e-TeleQuote Insurance, Inc. (PRI) Earnings Call Transcript & Summary

Good day, and welcome to the Primerica's investor call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Nicole Russell, Head of Investor Relations. Please go ahead.

Thank you, operator, and good evening, everyone. I would like to take a moment to welcome you to our call and direct your attention to the Investor Relations tab on our website for a copy of our press release and other materials that are relevant to today's call. Joining this call today are Chief Executive Officer, Glenn Williams; our Chief Financial Officer, Alison Rand; and our Head of Corporate Development and Strategy, Mr. Mike Miller. We will start with prepared remarks, and then we'll open the call for questions. During our call, some of our comments may contain forward-looking statements in accordance with the safe harbor provision of the Securities Litigation Reform Act. The company assumes no obligations to update these statements to reflect new information. We refer you to our press release issued after market closed today as well as our most recent Form 10-K for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also reference a GAAP -- a non-GAAP measure, which we believe provides additional insights. A reconciliation of this non-GAAP measure to its respective GAAP number is included in the appendix of our presentation deck posted on our Investor Relations website. Finally, throughout this call, management will use e-TeleQuote and the acronym ETQ interchangeably. With that, I would like to turn the call over to Glenn.

Thank you, Nicole, and good evening, everyone. I appreciate you joining us on short notice. Today, I'm proud to announce that we have entered into a definitive agreement to purchase 80% of the operating subsidiaries of e-TeleQuote, a privately held senior health insurance distributor with an enterprise value of $600 million. We have simultaneously entered into a distribution agreement to refer potential Medicare Advantage and Medicare Supplement clients to e-TeleQuote through our U.S.-based sales force. Alison will expand on the financial considerations of the transaction in her prepared remarks, so I will focus my comments on the strategic importance of this acquisition, which will combine the strength of 2 successful companies to create a unique partnership to serve more clients and enhance the long-term growth opportunities for both businesses, and then I'll ask Mike to cover some of the specifics of e-TeleQuote's business. For a number of years, the Primerica management team has had a parallel approach to growing our business within the framework of our strategic pillars. First, we focused on accelerating the growth of our distribution system, life insurance and investment product sales through fundamental improvements to these traditional business areas. We've seen significant success from these efforts. Simultaneously, we've worked to identify new product lines for distribution, focusing on the needs in the middle market and looking for products that complement rather than compete with our current successful offerings. Guided by our strategic plan, we have identified mortgage distribution, which we launched successfully last year and is showing exciting growth prospects. We also identified senior health insurance distribution as an attractive opportunity in an area where we could potentially serve a larger share of the overall economics. Today, we are excited to announce our upcoming entry into the senior health distribution space. As part of our strategic review, we noted that health insurance accounts for 15% of individual's financial wallet. We divided the health insurance market into 2 distinct parts: insurance for individuals under the age of 65 and senior health. What we confirmed is that the insurance market for people under 65 is complex, constantly changing and largely served through employer-sponsored plans. In contrast, the business regulatory environment for the senior health market is both more stable and favorable. It also possesses attractive distribution economics and superior growth trends. Currently, there are over 70 million seniors in the U.S. aged 65 or older and an estimated 10,000 more will reach that milestone every day. This validates a clear need for Medicare-related insurance products, and we expect that the opportunity will continue to grow in the future. Having narrowed our focus to senior health distribution, we evaluated the various models in the marketplace to identify the best fit for Primerica. Our research led to the conclusion that sales center-based models are succeeding and have synergies to support the whole market relationships of our face-to-face sales force. In addition, these models are experiencing the growth trajectory we desire. The announced acquisition is the result of 3 years of work by our internal strategy team, assisted by outside advisers to understand the space and engage with other potential partners. From these efforts, we recognize that the senior health insurance business requires significant specialized expertise, broad carrier relationships and sales center infrastructure. This ultimately led us to e-TeleQuote, which is the best fit for us with its innovative fast growth track record, dedicated employees and strong entrepreneurial leadership. Over the last 10 years, they've built dynamic sales center capabilities, including specialized technology and unique representative training process. Leading our evaluation process was Mike Miller, our Executive Vice President and Head of Corporate Development and Strategy. I would like to ask Mike to walk us through the unique characteristics of e-TeleQuote.

Thanks, Glenn. Good evening, everyone. It's a pleasure to be with you for this announcement. One of the core strengths that attracted us to e-TeleQuote is their strong entrepreneurial leadership and breadth of well-established carrier relationships, including United Health, Humana and Anthem, among others. e-TeleQuote currently offers more than 2,700 Medicare Advantage plans for more than 20 carriers across all 50 states, which aligns well with Primerica's U.S. distribution footprint. e-TeleQuote is also well positioned to scale its Medicare Supplement business given its existing expertise in Medicare Advantage, strong carrier relationships and proven client-centric needs-based sales approach. This further expansion into Medicare Supplement will enhance its already attractive growth prospects. e-TeleQuote's successful model sources leads through various channels, including leads purchased or acquired through lead aggregators, search engine optimization for paid inorganic listing, banner ads and TV advertising. These leads are then routed to licensed agents working in either sales centers or remotely from home to determine eligibility, evaluate client needs and present the best available options. In 2020, e-TeleQuote, through its 500 licensed agents, received carrier approvals for approximately 106,000 policies. As a result, e-TeleQuote reported $160 million in revenues and $50 million of EBITDA. e-TeleQuote has the right size, maturity and culture for Primerica. We believe this combination will create a formidable player in the senior health space that will be differentiated relative to competitors as a result of bringing together the best of Primerica's face-to-face distribution with ETQ's well-honed online and sales center expertise. The sector tailwinds that Glenn described earlier are strong, and we believe the business will continue to gain market share for the foreseeable future aided by qualified referrals generated by our sales force. Over the next 3 years, we expect to see e-TeleQuote's annual approved policies more than double with approximately 10% of annual sales originating from referrals made by Primerica's sales force that Glenn will now discuss.

Thanks, Mike. With the Primerica distribution agreement, e-TeleQuote will begin receiving warm referrals from our sales force to supplement their current successful model. We expect to begin a pilot relatively quickly where our face-to-face sales force uses their warm market relationships to identify leads for e-TeleQuote. Primerica is approaching 800,000 clients who are over the age of 65 with an additional 90,000 plus Primerica clients turning 65 each year, and through our sales force has established relationships with these clients, this represents an attractive pool of prospective clients for which our reps can identify potential referrals to e-TeleQuote. Under the distribution agreement, Primerica reps will generate qualified leads for ETQ. Their licensed sales agents will assess client needs, present appropriate product recommendations, complete the application and conduct the sale. Because of the referral process, Primerica reps generally will not need to obtain health insurance licenses for this business, and they will receive a referral fee for each submitted application. Primerica reps also will receive additional compensation for other services and support. While we are preparing our pilot game plan and expect to have members of our sales force ready to make referrals around the time of the transaction closing, well ahead of the Medicare annual enrollment period, which runs from October 15 to December 7, 2021, and is typically when e-TeleQuote experiences the highest daily volume of applications submitted. Expanding our product offerings to add senior health plans allows us to serve clients at every stage of their life. It also provides additional income opportunities for our sales force by enhancing the attractiveness, building a Primerica business with additional product grip, which could open the door to new clients and increase sales opportunities into our investments in savings products. e-TeleQuote's entrepreneurial and sales-oriented culture aligns well with Primerica. We're excited to join forces with them to help serve the financial needs of our clients more fully throughout their life cycle. Now I'll turn it over to Alison.

Thank you, Glenn, and good evening, everyone. Let me start by summarizing the key terms of our purchase agreement. We are acquiring 80% of e-TeleQuote at an enterprise value of $600 million and an implied equity value of $450 million, assuming $150 million in debt at closing. This enterprise value represents a multiple of 12x 2020 EBITDA. And at less than 10% of our market cap, we believe this is an efficient way for us to enter the senior health market. The transaction is expected to close on July 1. At closing, we will fund the 80% ownership interest for $360 million and extinguish e-TeleQuote's existing debt as we can provide funding at a lower cost than e-TeleQuote can picture on a stand-alone basis. The closing will be funded as follows: $370 million in cash, $270 million of which is currently at the holding company and $100 million of which will be distributed from Primerica Canada prior to closing. The distribution has already been approved by the Canadian regulator. Another $125 million in cash from a draw on our revolving credit facility bearing interest at LIBOR plus 1.25%. $15 million in the form of a 12-month seller's note issued by The Resource Group International Limited, or TRG, e-TeleQuote's majority shareholder. This note provides a cost-effective source of recourse for any post-closing liabilities that arise and will carry an annual interest rate of 1.5%. TRG will sell its full stake 7.25% of total equity, while e-TeleQuote's management will sell 9.75% of total equity and retain a 20% stake in the company. This remaining stake along with structural components such as earnout and call and put rights, that I will describe shortly, will help retain and incentivize key members of the e-TeleQuote management team. Primerica will acquire the remaining 20% equity stake through call and put right over a period of up to 4 years. We have the option to purchase all or a portion of the remaining equity stake held by e-TeleQuote's management, exercisable 12 and 24 months after closing. After the call rights expire, e-TeleQuote's management will sell Primerica any remaining portion of its equity stake with 50% exercisable 36 months after closing and the remainder 48 months after closing. Calls and puts will be valued using a formula price that reflects a discount to e-TeleQuote's publicly traded peer multiples. In addition to the consideration payable at closing, the purchase agreement includes an earnout of up to $50 million based on e-TeleQuote achieving certain earnings growth targets. A maximum of $25 million of the earnout will be payable in each of 2022 and 2023 for the preceding calendar year's performance, with the earnings starting at 85% of target for the applicable year and increasing on a straight-line basis to 100% at target. To fund the acquisition, we have temporarily suspended our stock repurchase program. The company has not repurchased any of its stock year-to-date nor does it plan to do so for the remainder of 2021. Given the company's strong capital generation, repurchases are expected to resume in 2022 in the $200 million range, while also generating enough deployable capital to fund the needs of both Primerica and e-TeleQuote's businesses. After considering the draw on our revolving credit facility, the seller's note, the contingent portion of the purchase consideration and other items, we expect our leverage ratio to increase to approximately 26% at closing and to be approximately 24% by year-end. We are very comfortable with this modest and temporary increase in leverage, and we'll evaluate appropriate long-term capital structures prior to our existing senior debt maturing in 2022. e-TeleQuote's results will be reflected in our consolidated financial statements beginning in Q3 in a newly formed operating segment called Senior Health. This segment will be used to report all e-TeleQuote-related earnings, including those generated through the distribution agreement with Primerica. In accordance with revenue recognition guidance under ASC 606, revenues in the Senior Health segment will be recognized for the lifetime contract commission at the time of sale, as e-TeleQuote has no remaining contractual performance obligations at that time. Given its rapid growth, e-TeleQuote is currently cash flow negative as the cost of acquisition exceeds the initial cash commissions received from carriers. A key benefit of bringing the 2 businesses together is that Primerica's strong capital generation provides a cost-effective source of funding for e-TeleQuote's growth. We expect e-TeleQuote to remain cash flow negative in 2026 and the Senior Health segment with the allocated interest expense from the Corporate and Other Distributed Products segment to reflect [ it's use to fund ]. In thinking about synergies with this acquisition, we do not anticipate any cost savings as e-TeleQuote will run on a largely independent basis. We expect to make investments in e-TeleQuote to meet our stocks compliance standards in areas such as information technology and financial reporting. As Glenn described earlier, the meaningful synergy story with this acquisition is the ability to generate incremental sales sourced by Primerica representatives. With the addition of e-TeleQuote, our fee-based revenue mix will continue to grow. The percentage of total revenues that are fee-based are estimated to increase from 34% in 2020 to over 40% in 2024. The high growth dynamics of e-TeleQuote will enhance Primerica's already strong earnings growth story. Given its size relative to our existing businesses, we expect the Senior Health segment to represent about 10% of total consolidated earnings by 2023. The transaction is expected to be immediately accretive to EPS in the low single-digit range for 2021 and the mid-single-digit range for 2022. It is expected to be dilutive to ROE due to the temporary suspension of stock buybacks and the goodwill and intangibles created by this transaction. We firmly believe acquiring e-TeleQuote will create value for all of our stakeholders, including our clients, our sales force, our employees and our stockholders. With that, operator, let's open the line up for questions.

[Operator Instructions] And our first question today will come from Mark Hughes with Truist.

Congratulations. Excuse my voice.

Thank you very much.

Yes. You had mentioned -- again, excuse my voice, when you're talking about the 10% of the referrals that you expect to come from Primerica, you mentioned a doubling. What was that doubling metric you suggested?

Mark, I will answer that for you. But it's about -- the doubling really had to do with their core business. As we've all sort of mentioned, this is a rapidly growing business itself. It's a young business. The marketplace is growing. It's position in the marketplace is growing. And of course, their relationship with us will enhance that growth accordingly. And so the doubling was really looking at their existing book, and then we think of that entire book will represent about 10% of their business.

Then what was the period over which you would expect it to double?

In about 4 years -- 3 years. Getting 3 fingers from Mike Miller, 3.

Three years. Okay. And then what is the lifetime value that you're projecting? You mentioned how your revenue recognition is all front-end loaded. What are you then assuming in terms of lifetime value and what's the duration associated with that?

Yes. And there'll be a lot more information on this to come, Mark, as one -- once we acquire the company, and we can obviously finalize all of our understanding. We did a lot of work from a value perspective, obviously, to make sure holistically, we were comfortable with their revenues or cash streams and the like. But if you look -- and I don't know how much these analysts on this call have looked at some of these companies. But if you look at the peers, they all have different ways of describing their metrics. So we're wanting to make sure that we pick what we feel is the most representative for this particular business, and we can make sure we define that accordingly. But just like any 606 type of revenue, it is what you would expect. You have to look at, as of today, what your expected future commissions are and you put some constraints around that and you look at historical information to say, what's your expected persistency on the business. And then the constraints gap applies for you to be able to say something that are just hard to determine. So whether it's 5% or the like. But it will be their future revenues as projected using historical persistency, looking at cohorts by issue year and the like. So pretty typical from what you would see anywhere, it's pretty well defined. The main thing for us is making sure that we define the basis under which we're going to give that LTV, whether it be submitted app, approved app or the like. So more to come on that, but that's how it will be determined.

With that in mind, has there been any change in churn lately?

So looking at this particular company, no. There's a lot of policies that come to market. And there's also a lot of players that come to market. And everybody has the ability to enroll, if you will, once a year. So there's naturally a good bit of churn in this business. That being said, their churn, we believe from all the work we've done as part of our diligence process, has been stable and is in line with what we've seen from other peers that are publicly reported.

Just one more question, if I may. I've got a few more, but I'll before -- I'll do this one question. Glenn, what will be the constraint on your sales force referring your warm relationships to e-TeleQuote? This is an easy sale. These are products that people are already buying. All they have to do is kind of shift their spend over to their warm friend or family. Why wouldn't you get a lot of referrals? And maybe in that question is, is there some reason why these are sticky or stickier than I might understand if the question is a banner ad or my beloved nephew, why wouldn't I go with my nephew?

Exactly, Mark. Well, you've asked the questions that we believe create an opportunity for us. We don't know the answers to all of those yet because it's a lot of well-researched theory up to this point. Until you get out of the marketplace, you never know why someone has an emotional attachment to something other than you or me. And so we do believe that there is a lot of momentum in our favor. The fact that we have these more market relationships of various age and various strength, we have to keep in mind that some of these relationships may be so old that we have to go find out what the value of them is at this point. But certainly, even an old week relationship is better than no relationship, we think. And so we do believe that we've got advantages that we bring that e-TeleQuote will benefit from and that are unique because we're certainly not aware of another model that has the infrastructure of a sales center like e-TeleQuote has, which a number of their peers do, but they just don't have access to this relationship-based referral source. And so that's where we're anticipating. We've got a lot of work to do to prove the theory. But we're excited and optimistic about the fact that there's an advantage here that we can figure out in a relatively short period of time.

And our next question will come from Ryan Krueger with KBW.

First question was just on the EPS accretion guidance, mid-single digits by 2022. Is that net of the foregone buyback for 2021? Or is it before considering that?

Yes, it's net of. We've taken that into consideration when determining the accretion.

Got it. And can you give us any sense of the magnitude of the negative cash flow either in 2020 or your expectations for the near term of the next year or 2?

Yes. It's going to be obviously something that we feel comfortable with. Their negative cash flow was probably in the tune -- maybe it's going to be in the tune of $40 million to $50 million this year. A lot of that has to do with how much we do both with our distribution business as well as what we have also included in that just to be clear, is all the added expenses that are going to be incurred to get this privately held company ready to be a public company, part of a public company. So some of that is a little bit created by this transaction. But with that said, I'd look at it in sort of that range.

Got it. And then I just have a couple more questions. Do they use captive agents? Or do they use externally sourced third-party agents for the business?

No, these are all captive, Ryan. They are their employees working either from sales centers or some remotely, obviously, during the pandemic. And I'm sure like most companies, they'll figure out the new balance of that as we all try to return. But they don't use third-party sales forces there, all their employees who are salaried and bonus and licensed through e-TeleQuote.

Last one for now at least. The merger agreement had some EBITDA projections for 2021 and 2022. Are those consistent with your EBITDA projection, including additional expenses and things like that after the sale? Or is that more related to their own previous EBITDA projection?

I'm not sure exactly what document you're referring to because we wouldn't have put out any EBITDA projections. So where are you pointing that from?

Yes. The merger agreement has a couple of different EBITDA projections, I think, related to the earn-out, $90.4 million in 2021 and...

I was wondering -- yes. I was actually looking at our general counsel, and our general counsel was trying to say is that's been posted. So the bottom line is those are based on projections that the seller anticipated when they went to market and we're marketing their organization. We built our view, I would say, a little more conservatively than their numbers. But that being said, if they hit those numbers and trigger the full earnout, it would be a very successful story, both for the members of management and TRG who would earn on the earnout as well as for Primerica and its stockholders, and that would do quite well on those earnings, too. So obviously, our desire would be for them to hit those numbers, whether they can or not, we'll have to see. Again, those were their marketing numbers when they marketed the company, and that's what we, therefore, based their earnout expectations on.

And our next question will come from Andrew Kligerman with Crédit Suisse.

Question first, just to clarify some of these earnings impacts. So in your low single-digit accretion in '21 and mid-single digit in '22, the earnout is contemplated in those numbers. So that accretion includes those earn-out figures?

The accretion number that we gave you include what our level of expected payout is on the earnouts, yes.

I see. And so those earnouts would be booked in the income statement and not viewed as not going in through the balance sheet. So that actually would run through the income statement that assuming they get paid?

Yes. I mean -- and to be honest with you, we'll have more time to talk about this as we get closer to bring them in on consolidation. I think -- and I don't want to get too much into the legalities of it. There are, obviously, regards to those be capital transactions for the people to get them. And so we will account for that accordingly. But the expenses would be running through our P&L.

Great. And then ultimately then, if everything works out and they hit their targets, which, as you said, is good news, so the price debt would be $650 million, not $600 million, right?

Yes. If you went back and if they were able to earn the entire both tranches of the earnouts, the entire enterprise value that would have been paid would be $650 million. But remember, thus far, we've only acquired 80% of the company. So keep that all in mind. There's another whole component where the calls and puts will happen over up to 4 years. And those are based on formulaic prices that have a combination of earnings, both for the company and public company multiples and a discount for the public company multiples. So the $650 million would be the enterprise value as sort of that point in time, but we wouldn't have necessarily paid that because we only have acquired 80%.

Got it. And regarding the business itself, the mix of Medicare Advantage and Medicare Supp, how does that kind of -- how does that -- what's the mix there?

Yes. e-TeleQuote, historically, has been primarily Medicare Advantage -- in fact almost all Medicare Advantage. They do have carriers for Medicare Supplement and do a small amount of that business. And so we do believe they are capable and have shown that through their history. We believe that our referrals are likely to be more balanced between the 2 products than they have shown historically. And so it was important to us to demonstrate that they could enter that business in a significant way. And I think as Mike mentioned in his prepared remarks, we see that as one of the opportunities of this relationship is really to bring them more to bear against the need in the supplement market. I mean, Mike, you might want to comment on that.

No, I think that's exactly right. The 2 products, Medicare Advantage is far more complex. Medicare Supplement is a more straightforward sale. And so we feel very confident about making that transition versus a business that was focused on Medicare Supplement making the transition to Medicare Advantage.

And with regard to the Medicare Advantage market in general, with the new administration in place, are there any regulatory risks that may be in play here with a new administration?

It's a great question. One of the things that we like about the senior health space is, as Glenn mentioned in his comments, it's stable and very favorable. It's one of the very few things in Washington today that enjoys bipartisan support, and so we feel very positive about that. And in fact, some of the discussions that are taking place in Washington today are about lowering the age for Medicare eligibility, which could be a positive on a net basis for this business.

Got it. And then just lastly, one more. Life insurance. Is this a platform that someday, assuming success with the Medicare Advantage and that stuff that you could build out of a life insurance vertical. Is that something you thought about as you did this transaction?

Yes. We obviously thought about that, Andrew. We don't have any intention of offering other products that we currently sell through e-TeleQuote. We believe that the life insurance market, potentially in the middle market where we do business is very much a face-to-face business and one that our success there and probably the considerable lack of competition there of other successful models demonstrate that to us. So we believe we're properly positioned to our strength to continue the face-to-face relationship building and use that to feed leads to e-TeleQuote on the senior health front, but we have no plans to do the opposite.

[Operator Instructions] And our next question will be a follow-up from Mark Hughes with Truist.

Well, the other guys asked some great questions. I don't have much left, but the earnout expense, Alison, you say that flows directly through the P&L. So whatever you're assuming relative to that $50 million bogey is already incorporated into the accretion estimate?

So yes, and not to get too much into the technicality than we are, obviously, we haven't completed our P GAAP, and I'm aging myself by saying that, but our purchase accounting work. But the difference between whatever we apply is the fair value of the earnout at the time of acquisitions and the earnout is what we'll go through, and that is included in our estimate of accretion.

Right. Okay. So is it fair to think your estimate is half or the total of that amount? And then once you get into 2023, that all drops away -- is that -- not huge numbers, but is that a fair way to think about it, the accretion is being dampened by those earnout payments somewhat...

Yes. I do think both of those are pieces of holding back -- could hold back a little bit. I think it really has more to do, quite frankly, it's not the earnout. It's the fact that this business, while it's growing tremendously, just relative size-wise to the rest of our book of business, it's going to take some time for it to become meaningful. And so even though it could be a powerhouse on its own and doing tremendously well, just because of relative size, it can only move EPS so much in any given period. Every year, I do believe, while I don't want to diminish our growth rate because I believe our growth rate has been tremendous, this is a very, very high-growth industry, very high-growth business. And so when you take that and layer it on top of our strong growth, I mean it did really provide a nice story with regard to what our potential could be. Again, it's going to take a little time for this business just to get large enough to really move the needle on our bottom line. And that's really the bigger piece of the story more than the earnout or any other small piece of the equation.

Understood. The quarterly earnings impact, is it expense drag through the first 3 quarters and a very profitable fourth quarter. Am I thinking about that properly?

Are you thinking of their business alone or for...

Yes.

Yes. So their business is seasonal. Glenn mentioned the annual enrollment period. And so they do a lot of their volume during that sort of, what we would call, the fourth quarter period. That being said, this business does do a nice mix of other types of business, special needs and the like. So they do produce quite a bit of volume throughout the year. But you are absolutely correct that the bulk of their revenues if you want, and cash will come in at any year beginning of the calendar year when those policies go effective.

And then the -- you've mentioned the sales force, you felt like they're training was quite strong with infrastructure expertise. What is -- are the sales kind of straight line with the sales force, you need to -- whenever you're projecting, you need to make sure you have that number of folks? And presuming that's already at -- in -- or being done now, is there any outlook you can give us for the sales force growth this year?

I think the way I'd characterize it is what Glenn said, we're endeavoring to start a pilot near the closing period for the transaction. And it will take time to get the right folks trained in our sales force, and we'll start to expand and add states and so forth. So I think once we get up to a run rate in terms of the number of policies produced, just like our life insurance business, it will scale as we grow the sales force at that point. But we're probably a couple of years out until we get to that run rate.

Mark, were you asking about our sales force or the e-TeleQuote sales force?

The e-TeleQuote sales force. Yes. What's the secret sauce? And what are they going to grow this year, I guess, is my question.

Yes. Well, they've developed -- again, they have kind of mastered, if you will, the Medicare Advantage space and also some good work in the special needs space and they really trained their people well around what they're good at, and they attract quality people, trained them well. The curves that we've seen on their productivity is exactly what you'd expect and what Mike just described about our sales force, the newer reps are not nearly as productive as the experienced reps. And then that productivity and success rate drives who gets which leads and what the algorithms that create the best outcomes for all of that. They've got a good system for doing that, for identifying their successful salespeople, for training people to the appropriate level, but there's no replacement for somebody being on the phones and talking to clients and gaining that expertise. But you're right, there is a relationship between the number of licensed reps they have and their sales. It's similar to the dynamic we have, although the numbers are very different. So you're right, there is a game plan to grow the size of that sales force, which will ultimately grow their total sales. Mike, you might want to add something else to that too.

That's exactly right. I mean they ended the year with around 700 agents at 500 on average throughout last year and are already approaching 900. And so they're making a good run at growth. And so we're pleased to see that, and we're excited to be a part of their growth story going forward.

And our next question will come from Ryan Krueger with KBW.

I just had a couple of quick follow-ups. I guess on the agents, would you -- I know you talked about referrals, but longer term, would you anticipate trying to -- would you ever anticipate recruiting agents within Primerica that then got moved over into this business?

No. I think it's probably, Ryan, 2 very different mindsets. I mean clearly, there could be some movement in between. But as I've described before, at Primerica, we recruit entrepreneurs that want to be in the financial services business, but they're entrepreneurs first. They're not -- they don't think of the sales as commission salespeople or employees. And so there's probably a mindset difference by and large, in the 2 sales forces. That said, I'm sure there will be some people that look up and say, "Well, that looks interesting over there. I think I'd like to try that." We want to manage that, so it's not disrupted, but I think there could be some of that. There's no plan to try to facilitate that at this point because we're not sure what we gained from it. But as we go, we'll evaluate that and see if we're missing an opportunity there.

Just last one. What do you expect holding company cash to be pro forma for the deal?

You mean after?

Yes, after just closing...

We expect it to -- by the time we report, it'd be over $150 million. Our target is to get it back up closer to $200 million in very short order.

And this will conclude the question-and-answer session and also concluding today's call. We'd like to thank you for attending today's presentation. And at this time, you may now disconnect your lines.