Primerica Inc

NYSE:PRI

Earnings Call Analysis

Primerica's Q3 2024: Growth in Earnings and Distribution Highlights

Primerica reported strong Q3 2024 results, with adjusted net operating income at $193 million, up 21% year-over-year, and diluted adjusted EPS at $5.68, increasing 28%. The company saw significant benefits from equity markets and revised actuarial assumptions, contributing $23 million to income. They recruited over 142,000 individuals, growing their life license sales force by 7% to 148,890. Term Life revenues rose 5% to $450 million with a 26% increase in pretax income. Investment and Savings Products sales soared by 34% to $2.9 billion, prompting a new sales forecast of 22-25% for 2024.

Strong Financial Performance and Shareholder Returns

Primerica delivered impressive financial results for the third quarter of 2024, with adjusted net operating income reaching $193 million, marking a 21% increase year-over-year. Diluted adjusted operating earnings per share soared by 28% to $5.68. The company generated strong cash flow, allowing for substantial shareholder returns, including $129 million in share repurchases and $31 million in dividends during the quarter. Over the year-to-date, Primerica has returned a total of $463 million to stockholders through a combination of stock buybacks and dividends.

Growing Distribution and Robust Recruitment

The company's distribution network saw a significant boost due to effective recruitment strategies and an engaging July convention. During the quarter, Primerica recruited over 142,000 new individuals and licensed 14,349 individuals—a notable 17% increase from the previous year. This momentum has reinforced the total number of life licensed representatives to 148,890 as of September 30, 2024. The company projects a continued growth rate of about 5% in its life license sales force by the end of the year, driven by historical patterns in recruiting.

Positive Trends in Life Insurance Policies

In the Term Life segment, Primerica reported revenues of $450 million, a 5% increase compared to the previous year. New term life policies issued rose to 93,377, contributing an additional $31 billion in protection to middle-income families. The average monthly productivity remained consistent at 0.21 new policies issued per life licensed representative. The company continues to expect life sales growth around 3% for the full year.

Investment and Savings Products Segment Growth

The Investment and Savings Products (ISP) segment experienced robust sales, totaling $2.9 billion, which represents a 34% year-over-year increase. This growth was propelled by strong demand and favorable equity market conditions, including a remarkable 42% increase in variable annuity sales and a 23% rise in mutual fund sales. With continued positive performance, Primerica has raised its 2024 sales forecast for this segment to a range of 22% to 25%.

Effective Cost Management Amid Growth

Adjusted operating expenses rose by 13% year-over-year to $145 million. This increase was primarily due to higher variable costs associated with recruitment and rising sales in both the ISP and Term Life segments. For the upcoming fourth quarter, Primerica expects insurance and operating expenses to increase by about 9%, anticipating a full-year growth of approximately 9% compared to 2023.

Successful Exit from Senior Health Business

Primerica has officially exited its senior health business, resulting in a reported gain of approximately $98 million in tax savings, primarily benefiting the company's cash tax liabilities in 2024. The exit has been firmly integrated into the financial reporting, reflecting the company's decision to streamline its operations.

Sustained Confidence in Future Growth

The management remains optimistic about future growth driven by ongoing recruitment efforts and market conditions favorable for the financial services sector. They noted the potential challenges posed by economic factors affecting middle-income families but expressed confidence that existing conditions should maintain the current momentum in sales and distribution.

Earnings Call Transcript 2024-Q3

[Operator]

Greetings, and welcome to the Primerica Third Quarter 2024 Earnings Call and Webcast. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicole Russell, Senior Vice President, Investor Relations. Thank you. You may begin.

[Nicole Russell, executive]

Thank you, Darryl, and good morning, everyone. Welcome to Primerica's Third Quarter Earnings Call. A copy of our press release issued last night, along with other materials relevant to today's call, are posted on the Investor Relations section of our website. Joining our call today are Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Tracy Tan.

Our comments this morning may contain forward-looking statements in accordance with the safe harbor provision of the Securities Litigation Reform Act. We assume no obligation to update these statements to reflect new information, and refer you to our most recent Form 10-K filing as may be modified by subsequent Forms 10-Q for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied.

We will also reference certain non-GAAP measures, which we believe will provide additional insight into the company's financial results. Reconciliation of non-GAAP measures to their respective GAAP numbers are included at the end of our earnings press release and are available on our Investor Relations website.

I would now like to turn the call over to Glenn.

[Glenn Williams, executive]

Thank you, Nicole, and thanks, everyone, for joining us today. Primerica reported another strong quarter with solid distribution momentum and double-digit growth in adjusted operating earnings. The appeal of our entrepreneurial business opportunity continues to resonate, supporting our ability to grow distribution and serve more middle-income families in the U.S. and Canada.

We continue to benefit from favorable equity markets that bolster investor confidence and drive strong results in our investment and savings business, while a revision to our actuarial assumptions added $23 million to pretax income in the current quarter.

In total, adjusted net operating income was $193 million, up 21% compared to the prior year period, while diluted adjusted operating earnings per share of $5.68 increased 28%. And -- Strong cash flow generation enabled us to repurchase $129 million of our common stock during the quarter and paid $31 million in regular dividends. Year-to-date, Primerica has returned a total of $463 million to stockholders through a combination of share repurchases and dividends.

Let's review our distribution results. The additional momentum that was generated by the July convention and our field leaders' ability to effectively communicate the attractiveness of Primerica's opportunity boosted our recruiting efforts. During the closing line of our convention, we announced a promotion that discounted our licensing fee for the remainder of July and the beginning of August. This initiative increased our already strong trajectory and helped us recruit over 142,000 individuals during the quarter.

During the quarter, we licensed 14,349 individuals, a 17% increase compared to the prior year period. We attribute this growth to record recruiting, combined with the improvements we've made in our licensing focus and process over the last few years. The sustained success in recruiting and licensing has fueled a 7% increase in the size of our life license sales force year-over-year to a total of 148,890 life licensed reps as of September 30, 2024, and for the first time ever, to a milestone of over 150,000 licensed reps at the end of October. We project ending 2024 with full year growth in the size of our life license sales force of 5% as how recruiting historically drive strong licensing for several months.

Let's turn next to our Term Life business. We issued 93,377 new term life policies during the quarter, a 5% increase compared to the prior year period and added $31 billion of new term life protection from middle-income families. Year-over-year, productivity remained unchanged at an average monthly rate of 0.21 new policies issued per life license rep.

After factoring for the continued impact of cost of living pressures on middle-income families and strong sales volume in last year's fourth quarter, we continue to expect full year life sales to grow around 3%.

Looking at our Investment and Savings Products business. Sales continue to benefit from strong equity market returns, which serve as a key driver. This positive trend is complemented by improvements in our product offering including more portfolio options in our managed accounts and attractive variable annuity choices. Additionally, our sales force in Canada is gaining experience with the new mutual fund product set introduced there last year.

Sales of $2.9 billion during the quarter increased 34% compared to the prior year period, outpacing expectations. We saw solid year-over-year growth across all major product lines, including the 42% increase in variable annuity sales and a 23% increase in combined U.S. and Canada mutual fund sales.

Sales of managed accounts were also robust as clients took advantage of the wider fund options available on the new custodial platform that was launched in the third quarter of 2023. Preliminary results in October showed continued sales strength. As a result, we're raising our 2024 ISP sales forecast to a range of 22% to 25%.

We -- Client asset values have again benefited from strong equity market appreciation, ending the quarter at $111 billion, up 26% year-over-year. Net flows remained positive at $444 million during the quarter.

In Canada, we recently entered into a new distribution agreement with Canada Life, which will give our reps access to a curated selection of Canada Life segregated funds. This not only expands product choice, but it also provides additional options to help address the needs of underserved Canadian families. The new funds are expected to be rolled out to our reps and phases beginning next year.

Sales volume in our mortgage business has also started to improve. This business is well positioned to help middle-income families obtain a new mortgage or refinance to consolidate consumer debt. We're licensed to do business in 33 states through more than 3,000 license representatives. Year-to-date, we've closed nearly $300 million in U.S. mortgage volume, up around 25% compared to the first 9 months of 2023.

We -- we have great lending partners, and we are optimistic about the long-term potential for this business. We also have a mortgage referral program in Canada, bringing refinancing opportunities and new mortgages to our clients north of the border.

We look to the future with confidence because of the important role Primerica plays in the lives of middle-income families. Every day, we provide our clients with much needed financial education and compel them to take action. I'm proud of what our sales force is accomplished and grateful to my teammates at the home office who support the field and their efforts. We remain committed to our mission as we grow distribution to best serve our clients.

With that, I'll hand it over to Tracy.

[Tracy Tan, executive]

Thank you, Glenn. Good morning, everyone. As of September 30, 2024, Primerica has successfully exited its senior health business by abandoning e-TeleQuote Inc., and permanently surrendering and relinquishing our rights to e-TeleQuote. The segment's results are now reported in discontinued operations and its performance measures have been excluded from all periods presented.

In my comments today, I will cover the earnings results for each of our core segments followed by a discussion of consolidated insurance and other operating expenses and an update on our capital position.

Starting with the Term Life segment. Revenues of $450 million during the quarter increased 5% year-over-year, driven by 6% growth in adjusted direct premiums. Pretax income of $178 million rose 26% due in part to a $2 billion -- to a $28 million remeasurement gain recognized in the quarter. Under LDTI accounting rules, our Term Life margins are generally predictable given that they are not highly sensitive to last variances, while mortality variances are limited by our extensive use of reinsurance.

When we make changes to the long-term actuarial assumptions, the segment's results can be subject to some volatility, as was the case in this quarter during our annual assumption review. As a reminder, our assumptions are set as best estimates and reflect our long-term view of the future that avoid forecasting short-term volatility.

As we disclosed in our 2023 Form 10-K filed in February of this year, the disability incident rate under our waiver of premium rider has been falling since the pandemic. Unlike our mortality for lapse rates, which has had both favorable and unfavorable experience since 2020 and the disability incident rate has declined and remained at similar levels. We reflected an improvement in our best estimate assumptions and recognized a $27 million remeasurement gain in the current quarter. Because these waiver benefits are not debt benefits, it is not part of the YRT reinsurance program which resulted in a disproportionate impact to our financial results.

We also made slight adjustments to our lapse and mortality assumptions, neither of which had a meaningful impact to our financial results. In aggregate, these updates resulted in a $1 million remeasurement gain net of reinsurance.

Turning to Experian experiences. We observed higher lapses and lower mortality from our updated assumptions, which had an immaterial net impact in the remeasurement. We believe higher cost of living pressure on middle-income family remains a key contributor for elevated lapses across multiple durations. Persistency on policies issued over the last year remained largely in line with our assumptions. We expect the overall persistency to normalize over time.

While higher lapses can constrain future ADP growth under LDTI, lapses do not meaningfully impact our current key financial ratios.

Looking at our key financial ratios, the remeasurement gain recorded in the current year period contributed a favorable 430 basis points to the benefits and claims ratio. Adjusting for this item, the benefits and claims ratio at 57.6% was largely in line with the prior year period. The debt amortization ratio at 11.9% and the insurance expense ratio at 7.4% remained consistent with the prior year period.

Finally, after adjusting for the impact of the remeasurement gain, the revised operating margin of 23.1% was in line with the prior year period. In the fourth quarter, we expect the benefits and claims ratio to be around 58%, the DAC amortization ratio to be around 12% and an operating margin of around 22%. I will provide full year guidance for 2025 in February.

Turning next to the results of our Investment and Savings Products segment, which continues to benefit from strong product demand across nearly all product lines and favorable equity market conditions. During the quarter, revenues of $266 million increased 22% due to a combination of strong sales benefiting from client demand and higher average client asset values. Pretax income of $80 million rose 24%. I -- Revenue from sales-based commissions and fees of $96 million increased 32%, while revenue generating sales rose 29%.

We -- revenues grew are -- at a slightly higher rate than correlated sales due to continued strong demand for variable annuities. Sales-based commission expenses generally rose in line with correlated sales. Asset-based revenues of $142 million rose 19%, in line with 18% increase in average client asset value while associated commission expenses grew at a similar rate.

The Corporate and Other Distributed Products segment incurred a pretax operating loss of $5.7 million during the third quarter compared to pretax operating income of $3.1 million in the prior year period. The current quarter included a $5.2 million remeasurement loss due to a refinement in assumptions on the subset of the closed book of non-term life insurance business. The segment continues to benefit from a combination of higher yielding investments and growth in size of the portfolio. which added $4 million to net investment income compared to the prior year period.

Finally, adjusted consolidated insurance and other operating expenses were $145 million during the third quarter, up 13% year-over-year. The increase is primarily due to higher variable expenses resulting from the growth in recruiting and licensing and rising sales and production in the ISP and Term Life segment as well as higher employee-related costs due to the company's strong performance in 2024.

As we look into the future, we expect fourth quarter insurance and other operating expenses to grow around 9%, and -- resulting in full year growth of 9% or approximately $50 million. Our projection is above our previous guidance because of higher ISP client asset levels in 2024 and growth-related higher variable and employee costs.

Moving to our capital position. The holding company had cash and invested assets of $383 million at the end of September 2024. During the third quarter, we purchased $129 million of common stock. And since the end of third quarter, we completed our current authorized repurchase program of $425 million. As of September 30, 2024, Primerica Life estimated RBC ratio was 440%.

With that, operator, I'll open the line for questions.

[Operator]

[Operator Instructions]. Our first questions come from the line of Ryan Krueger with KBW.

[Ryan Krueger, analyst]

My first question was on the strong recruiting. I know some of it was influenced by the discounted fee. Can you give us some perspective on how recruiting has been following the expiration of the discounted fees, I guess, into September and October?

[Glenn Williams, executive]

Sure. We were fortunate to have excellent momentum going into the convention. And so the process of discounting those fees is just to already -- add to the already great momentum going in, and we believe it was sustainable going in, and we are having good experience since the discounted fees have expired. And so we continue to see strong growth in recruiting, did through the rest of the quarter. and had a good October. So we feel good about where we are.

Clearly, it will be at the levels of -- just as a reminder, it's the licensing fee that people who come to Primerica with no license pay, if you arrive with a license, there's no cost to affiliate with Primerica, but we discount that fee for a period of time just to generate some excitement, some good news and a reason to talk to people and it does have the impact of giving us a recruiting boost during that time, where we've got very strong underlying fundamentals. So we will continue recruiting to continue to be strong as well.

[Ryan Krueger, analyst]

Great. And then another -- just a quick clarification on the expense guidance. Just want to make sure it's on the same basis. So the 9% increase or the $60 million full year increase that's relative to 2023 that no longer includes senior house. Is that correct?

[Tracy Tan, executive]

Yes. So all the comparisons now exclude the senior house for all periods, yes. .

[Operator]

Our next questions come from the line of Dan Bergman with TD Securities.

[Daniel Bergman, analyst]

I guess -- I know you just touched on recruiting, but the sales force growth has also been really strong this year, and it sounds like you'll likely end the year with mid-single-digit growth kind of above the initial 3% guidance you provided at the start of the year. Just wanted to see if you could give some details around what have been the main drivers of the upside surprise relative to that initial guidance?

And then looking forward, is that mid-single-digit pace we've seen last year and this year sustainable? Or could there be some slowdown ahead for a period of time as you digest the recent strong growth?

[Glenn Williams, executive]

So let me start, Dan, if I could, with the ingredients. I mean clearly, the strong recruiting at the very front end of the pipeline is a significant factor, but at the same time, just as important or perhaps even more important are the improvements we've made over time in both our focus and our process.

I've got to give the credit to our field leadership who has caught the vision of the importance of growing the size of the sales force. It benefits clients first of all, but it also benefits them as they build their business and obviously, Primerica as a whole. And so our field leadership is focused on growing sales force size, more so than I've ever seen them.

And then, of course, we have worked hard, as we've discussed many times on improving our process along the way, to make a fairly difficult exam administration and paperwork process as simple as we can make it. And we've seen benefits from all of that.

So it's a combination of an effort to improve every part of the pipeline. And we do feel like our message is resonating. We feel like the conditions for our recruiting message is very strong. So from the previous question, we expect continued momentum there. And we do believe that as long as the circumstances, the environment are similar as they are today, we don't see any pending changes in that, but there are a lot of moving parts.

And so if you have some sudden change in cost of living going against us, that has both positives and negatives, cost of living means people have less money available, but it also makes them look for opportunities. So there's a push and a pull there. you got regulatory change, you got state and province processing capabilities. There are a lot of things that could be adjusted.

Unfortunately, most of those have been adjusted positively in the last few years. but we are always very sensitive to -- there could be negatives out there on the horizon that we can't see nor can we impact real time probably. But for the things that we can control, we feel very good about our processes and feel like we've got the ability to continue some momentum in the future.

[Daniel Bergman, analyst]

Got it. And then maybe just moving to the ISP business. Well, the redemption rate in that business had been drifting upward pretty steadily over the past year or 2, both nominally and as a percent of beginning assets, it took a step down this quarter. Just wanted to see if you can give a little more color on what you're seeing in terms of that ISP redemption rate. Any sense of whether there's seasonality or any impact from maybe a slowdown in inflation, -- just any other drivers and just thoughts on how that might trend going forward. .

[Glenn Williams, executive]

Yes. I think you have to be careful quarter-to-quarter because you could have any odd occurrence happen in a 90-day period of time that can make the comparisons a little difficult. But I do think we are seeing, whether it's aging population and our clients getting the retirement age and mean withdraw more in order to support the standard of living or it is the continued kind of ongoing stress in people's budgets, both middle-income clients, and in many cases, some of these are upper middle-income clients. .

So we're seeing some of all of that. I don't think either one of the trends, either the pressure up that you mentioned or the drop this most recent quarter is a significant sustainable trend. It should all average out to be about the same over the long term. But we are seeing a little pressure from the economic dynamics of our client base right now and the age of our clients that are probably putting a little upward pressure on the redemption rate.

[Operator]

Our next questions come from the line of John Barnidge with Piper Sandler.

[John Barnidge, analyst]

Can we talk about the Canada Life opportunity? How large do you view that? I know it's a big brand in Canada and Primerica's operation pretty sizable in that market. Certainly, the Quebec team was loud at the convention. So we've got their presence. I'd love to hear more about that.

[Glenn Williams, executive]

Sure. Well, as you may be aware, John, we had our own segregated fund product set which we have kind of run off slowly over time due to some regulatory changes there. And you've seen that in our numbers over the last few quarters, probably 3, 4 or 5 quarters. .

And we've been looking for an alternative because we do believe there is a need for that product in Canada. It's the VA product, most similar to the U.S. VA product. although with some pretty significant differences under the Canada kind of tax regime. But it's an important product that fills an important need. And so we've been looking for an alternative rather than try to retool our own product we decided it was to look for a larger provider that had more capabilities, more experience and a broader product shelf than we could probably create in any reasonable period of time.

And so we're excited about our relationship with Canada Life. We do believe it will replace the same fund flow that we have, maybe look back at our numbers from a couple of years ago, and see maybe a little before that because that business has been under pressure for quite some time.

So we believe that it puts us back in that game that we were pretty good at a few years ago. It's not the most significant part of our ISP business in Canada by any means, but it certainly plays an important role there across the country. And so we're excited to watch that grow and see what kind of opportunities it creates when it rolls out next year.

[John Barnidge, analyst]

My follow-up question seems like the Fed control is maybe more the short end of the curve than the long end and mortgage refinancing wave might not happen or it might. How do you view that opportunity to free up dollars within your customers' wallets in the backdrop of the cost of living increases you even highlighted in your comments?

[Glenn Williams, executive]

The interesting thing, John, about the mortgage business at Primerica is yes, we do serve the market for purchase money mortgages kind of the traditional mortgage business. but something we do this pretty unique is sit down with clients and talk to them about consolidating and accelerating their current debt load and hopefully finding a lower average weighted interest rate, so they get the benefit of a lower rate plus accelerated payments and get them on a bit faster.

So our lending business is for the purpose of freeing up money that can be redeployed elsewhere. Many times, it needs to go directly into the client's living budget, but sometimes it can also be used to access other financial services that we offer and that are needed elsewhere.

So clearly, it's interest rate sensitive. However, we do find when interest rates go up, which is normally a headwind in the mortgage business, we find out that the interest rates on clients existing consumer debt goes up even more. And so it's the difference between the 2 that's the conversation when is the right time to consolidate accelerate. It gives us an excellent discussion point, I've called it sometimes the emotional lightning rod of people's finances is debt. And so they'll have a conversation about getting out of debt when they may not want to talk about other dynamics initially. And then we can have a broader conversation with them after we have the debt conversation.

So it gives -- it's a great door opener for us. It's a tremendous service. Our approach is very different from most companies in the mortgage business. We're not out there just trying to run up the score with as many mortgages because as we can put in place, we're trying to study the clients' debt situation.

So it's a very interesting dynamic. It's a fairly complicated business in the U.S., significant licensing requirements, so we're moving methodically and deliberately through it as we grow it. But we do think there's an opportunity out there hopefully, we'll see at some point, both the Fed's rate go down and mortgage rates go down. Sometimes they're going in opposite directions for reasons now. But if we can get some consistent downturn in interest rates, I think it will give that business a real tailwind, and we'll start to see some real progress there.

[Operator]

Our next question come from the line of Wilma Jackson Burdis with Raymond James.

[Wilma Jackson Burdis, analyst]

Could you talk a little bit about what you're seeing on lapses, which ticked down a bit in 3Q versus the first half of the year? Do you think there's a story there behind what's happening with your customers? Or has it just been a little bit noisy? And is there anything you expect going forward?

[Glenn Williams, executive]

Wilma, if you don't mind, I'm sorry, I missed the very first part of the question.

[Tracy Tan, executive]

When we look at the lapse in persistency, we are seeing that the persistency starts to level last couple of quarters. and there might be a slight drop this quarter. But overall, we still see the trend as elevated compared to our pre-pandemic experience.

When I mean elevated, it is across multiple durations. -- with the exception of the most recent 12-month policies that we wrote are within the expectation from pre-pandemic. Now we really contribute that as the primary reason from the cost of living pressures that we continue to see, even though the interest rate have some relief for the middle-income families.

The cumulative impact from the last 4, 5 years, continue to put some stress so that their buying pattern has not yet returned to pre-pandemic. Even though in the Primerica HBI, the household budget index, we see that the purchasing power finally returning to 2019 levels. but we are not seeing that significant change in spending pattern.

On the other hand, we also see that persistency during the pandemic was very, very strong, very good. And after pandemic, there are some really pick up on lapses. So there is a -- from a cyclical standpoint, there's an up and down.

Cumulatively, though, we're seeing the trend over this period of time is relatively consistent. So based on all the history and the facts and previous experience with financial hardship, we do expect that it will take a few years for it to return. But we do believe in the long run, it will return to a consistent expected levels that.

[Wilma Jackson Burdis, analyst]

No, that helps. Any color on the unfavorable remeasurement gain in corporate? Just what drove that? And then just help us think through any, I guess, changes from the remeasurement gains as well.

[Tracy Tan, executive]

Yes. So the remeasurement loss that we experienced in the Corporate and Other segment is on a closed book a very small block of business that we're not growing, it's a runoff. And it was just a refinement in the annual assumption review that we corrected in terms of refining the assumptions. So we don't expect that to be really a material impact either the period or in the future. .

[Operator]

Our next questions come from the line of Jeff Schmitt with William Blair.

[Jeffrey Schmitt, analyst]

Glen. So given the strong growth in the sales force just from the new incentives that can bring in some agents you wouldn't have otherwise had. Do you see that having any effect on the life productivity over the next year?

[Glenn Williams, executive]

Yes. There are a lot of steps in between the recruiting process and getting down to license productivity. So really how people are recruited probably doesn't impact our productivity that much.

There's always the conversation of the lower the commitment level is to start, how committed are you going to be down the road? But that's pretty hard to measure because of the steps in between. So far, we're seeing productivity of new license reps at a level that we're accustomed to within our normal quarter as we reported in the prepared comments.

So we're not seeing -- we don't believe we're recruiting a lower level of quality or productivity. We're just getting -- we're getting more people of the same productivity and always, we believe we recruit very high-quality candidates. So the same quality we would always expect.

So as the sales force grows, you do get some downward pressure on that calculation. But I think as those new licensees get some experience, understand the business, see the vision and the benefit they're bringing to families and to their own families, they build a business, we're going to see similar productivity that we've seen in the past.

[Jeffrey Schmitt, analyst]

Okay. Understood. And then on the favorable trend in disability incident rates, I may have missed it, but do you see that having kind of a longer-term impact on your benefit ratio? I mean, is 58% kind of still a good run rate going forward? Or do you see that moving down?

[Tracy Tan, executive]

So we experienced favorable disability incident rate as we had also mentioned in the 10-K filed. We have observed this trend in the past 4 years since 2020. And that's the main reason that we believe that using our best estimates in our annual review that this does represent the long-term trend, which is the reason that we made this adjustment. In terms of long-term trend, obviously, as time goes on, things can change. At this point, it is indeed our best estimate.

[Operator]

Our next questions come from the line of Suneet Kamath with Jefferies.

[Suneet Kamath, analyst]

I wanted to start with the annuity sales. I mean you've talked in your script about sales being very strong. I just want to get some color around sort of what's behind that? What's sort of funding those sales? Is it 401(k) withdrawals? Is it something else? Just some color would be helpful.

[Glenn Williams, executive]

Yes. Thanks, Suneet. That's a great question because that does jump out when you see the success we're having in that product line. And I would attribute to a number of things. Number one, our product providers are very good at keeping the products fresh, making sure that they're making the adjustments required for the products to be financially sound, but at the same time, adding the features that they know are attractive under the current circumstances.

And of course, particularly in the fast-growing index-linked variable annuity business people are attracted to them because they have the upside of the market gains with the protections underneath. Sometimes those protections vary with interest rates. So there's -- as interest rates come down, there's downward pressure on benefit sometime. But usually, at the same time, you get an improving equity opportunity and they tend to offset each other.

So the products themselves are very attractive, very current to clients' need, particularly clients who are kind of moving from the accumulation phase to the distribution phase and making sure that they need to take the edge off of some risks. So we see people moving the VAs from more traditional just mutual funds or other products, other investments they may have elsewhere with no guarantees in them, particularly if they're coming to the end of their kind of income earning period of their lives and need to take the edge off of some risk.

So there's some advantages there. We do recognize that society and our client base is aging. So we have a larger percentage of people moving into the retirement or the decumulation phase, if you would. And then our representatives are getting better every day at combining the need with the solution.

And so we see a number of factors that are [ growing]. We also see that we're traveling in a pretty good pack with the industry. Our numbers are similar to industry numbers as we understand them probably a slightly better than industry, but that's a strong dynamic that's happening across financial services interest in the U.S., and we're properly positioned to take advantage of it.

[Suneet Kamath, analyst]

And when you think about the product providers, are you seeing any sort of irrational either pricing or features? I mean, you guys should have a pretty good lens on that, just given your distribution. Just curious what you're seeing.

[Glenn Williams, executive]

Yes. No, when I complemented them on their quality, it includes their restraint. This industry and the index annuity business went through some very tough times during the economic meltdown 15 years ago or so. And I think they learned a good lesson.

But as we screen for the product providers, we are looking for the same sustainability dynamic that we get asked about all the time in our business, is this success for a moment or is this success where people are thinking ahead, planning for the future and not taking unreasonable risks. And we've got the highest quality partners in this business, and so they're doing a great job of managing that. They're not taking unreasonable risk to try to capture a trend for the moment.

[Suneet Kamath, analyst]

Got it. And if I could just ask Tracy one. Did you say in your prepared remarks that you have exhausted the $425 million authorization for buybacks? Or is there still some piece of that left?

[Tracy Tan, executive]

Yes. We have completed our repurchase authorized for $425 million by now. Yes. .

[Suneet Kamath, analyst]

And so does that mean no more buybacks for the fourth quarter then?

[Tracy Tan, executive]

Yes. We have completed for 2024 period authorized by the Board. Very soon, we're going to be discussing 2025 period. And hopefully, we can make an announcement shortly, and we'll start that program beginning of 2025.

[Operator]

Our next questions come from the line of Mark Hughes with Truist Securities.

[Mark Hughes, analyst]

Tracy, the senior health exit, is there any tax consequence to that, any cash tax savings, anything like that?

[Tracy Tan, executive]

Senior Health exit has generated a tax saving for us, and it will be disclosed in our 10-Q filed later today. And the overall benefit is going to be about $98 million, and a majority of those, $91 million, $92 million is going to be federal. So that saving is going to be benefiting our 2024 from a cash basis in terms of reducing our tax liabilities and payments. .

[Mark Hughes, analyst]

Will that tax benefit actually occur in calendar 2024? Or is it next year on the 2024 tax year?

[Tracy Tan, executive]

Yes. So for third quarter, in terms of savings, we're going to be realizing about half of that federal piece, about $46 million or so, and the remainder ones will be realized in the fourth quarter of 2024.

[Mark Hughes, analyst]

Okay. Very good. And then in the term life business, the YRT ceded premium. If you look at the ratio as a percentage of adjusted direct premium, it's up about 100 bps kind of through the first 3 quarters. How should we think about that is where contemplating 2025? Or just kind of the -- what are the puts and takes that might lead us to think that, that ratio should be higher or lower, steady, anything in the pricing in the reinsurance market that influences that? Just a couple of thoughts would be great.

[Tracy Tan, executive]

Okay. So let me just clarify, Mark, you're asking about the other ceded premium, which is the YRT premium, correct? .

[Mark Hughes, analyst]

Yes, that's right. And the number I'm looking at is kind of low 30s and it's that relative to adjusted direct premiums? And as I say, it's been up a little bit this year about 100 bps.

[Tracy Tan, executive]

Okay. So YRT premium is essentially the premium that we have reinsurance for our mortality risk and YRT premium compared to direct premium have a different pattern. Direct premium is pretty much flat over the period of the contract in duration versus YRT premium tracks with the age of -- and the size of the risk, because it is a premium that we expect to collect and recover in size, correlating to the mortality risks.

So you are going to see that the YRT premium is very well offset by the growing size of the mortality risk. So from a ratio standpoint, it doesn't really change in terms of the ceded premium and the recoverable, they kind of already in line with the size of mortality. So when you look at the ratio of benefits and claims ratio, we expect that to continue to be around 58% as our guidance has provided for the year, and I expect that to be around that ratio for the fourth quarter as well.

[Operator]

Our next questions come from the line of Wilma Burdis with Raymond James.

[Wilma Jackson Burdis, analyst]

Just a quick follow-up on my earlier question. Just wondering if you could talk a little bit more about the block that you had the negative remeasurement loss on just what type of product it was when you wrote it, just would be kind of curious on that.

[Tracy Tan, executive]

Okay. So that remeasurement loss is on a non-term life type of product.

[Glenn Williams, executive]

If I could jump in. Wilma, this is going way back in the history of Primerica, but that product exists in our New York company, National Benefit Life, which are aware, most insurance companies have a New York sub as a result of unique regulations in New York. .

And so that was a company that we inherited or again used during our city days, it was not designed specifically for Primerica use but it had some existing books of business, lots of business that came when we took it over and started writing term business in New York under the National Benefit name.

So this is a business that's been out there for quite some time. I believe it's student life business. Life insurance total to as students matriculate through an exit college and begin their careers and it's not something that we've sold in quite some time. But we do continue to maintain the block, and so we have to reassess it occasionally as we did during the quarter.

[Operator]

There are no further questions at this time. And with that, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Enjoy the rest of your day.