Primerica Q1 2025 Earnings Call Transcript

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Operator

Greetings, and welcome to Primerica's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Nicole Russell, SVP, Investor Relations.

Operator

Thank you. You may begin.

Nicole Russell
Nicole Russell
SVP - Investor Relations at Primerica

Thank you, operator, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings 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 our Chief Executive Officer, Glenn Williams and our Chief Financial Officer, Tracy Tam. Our comments this morning may contain forward looking statements in accordance with the Safe Harbor provisions of the Securities Litigation Reform Act.

Nicole Russell
Nicole Russell
SVP - Investor Relations at Primerica

We assume no obligation to update these statements to reflect new information and refer you to our most recent Form 10 ks filing as may be modified by subsequent Form 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 provide additional insight into the company's financial results. Reconciliations of non GAAP measures to their respective GAAP numbers are included in our earnings press release. I would now like to turn the call over to Glenn.

Glenn Williams
Glenn Williams
CEO at Primerica

Thank you, Nicole, and good morning, everyone. Thanks for joining us. In the first quarter of twenty twenty five, Primerica delivered strong financial results despite headwinds from external factors, including sustained cost of living pressures and heightened economic uncertainty during the quarter. Starting with a snapshot of financial results, Adjusted net operating income for the quarter was 168,000,000 up 14% year over year, while diluted adjusted operating EPS increased 20% to $5.2 These results reflect the continued strength within our investment and savings product business and the steady contribution from our Term Life business during the first quarter of twenty twenty five. The predictability of our business allowed us to return a total of $153,000,000 to stockholders during the quarter through a combination of $118,000,000 in share repurchases and $35,000,000 in regular dividends.

Glenn Williams
Glenn Williams
CEO at Primerica

The strength of our business model, our commitment to the sales force and the growing need for the financial education provided by our independent sales representatives resulted in record success during 2024. Following an outstanding year, we entered 2025 with solid business fundamentals and a clear understanding of the financial pressures affecting middle income families. The recent increase in economic uncertainty has impacted our marketplace, pressuring recruiting and term life insurance sales during the first quarter. And since April, we're starting to see some resistance to investment sales momentum. Looking at distribution, we recruited a total of 100,867 individuals during the first quarter, representing a 9% decline year over year.

Glenn Williams
Glenn Williams
CEO at Primerica

Similarly, life new life licenses declined 5% versus the prior year period. Both recruiting and licensing activity were softer than expected as uncertainty appears to be contributing to greater caution in decision making. That said, it's important to note that both recruiting and licensing numbers are historically strong and continue to fuel growth in our sales force. The total number of life license representatives grew slightly since year end and is up 7% compared to March 2024. We remain committed to growing our sales force and continue to expect around 3% growth during 2025.

Glenn Williams
Glenn Williams
CEO at Primerica

Looking at term life results. We issued 86,415 new term life policies during the first quarter, representing $28,000,000,000 in new term life protection for our clients, which was in line with prior year levels. Productivity at 0.19 policies per rep was just below our historical range. We believe that today's challenging environment is particularly difficult for representatives to navigate, especially those with less sales experience. Considering these dynamics, we expect twenty twenty five full year policies issued to be broadly in line with 2024 levels.

Glenn Williams
Glenn Williams
CEO at Primerica

At quarter end, we had a total of $957,000,000,000 of protection in place for middle income families, and we are pleased to see that persistency has remained stable again this quarter. Turning next to the ISP segment. Total sales during the quarter were $3,600,000,000 up 28% year over year, driven by strong demand across the board, including U. S. And Canadian mutual funds, variable annuities and managed accounts.

Glenn Williams
Glenn Williams
CEO at Primerica

Net inflows for the quarter were very strong at $839,000,000 versus $274,000,000 in the prior year period. Client asset values ended the quarter at $110,000,000,000 up 6% year over year and down 2% during the first three months of twenty twenty five due to negative market performance. Our securities license sales force has done a good job keeping clients focused on their long term goals and the importance of staying invested despite heightened market volatility. Preliminary sales results in April, while positive, are beginning to reflect the effects of continued market volatility and broader economic uncertainty. Considering our strong outperformance during the first quarter, we continue to expect full year sales growth in the mid- to high single digit range during 2025.

Glenn Williams
Glenn Williams
CEO at Primerica

Our mortgage business showed strong sales growth in both The U. S. And Canada during the first quarter of twenty twenty five. In The U. S, we had $93,500,000 of closed loans, up 31%.

Glenn Williams
Glenn Williams
CEO at Primerica

We now have 3,269 licensed mortgage loan originators in 33 states. Our referral program in Canada had $43,300,000 of closed loans, up 78%. While both programs are still relatively small, we believe their importance will continue to grow over time. The resilience of our business model demonstrated over nearly fifty years, combined with our unwavering commitment to help middle income families achieve financial independence, are the key drivers of our success. There will always be a need for financial education among underserved families, a group that is often overlooked by the broader financial services industry.

Glenn Williams
Glenn Williams
CEO at Primerica

This reality underscores the importance of our mission and the opportunity that lies ahead. We have confidence in our model and in our sales force's ability to continue meeting the needs of the communities we serve. With that, I'll hand it over to Tracy for the financial details.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Thank you, Glenn, and good morning, everyone. Starting with Term Life segment. Operating revenues rose 4% year over year to $458,000,000 driven by 5% growth in adjusted direct premiums. Pretax operating income was $147,000,000 up 6% compared to the first quarter of twenty twenty four. All key financial ratios were in line with our expectations and consistent with the prior year period.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

These included the benefits and claims ratio at 58.2%, the DAC amortization and insurance commissions ratio at 12%, the insurance expense ratio at 7.7% and the operating margin at 22.1. Overall, remains above our long term expectations, which we believe reflects the ongoing financial impact from higher cost of living pressure on middle income families. Over the last two quarters, lab trends stabilized with persistency on policies issued during the last year, largely in line with our long term assumptions. We expect that overall persistency will continue to normalize over time. Turning to mortality.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

As noted on a number of occasions last year, claims experience continued to trend favorably relative to expectations. Given the relatively predictable nature of our Term Life business, we reiterate our full year 2025 outlook to be consistent for ADP growth and PT financial ratios. We expect ADP to grow around 5%, the benefits and claims ratio at around 58%, the debt amortization and insurance commissions ratio at around 12% and operating margin around 22. I want to remind investors that insurance expenses are subject to some seasonal variances. I will provide additional guidance on our expectations for the second quarter on a consolidated basis in a moment.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Turning next to our Investment and Savings Products segment. Operating revenues of $291,000,000 increased 19% from the prior year period, driven by both higher sales and growth in client asset value. Pretax income rose 24% to $81,000,000 Sales based revenues increased 25%, slightly outpacing 22% increase in revenue generating sales, primarily driven by strong demand for variable annuity. Asset based revenues increased 18% year over year compared to 14% increase in average client asset values as we continue to benefit from a mix shift towards products on which we earn higher asset based commissions, including U. S.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Managed accounts and Canadian mutual funds sold under the principal distributor model. Sales commissions for both sales and asset based products increased in close correlation with revenues. The Corporate and Other segment incurred a pretax adjusted operating loss of $8,000,000 compared to a loss of $12,000,000 in the prior year period. The year over year change was driven by an increase in net investment income, primarily due to growth in the size of the portfolio. Finally, consolidated insurance and other operating expenses were $163,000,000 up 4% year over year.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

The growth in expenses was primarily driven by higher variable costs associated with growth in our Term Life and ISP segments and increased employee compensation costs from annual merit increases. First quarter expense levels were a couple of million dollars lower than planned due to timing of technology investments and other expenses. We expect these projects to ramp up in the coming months. As such, we're maintaining our full year outlook for expenses to increase by around $40,000,000 or 6% to 8% in 2025, with second quarter growth consistent with our full year guidance. Our invested asset portfolio remained well diversified with a duration of five point one years and an average quality of eight.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

The portfolio had a net unrealized loss of $169,000,000 at the March, modestly better than prior year end as rates generally decreased during the quarter. We continue to believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns. And we have the intent and ability to hold these investments until maturity. We continue to generate significant deployable capital, reflecting the strength and consistency of our capital light distribution model. The predictability of our cash flow is driven by our large in force block of term life insurance policies, our use of reinsurance, which substantially reduces the mortality risk exposure and our fee based ISP business, which requires very little capital.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

This model supports our ongoing commitment to returning value to stockholders, while also enabling us to invest in long term growth. Our holding company ended the quarter with $4.00 $7,000,000 in cash and invested assets. Primerica Life estimated RBC ratio was $470,000,000 4 70 percent. We remain confident in our ability to sustain capital strength while supporting ongoing growth initiatives and continuing to return capital to stockholders. With that, operator, please open the line for questions.

Operator

Thank you. We will now be conducting a question and answer session. Session. Our first questions come from the line of Ryan Krueger with KBW. Please proceed with your questions.

Glenn Williams
Glenn Williams
CEO at Primerica

Good morning, Ryan.

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

Hey, thanks. Good morning. My first question was on the dynamic you're seeing between Term Life sales and ISP sales. Just seems striking that you're seeing some pressures on term life given economic uncertainty and cost of living pressures, then very extremely high production in ISP. What do you attribute this to?

Glenn Williams
Glenn Williams
CEO at Primerica

Yes. Ryan, one of the beauties of our complementary business model is that our two main lines of business often react differently under the same circumstances, and that gives us a unique balance. But you're right. They're pretty much at an extreme right now as we have our life insurance momentum decelerating, a very strong quarter in ISP, although we're seeing some deceleration due to the uncertainty. Cost of living, as we've talked about before, impacts our life insurance business fairly quickly because families often, new income families are making priority decisions on whether to buy and keep a term policy.

Glenn Williams
Glenn Williams
CEO at Primerica

If they have some additional disposable income, they might start a systematic investment plan, generally fairly small. And when money gets tight, those two things come into question. The larger sale business, particularly rollover business and movement of larger blocks of money, is not impacted nearly as much by cost of living. People aren't making a rollover decision based on do the cost of gas go up this month or not. They're looking for a better investment or different features of the investment.

Glenn Williams
Glenn Williams
CEO at Primerica

One of the things we've mentioned before is our variable annuity business is particularly strong, and that's because of the guarantees. Often, there's a flight to guarantees in time of uncertainty. We are seeing some of that. So the businesses do react differently, specifically to cost of living. The uncertainty tends to be a headwind for both because when people are not sure what's about to happen, they tend to wait and see.

Glenn Williams
Glenn Williams
CEO at Primerica

And that can impact term life sales, can impact even recruiting, as we've seen. And it's beginning to slow down some of the movement of money, even the rollovers and transfers in the ISP business. That said, I hope that uncertainty is can be a relatively short phenomenon. If we can get some clarity and direction, some decisions about our tariffs in or tariffs out, what are their impacts and so forth, hopefully, is a fairly short term dilemma that could be resolved during this year, and then we can get some more certainty and clarity going forward.

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

And related follow-up, the 5% to 10% ISP sales outlook for the year, that's certainly much lower than you had for the first quarter. Are you kind of assuming that there's some ongoing headwinds the rest of the year because of the volatility that we're seeing and that's embedded in outlook?

Glenn Williams
Glenn Williams
CEO at Primerica

Yes. We make the outlook based primarily on today's conditions because we're not sure what might happen next. I mean, uncertainty is the word that's going be used at a record pace, I think, this quarter by companies and others. So we tend to look out. But we also had extremely strong last two quarters last year.

Glenn Williams
Glenn Williams
CEO at Primerica

So the comparisons to try to get the same percentage growth that we saw in the first quarter result in much bigger numbers. So it's the combination of the very strong finish last year and the comparison in the kind of decelerating percentages as well as assuming that the disruption and uncertainty we're experiencing today is probably going to continue for a while. I hope it doesn't, but we make our plans assuming it will.

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

Makes sense. Thank you. Certainly.

Operator

Thank you. Our next questions come from the line of Wilma Burdis with Credit Suisse. Please proceed with your questions.

Glenn Williams
Glenn Williams
CEO at Primerica

Good morning, Wilma.

Wilma Burdis
Wilma Burdis
Director at Raymond James Financial

Hey, good morning. This is a little bit of a follow-up on Ryan's question, but you've talked before about how your clients tend to be a little bit slower to react to market news. Just can you just talk about how people have been thinking about things and how you're seeing that now, especially in April?

Glenn Williams
Glenn Williams
CEO at Primerica

Yes. We do believe, Wilma, as you point out, that in general, most of our clients react a little more slowly, particularly the middle income clients. But even those that have fairly large assets, we always teach long term investing, buy and hold most of our accounts are for retirement accounts, so they have long term time horizon. So we're not in an environment where people are moving in and out like day traders or other more frequent traders might be. So I would expect our people to buy and hold and react more slowly.

Glenn Williams
Glenn Williams
CEO at Primerica

We do see that. But after the noise gets so loud or lasts so long, we do people start see people start to take a wait and see attitude, and that does start to slow down some of the momentum. So I think it's catching up with us now. I do think that, again, it could be short lived if we get some clarity quickly. But we're assuming that we're going to be under the current conditions for most of this year as we make our plans going forward.

Wilma Burdis
Wilma Burdis
Director at Raymond James Financial

Thank you. And then can you just talk a little bit about the recruiting environment or a little bit more about the recruiting environment, especially going forward? Is there maybe a situation where the Primerica opportunity becomes more attractive as people maybe look for a little bit more income or that kind of thing?

Glenn Williams
Glenn Williams
CEO at Primerica

Sure.

Glenn Williams
Glenn Williams
CEO at Primerica

As we've talked about many times before, some disruption and dissatisfaction actually helps our recruiting. So when people are frustrated or they fear for job loss, about job loss and that kind of they look for alternatives. And I think we benefited from that over the last few years. We do need to remember that the uncertainty is new, but the cost of living pressures are not new. It's something that has people in the family has been dealing with for a number of years.

Glenn Williams
Glenn Williams
CEO at Primerica

And so but there is a point, I believe, where when you just don't know what's going to happen next, you just stop and think a little longer. And that's what we believe we're seeing both on the recruiting side compared to last year, is people are just being are giving it a little more consideration, a little more thought, whether they're buying if money is tight, whether they're buying a term insurance policy or if they're about to invest the effort, there's very little money, but there's tremendous effort in building the business and kind of exercising that entrepreneurial spirit, they're in a wait and see mode. And again, it's possible that this could be short lived, that clarity could come quickly, but we're assuming it lasts for some time. And so that's why we've taken the edge off of some of our expectations for the year. But on the other side of that is once clarity does come back, people remember the disruption, and that becomes a recruiting tailwind.

Glenn Williams
Glenn Williams
CEO at Primerica

So when we do get some clarity and people start feeling better, money is not quite so tight, the future direction is not quite so cloudy, we will remind people what they just went through. You don't want to experience that with no control. You want to take control of your future, and it becomes a recruiting message. So we will turn a positive into a negative whenever we can when it comes to delivering our message of our entrepreneurial opportunity.

Wilma Burdis
Wilma Burdis
Director at Raymond James Financial

Okay. Thank you.

Glenn Williams
Glenn Williams
CEO at Primerica

Thank you.

Operator

Thank you. Our next questions come from the line of Jack Matten with BMO Capital Markets. Please proceed with your questions.

Jack Matten
Jack Matten
Vice President Equity Research at BMO Capital Markets

Welcome, Hey, thank you. Good morning. Just one more follow-up on the ISP growth outlook. I'm just curious, are you seeing any particular products more impacted than others? I mean, I know you in recent quarters, you've been seeing a mix shift towards more higher margin products.

Jack Matten
Jack Matten
Vice President Equity Research at BMO Capital Markets

Just wondering how we should think about that dynamic moving forward?

Glenn Williams
Glenn Williams
CEO at Primerica

Yes. As we're accustomed to seeing, Jack, when things get bumpy, the guarantees of variable annuities and index linked variable annuities become very attractive. And we are seeing that as sort of our lead product that we've sold for a long time, mix shift in that direction. Our Managed Account business is a newer business, and it's a fast growing product line, not just to Primerica but in the industry. And so we're seeing good percentage growth in that simply because it's new and it's a great addition to our product line.

Glenn Williams
Glenn Williams
CEO at Primerica

If we call it new, it's been a decade, but it's newer than the other product lines. So that's what we're seeing is we're seeing the faster growth in VAs because of the guarantees, and then we're seeing some fast percentage growth in our managed account because it's a newer, smaller business that's got some really great momentum.

Jack Matten
Jack Matten
Vice President Equity Research at BMO Capital Markets

Got it. And then just one on capital. Can you just talk about what drove the nice uptick in the RBC ratio to four seventy this quarter up from four thirty I think last quarter. Was there anything notable going on that drove that result?

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Good morning, Jack. On the RBC ratio and our capital position, overall, our RBC ratio is a function of some of the also state regulatory requirements for where we domicile, and sometimes we have some variation on that. But overall, we believe in having strong capital position, both for our insurance businesses as well as for our overall company. So when you look at the RBC ratio, obviously, there are some quarterly ups and downs variations. But overall, our line of thinking is that we need a strong capital in order to support our growth, but more importantly, also have a strong rating.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

And in the time of any sort of potential uncertainty, our capital position is very important. And you also look at the holdco capital that we have, by and large, we do believe that given any sort of growth for the long term as well as for facing any sort of potential downturn, we have the resiliency and the strong capital position to absorb any sort of uncertainties and downside risks.

Jack Matten
Jack Matten
Vice President Equity Research at BMO Capital Markets

Got it. Thank you very much.

Operator

Thank you. Our next questions come from the line of John Barnidge with Piper Sandler. Please proceed with your questions.

Glenn Williams
Glenn Williams
CEO at Primerica

Good morning, John.

John Barnidge
John Barnidge
Managing Director & Senior Research Analyst at Piper Sandler Companies

Good morning. Appreciate the opportunity. My question here is, how do you view the health of the economy in Canada? You talked about moderation in sales in April, I believe.

John Barnidge
John Barnidge
Managing Director & Senior Research Analyst at Piper Sandler Companies

Is that experience any different between your U. S. Business and your Canada business?

Glenn Williams
Glenn Williams
CEO at Primerica

I think, John, speaking as an expert who lived in Canada for fifteen years, but I'm not really an expert, I think there are more similarities than there are differences in the countries in most questions, and I think this is one of them. I think the two economies are very similar.

Glenn Williams
Glenn Williams
CEO at Primerica

There's uncertainty in both, although one segment of uncertainty has been removed with the election that's done in Canada. So now there's clarity in who the leadership is. But we have a great business in Canada. We've been doing business there thirty nine years. We have a very strong and experienced leadership team, both in our sales force and in our corporate office.

Glenn Williams
Glenn Williams
CEO at Primerica

And fortunately, we're viewed by Canadians as a Canadian company since we do have the strong outpost there. So I would we're anticipating that the timing might be a little different in the impact of some things, but it's going to be a very similar set of dynamics. Our business in Canada generally reacts very much like our business in The U. S. The two investment businesses, for example, are tracking very close to each other in growth.

Glenn Williams
Glenn Williams
CEO at Primerica

I would say that our distribution building and term business has been exceptionally strong this year in Canada following a period coming out of the pandemic where Canada reacted more slowly. So they're catching up. So again, there are a handful of differences. But at the same time, we would expect the results to be similar in direction and in quantity. So we're just as optimistic about the future in Canada as we are here.

John Barnidge
John Barnidge
Managing Director & Senior Research Analyst at Piper Sandler Companies

Appreciate that answer. And my follow-up question. In light of a dynamic macro environment, how do you think about your presence in the market repurchasing stock versus maybe your expectations coming into the year? Thank you.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Good morning, John. In terms of stock purchase program, we have announced the program for 2025 at $450,000,000 and there's a nice healthy growth from prior year. The way we look at the repurchase program is to provide consistent, resilient and predictable type of return on capital for our stockholders. So we typically try not to play and time the market, and we also like to be able to provide the type of strength on the ability to return based on multiyear stress test as a premise. So we don't at current point, we believe there's any risk to our program that's announced for 2025.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

And our thesis really is to have a predictable type of pattern, which is very helpful for investors.

John Barnidge
John Barnidge
Managing Director & Senior Research Analyst at Piper Sandler Companies

Thank you for the answers. Great. Thank you.

Operator

Thank you. Our next questions come from the line of Mark Hughes with Truist Securities. Please proceed with your question.

Glenn Williams
Glenn Williams
CEO at Primerica

Good morning, Mark.

Mark Hughes
Mark Hughes
Analyst at Truist Securities

Good morning, Glenn. Good morning, Tracy.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Good morning.

Mark Hughes
Mark Hughes
Analyst at Truist Securities

The corporate segment are doing better. It looks like just higher net investment income. Was there anything unusual in this quarter or should that higher allocated net investment income carry through the balance of the year and help support a better corporate expense or corporate performance?

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Yes, Mark, our corporate C and L segment really benefited from the investment portfolio. This is really a combination result for several things. One is the growth of the portfolio itself, and that has been on a pretty healthy trajectory in the past. The second part is we have moved some of our investments as the securities mature into a slightly higher yielding type of investments without giving up on the conservative risk profile we have. The majority of it is really fixed income portfolio that well matches our life side of the business in terms of duration, in terms of risk profile, and we are relatively conservative.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

However,

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

that

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

being said, we are pursuing some higher yields without giving up the risk and having that good balance. And I see this as a pretty good predictable around $40,000,000 a quarter type of up or down in that range support for our C and L segment. And I also do believe that our investment portfolio in general is a good way of keeping our capital very strong continuously while having a very balanced and low risk profile that supports our distribution business model and not having that being the main relying focus on our revenues.

Mark Hughes
Mark Hughes
Analyst at Truist Securities

And then when thinking about the term business, did you provide guidance? I think in the past you've talked about growth in adjusted direct premium for instance. Any reason to think the outlook has changed? I think the new sales perhaps stabilizing is a little bit different, but any updates on that those performance measures within Term Life?

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Yes. On the Term Life, AVP guidance, even though we have seen some uncertainty and there are some headwinds on the recruiting licensing side, given the large size of our in force block, any given year of new policies and premium is a very small slice of the overall income on the revenue that we bring in from Term Life. So considering the very stable nature of that business, there's really no impact materially this year. And I think our ADP guidance is going to be very consistent around 5% of our growth. And also keep in mind that when we give out our guidance for ADP, we have already considered the lapse situation.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

So that's already been factored in all of that situation as well. So it's pretty consistent. It's a very good defense business, and you could see that given also the capital light nature, very good defensive business in the long term.

Mark Hughes
Mark Hughes
Analyst at Truist Securities

Thank you for that. And then maybe one more quick one. Glenn, I think you've touched on this, but the annuity sales versus the mutual funds seems like more broadly there's been growing demand for annuities as protection products, volatile markets make those more attractive. Do you think maybe that outperforms in this go around relative to your earlier experience?

Glenn Williams
Glenn Williams
CEO at Primerica

I'm just thinking in comparison to early experience because this is a fairly common phenomenon. When things get a little bumpy and uncertain, we see it in the mix shift toward VAs. Not sure whether it will be more extreme this time. I think it depends on how long this goes on. The longer uncertainty continues, kind of the more impact it has, to a certain extent, I think, the investment side, at least.

Glenn Williams
Glenn Williams
CEO at Primerica

So I'm not sure it's much more extreme than it has in the past. It's a pretty natural phenomenon. We expect it. We see it. And but I don't think it's too much different from the past.

Mark Hughes
Mark Hughes
Analyst at Truist Securities

Thank you.

Glenn Williams
Glenn Williams
CEO at Primerica

Certainly.

Operator

Thank you. Our next questions come from the line of Dan Bergman with TD Cowen. Please proceed with your questions.

Glenn Williams
Glenn Williams
CEO at Primerica

Welcome, Dan.

Daniel Bergman
Stock Analyst at TD Cowen

Thanks. Good morning. I guess just to follow-up on your prepared remarks. I wanted to see if you could give a little more detail around what you're seeing regarding lapse rates across the term book. It sounded like they stabilized overall, but any more detail around what you're seeing, any differences across vintages would be very helpful.

Daniel Bergman
Stock Analyst at TD Cowen

And I know it sounds like you expect normalization over time, but just given the recent uncertainty, is there a risk that this could take a step back before it gets better? Just any thoughts on the outlook given the uncertain environment would be much appreciated.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Yes. Good morning, Dan. Regarding lapse rates, the first thing I will say is that we continue to see higher lapses across multiple durations than our long term actuarial assumptions, which was really the pre pandemic level of lapse rates. And also be reminded that during the pandemic period, we had extraordinarily low lapse rates. So some of the elevation in the recent past assumes pandemic had been the runoff of those relatively uncommitted population.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

But our recent within, let's say, the last year of new policies have consistent lapse rates as our expectations. So cumulatively, persistency also is in line with pre pandemic period. This is when you consider the very low lapse and the very high lapse. So over the long haul, when you look at it cumulatively, it's still very reasonable to our expectations. Now the last couple of quarters, we also have seen stabilizing trends.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

And for example, last quarter has been a decrease from the recent past. So that's also a good trend that we are observing. Obviously, we're going to need to give it a little bit more time. Even with the uncertainty that is being faced by middle income families, We are still already considering some of those higher lapses in our ADP guidance. So none of that is going to be new.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

We obviously, over time, we expect the trend to return to normal. That's really just relying on how quick the economic can return for the normalcy for the income family. And we know that in past financial recession type of situation, it may take a few years for the middle income families to get back on their feet. But by and large, we've considered a lot of those higher elevations in our guidance. So we see that for the year, our ADP growth outlook remains the same and we also do believe that overall cumulative trend is within our expectations.

Tracy Tan
Tracy Tan
Executive VP & CFO at Primerica

Hope that answers your question, Dan.

Daniel Bergman
Stock Analyst at TD Cowen

Yes. It's very, very helpful. Thank you. And then maybe one more on the ISP business, if I could. I guess, despite the market volatility, if my math is right, I think your full year guidance still implies something like flattish sales growth for the rest of the year against a pretty tough comp given that you had nice growth in 2024.

Daniel Bergman
Stock Analyst at TD Cowen

Is there any way to frame what would it take in the markets for there to be a more material decline in sales over the rest of the year? I mean, that's a business that's shown some sales volatility in the past, I think, for example, in 2022, you had a drop in sales after a really strong year in 2021. So how confident are you that this 2024 sales level is relatively sustainable going forward? A little bit of a broad question, but any thoughts would be much appreciated.

Glenn Williams
Glenn Williams
CEO at Primerica

Yes. Well, as we kind of view how our business has been reacting, again, some of these pressures that we're seeing this year or there last year, the uncertainty, I think, is new. And so that's what we're trying to layer on and assess. But we don't have an exact formula that says if the market drops 20%, here's what we'd expect. That would definitely impact us.

Glenn Williams
Glenn Williams
CEO at Primerica

But we're assuming that we get sort of a flattish market net net. It seems like it goes way up and goes way down from day to day or week to week. But and then if it were down 5%, ten %, you would see more slowing of our business. But to be able to gauge that and do the math or you've done the math for the full year in your head very well, I think. But to try to give sensitivities to that is a little trickier.

Glenn Williams
Glenn Williams
CEO at Primerica

And so that's why we'll update by quarter the full year number, and then you can see what that means we're thinking for the coming quarters as you kind of back into them. So we don't try to participate. It would take something more severe than what we're seeing. Exactly how to quantify that is pretty difficult.

Daniel Bergman
Stock Analyst at TD Cowen

Got it. Very helpful. Thank you.

Glenn Williams
Glenn Williams
CEO at Primerica

Sure.

Operator

Thank you. Our next questions come from the line of Suneet Kamath with Jefferies. Please proceed with your questions.

Glenn Williams
Glenn Williams
CEO at Primerica

Good morning, Suneet.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Good morning, Glenn. So I wanted to go back to your prepared remarks. I think it was when you were talking about the Term Life business. I believe you used the word resistance or we're seeing some resistance, which I don't know, to me, it sounds like a stronger word We're seeing people take a pause.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

So I just want to make sure I'm not reading too much into that. And if you could provide any color in terms of what that means, that would be helpful.

Glenn Williams
Glenn Williams
CEO at Primerica

Yes.

Glenn Williams
Glenn Williams
CEO at Primerica

And this is us trying to quantify human behavior, which is a little tricky at best. But what we're seeing in addition to the cost of living pressures, which we have been facing for a number of years now and have successfully overcome, I think our results would have been better in past years that had not been for the cost of living pressures, but we still were able to produce some growth. Now we have the uncertainty, which creates the wait and see kind of behavior is what we believe we're seeing. You're right, how to quantify the impact of the word resistance is but what we see is we've got a growing sales force, which means we've got new salespeople in the marketplace. Overcoming objections as part of what salespeople do.

Glenn Williams
Glenn Williams
CEO at Primerica

But this is a particularly hard objection to overcome, saying, I'm not sure what the economic situation means for my job or for my family, and therefore, back with me next quarter or check back with me in a few weeks, particularly hard to overcome, particularly for a brand new salesperson. And so whether we characterized it perfectly using the word resistance, it's another objection that a salesperson has to deal with sitting down with families and helping them through the very tough process of prioritizing tight budgets. And so that's a little different. That's a little new, and that's what we're seeing that's different this year. Again, uncertainty can resolve itself with certainty or it can resolve itself that people just get used to it and start to ignore it after a period of time.

Glenn Williams
Glenn Williams
CEO at Primerica

And so we do have some optimism that this doesn't go on forever, but it is a phenomenon we believe we're seeing in the numbers right now, and that's how we try to express it.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

I got it. That makes sense. So resistance in terms of customers, not in terms of recruits is kind of the message.

Glenn Williams
Glenn Williams
CEO at Primerica

Exactly. And you even get you do even get some recruits with wait and see. If you're thinking about starting a new business and the effort that it takes to get a new Primerica business up off the ground and you're not sure what the economic environment is going to be, that's hard at the best of times, but it looks like if I have an opinion that for the next three months, that might be particularly hard. I might say, let me start later when conditions are better.

Glenn Williams
Glenn Williams
CEO at Primerica

So you

Glenn Williams
Glenn Williams
CEO at Primerica

get humans are looking for a reason to procrastinate in general, and uncertainty provides a great one. And so it's just another it's not the first time we've seen this, won't be the last time, but it's just an extra dynamic to deal with in the marketplace that's relatively new this year.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

That makes sense. And then I guess in response to Ryan's question, you talked a little bit about the complementary nature of term versus ISP and these offsets that exist. But it feels like maybe as you move into 2Q, you may lose some of that just because markets were generally pretty positive in the first quarter. So I just want to make sure I have that right. And then if that's the case, is it are you guys thinking about anything that you might want to do on the cost side or anything like that?

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Or is it sort of too early to kind of take those steps?

Glenn Williams
Glenn Williams
CEO at Primerica

Sure.

Glenn Williams
Glenn Williams
CEO at Primerica

Well, on the ISP side, we had a very strong April, not at the percentage growth that we reported in the first quarter, but still significant growth. And so we're assuming that, that momentum continues for some period of time. It doesn't just turn on a dime and stop one day. So we got a pretty good read on how we think this quarter shapes up. And so there are no cliffs in sight, I would say that.

Glenn Williams
Glenn Williams
CEO at Primerica

And so we think we've got a little bit of a tail. Obviously, we're working to generate momentum in our Life business and overcome those objections we just discussed. We disciplined and very lean organization expense wise. And what that means is that we don't just have a lot of fat. We can go and let's just drop a few million dollars of expenses.

Glenn Williams
Glenn Williams
CEO at Primerica

Now we do have a game plan where we can reduce expenses as necessary if it became necessary. But it's not something like we just got unimportant expenses that we can just lift out of here. It's because we run a disciplined ship all the time, it makes it a little harder to reduce expenses when necessary. We can do it. We have a plan to do that.

Glenn Williams
Glenn Williams
CEO at Primerica

But we believe that we'll be able to overcome the headwinds, and that's not at the top of our list for our game plan for the rest of the year.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Got it. That makes sense. Thanks for the

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

answers.

Glenn Williams
Glenn Williams
CEO at Primerica

Absolutely.

Operator

Thank you. We have reached the end of our question and answer session. And with that, I would like to bring the call to a close. We appreciate your participation. You may disconnect your lines at this time.

Operator

Enjoy the rest of your day.

Executives
    • Nicole Russell
      Nicole Russell
      SVP - Investor Relations
    • Tracy Tan
      Tracy Tan
      Executive VP & CFO
Analysts

Key Takeaways

  • Strong Q1 results: Adjusted net operating income rose 14% year-over-year to $168 million and diluted operating EPS increased 20% to $5.20, enabling a $153 million return to shareholders via $118 million in buybacks and $35 million in dividends.
  • Term life stability: Primerica issued 86,415 new term life policies ($28 billion of protection) in line with last year and maintained stable persistency, though productivity dipped slightly amid economic uncertainty, with full-year policy counts expected to match 2024.
  • ISP momentum: Investment & Savings Products sales jumped 28% to $3.6 billion and net inflows reached $839 million, lifting client assets to $110 billion, and the company expects mid- to high-single digit sales growth for 2025 despite ongoing market volatility.
  • Recruiting headwinds: New agent recruiting fell 9% to 100,867 and new life licenses declined 5% as cost-of-living pressures and economic uncertainty prompted a “wait-and-see” approach, though total licensed reps grew 7% year-over-year and sales force expansion remains on track for ~3% in 2025.
  • Controlled expenses & capital strength: Operating expenses rose 4% in Q1 with full-year expense growth still guided at 6–8%; the holding company ended the quarter with $4.07 billion in cash and investments and a 470% RBC ratio to fund growth, dividends, and buybacks.
AI Generated. May Contain Errors.
Earnings Conference Call
Primerica Q1 2025
00:00 / 00:00

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