets. Estimated fair values of investments in AFS securities are principally a function of current spreads and interest rates that are corroborated by independent third-party data. Therefore, the fair values presented are indicative of amounts we could realize or settle at the respective balance sheet date. We do not necessarily intend to dispose of or liquidate such instruments prior to maturity. Trading securities and equity securities, including common and nonredeemable preferred stocks, are carried at fair value. Segregated funds in separate accounts are carried at the underlying value of the variable insurance contracts, which is fair value.

The carrying amounts for cash and cash equivalents, trade receivables, accrued investment income, accounts payable, notes payable – short term, cash collateral and payables for security transactions approximate their fair values due to the short-term nature of these instruments. Consequently, such financial instruments are not included in the above table.

(5) Reinsurance

We use reinsurance extensively, which has a significant effect on our results of operations. Reinsurance arrangements do not relieve us of our primary obligation to the policyholder.

Details on in-force life insurance were as follows:


	March 31, 2023			December 31, 2022
	(Dollars in thousands)
Direct life insurance in-force	$	925,084,773		$	919,081,738
Amounts ceded to other companies		(792,325,968	)		(787,907,229	)
Net life insurance in-force	$	132,758,805		$	131,174,509
Percentage of reinsured life insurance in-force		86	%		86	%

Benefits and claims ceded to reinsurers during the three months ended March 31, 2023 and 2022 were $338.9 million and $288.4 million, respectively.

Reinsurance recoverables as of March 31, 2023 and December 31, 2022 include ceded reserve balances, ceded claim liabilities, and ceded claims paid. Reinsurance recoverables and financial strength ratings by reinsurer were as follows:


	March 31, 2023				December 31, 2022
	Reinsurance recoverables			A.M. Best rating	Reinsurance recoverables			A.M. Best rating
	(In thousands)
Swiss Re Life and Health America, Inc. (Novated from Pecan Re Inc.) (1)	$	2,432,148		A+	$	2,403,180		A+
Munich Re of Malta (1) (2)		249,328		NR	$	245,521		NR
American Health and Life Insurance Company (1)		150,874		B++	$	148,573		B++
SCOR Global Life Reinsurance Companies (3)		126,485		A+		121,408		A+
Swiss Re Life & Health America Inc. (4)		44,624		A+		57,439		A+
RGA Reinsurance Company		41,213		A+		47,110		A+
Korean Reinsurance Company		35,602		A		42,169		A
Munich American Reassurance Company		34,942		A+		41,450		A+
Hannover Life Reassurance Company		20,297		A+		18,504		A+
TOA Reinsurance Company		16,938		A		18,043		A
All other reinsurers		30,186		-		35,936		-
Allowance for credit losses		(3,563	)			(2,936	)
Reinsurance recoverables	$	3,179,074			$	3,176,397

NR – not rated

(1)

Reinsurance recoverables includes balances ceded under coinsurance transactions of term life insurance policies that were in-force as of December 31, 2009. Amounts shown are net of their share of the reinsurance recoverables from other reinsurers. Arrangements with these reinsurers include collateral trust agreements held in support of reinsurance recoverables.

(2)

Entity is rated AA- by S&P.

(3)

Includes amounts ceded to Transamerica Reinsurance Companies and fully retroceded to SCOR Global Life Reinsurance Companies.

(4)

Includes amounts ceded to Lincoln National Life Insurance and fully retroceded to Swiss Re Life & Health America Inc.

We estimate and recognize lifetime expected credit losses for reinsurance recoverables. In estimating the allowance for expected credit losses for reinsurance recoverables, we factor in the underlying collateral for reinsurance agreements where available. Specifically, for reinsurers with underlying trust assets, we compare the reinsurance recoverables balance to the underlying trust assets that mitigate the potential exposure to credit losses. We also analyze the financial condition of the reinsurers, as determined by third-party rating agencies, to determine the probability of default for the reinsurers. We then utilize a third-party credit default study to calculate an expected credit loss given default rate or recovery rate. The probability of default and loss given default rates are then applied to the reinsurers’ recoverable balance, while also factoring in any third-party letters of credit that support the reinsurance agreement, in order to calculate our current expected credit loss allowance.

The rollforward of the allowance for credit losses on reinsurance recoverables were as follows:


	Three months ended March 31,
	2023		2022
	(In thousands)
Balance, beginning of period	$	2,936	$	2,942
Current period provision for expected credit losses		627		141
Balance, at the end of period	$	3,563	$	3,083

(6) Deferred Policy Acquisition Costs

The balances and activity in DAC were as follows:


	Three months ended						Year ended
	March 31, 2023						December 31, 2022
	(In thousands)
	Term Life			Segregated Funds (Canada)			Term Life			Segregated Funds (Canada)
Balance, beginning of period	$	3,111,675		$	62,341		$	2,872,816		$	65,411
Capitalization		127,293			1,834			507,834			7,003
Amortization		(65,503	)		(1,493	)		(252,352	)		(5,581	)
Foreign exchange translation and other		830			181			(16,623	)		(4,492	)
Balance, at the end of period	$	3,174,295		$	62,863		$	3,111,675		$	62,341

Reconciliation of DAC by product was as follows:


	March 31, 2023		December 31, 2022
	(In thousands)
Term Life	$	3,174,295	$	3,111,675
Segregated Funds (Canada)		62,863		62,341
Other		19,687		20,013
Total DAC, net	$	3,256,845	$	3,194,029

There were no changes to the judgments, assumptions and methods used to amortize DAC during the three months ended March 31, 2023 and 2022.

(7) Separate Accounts

The following table represents the fair value of assets supporting separate accounts assets by major investment category:


	March 31, 2023			December 31, 2022
	(In thousands)
Fixed-income securities	$	850,880		$	796,384
Equity securities		1,358,331			1,340,541
Cash and cash equivalents		130,713			181,162
Due to/from funds		(9,983	)		(12,399	)
Other		27			29
Total separate accounts assets	$	2,329,968		$	2,305,717

The following table represents the balances of and changes in separate account liabilities:


	Three months ended			Year ended
	March 31, 2023			December 31, 2022
	(In thousands)
Separate account liabilities balance, beginning of period	$	2,305,717		$	2,799,992
Premiums and deposits		77,897			253,982
Surrenders and withdrawals		(108,494	)		(293,278	)
Investment performance		67,262			(202,997	)
Management fees and other charges		(15,140	)		(62,281	)
Foreign exchange translation		2,726			(189,701	)
Separate accounts liabilities balance, end of period	$	2,329,968		$	2,305,717
Cash surrender value	$	2,293,074		$	2,268,436

The cash surrender value represents the amount of the contract holders account balance distributable at the balance sheet date less the Company’s estimate of the deferred sales charges that would be assessed if the policyholders redeemed their contracts at the balance sheet date. This estimate requires the Company to make certain assumptions regarding the underlying account balances by contribution year and application of the contractually defined deferred sales charges that would be applicable to each contribution year.

(8) Policy Claims and Other Benefits Payable

Changes in policy claims incurred and other benefits payable were as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Policy claims and other benefits payable, beginning of period	$	538,250		$	585,382
Less reinsured policy claims and other benefits payable		542,613			638,007
Net balance, beginning of period		(4,363	)		(52,625	)
Incurred related to current year		65,820			77,232
Incurred related to prior years (1)		(2,732	)		(4,547	)
Total incurred		63,088			72,685
Claims paid related to current year, net of reinsured policy claims received		(141,557	)		(161,818	)
Reinsured policy claims received related to prior years, net of claims paid		8,422			64,532
Total paid		(133,135	)		(97,286	)
Foreign currency translation		38			(12	)
Net balance, end of period		(74,372	)		(77,238	)
Add reinsured policy claims and other benefits payable		572,855			652,088
Balance, end of period	$	498,483		$	574,850

(1)

Includes the difference between our estimate of claims incurred but not yet reported as of period-end and the actual incurred claims reported after period-end.

The liability for policy claims and other benefits payable on traditional life insurance products includes estimated unpaid claims that have been reported to us and claims incurred but not yet reported. We estimate claims incurred but not yet reported based on our historical claims activity, adjusted for any current new trends and conditions, and reported lag time experience.

(9) Future Policy Benefits

The following tables summarize balances and changes in the present value of expected net premiums and the present value of expected future policy benefits underlying the LFPB:


	Three months ended			Year ended
	March 31, 2023			December 31, 2022
	(In thousands)
Present Value of Expected Net Premiums	Term Life
Balance at current discount rate, beginning of period	$	13,053,386		$	14,988,852
Balance at original discount rate, beginning of period		13,521,221			12,800,441
Effect of changes in cash flow assumptions		-			26,090
Effect of actual variances from expected experience		(66,059	)		8,653
Adjusted balance, beginning of period		13,455,162			12,835,184
Issuances		465,861			1,892,716
Interest accrual at original discount rate		130,130			486,436
Net premiums collected		(414,681	)		(1,623,000	)
Foreign currency translation		1,326			(70,115	)
Expected net premiums at original discount rate, end of period		13,637,798			13,521,221
Effect of changes in discount rate assumptions		(117,304	)		(467,835	)
Expected net premiums at current discount rate, end of period	$	13,520,494		$	13,053,386

Present Value of Expected Future Policy Benefits
Balance at current discount rate, beginning of period	$	19,143,253		$	23,309,576
Balance at original discount rate, beginning of period		19,706,818			18,991,175
Effect of changes in cash flow assumptions		-			29,915
Effect of actual variances from expected experience		(58,593	)		21,101
Adjusted balance, beginning of period		19,648,225			19,042,191
Issuances		465,885			1,892,730
Interest Accrual at original discount rate		206,814			796,017
Benefit payments		(467,008	)		(1,915,518	)
Foreign currency translation		2,016			(108,602	)
Expected future policy benefits at original discount rate, end of period		19,855,932			19,706,818
Effect of changes in discount rate assumptions		13,498			(563,565	)
Expected future policy benefits at current discount rate, end of period	$	19,869,430		$	19,143,253

LFPB	$	6,348,936		$	6,089,867
Less: reinsurance recoverables		3,154,789			3,153,121
Net LFPB, after reinsurance recoverables	$	3,194,147		$	2,936,746

Weighted-average duration of net LFPB		7.8			7.8

During the three months ended March 31, 2023 and 2022, experience variances resulted in remeasurement gains of $0.5 million and $1.3 million, respectively. The impact of experience variances in persistency and mortality during each period was largely offset by reinsurance. There were no changes to the inputs, judgments, assumptions, and methods used in measuring the LFPB during the three months ended March 31, 2023 and 2022.

For the full year 2022, the remeasurement gain recognized by the Company was $0.5 million. During 2022, a small assumption change was made relating to moving mortality improvement forward one calendar year when the Company reviewed assumptions during the third quarter. The impact of this change in assumption, together with experience variances during 2022, were largely offset by reinsurance.

Losses recognized as a result of capping the net premium ratio at 100% were immaterial during the three months ended March 31, 2023 and 2022.

The following table reconciles the LFPB to the condensed consolidated balance sheets:


	March 31, 2023		December 31, 2022
	(In thousands)
Term Life	$	6,348,936	$	6,089,867
Other		212,688		208,039
Total	$	6,561,624	$	6,297,906

The following table reconciles the reinsurance recoverables to the condensed consolidated balance sheets:


	March 31, 2023		December 31, 2022
	(In thousands)
Term Life	$	3,154,789	$	3,153,121
Other		24,285		23,276
Total	$	3,179,074	$	3,176,397

The amount of discounted (using the original discount rate) and undiscounted expected gross premiums and expected future benefit payments were as follows:


	March 31, 2023				December 31, 2022
	(In thousands)
Term Life
	Undiscounted		Discounted		Undiscounted		Discounted
Expected future benefit payments	$	32,216,059	$	19,869,430	$	31,904,059	$	19,143,253
Expected future gross premiums	$	37,480,296	$	25,902,466	$	37,135,605	$	25,070,802

The amount of revenue and interest recognized in our unaudited condensed consolidated statements of income were as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Term Life
Gross premiums	$	812,880		$	793,254
Interest accretion (expense)	$	(76,684	)	$	(76,496	)

The weighted-average rates were as follows:


	March 31, 2023			December 31, 2022
	(In thousands)
Term Life
Original discount rate		4.95	%		5.00	%
Current discount rate		4.91	%		5.28	%

There were no changes to the methods used to determine the discount rates during the three months ended March 31, 2023 and the twelve months ended December 31, 2022.

(10) Stockholders’ Equity

A reconciliation of the number of shares of our outstanding common stock follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Common stock, beginning of period	$	36,824		$	39,368
Shares issued for stock options exercised		43			-
Shares of common stock issued upon lapse of sales restrictions on restricted stock units (“RSUs”)		129			132
Common stock retired		(589	)		(748	)
Common stock, end of period	$	36,407		$	38,752

The above reconciliation excludes RSUs and performance-based stock units (“PSUs”), which do not have voting rights. As sales restrictions on RSUs lapse and PSUs are earned, we issue common shares with voting rights. As of March 31, 2023, we had a total of 266,601 RSUs and 65,459 PSUs outstanding. The PSU outstanding balance is based on the number of PSUs granted pursuant to the award agreement; however, the actual number of common shares earned could be higher or lower based on actual versus targeted performance. See Note 12 (Share-Based Transactions) for discussion of the PSU award structure.

On November 17, 2022, our Board of Directors authorized a share repurchase program for up to $375.0 million of our outstanding common stock for purchases from January 1, 2023 through December 31, 2023 (the “Share Repurchase Program”). Under the Share Repurchase Program, we repurchased 530,723 shares of our common stock in the open market for an aggregate purchase price of $85.3 million through March 31, 2023. Approximately $289.7 million remains available for repurchases of our outstanding common stock under the Share Repurchase Program as of March 31, 2023.

(11) Earnings Per Share

The Company has outstanding common stock and equity awards that consist of RSUs, PSUs and stock options. The RSUs maintain non-forfeitable dividend rights that result in dividend payment obligations on a one-to-one ratio with common shares for any future dividend declarations.

Unvested RSUs are deemed participating securities for purposes of calculating earnings per share (“EPS”) as they maintain dividend rights. We calculate EPS using the two-class method. Under the two-class method, we allocate earnings to common shares and vested RSUs outstanding for the period. Earnings attributable to unvested participating securities, along with the corresponding share counts, are excluded from EPS as reflected in our unaudited condensed consolidated statements of income.

In calculating basic EPS, we deduct from net income any dividends and undistributed earnings allocated to unvested RSUs and then divide the result by the weighted-average number of common shares and vested RSUs outstanding for the period.

We determine the potential dilutive effect of PSUs and stock options outstanding (“contingently-issuable shares”) on EPS using the treasury-stock method. Under this method, we determine the proceeds that would be received from the issuance of the contingently-issuable shares if the end of the reporting period were the end of the contingency period. The proceeds from the contingently-issuable shares include the remaining unrecognized compensation expense of the awards and the cash received for the exercise price on stock options. We then use the average market price of our common shares during the period the contingently-issuable shares were outstanding to determine how many shares we could repurchase with the proceeds raised from the issuance of the contingently-issuable shares. The net incremental share count issued represents the potential dilutive securities. We then reallocate earnings to common shares and vested RSUs by incorporating the increased fully-diluted share count to determine diluted EPS.

The calculation of basic and diluted EPS was as follows:


	Three months ended March 31,
	2023			2022
	(In thousands, except per-share amounts)
Basic EPS:
Numerator:
Net income attributable to Primerica, Inc.	$	125,106		$	115,039
Income attributable to unvested participating securities		(565	)		(476	)
Net income used in calculating basic EPS	$	124,541		$	114,563
Denominator:
Weighted-average vested shares		36,710			39,221
Basic EPS	$	3.39		$	2.92

Diluted EPS:
Numerator:
Net income attributable to Primerica, Inc.	$	125,106		$	115,039
Income attributable to unvested participating securities		(564	)		(475	)
Net income used in calculating diluted EPS	$	124,542		$	114,564
Denominator:
Weighted-average vested shares		36,710			39,221
Dilutive effect of incremental shares to be issued for contingently-issuable shares		94			111
Weighted-average shares used in calculating diluted EPS		36,804			39,332
Diluted EPS	$	3.38		$	2.91

(12) Share-Based Transactions

The Company has outstanding equity awards under the Primerica, Inc. Second Amended and Restated 2010 Omnibus Incentive Plan (“2010 OIP”), which expired in 2020 in accordance with its terms and under which no future awards will be made, and the Primerica, Inc. 2020 Omnibus Incentive Plan (the “2020 OIP”, and together with the 2010 OIP, the “OIP”), which was approved by the Company’s stockholders on May 13, 2020. The OIP provides for the issuance of equity awards, including stock options, stock appreciation rights, restricted stock, deferred stock, RSUs, PSUs, and stock payment awards, as well as cash-based awards. In addition to time-based vesting requirements, awards granted under the OIP may also be subject to specified performance criteria. Under the OIP, the Company issues equity awards to our management (officers and other key employees), non-employees who serve on our Board of Directors, and sales force leaders. For more information on equity awards granted under the OIP, see Note 14 (Share-Based Transactions) to our consolidated financial statements within our 2022 Annual Report.

In connection with our granting of equity awards to management and members of the Board of Directors, we recognize expense over the requisite service period of the equity award. We defer and amortize the fair value of equity awards granted to the sales force in the same manner as other deferred policy acquisition costs for those awards that are an incremental direct cost of successful acquisitions of life insurance policies that result directly from and are essential to the policy acquisition(s) and would not have been incurred had the policy acquisition(s) not occurred. All equity awards granted to the sales force that are not directly related to the successful acquisition of life insurance policies are recognized as expense as incurred, which is in the quarter granted and earned.

The impact of equity awards granted under the OIP are as follows:


	Three months ended March 31,
	2023		2022
	(In thousands)
Equity awards expense recognized	$	12,125	$	12,181
Equity awards expense deferred		2,523		2,377

On February 28, 2023, the Compensation Committee of our Board of Directors granted the following equity awards to employees as part of the annual approval of management incentive compensation:

•

55,137 RSUs awarded to management with a measurement-date fair value of $185.24 per unit that have time-based vesting requirements with equal and annual graded vesting over approximately three years subsequent to the grant date.

•

17,139 PSUs awarded to our four top executives with a measurement-date fair value of $185.24 per unit. The PSUs will be earned on March 1, 2026 contingent upon the Company achieving a targeted annual average three-year return on adjusted equity (“ROAE”) and average EPS growth for the period from January 1, 2023 through December 31, 2025. The actual number of common shares that will be earned will vary based on the actual ROAE and average EPS growth relative to the targeted ROAE and average EPS growth and can range from zero to 25,708 shares.

All awards granted to employees on February 28, 2023 vest upon voluntary termination of employment by any employee who is “retirement eligible” as of his or her termination date. In order to be retirement eligible, an employee must be at least 55 years old and his or her age plus years of service with the Company must equal at least 75. The number of PSUs that will ultimately be earned for a retirement eligible employee is equal to the amount calculated using the Company’s actual cumulative three-year ROAE and average EPS growth for the performance period ending on December 31, 2025, even if that employee retires prior to the completion of the three-year performance period.

(13) Commitments and Contingent Liabilities

Letter of Credit (“LOC”). Peach Re maintains a credit facility agreement with Deutsche Bank (the “Credit Facility Agreement”) to support certain obligations for a portion of the Regulation XXX reserves related to the Peach Re Coinsurance Agreement. Under the Credit Facility Agreement, Deutsche Bank issued a letter of credit for the benefit of Primerica Life with a term expiring on December 31, 2025. As of March 31, 2023, the amount of the LOC outstanding was $80.4 million. This amount will decline over the remaining term of the LOC to correspond with declines in the Regulation XXX reserves. As of March 31, 2023, the Company was in compliance with all financial covenants under the Credit Facility Agreement.

Further discussion on the Company’s LOC is included in Note 16 (Commitments and Contingent Liabilities) to our consolidated financial statements within our 2022 Annual Report.

Contingent Liabilities. The Company is involved from time to time in legal disputes, regulatory inquiries and arbitration proceedings in the normal course of business. These disputes are subject to uncertainties, including the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation. As such, the Company is unable to estimate the possible loss or range of loss that may result from these matters unless otherwise indicated.

(14) Other Comprehensive Income

The components of other comprehensive income (“OCI”), including the income tax expense or benefit allocated to each component, were as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Foreign currency translation adjustments:
Change in unrealized foreign currency translation gains (losses) before income taxes	$	998		$	3,289
Income tax expense (benefit) on unrealized foreign currency translation gains (losses)		-			-
Change in unrealized foreign currency translation gains (losses), net of income taxes	$	998		$	3,289
Unrealized gain (losses) on available-for-sale securities:
Change in unrealized holding gains (losses) arising during period before income taxes	$	38,549		$	(164,937	)
Income tax expense (benefit) on unrealized holding gains (losses) arising during period		8,316			(35,241	)
Change in unrealized holding gains (losses) on available-for-sale securities arising during period, net of income taxes		30,233			(129,696	)

Reclassification from accumulated OCI to net income for (gains) losses realized on available-for-sale securities		3,137			(658	)
Income tax (expense) benefit on (gains) losses reclassified from accumulated OCI to net income		659			(138	)
Reclassification from accumulated OCI to net income for (gains) losses realized on available-for-sale securities, net of income taxes		2,478			(520	)
Change in unrealized gains (losses) on available-for-sale securities, net of income taxes and reclassification adjustment	$	32,711		$	(130,216	)
Effect of change in discount rate assumptions on the LFPB:
Change in effect in discount rate assumptions on the LFPB before income taxes	$	(182,045	)	$	821,904
Income tax (expense) benefit on the effect of change in discount rate assumptions on the LFPB from accumulated OCI to net income		(39,071	)		175,763
Change in effect in discount rate assumptions on the LFPB, net of income taxes	$	(142,974	)	$	646,141

(15) Debt

Notes Payable. As of March 31, 2023, the Company had outstanding $600.0 million of publicly-traded, senior unsecured notes (the “Senior Notes”), with an annual interest rate of 2.80% that are scheduled to mature on November 19, 2031. As of March 31, 2023, we

were in compliance with the covenants of the Senior Notes. No events of default occurred on the Senior Notes during the three months ended March 31, 2023.

Further discussion on the Company’s Senior Notes is included in Note 10 (Debt) to our consolidated financial statements within our 2022 Annual Report.

Surplus Note. As of March 31, 2023, the principal amount outstanding on the Surplus Note issued by Vidalia Re was $1.46 billion, which is equal to the principal amount of the LLC Note. The principal amount of both the Surplus Note and the LLC Note will fluctuate over time to coincide with the amount of policy reserves being contractually supported under the Vidalia Re Coinsurance Agreement. Both the LLC Note and the Surplus Note mature on December 31, 2030 and bear interest at an annual interest rate of 4.50%. Based on the estimated reserves for policies issued in 2011 through 2017 that have been ceded under the Vidalia Re Coinsurance Agreement, the principal amounts of the Surplus Note and the LLC Note are expected to reach $1.5 billion each. This financing arrangement is non-recourse to the Parent Company and Primerica Life, meaning that neither of these companies has guaranteed the Surplus Note or is otherwise liable for reimbursement for any payments triggered by the LLC Note’s credit enhancement feature. The Parent Company has agreed to support Vidalia Re’s obligation to pay the credit enhancement fee incurred on the LLC Note.

Further discussion on the Company’s LLC Note is included in Note 3 (Investments).

Revolving Credit Facility. We maintain an unsecured $200.0 million revolving credit facility (“Revolving Credit Facility”) with a syndicate of commercial banks. The Revolving Credit Facility has a scheduled termination date of June 22, 2026. Amounts outstanding under the Revolving Credit Facility are borrowed, at our discretion, on the basis of either a Secured Overnight Financing Rate (“SOFR”) rate loan, or a base rate loan. SOFR rate loans bear interest at a periodic rate equal to one-, three-, or six-month Adjusted Term SOFR, plus an applicable margin. Base rate loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) one-month Adjusted Term SOFR plus 1.00%, plus an applicable margin. The Revolving Credit Facility also permits the issuance of letters of credit. The applicable margins are based on our debt rating with such margins for SOFR rate loans and letters of credit ranging from 1.00% to 1.625% per annum and for base rate loans ranging from 0.00% to 0.625% per annum. Under the Revolving Credit Facility, we incur a commitment fee that is payable quarterly in arrears and is determined by our debt rating. This commitment fee ranges from 0.10% to 0.225% per annum of the aggregate amount of the $200.0 million commitment of the lenders under the Revolving Credit Facility that remains undrawn. During the three months ended March 31, 2023, no amounts were outstanding under the Revolving Credit Facility and we were in compliance with its covenants. Furthermore, no events of default occurred under the Revolving Credit Facility during the three months ended March 31, 2023.

(16) Revenue from Contracts with Customers

Our revenues from contracts with customers primarily include:

•

Commissions and fees earned for the marketing and distribution of investment and savings products underwritten by mutual fund companies and annuity providers. For purposes of revenue recognition, mutual fund companies and annuity providers are considered the customers in marketing and distribution arrangements;

•

Fees earned for investment advisory and administrative services within our managed investments program and shareholder services fees earned in Canada for mutual funds for which we serve as principal distributor;

•

Account-based fees for transfer agent recordkeeping functions and non-bank custodial services;

•

Commissions and fees earned from the distribution of Medicare-related insurance products on behalf of health insurance carriers, including tail revenue adjustments;

•

Marketing development revenues earned for selling Medicare-related insurance products on behalf of health insurance carriers, which is recorded in Other, net revenue;

•

Fees associated with mortgage distribution and the distribution of other third-party financial products; and

•

Other revenue from the sale of miscellaneous products and services including monthly subscription fees from the sales representatives for access to Primerica Online, our primary sales force support tool.

Premiums from insurance contracts we underwrite, fees received from segregated funds insurance contracts, and income earned on our invested assets are excluded from the definition of revenues from contracts with customers in accordance with U.S. GAAP.

Further discussion on the Company’s revenues from contracts with customers and revenue recognition policies are included in Note 18 (Revenue from Contracts with Customers) to our consolidated financial statements within our 2022 Annual Report.

The disaggregation of our revenues from contracts with customers were as follows:


	Three months ended March 31,
	2023		2022
	(In thousands)
Term Life Insurance segment revenues:
Other, net	$	12,233	$	12,175
Total segment revenues from contracts with customers		12,233		12,175
Revenues from sources other than contracts with customers		408,836		394,808
Total Term Life Insurance segment revenues	$	421,069	$	406,983

Investment and Savings Products segment revenues:
Commissions and fees
Sales-based revenues	$	72,388	$	103,242
Asset-based revenues		98,104		97,355
Account-based revenues		22,790		21,541
Other, net		3,120		3,144
Total segment revenues from contracts with customers		196,402		225,282
Revenues from sources other than contracts with customers (segregated funds)		13,800		15,757
Total Investment and Savings Products segment revenues	$	210,202	$	241,039

Senior Health segment revenues:
Commissions and fees	$	15,755	$	1,278
Other, net		2,955		4,553
Total Senior Health segment revenues	$	18,710	$	5,831

Corporate and Other Distributed Products segment revenues:
Commissions and fees	$	8,710	$	12,627
Other, net		1,199		1,117
Total segment revenues from contracts with customers		9,909		13,744
Revenues from sources other than contracts with customers		30,146		23,629
Total Corporate and Other Distributed Products segment revenues	$	40,055	$	37,373

Renewal Commissions Receivable. For revenue associated with ongoing renewal commissions in the Senior Health and Corporate and Other Distributed Products segments, we record a renewal commission receivable asset for the amount of ongoing renewal commissions we anticipate collecting in reporting periods subsequent to the satisfaction of the performance obligation, less amounts that are constrained in the accompanying unaudited condensed consolidated balance sheets. We update our estimate of variable consideration each period and new facts or circumstances that were not available at the time of the initial estimate will indicate that the expected renewal commissions are higher or lower than our renewal commissions receivable. As such, the expected renewal commissions receivable will be written down or up to its revised expected value by adjustments to revenue, which we refer to as tail revenue adjustments. During the three months ended March 31, 2023, no tail revenue adjustments were recognized based on our current estimates.

Activity in the Renewal commissions receivable account was as follows:


	Three months ended March 31,
	2023			2022
	(In thousands)
Senior Health segment:
Balance, beginning of period	$	139,399		$	172,308
Commissions revenue		9,062			12,849
Less: collections		(14,262	)		(12,314	)
Tail revenue adjustments from change in estimate		-			(19,060	)
Balance, at the end of period	$	134,199		$	153,783

Corporate and Other Distributed Products segments:
Balance, beginning of period	$	60,644		$	59,443
Commissions revenue		5,370			5,643
Less: collections		(5,804	)		(5,694	)
Balance, at the end of period	$	60,210		$	59,392

Incremental costs to obtain or fulfill contracts, most notably sales commissions to the sales representatives, are not incurred prior to the recognition of the related revenue. Therefore, we have no assets recognized for incremental costs to obtain or fulfill contracts.

(17) Goodwill

Goodwill represents the excess of the purchase price over the estimated acquired values of identifiable assets and liabilities acquired in a business combination. In accordance with U.S. GAAP, goodwill is not amortized. The Company tests goodwill for impairment annually on July 1 and whenever events occur or circumstances change that would indicate the carrying value of goodwill may be impaired. All of the Company’s goodwill was obtained from the acquisition of the e-TeleQuote business, which has been designated as a separate operating segment called Senior Health. Therefore, goodwill has been allocated solely to the Senior Health segment and is evaluated for impairment at the Senior Health segment level, which is also defined as the reporting unit.

At March 31, 2023, the Company recognized goodwill of $127.7 million in its Senior Health reporting unit after accumulated

goodwill impairment charges of $136.0 million. There was no change in the goodwill balance during the three months ended March 31, 2023.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to inform the reader about matters affecting the financial condition and results of operations of Primerica, Inc. (the “Parent Company”) and its subsidiaries (collectively, “we”, “us” or the “Company”) for the period from December 31, 2022 to March 31, 2023. As a result, the following discussion should be read in conjunction with MD&A and the consolidated financial statements and notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Annual Report”). This discussion contains forward-looking statements that constitute our plans, estimates and beliefs. These forward-looking statements involve numerous risks and uncertainties, including, but not limited to, those discussed under the heading “Risk Factors” in the 2022 Annual Report and in Item 1A of this Report. Actual results may differ materially from those contained in any forward-looking statements.

This MD&A is divided into the following sections:

•

Business Overview

•

Business Trends and Conditions

•

Factors Affecting Our Results

•

Critical Accounting Estimates

•

Results of Operations

•

Financial Condition

•

Liquidity and Capital Resources

Business Overview

We are a leading provider of financial products 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.

The Company adopted Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944) — Targeted Improvements to the Accounting for Long-Duration Contracts (“LDTI”) on January 1, 2023. The amendments in LDTI change accounting guidance for insurance companies that issue long-duration contracts, such as term life insurance and segregated funds products. All prior period financial information has been restated as of January 1, 2021 (the “Transition Date”). See Note 1 (Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies) to our condensed consolidated financial statements included elsewhere in this report for more information about the adoption of LDTI.

Term Life Insurance. We distribute the term life insurance products that we underwrite through our three issuing life insurance company subsidiaries: Primerica Life Insurance Company (“Primerica Life”), National Benefit Life Insurance Company (“NBLIC”), and Primerica Life Insurance Company of Canada (“Primerica Life Canada”). Policies remain in-force until the expiration of the coverage period or until the policyholder ceases to make premium payments. Our in-force term life insurance policies have level premiums for the stated term period. As such, the policyholder pays the same amount each year. Initial policy term periods are between 10 and 35 years. While premiums typically remain level during the initial term period, our claim obligations generally increase as our policyholders age. In addition, we incur significant upfront costs in acquiring new insurance business.

Investment and Savings Products. In the United States, we distribute mutual funds, managed investments, variable annuity, and fixed annuity products of several third-party companies. We provide investment advisory and administrative services for client assets invested in our managed investments program. We also perform distinct transfer agent recordkeeping services and non-bank custodial services for investors purchasing certain mutual funds we distribute. In Canada, we offer mutual funds of other companies and segregated funds, which are underwritten by Primerica Life Canada.

Senior Health. In the United States, we distribute Medicare-related insurance products nationwide to eligible Medicare participants and enroll them in coverage utilizing licensed health insurance agents through our e-TeleQuote, Inc. subsidiary ("e-TeleQuote"). 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 upfront 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 health insurance carriers in the form of initial commissions when eligible Medicare participants are enrolled and renewal commissions, upon the anniversary of the effective date, for as long as policies remain in-force.

Corporate and Other Distributed Products. The Corporate and Other Distributed Products segment consists primarily of revenues and expenses related to other distributed products, including closed blocks of various insurance products underwritten by NBLIC, prepaid legal services, mortgage originations, and other financial products. These products, except for closed blocks of various insurance products underwritten by NBLIC, are distributed pursuant to distribution arrangements with third-party companies through the independent sales force. Net investment income earned on our invested asset portfolio is recorded in the Corporate and Other Distributed Products segment. Interest expense incurred by the Company is attributed solely to the Corporate and Other Distributed Products segment.

Business Trends and Conditions

The relative strength and stability of 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.

The financial and distribution results of our operations in Canada, as reported in U.S. dollars, are affected by changes in the currency exchange rate. As a result, changes in the Canadian dollar exchange rate may significantly affect the result of our business for all amounts translated and reported in U.S. dollars.

Significant volatility in capital markets in recent periods has continued to impact our business. Declines in the capital markets during 2022 continued to adversely impact revenue generated by the Investments and Savings Products segment in the first quarter of 2023. In addition, the sharp rise in market interest rates during 2022 has driven unrealized losses 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.

Inflation remained elevated from historical levels during the first quarter of 2023, which led to an increased cost of living for middle-income families. Continued elevated inflation could impact demand for our products.

Certain year-over-year comparisons are impacted by the effects of the COVID-19 pandemic (“COVID-19”). Results during the first quarter of 2022 reflect the continued effects of COVID-19, namely strong policyholder persistency and elevated claims activity in our Term Life Insurance segment. Subsequent to the first quarter of 2022, persistency and claims trends have returned to pre-COVID-19 levels.

The effects of these trends and conditions on our quarterly results are discussed below in the Results of Operations and Financial Condition sections.

Size of the Independent Sales Force.

Our ability to increase the size of the independent sales force (“independent sales representatives” or “independent sales force”) is largely based on the success of the sales force’s recruiting efforts as well as training and motivating recruits to get licensed to sell life insurance. We believe that recruitment and licensing levels are important to independent sales force trends, and growth in recruiting and licensing is usually indicative of future growth in the overall size of the independent sales force. Recruiting changes do not always result in commensurate changes in the size of the licensed independent sales force because new recruits may obtain the requisite licenses at rates above or below historical levels.

Details on recruiting and life-licensed independent sales representative activity were as follows:


	Three months ended March 31,
	2023		2022
New recruits		93,540		84,707
New life-licensed independent sales representatives		11,118		9,983
Life-licensed independent sales representatives, at period end		136,430		130,206

The number of new recruits increased during the three months ended March 31, 2023 compared to the same period in 2022 primarily due to strong recruiting efforts during 2023 as the Company continues to see a high degree of interest from people who are attracted to the flexibility of its business opportunity.

New life-licensed sales representatives increased during the three months ended March 31, 2023 compared to the same period in 2022 primarily as the Company and field leaders remained focused on licensing rates and continued to see the benefits of improvements to the licensing process. These improvements included new licensing progress-tracking tools and additional in-person licensing classes.

The number of life-licensed independent sales representatives grew to 136,430 as of March 31, 2023 and reflects recent improvements to the licensing process and higher recruiting volume as discussed above.

Term Life Insurance Product Sales and Face Amount In-Force.

The average number of life-licensed independent sales representatives and the number of term life insurance policies issued, as well as the average monthly rate of new policies issued per life-licensed independent sales representative (historically (1) between 0.20 and 0.24), were as follows:


	Three months ended March 31,
	2023		2022		Adjusted 2022
Average number of life-licensed independent sales representatives		135,366		129,494		129,494
Number of new policies issued (1)		84,561		71,324		83,050
Average monthly rate of new policies issued per life-licensed (1) independent sales representative		0.21		0.18		0.21

(1) The previously reported number of new policies issued and average monthly rate of new policies issued per life-licensed independent sales representatives has been adjusted for the three months ended March 31, 2022 for comparability purposes as a result of our new generation of life insurance products introduced in October 2022, which modified how policies are structured in relation to individual lives. Historically, two adult lives could be covered under a single policy by adding a spouse rider. To better align risk and pricing in our new life insurance products, we eliminated this rider and now sell a separate policy for each insured life. Results for the three months ended March 31, 2023 reflect additional policies issued to reflect the spouse rider with a separate policy in the new life insurance products. To make year-over year comparisons more consistent, we have provided an estimate for the three months ended March 31, 2022.

Average number of life-licensed independent sales representatives increased for the three months ended March 31, 2023 from the same period in 2022 as a result of continued improvements made to the licensing process and elevated recruiting volume discussed above.

New policies issued during the three months ended March 31, 2023 increased slightly compared to the same period in 2022 as a result of continued growth in the sales force and the launch of our new life insurance products, which occurred in late 2022.

Productivity in the three months ended March 31, 2023, measured by the average monthly rate of new policies issued per life-licensed independent sales representative, remained within our historical range.

The changes in the face amount of our in-force book of term life insurance policies were as follows:


	Three months ended March 31,
	2023			% of beginning balance			2022			% of beginning balance
	(Dollars in millions)
Face amount in force, beginning of period	$	916,808					$	903,404
Net change in face amount:
Issued face amount		28,124			3	%		24,773			3	%
Terminations		(22,211	)		(2	)%		(19,787	)		(2	)%
Foreign currency		124		*				1,242		*
Net change in face amount		6,037		*				6,228			1	%
Face amount in force, end of period	$	922,845					$	909,632

* Less than 1%.

The face amount of term life policies in-force increased for the three months ended March 31, 2023 as the level of face amount issued continued to exceed the face amount terminated. Issued face amount during the three months ended March 31, 2023 increased due to an increase in both the number of new policies issued and higher average face amounts per policy. Policy terminations were higher during the three months ended March 31, 2023 as persistency returned to pre-COVID-19 pandemic levels. In addition, higher cost of living on middle income families may have contributed to higher terminations.

Investment and Savings Product Sales, Asset Values and Accounts/Positions.

Investment and savings product sales and average client asset values were as follows:


	Three months ended March 31,				Change
	2023		2022		$			%
	(Dollars in millions)
Product sales:
U.S. Retail mutual funds	$	972	$	1,298	$	(326	)		(25	)%
Canada retail mutual funds - with upfront sales commissions		150		438		(288	)		(66	)%
Annuities and other		637		726		(89	)		(12	)%
Total sales-based revenue generating product sales		1,759		2,462		(703	)		(29	)%
Managed investments		306		454		(148	)		(33	)%
Canada retail mutual funds - no upfront sales commissions		183		82		101			124	%
Segregated funds		52		68		(16	)		(24	)%
Total product sales	$	2,300	$	3,066	$	(766	)		(25	)%
Average client asset values:
Retail mutual funds	$	53,442	$	58,548	$	(5,106	)		(9	)%
Annuities and other		23,473		25,868		(2,395	)		(9	)%
Managed investments		7,338		7,077		261			4	%
Segregated funds		2,329		2,710		(381	)		(14	)%
Total average client asset values	$	86,582	$	94,203	$	(7,621	)		(8	)%

The rollforward of asset values in client accounts was as follows:


	Three months ended March 31,
	2023			% of beginning balance			2022			% of beginning balance
	(Dollars in millions)
Asset values, beginning of period	$	83,949					$	97,312
Net change in asset values:
Inflows		2,300			3	%		3,066			3	%
Redemptions		(1,658	)		(2	)%		(1,900	)		(2	)%
Net flows		642		*				1,166			1	%
Change in fair value, net		3,014			4	%		(4,941	)		(5	)%
Foreign currency, net		16		*				171		*
Net change in asset values		3,672			4	%		(3,604	)		(4	)%
Asset values, end of period	$	87,621					$	93,708

* Less than 1%.

Average number of fee-generating positions was as follows:


	Three months ended March 31,				Change
	2023		2022		Positions		%
	(Positions in thousands)
Average number of fee-generating positions (1):
Recordkeeping and custodial		2,316		2,243		73		3	%
Recordkeeping only		829		797		32		4	%
Total average number of fee-generating positions		3,145		3,040		105		3	%

(1)

We receive transfer agent recordkeeping fees by mutual fund positions. An individual client account may include multiple mutual fund positions. We may also receive fees, which are earned on a per account basis, for custodial services that we provide to clients with retirement plan accounts that hold positions in these mutual funds.

Changes in Investment and Savings Product Sales, Asset Values and Accounts/Positions During the Three Months Ended March 31, 2023

Product sales. Investment and savings product sales decreased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 led by lower sales of investment and savings products as investor demand deteriorated due to the lingering effects of equity market volatility during 2022. By comparison, product sales during the three months ended March 31, 2022 reflected strong demand that followed positive equity market returns during 2021.

Average client asset values. Average client asset values decreased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to negative equity market conditions leading into 2023, which yielded a lower average asset base. Net flows remained positive for the first quarter of 2023.

Rollforward of client asset values. Ending client asset values decreased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to negative equity market performance leading into 2023, which led to lower beginning asset values. During the three months ended March 31, 2023, equity markets performance appreciated slightly. Net flows remained positive for the first quarter of 2023.

Average number of fee-generating positions. The average number of fee-generating positions increased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 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.

Senior Health Key Performance Indicators.

Submitted Policies and Approved Policies and Policies Sourced by Primerica Independent Sales Representatives

Submitted policies. Submitted policies represent the number of completed applications that, with respect to each application, the applicant has authorized e-TeleQuote to submit to the health insurance carrier. The applicant may need to take additional action, including providing subsequent information, before the application is reviewed by the health insurance carrier.

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.

Policies sourced by Primerica Independent Sales Representatives. Primerica independent sales representatives are eligible to refer Medicare participants to e-TeleQuote licensed 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 by e-TeleQuote sourced from 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.

The number of Senior Health submitted policies and approved policies were as follows:


	Three months ended March 31,
	2023		2022
Number of Senior Health submitted policies		19,826		26,231
Number of Senior Health approved policies		18,413		23,594
Submitted policies sourced by Primerica independent sales representatives		2,073		988

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 15th to December 7th. We also experience seasonally higher demand in the first quarter due to the Medicare Open Enrollment Period from January 1st to March 31st, 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 participants 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.

During the three months ended March 31, 2023, the volume of submitted and approved policies reflects the Company’s efforts to control growth in favor of developing more efficient lead procurement and conversion. Approved policies as a percentage of submitted policies increased during the three months ended March 31, 2023 due to a higher conversion rate of policies submitted in 2023. The increase in the conversion rate of submitted policies is largely due to a higher mix of policies submitted by Primerica independent sales representatives as well as having a greater concentration of more tenured agents in e-TeleQuote's employee agent population.

For the three months ended March 31, 2023, the number of submitted policies sourced by Primerica Senior Health certified independent sales representatives increased compared to the same period in 2022 primarily due to the increasing maturity of the Primerica referral program that has achieved greater participation by Primerica independent sales representatives.

Lifetime Value of Commissions and Contract Acquisition Costs

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 18 (Revenue from Contracts with Customers) of our consolidated financial statements within our 2022 Annual Report and the Factors Affecting our Results – Senior Health Segment section of MD&A included elsewhere in this 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 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. 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 carrier, we incur the entire cost of approved policies prior to enrollment and prior to receiving our first commission-related payment.

Per policy metrics for LTV and CAC measure our ability to profitably distribute Senior Health insurance products.

The LTV per approved policy, CAC per approved policy, and ratio of LTV to CAC per approved policy were as follows:


	Three months ended March 31,
	2023		2022
LTV per approved policy during the period	$	856		862
CAC per approved policy during the period	$	814		875
LTV/CAC per approved policy		1.05		0.98

LTV per approved policy reflects current estimates for renewal rates, policy retention and chargeback activity taking into consideration the most recent experience through March 31, 2023. LTV per approved policy remained relatively consistent during the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

The reduction in CAC per approved policy during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by lower agent counts with a higher concentration of tenured agents, which resulted in lower per unit labor costs and greater lead conversion efficiency.

Regulatory Changes.

Worker classification standards. There has been a trend toward administrative and legislative activity around worker classification. For example, in January 2021, the Department of Labor (“DOL”) under the prior presidential administration issued a rulemaking interpreting the “economic realities” worker classification standard applicable to the Fair Labor Standards Act (“FLSA”). In October 2022, the DOL under the current presidential administration proposed a new rule that would rescind the 2021 rule and replace it with its own interpretation of the “economic realities” standard under the FLSA. Other federal and state legislative and regulatory proposals regarding worker classification have also come under consideration. It is difficult to predict what the outcome of worker classification activity may be. Changes to worker classification laws could impact our business as sales representatives (other than those hired by e-TeleQuote) are independent contractors.

Restrictions on compensation models in Canada. During 2022, in response to regulatory changes in Canada, we developed a set of mutual fund products with two third-party mutual fund companies that are sold exclusively by our independent sales representatives (the “Principal Distributor funds”). The revenue we receive is primarily in the form of asset-based distribution fees from the mutual fund companies and asset-based service fees that are charged to investors. In turn, the primary compensation we offer independent sales representatives is the option of an upfront sales commission or higher asset-based commissions over time. Although we received the requisite approval, the organization of provincial and territorial securities commissions throughout Canada (collectively referred to as the “Canadian Securities Administrators” or “CSA”) has indicated that it intends to closely examine the model, including potentially through a public consultation on sales practices, and may require undertakings or consider future amendments that would require modifications to the model, including with respect to its upfront commission features. At this time, we cannot quantify the financial impact, if any, of future changes to our business that may be necessary if our Principal Distributor funds model is required to be modified or discontinued. During the three months ended March 31, 2023, Canadian mutual funds represented approximately 14% of our total investment and savings product sales and approximately 13% of our average client asset values.

Insurance regulators in Canada have indicated that a cessation of deferred sales charges on segregated fund contracts entered into after May 31, 2023 will go into effect as previously announced. We currently expect that deferred sales charges will continue to be allowed on subsequent deposits of existing segregated funds contracts for a period of time, however, insurance regulators will be further evaluating whether to allow this continued use. Currently, our Canadian segregated funds products are primarily sold on a deferred sales charge basis and we pay upfront commissions to the independent sales representatives for the sale of these products. At this time, without further clarity from regulators on allowable segregated funds compensation practices, we expect a decline in segregated funds product sales beginning in June 2023. We earn revenue from Canadian segregated funds products based on a percentage of client assets under management. During the three months ended March 31, 2023, Canadian segregated funds represented approximately 2% of our total investment and savings product sales and approximately 3% of our average client asset values.

Factors Affecting Our Results

Term Life Insurance Segment. The Term Life Insurance segment results are primarily driven by sales volumes, how closely actual experience matches our actuarial assumptions, terms and use of reinsurance, and expenses.

Sales and policies in-force. Sales of term policies and the size and characteristics of our in-force book of policies are vital to our results over the long term. Premium revenue is recognized as it is earned over the term of the policy. However, because we incur significant cash outflows at or about the time policies are issued, including the payment of sales commissions and underwriting costs, changes in life insurance sales volume in a period will have a more immediate impact on our cash flows than on revenue.

Historically, we have found that while sales volume of term life insurance products between fiscal periods may vary based on a variety of factors, the productivity of sales representatives generally remains within a range (i.e., an average monthly rate of new policies issued per life-licensed independent sales representative between 0.20 and 0.24). The volume of term life insurance products sales will fluctuate in the short term, but over the longer term, our sales volume generally correlates to the size of the independent sales force.

Actuarial assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of mortality, persistency, and disability. 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 DAC.

•

Persistency. Persistency is a measure of how long our insurance policies stay in-force. As a general matter, persistency that is lower than our actuarial assumptions adversely affects our results over the long term because we lose the recurring revenue stream associated with the policies that lapse. In general, persistency differences have a minimal impact on our financial results from period to period since deferred policy acquisition costs (“DAC”) is generally amortized on a straight-line basis and the unlocking of the LFPB adjusts both expected net premiums and expected future policy benefits and spreads any variances over the remaining contract period.

•

Mortality. Our profitability will fluctuate to the extent actual mortality rates differ from actuarial assumptions. We mitigate a significant portion of our mortality exposure through reinsurance. Long term mortality variances that result in an assumption change may have a significant impact on our financial results.

•

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.

•

Interest Rates. We use a locked-in assumption for future interest rates for reserves underlying our segment results. Policies issued prior to the Transition Date use an interest rate that reflects the portfolio’s current reinvestment rate while policies issued on or after the Transition Date use an upper-medium grade fixed income instrument yield during the period of issue.

Reinsurance. We use reinsurance extensively, which has a significant effect on our results of operations. We have generally reinsured between 80% and 90% of the mortality risk on term life insurance (excluding coverage under certain riders) on a quota share YRT basis. To the extent actual mortality experience is more or less favorable than the contractual rate, the reinsurer will earn incremental profits or bear the incremental cost, as applicable. In contrast to coinsurance, which is intended to eliminate all risks (other than counterparty risk of the reinsurer) and rewards associated with a specified percentage of the block of policies subject to the reinsurance arrangement, the YRT reinsurance arrangements we enter into are intended only to reduce volatility associated with variances between estimated and actual mortality rates.

In 2010, as part of our corporate reorganization and the initial public offering of our common stock, we entered into significant coinsurance transactions (the “IPO coinsurance transactions”) with entities then affiliated with Citigroup, Inc. (collectively, the “IPO coinsurers”) and ceded between 80% and 90% of the risks and rewards of term life insurance policies that were in-force at year-end 2009. We administer all such policies subject to these coinsurance agreements. Policies reaching the end of their initial level term period are no longer ceded under the IPO coinsurance transactions.

The effect of our reinsurance arrangements on ceded premiums and benefits and expenses on our statements of income follows:

•

Ceded premiums. Ceded premiums are the premiums we pay to reinsurers. These amounts are deducted from the direct premiums we earn to calculate our net premium revenues. Similar to direct premium revenues, ceded coinsurance premiums remain level over the initial term of the insurance policy. Ceded YRT premiums increase over the period that the policy has been in-force. Accordingly, ceded YRT premiums generally constitute an increasing percentage of direct premiums over the policy term.

•

Benefits and claims. Benefits and claims include incurred claim amounts and changes in future policy benefit reserves. Reinsurance reduces incurred claims in direct proportion to the percentage ceded and reinsurance cash flows are reflected in the ceded reserves underlying reinsurance recoverables that are an offset to the LFPB.

•

Insurance expenses. Insurance expenses are reduced by the allowances received from coinsurance. There is no impact on insurance expenses associated with our YRT contracts.

We may alter our reinsurance practices at any time due to the unavailability of YRT reinsurance at attractive rates or the availability of alternatives to reduce our risk exposure. We presently intend to continue ceding approximately 90% of our U.S. and Canadian mortality risk on new business.

Expenses. Results are also affected by variances in client acquisition, maintenance and administration expense levels.

Investment and Savings Products Segment. The Investment and Savings Products segment results are primarily driven by sales, the value of assets in client accounts for which we earn ongoing management, marketing and support, and distribution fees, and the number of transfer agent recordkeeping positions and non-bank custodial fee-generating accounts we administer.

Sales. We earn commissions and fees, such as dealer re-allowances and marketing and distribution fees, based on sales of mutual fund products and annuities in the United States and sales of certain mutual fund products in Canada. Sales of investment and savings products are influenced by the overall demand for investment products in the United States and Canada, as well as by the size and productivity of the independent sales force. We generally experience seasonality in the Investment and Savings Products segment results due to our high concentration of sales of retirement account products. These accounts are typically funded in February through April, coincident with our clients’ tax return preparation season. While we believe the size of the independent sales force is a factor in driving sales volume in this segment, there are a number of other variables, such as economic and market conditions, which may have a significantly greater effect on sales volume in any given fiscal period.

Asset values in client accounts. We earn marketing and distribution fees (trail commissions or, with respect to U.S. mutual funds, 12b-1 fees) on mutual fund and annuity assets in the United States and Canada. In the United States, we also earn investment advisory and administrative fees on assets in managed investments. In Canada, we earn marketing, distribution, and shareholder services fees on mutual fund assets for which we serve as the principal distributor and management fees on the segregated funds for which we serve as investment manager. Asset values are influenced by new product sales, ongoing contributions to existing accounts, redemptions and the change in market values in existing accounts. While we offer a wide variety of asset classes and investment styles, our clients’ accounts are primarily invested in equity funds. Volatility in equity markets will impact the value of assets in client accounts and, as a result, the revenue we earn on those assets.

Positions. We earn transfer agent recordkeeping fees for administrative functions we perform on behalf of several of our mutual fund providers. An individual client account may include multiple fund positions for which we earn transfer agent recordkeeping fees. We may also receive fees earned for non-bank custodial services that we provide to clients with retirement plan accounts.

Sales mix. While our investment and savings products all provide similar long-term economic returns to the Company, our results in a given fiscal period will be affected by changes in the overall mix of products within these categories. Examples of changes in the sales mix that influence our results include the following:

•

sales of annuity products in the United States will generate higher revenues in the period such sales occur than sales of other investment products that either generate lower upfront revenues or, in the case of managed investments and segregated funds, no upfront revenues;

•

sales of a higher proportion of managed investments, Canadian mutual funds, and segregated funds products will spread the revenues generated over time because we earn higher revenues based on assets under management for these accounts each period as opposed to earning upfront revenues based on product sales; and

•

sales of a higher proportion of mutual fund products sold will impact the timing and amount of revenue we earn given the distinct transfer agent recordkeeping and non-bank custodial services we provide for certain mutual fund products we distribute.

Senior Health Segment. The Senior Health segment results are primarily driven by approved policies, LTV per approved policy and tail revenue adjustments, CAC per approved policy, and other revenue.

Approved policies. Approved policies represent submitted policies approved by 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. 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 the substantial portion of the approved policies we distribute. The number of approved policies are influenced by the following:

•

the size and growth of the population of senior citizens in the United States;

•

the appeal of government-funded Medicare Advantage plans that provide privately administered healthcare coverage with enhanced benefits relative to original Medicare;

•

our ability to generate and obtain leads for our team of e-TeleQuote licensed health insurance agents;

•

our ability to staff and train our team of e-TeleQuote licensed health insurance agents to manage leads and help eligible Medicare participants through the enrollment process; and

•

our health insurance carrier relationships that allow us to offer plans that most appropriately meet eligible Medicare participants’ needs.

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 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, less an estimate of chargebacks for paid policies that are disenrolled in the first policy year, plus forecasted renewal commissions. This estimate is driven by a number of factors including, but not limited to, contracted commission rates from carriers, expected policy turnover, emerging chargeback activity and applied constraints. These factors may result in varying values from period to period.

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.

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:

•

the market price of externally-generated leads;

•

our ability to efficiently procure internally-generated leads; and

•

the productivity of our e-TeleQuote licensed health insurance agents in converting procured leads into approved policies.

Other revenue. Other revenue recognized in the Senior Health segment includes marketing development revenues received for providing marketing services to certain health insurance carriers. Marketing development revenue provides additional revenue to deliver approved policies and are based on meeting agreed-upon objectives with certain health insurance carriers. Marketing development revenue serves to offset contract acquisition costs associated with distribution of approved policies. Agreements for marketing development revenue are generally short-term in nature and can vary from period to period.

Corporate and Other Distributed Products Segment. We earn revenues and pay commissions and referral fees within the Corporate and Other Distributed Products segment for mortgage loan originations, prepaid legal services, auto and homeowners’ insurance referrals, and other financial products, all of which are originated by third parties. The Corporate and Other Distributed Products segment also includes in-force policies from several discontinued lines of insurance underwritten by NBLIC.

Corporate and Other Distributed Products segment includes net investment income recognized by the Company. Net investment income is impacted by the size and performance of our invested asset portfolio, which can be influenced by interest rates, credit spreads, and the mix of invested assets.

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 or Investment and Savings Products segments), interest expense on notes payable, redundant reserve financing transactions and our revolving credit facility (“Revolving Credit Facility”), as well as realized gains and losses on our invested asset portfolio.

Capital Structure. Our financial results are affected by our capital structure, which includes our senior unsecured notes (the “Senior Notes”), redundant reserve financing transactions, our Revolving Credit Facility, and our common stock. See Note 10 (Stockholders’ Equity), Note 13 (Commitments and Contingent Liabilities), and Note 15 (Debt) to our unaudited condensed consolidated financial statements included elsewhere in this report for more information on changes in our capital structure.

Foreign Currency. The Canadian dollar is the functional currency for our Canadian subsidiaries and our consolidated financial results, reported in U.S. dollars, are affected by changes in the currency exchange rate. As such, the translated amount of revenues, expenses, assets and liabilities attributable to our Canadian subsidiaries will be higher or lower in periods where the Canadian dollar appreciates or weakens relative to the U.S. dollar, respectively. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Canadian Currency Risk included in our 2022 Annual Report and Note 2 (Segment and Geographical Information) to our unaudited condensed consolidated financial statements included elsewhere in this report for more information on our Canadian subsidiaries and the impact of foreign currency on our financial results.

Critical Accounting Estimates

We prepare our financial statements in accordance with U.S. GAAP. These principles are established primarily by the Financial Accounting Standards Board. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions based on currently available information when recording transactions resulting from business operations. Our significant accounting policies are described in Note 1 (Description of Business, Basis of Presentation, and Summary of Significant

Accounting Policies) to our consolidated financial statements included in our 2022 Annual Report. The most significant items on our unaudited condensed consolidated balance sheets are based on fair value determinations, accounting estimates and actuarial determinations, which are susceptible to changes in future periods and could affect our results of operations and financial position.

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.

Accounting Policy Changes.

During the three months ended March 31, 2023, there were changes in accounting methodology for Deferred Policy Acquisition Costs and Future Policy Benefit Reserves and Reinsurance that we have identified as critical accounting estimates. These changes were necessitated by the adoption of LDTI. See Note 1 (Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies), Note 6 (Deferred Policy Acquisition Costs), and Note 9 (Future Policy Benefits) to our condensed consolidated financial statements included elsewhere in this report. For additional information regarding our other critical accounting estimates, see the Critical Accounting Estimates section of MD&A included in our 2022 Annual Report.

Results of Operations

Primerica, Inc. and Subsidiaries Results. Our results of operations were as follows:


Three months ended March 31,		Change
2023	2022