Primerica Q2 2025 Earnings Report

Primerica EPS Results

• Actual EPS: $5.46
• Consensus EPS: $5.18
• Beat/Miss: Beat by +$0.28
• One Year Ago EPS: $4.71

Primerica Revenue Results

• Actual Revenue: $796.02 million
• Expected Revenue: $790.99 million
• Beat/Miss: Beat by +$5.03 million
• YoY Revenue Growth: +0.30%

Primerica Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 10:00AM ET

Primerica (NYSE:PRI), together with its subsidiaries, provides financial products and services to middle-income households in the United States and Canada. The company operates in four segments: Term Life Insurance; Investment and Savings Products; Senior Health; and Corporate and Other Distributed Products. The Term Life Insurance segment underwrites individual term life insurance products. The Investment and Savings Products segment provides mutual funds and various retirement plans, managed investments, variable and fixed annuities, and fixed indexed annuities. The Senior Health segment offers segregated funds; and medicare advantage and supplement plans. The Corporate and Other Distributed Products segment provides mortgage loans; prepaid legal services that assist subscribers with legal matters, such as drafting wills, living wills and powers of attorney, trial defense, and motor vehicle-related matters; ID theft defense services; auto and homeowners' insurance; home automation solutions; and insurance products, including supplemental and accidental death, and disability insurance. It distributes and sells its products through licensed sales representatives. Primerica, Inc. was founded in 1927 and is headquartered in Duluth, Georgia.

Primerica Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Primerica reported adjusted net operating income of $180 million, up 6% YoY, and diluted adjusted operating EPS rose 10% to $5.46, while returning $163 million to shareholders through buybacks and dividends.
• Positive Sentiment: The sales force expanded with over 80,000 recruits in Q2 and 152,592 licensed representatives at quarter-end (up 5% YoY), and July incentives added 50,000 more recruits as the company targets 23% full-year growth.
• Negative Sentiment: New term life insurance policies fell by 11% and face amounts declined similarly, with Primerica now forecasting a ~5% drop in new life policies for FY2025 due to cost-of-living pressures and economic uncertainty.
• Positive Sentiment: The ISP segment delivered 15% sales growth to $3.5 billion, doubled net inflows to $487 million, and saw client assets climb 14% to $120 billion, prompting expectations for over 10% sales growth this year.
• Positive Sentiment: Primerica’s mortgage business grew strongly in Q2 with U.S. closed loan volume up 33% to $133 million and Canadian referrals up 30% to $45 million, adding a diversified income stream for the sales force.

Presentation

[Operator]

Greetings, and welcome to Primerica's Second Quarter twenty twenty five Earnings Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Nicole Russell, Head of Investor Relations. Thank you. You may begin.

[Nicole Russell, SVP - IR at Primerica]

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

[Nicole Russell, SVP - IR at Primerica]

We assume no obligations 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 Forms 10 Q for a list of risks and uncertainties that could cause actual results to materially differ from those that are expressed or implied. We also reference certain non GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliation of non GAAP results 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, CEO at Primerica]

Thank you, Nicole, and thanks, everyone, for joining us. Primerica delivered another strong quarter with results that reflect the consistent performance of our business. Despite continued economic and government policy uncertainty, our investment clients remain committed to their long term savings goals, our life insurance clients recognize the importance of protecting their income, and our business opportunity is attracting a significant number of recruits. Our sales force plays a critical role in delivering protection and investment solutions to middle income families when they need it most. As we sometimes see, our two main product lines respond differently to changes in the business environment, creating a good balance in our business model and financial results.

[Glenn Williams, CEO at Primerica]

Starting with our financial results. Adjusted net operating income was $180,000,000 during the 2025, up 6% year over year, while diluted adjusted operating EPS increased 10% to 5.46 These results reflect the continued strength within our investment savings products business and a steady contribution from our Term Life business. We continue to generate solid earnings growth and maintain our commitment to returning capital to stockholders. During the quarter, we returned a total of $163,000,000 to stockholders through a combination of $129,000,000 in share repurchases and $34,000,000 in regular dividends. Looking at distribution, we recruited over 80,000 individuals during the second quarter and licensed nearly 13,000 new representatives, down 10% from the second quarter record set last year.

[Glenn Williams, CEO at Primerica]

This level of activity continues to fuel growth in our sales force. We ended the quarter with 152,592 life license representatives, up 5% compared to June 2024. Recruiting in the third quarter also started strong. Using a recruiting incentive, has been affected in the past, we added over 50,000 new recruits in the month of July. We remain committed to growing our sales force and expect to grow between 23% in the full year of 2025.

[Glenn Williams, CEO at Primerica]

Turning to our sales results. We issued 89,850 new term life insurance policies during the second quarter and put in place over $30,000,000,000 in new term life protection for our clients, bringing our total face amount in force to a record $968,000,000,000 On a year over year basis, the number of new life insurance policies and face amount issued declined 119%, respectively. We believe the decline reflects a combination of continued cost of living pressures and ongoing uncertainty compounded by comparison to exceptionally strong results in the prior year period. Productivity at 0.2 policies per life insurance license representative per month was within our historical range of 0.2 to 0.24. Considering these stronger headwinds, we're now projecting the total number of new life policies issued to decline around 5% in 2025 compared to full year 2024.

[Glenn Williams, CEO at Primerica]

Turning next to the ISP segment. Results were once again stronger than anticipated, with total sales during the quarter up 15% to $3,500,000,000 We continue to see strong demand for variable annuities and managed accounts, while U. S. And Canadian mutual funds grew at a more modest pace. Net inflows for the quarter were $487,000,000 versus $227,000,000 in the prior year period, and client asset values ended the quarter at $120,000,000,000 up 14% year over year.

[Glenn Williams, CEO at Primerica]

We see more clients focusing on saving for retirement, driving higher transaction volume and increased average sales size. This trend has the potential to continue based on the large number of individuals in the baby boomer and Gen X populations who are approaching retirement age. Given our momentum in the 2025 and strong sales in July, we expect full year ISP sales growth to be more than 10%. During the quarter, we discovered a need to correct our methodology for calculating outflows and market value for Canadian mutual fund assets included in our consolidated client asset roll forward statistical data. We updated the roll forward table in our financial supplement to provide investors with restated historical statistics.

[Glenn Williams, CEO at Primerica]

This correction had no impact on our financial statements, ISP product sales nor the average or ending client asset values during the relevant periods. Net flows were impacted but remained positive. Our mortgage business showed solid year over year growth in both The U. S. And Canada during the 2025.

[Glenn Williams, CEO at Primerica]

In The U. S, we had 133,000,000 of closed loan volume, up 33% year over year. We are licensed to do business in 35 states through a total of nearly 3,400 licensed mortgage loan originators. Our referral program in Canada had $45,000,000 of closed loan volume, up 30% from a year ago. While mortgages currently represent a relatively small portion of our business, they provide our clients with a valuable financial tool while also creating a diversified income stream for our mortgage licensed sales force.

[Glenn Williams, CEO at Primerica]

The unique characteristics of each of our product lines can cause them to respond differently to changing business conditions. This quarter highlighted their complementary nature, with ISP with record ISP sales helping to offset the headwinds in Life sales. Despite the pressure on new Life sales, the size and stability of our Life business continues to provide consistent earnings even in an uncertain environment. We remain well positioned to deliver long term value for our clients, our field and our stockholders. With that, I'll hand it over to Tracy for the financial results.

[Tracy Tan, EVP & CFO at Primerica]

Thank you, Glenn, and good morning, everyone. The company's financial performance across all segments was very strong. Starting with Term Life, second quarter revenues of $442,000,000 rose 3% year over year, driven by 5% growth in adjusted direct premiums. The segment delivered solid performance with pretax income of $155,000,000 up 5% compared to the prior year period. Our key financial ratios remain consistent with expectations and largely in line with the prior period.

[Tracy Tan, EVP & CFO at Primerica]

These included the benefits and claims ratio at 57.5%, the DAC amortization and insurance commissions ratio at 12%, the insurance expense ratio at 7.6% and the operating margin at 23%. Overall, lapse rates for the quarter remained elevated and were stable compared to the prior year period in aggregate. We continue to believe higher lapse rates are primarily driven by cost of living pressures and their impact on middle income families. We believe that our clients are resilient over the long term and value our services and products. Based on historical trends, we expect persistency to normalize as clients adapt to the evolving economic environment.

[Tracy Tan, EVP & CFO at Primerica]

Therefore, we do not expect any significant changes to our LDTI lapse assumptions. We started to experience favorable mortality in the 2022 and continued to see favorable mortality trends relative to our expectations. Given the stable nature of our Term Life business, our full year guidance remains unchanged. To reiterate, we expect ADP to grow around 5% with a benefit and claims ratio at around 58%, the debt amortization and insurance commissions ratio at around 12% and the operating margin at around 22%. As a reminder, we will conduct our annual assumptions setting review in the third quarter, which may impact our future guidance for key ratios.

[Tracy Tan, EVP & CFO at Primerica]

Continued sales momentum and growth in our client asset values drove record revenues in our investments and savings product segments. Second quarter operating revenues of $298,000,000 increased 14% from the prior year period, while pretax income rose 6% to $79,000,000 Sales based revenues increased 15%, slightly outpacing the 11% increase in relevant sales, primarily driven by strong demand for variable annuities. Asset based revenues increased 17% year over year compared to 11% increase in average client asset values as we continued to benefit from strong client demand for products on which we earn higher asset based commissions, namely U. S. Managed accounts and Canadian mutual funds sold under the principal distributor model.

[Tracy Tan, EVP & CFO at Primerica]

Sales commissions for both sales and asset based products increased relatively in line with revenues. The Corporate and Other Distributed Products segment recorded pre tax adjusted operating income of $3,000,000 during the quarter compared to $1,000,000 in the prior year period. The year over year change was driven by an increase in net investment income, primarily due to the growth in the size of the portfolio. Finally, consolidated insurance and other operating expenses were $154,000,000 up 8% year over year. The growth in expenses was primarily driven by higher variable growth related costs in our ISP and Term Life segments and higher technology and infrastructure investments to support our sales force and business growth.

[Tracy Tan, EVP & CFO at Primerica]

We reiterate our full year outlook for expenses to increase in 2025 by around $40,000,000 or six to 8%. Our invested asset portfolio remains well diversified with a duration of five point three years and an average quality of eight. The average rate on new investment purchases in our life companies was 5.65% for the quarter with an average rating of A. The net unrealized loss in our portfolio continues to improve ending the June with a net unrealized loss of $158,000,000 We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns and we have the intended ability to hold these investments until maturity. We continue to generate significant deployable capital underscoring the strength and reliability of our capital light distribution model.

[Tracy Tan, EVP & CFO at Primerica]

The steady cash flow from our term life business is driven by the sizable in force block of insurance policies and our use of reinsurance, which limits our exposure to mortality risk. The fee based nature of our ISP business supports strong cash flow generation and a higher rate of earnings conversion. This model allows us to consistently return value to stockholders while also investing in long term growth opportunities. Our holding company ended the quarter with $371,000,000 in cash and invested assets. Primerica Life's estimated RBC ratio was 490%.

[Tracy Tan, EVP & CFO at Primerica]

We remain confident in our ability to maintain a strong capital position while supporting ongoing growth initiatives and continuing to return capital to stockholders. In both good and bad economic times, Primerica has been able to deliver strong earnings, solid cash conversion and superior return on equity. With that, operator, please open the line for questions.

[Operator]

Thank you. And at this time, we will conduct our question and answer session. In order to get through as many questions as we can, please limit yourselves to one question only for each time that you queue. And our first question comes from John Barrage with Piper Sandler. Please state your question.

[Glenn Williams, CEO at Primerica]

Good morning, John.

[John Barnidge, MD & Senior Research Analyst at Piper Sandler Companies]

Good morning. Thank you for the opportunity. You talk about the decline in term license sales in the revised guidance? I know it's a point of sale that a monthly contributor like ISP. There's been concerns about cost of living, you've noted in your prepared remarks. Did that accelerate post Liberation Day? Thanks.

[Glenn Williams, CEO at Primerica]

Well, I think it's a combination, as we said, John, of cost of living and then just some uncertainty, which has led, I think, for most middle income families living on a month to month type of budget in a lot of a wait and see attitude. Let's see how prices turn out moving from here. Let's see what happens to interest rates. Let's see what happens to other issues that may not be clear yet. And of course, very difficult to get a beat on that based on what media might be feeding the middle class on either side of any one of those issues.

[Glenn Williams, CEO at Primerica]

So we've seen cost of living pressures for a number of years. I think we outstripped them last year, and we're able just to overcome them and show positive growth. But adding that wait and see element is what we see for those middle income families that really have a very tight budget. And that, of course, impacts our Term Life sales as well as our monthly investments in the ISP side of our business. The larger ticket investments, as we've discussed in the past, that move are not really related to a monthly budget.

[Glenn Williams, CEO at Primerica]

They're transfers of retirement accounts. They're estates that move from one generation to another. Those types of things are not impacted as much, at least by monthly cost of living. So we see it first in our Term Life business. And we do believe that, as Tracy pointed out, this is a temporary issue.

[Glenn Williams, CEO at Primerica]

We do believe that middle income families adapt to this over time. And the uncertainty becomes certainly, it may be different from last year's challenges, but at least it becomes certain, and then they begin to adapt and move forward. So I think we're in a wait and see period right now that we've experienced and that we see that first in Term Life sales.

[John Barnidge, MD & Senior Research Analyst at Piper Sandler Companies]

My follow-up question. You talk about a lot of wait and see mode on how the cost of living pressures will turn up as the pushback. When you're talking about adding over 50,000 recruits in July, are these pushbacks actually an opportunity to recruit new agents?

[Glenn Williams, CEO at Primerica]

I'm sorry, I didn't hear you. Is what an opportunity to recruit new agents?

[John Barnidge, MD & Senior Research Analyst at Piper Sandler Companies]

The cost of living pushbacks. I mean, you're Absolutely. There's a pushback like, hey, costs are going up. I don't know if I can commit to this. Well, okay, well, consider being an agent, maybe you get some part time work.

[Glenn Williams, CEO at Primerica]

Absolutely. There are generally both a push and a pull for most economic dynamics on a lot of what we do. But the positive side of financial stress in recruiting is people looking for additional income. And so the attraction of our part time opportunity absolutely plays into that. As we've said in the past, kind of ramp up unemployment does not help us because that creates the need for someone to get a paycheck on Friday, not build a business over a long period of time.

[Glenn Williams, CEO at Primerica]

So when things get extreme, it may work a little differently. But yes, while cost of living pressures and to a certain extent employment uncertainty are reasonable, they actually give us a little bit of a tailwind for recruiting, while they might provide a headwind for that month's life insurance sales. So yes, absolutely, you've defined that correctly.

[Operator]

Thank you. And your next question comes from Joel Hurwitz with Dowling and Partners. Please state your question.

[Glenn Williams, CEO at Primerica]

Good morning, Joel.

[Joel Hurwitz, Lead Analyst at Dowling & Partners]

Good morning. Tracy, you had mentioned in your prepared remarks that mortality continues to be favorable in the quarter. Can you just unpack the level of favorability versus expectation? And then in terms of the Q3 assumption review, I know you mentioned no change to the lapse rate, but any potential for changes to the mortality assumption as part of the review?

[Tracy Tan, EVP & CFO at Primerica]

Yes. Good morning, Joe. So mortality has been a trend we've been observing very closely. And in the 2022, we started to experience favorable mortality. And for over more than ten quarters at this point.

[Tracy Tan, EVP & CFO at Primerica]

We had initially been waiting to see if this was just a pull forward impact from COVID, which means that there could be a earlier accelerated death rates and then somehow it's going to stabilize over what the trend could turn out to be. But so far, we continue to see that the mortality has been favorable, especially last four quarters and twelve months, and we've seen that trend stabilizing downward. At this point, I think there's a potential likelihood that this is a trend to stay and clearly in terms of magnitude, we're quite a few percentages lower than our long term pre pandemic baseline actuarial assumptions. So in the third quarter, the annual reviews, we will certainly take very close look and make a decision on if we change our long term assumptions to recognize this trend.

[Joel Hurwitz, Lead Analyst at Dowling & Partners]

Got it. That's very helpful, Tracy. And then moving to ISP, really good sales in the quarter. I guess just a question, I look at the sales based margin, it was 123 basis points in the quarter. That's a bit below where you've been running the past several quarters. Colors on the driver there?

[Tracy Tan, EVP & CFO at Primerica]

In terms of IFT margin, I think the part of the expenses is the impact because of the variable growth related expenses that we have. And we also have commissions that is slightly higher than what you've seen in terms of dollars. We do try to true up as much as we can by mid year point where we see that the total year trend is running favorable. So we do a true up in the middle of the year, which may make the second quarter slightly higher than the first quarter. But it's in terms of the magnitude based on the running rate of our growth and where the commission is headed.

[Tracy Tan, EVP & CFO at Primerica]

And the other part to consider also is, as we see the growth trend of ISP last year was growing more than 20%, 25% and this year we're continually on pretty strong double digit top line growth and our infrastructure has been a little bit stressed in terms of catching up with the volume. So we continue to invest in technology and infrastructure to support our ISP sales. So some of those are part of what we had announced earlier in the year in terms of expense investments that would be supporting our growth. So that's what you're seeing coming through for ISP and that segment really deserves that buildup on technology and infrastructure.

[Joel Hurwitz, Lead Analyst at Dowling & Partners]

That makes sense. Thank you guys.

[Operator]

Your next question comes from Ryan Krueger with KBW. Please state your question.

[Glenn Williams, CEO at Primerica]

Hello, Ryan.

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

Hey, good morning. I had a question on ISP sales. You mentioned they were still strong in July. I was hoping maybe you could give a little more color on that. Reason I ask is, I think you said you'd expect them to be grow above 10% or more this year, but they were up over 20% in the first half of the year.

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

So maybe the above 10% is what you're emphasizing, but just wanted to see if you expected any slowdown or should we kind of see the same momentum in the second half?

[Glenn Williams, CEO at Primerica]

Yes, Ryan, we've always asking how long can that far into the double digit momentum continue, particularly when you lap yourself annually and you start comparing to the strong second half results from last year. So we've been signaling that we do expect the comparisons to get more difficult, bringing the percentage growth down. But we continue to see stronger than anticipated growth kind of month over month. So we did tick up the expectation now to above 10% above in the double digit growth range when we had guided to something less than double digits last quarter. So we are seeing continued strength.

[Glenn Williams, CEO at Primerica]

The comparisons with the second half of last year do get more difficult because this real momentum that we're experiencing today started in the second half. So we're seeing continued strength, but we're expecting it to moderate on a comparison basis.

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

Got it. Makes sense. And then just one quick follow-up on lapses in Term Life. Are they still running basically similar to what they were in the first quarter or have you seen any change?

[Tracy Tan, EVP & CFO at Primerica]

Yes, good morning. In terms of lapse, we continue to see in aggregate the elevated lapse compared to our long term LDTI assumptions, is pre pandemic. But in terms of comparative to prior year, the overall trend is pretty steady. And we started to see the lapse rate stabilizing a few quarters earlier, meaning that they're not elevating because during pandemic, we have extraordinarily low lapse rates. And then after pandemic, we see them run up because of the people who weren't committed and bought it during the pandemic period.

[Tracy Tan, EVP & CFO at Primerica]

And that is part of the reason that, for example, duration five, maybe the duration that we continue to see most fall off in terms of lapse and ability to persist. But we're obviously still waiting for that to run off and to us that is going through the snake at some point that falls off. But in aggregate, I think we're seeing a stable trend and we do believe that our consumers over the long term, if you look at the history of our forty years, they learn to adapt as the economics conditions evolve. So they're going to continue to value the policies and we do believe that it's going to stabilize over time. And by the way, our ADP assumption of growth that we give the guidance on of 5% already considered this elevated lapse rate.

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

Thank you.

[Operator]

Your next question comes from Jack Madden with BMO Capital Markets. Please state your question.

[Glenn Williams, CEO at Primerica]

Good morning, Jack.

[Jack Matten, VP - Equity Research at BMO Capital Markets]

Good morning. Just a follow-up on the recruiting outlook in term life. I think you referenced over 50,000 recruits in July. Can you talk about the incentives that drove that strong level? And then in the second quarter, was pressure on recruiting more prevalent early in the quarter in April and then improved? Or was there like a different trend, I guess?

[Glenn Williams, CEO at Primerica]

Some of the comparison, Jack, is because we've had incentives in place in a slightly different calendar last year, which was kind of the perfect positive storm. We had the convention last year, which gives us an opportunity to communicate these incentives to the entire a large portion of the sales force all at the same time rather than put it out through our normal communication channel. So you get a bigger response during a commission year during a convention year. So we decided to rerun the play that we did at the last convention. When you if you want to become part of Primerica and you have an insurance license, there's absolutely no cost to become part of Primerica to join.

[Glenn Williams, CEO at Primerica]

If you don't have an insurance license, we have a process to help you get one, and we do it at a very low rate. We discounted that licensing fee in July. And of course, that stimulated the communication about that opportunity from our recruiters and our team to those that recruits, we were very pleased considering all the other kind of negative economic headwinds and uncertainties we talked about earlier to know what kind of response we might want to get. Very pleased to see that it was a powerful response. Our entrepreneurial opportunity is attractive or maybe even more attractive than ever.

[Glenn Williams, CEO at Primerica]

And we had good excitement about spreading news and good response to it. So you've got a convention year last year we're comparing to. You've got a little bit of different timing in the calendar. You have to kind of look through all that to really understand the results, but we were extraordinarily pleased with the response we got in July. It gave us a good start to the third quarter.

[Jack Matten, VP - Equity Research at BMO Capital Markets]

Got it. That's helpful. Thank you. And then maybe just one on capital. The RBC ratio moved up again nicely to 490% this quarter.

[Jack Matten, VP - Equity Research at BMO Capital Markets]

I'm curious like when or if you might get in some of that excess up to the holding company? I think if Primerica is having a relatively low risk asset liability profile. So just curious why you're kind of running what looks to be a pretty conservative RBC ratio at the moment?

[Tracy Tan, EVP & CFO at Primerica]

Yes. Good morning, Jack. Our RBC ratio has a couple of things to take into consideration when you evaluate it. The first thing is that the RBC ratio oftentimes is impact also from the statutory regulatory restrictions, meaning how much you can take out has a rule by the defined by the state that you're domiciled in and you can only take out certain amount based on your prior year statutory income. So we practically are taking out the maximum we can, given that restriction and we do our best to estimate what that might be and take out all we can.

[Tracy Tan, EVP & CFO at Primerica]

And second part to consider is we do have an overall desire to keep a very strong RBC ratio. Partly is because when we look at life insurance, if we had stronger growth, we wanted to be able to support that growth and when the growth occurs, there is a capital requirement need to write that policy and put up the reserve for the claims. So that is another part to consider. But over the long haul, I think we do value to have a strong rating that really helps give clients and sales force the confidence when they look at using our protection product. So all of these are consideration.

[Tracy Tan, EVP & CFO at Primerica]

Now that being said, we are looking at all the options and alternatives on the best long term strategy capital deployment and certainly in consideration of supporting the holdco for buybacks, for dividends and all the support of the growth. And we're going to evaluate all the options to keep that ratio in reasonable range in terms of supporting growth and as well as being able to take it out when we can to do all the things we need to do for our stockholders and growth.

[Operator]

Your next question comes from Dan Bergman with TD Securities. Please state your question.

[Glenn Williams, CEO at Primerica]

Good morning, Dan.

[Daniel Bergman, Research Associate at TD Cowen]

Hey, good morning. Just digging into your ISP sales a little more this quarter. There's really strong continued growth in variable annuities managed accounts, but a little closer to flattish in U. S. Mutual funds.

[Daniel Bergman, Research Associate at TD Cowen]

There's still a really strong nominal level of sales there. But I was just hoping you could talk a little more about the dynamics in these different product areas. And do you view the mix shift this quarter as a one off given the high equity volatility in The U. S. Or part of an ongoing trend given the shift towards more retirement savings?

[Glenn Williams, CEO at Primerica]

I think it's some of both, Dan. I think we do have a longer term kind of demographic tailwind, as I mentioned in my script, from just kind of our aging society people moving toward retirement, which would be positive for retirement products like variable annuities. I do think the uncertainty that we talked about that probably impacts everyone to a certain extent. Our view is for investors, they look for guarantees in uncertain times or volatile times. And while I think there's confidence in the overall direction of the market, you look at the history this year, it's been tremendously volatile.

[Glenn Williams, CEO at Primerica]

And so that's where the variable annuity guarantees, the guaranteed income options or the upside market protection of the index linked variable annuities have real appeal to consumers. And I do think that the product providers have played into that and have continued to improve their products and make them appropriately more attractive to that marketplace. So my guess is, and again, I'm peering into a crystal ball, so it's just entirely opinion, is that as people move toward retirement and want security, there's likely the potential for a long term trend here. Our other products continue to grow and continue to serve a fantastic purpose. Our Managed Account business that you mentioned is a newer business, and you would expect it to be faster growing coming off a smaller base, and it is.

[Glenn Williams, CEO at Primerica]

And it's something that our sales force more people are getting licensed and getting more experienced with that. And so we would expect that to grow faster than an established business. But our mutual fund business is the largest of all those businesses. And it still performs an important, important function, particularly as we see those middle income families moving through their periods of life. Many times, they start in mutual funds because the minimums are smaller.

[Glenn Williams, CEO at Primerica]

They're simpler products. They can understand they're appropriate because they're simpler. And then later, they move into more sophisticated products. So our product set works together very, very well. We do see the mix shift according to economic conditions, but it's very much what we would expect from this product set.

[Daniel Bergman, Research Associate at TD Cowen]

Got it. That's very helpful. And then I think the mortgage volume showed nice growth this quarter. I think it was the highest it's been in a while. Just any more color on the trends here and the outlook for growth?

[Daniel Bergman, Research Associate at TD Cowen]

And just maybe big picture thoughts on how much room is there for continued incremental growth if interest in mortgage rates remain elevated?

[Glenn Williams, CEO at Primerica]

Yes. We're very excited about the potential for our mortgage business. Canada has had some rate reductions and that gave some early momentum to the referral program there. I think we're still waiting on rate reductions in The U. S.

[Glenn Williams, CEO at Primerica]

But back in times when rates were lower, as this program came off the ground, it got a very fast start in the 2019 to 2021. And then we kind of stalled out and retreated a little bit. But now we're regaining that momentum. I think there's tremendous potential if we do get some rate reductions. A lot of our advice around mortgages is around reducing debt and reducing your weighted average interest rate as a family.

[Glenn Williams, CEO at Primerica]

As interest rates come down, there are opportunities for refinancing, folding in high interest rate credit card debt. All of that comes on the table with falling interest rates. So we're optimistic about the potential for the program and could be a real player in the future for our company. Already, as we stated in the prepared remarks, important for clients and families and for our sales force, but there's upside for Primerica as well in the future.

[Daniel Bergman, Research Associate at TD Cowen]

Got it. Thanks so much.

[Operator]

Thank you. And your next question comes from Wilma Burden with Raymond James. Please state your question.

[Glenn Williams, CEO at Primerica]

Good morning, Wilma.

[Wilma Burdis, Director at Raymond James Financial]

Hey, good morning. Could you talk about a little bit more specifically about what drove the good expense results in 2Q? I realize that you guys reiterated the full year guide, but is there any sustainable element to the lower expenses in the quarter? Or is it more of a timing related to the ISP tech investments? Thanks.

[Tracy Tan, EVP & CFO at Primerica]

Good morning, Wilma. The expenses in second quarter was certainly an aspect of timing and some of it also has to do with our investment on technology. So the combination of those, the projects obviously are long term projects, many of those. So the timing of the start and when they get ramped up could be more likely towards the third and fourth quarter at this point. And we obviously also are experiencing variable growth related expense that is associated with how top line is going.

[Tracy Tan, EVP & CFO at Primerica]

And as ISP, for example, continue to be strong and you see some of the expenses coming through that segment a little bit stronger. Now in terms of full year guidance, I think we remain in the 6% to 8% range and just depends on how accelerated some of those technology and investments can be so that there could be some timing variable depends on those as well.

[Wilma Burdis, Director at Raymond James Financial]

Thank you. And then can you talk a little bit more about your efforts to grow the ISP sales force, and also to increase the diversity of sales by selling both Term Life and ISP across the sales force? Thanks.

[Glenn Williams, CEO at Primerica]

Sure, Wilma. We feel it's very important to continue to grow that sales force size as well. It's not as directly related to production as it is on the term life side. There's a very close relationship in most circumstances between our Life license sales force size and Life production. But on the security side, there are so many more factors involved like confidence in the market like we're seeing today, appeal of product set, mix shift, all the things that we talked about earlier.

[Glenn Williams, CEO at Primerica]

But we still believe having a growing base of the sales force is critical. The process is more difficult for getting securities license individuals, even if they're going to be with a limited securities license as opposed to the full stock and bond license Series seven, we generally use the Series six and sixty three. And that has proven to be more difficult and grow more difficult over time. So that has provided somewhat of a hurdle in that growth rate. However, we're pleased to we're beginning to see some traction.

[Glenn Williams, CEO at Primerica]

We had very good experience so far this year in seeing some traction and growth in our security sales force as well as the mortgage sales force that we discussed just a minute ago. So those other licenses are beginning to come through, and we're going to continue to feed that process and improvement. We have a lot of efforts going on among our team here and working with field leaders to try to make sure that we provide all the resources to kind of navigate through the difficulties of that licensing process. So we generally talk about the sales force just once a year and give a stat on it, but we are seeing growth in it this year, and we're pleased that some of our efforts are beginning to show results. But it does grow generally more slowly than our Life sales force.

[Wilma Burdis, Director at Raymond James Financial]

Thank you.

[Glenn Williams, CEO at Primerica]

You're welcome.

[Operator]

Thank you. Your next question comes from Mark Hughes Please state your question.

[Glenn Williams, CEO at Primerica]

Hello, Mark.

[Mark Hughes, Analyst at Truist Securities]

Yes. Thank you. Hello, Glenn. The ISP momentum continuing in July, are you seeing a little more mutual fund activity with the market having bounced back?

[Mark Hughes, Analyst at Truist Securities]

I think you said April was very poor, sentiment was soft in your last call. Is that picking up some steam?

[Glenn Williams, CEO at Primerica]

The mix shift, Mark, it usually is not quite that real time responsive. I mean, if we have a month or two or a quarter of positive returns, it's not like suddenly people go, I don't need those guarantees anymore. Let's move back over here into the lower guarantee or no guarantee business. It happens over longer term trends and longer term sentiment. So I don't have the data in front of me on the mix exactly for the month of July.

[Glenn Williams, CEO at Primerica]

But my gut tells me that it's similar to what we've seen in the past. If it does change, it will change slightly over time rather than take a hard turn. So I don't think you've got much difference in mix shift probably just for the single month.

[Mark Hughes, Analyst at Truist Securities]

Understood. When you think about the Term Life sales, how do you think you stacked up relative to the industries? Some of the industry data seem to be it hasn't been great, but it's been a little more stable than your results. I wonder whether you think that's not reflective of your particular end market or I'm just sort of curious how you see your experience versus the industry?

[Glenn Williams, CEO at Primerica]

Yes, that's a great question, Mark. I was looking earlier this morning at numbers that were released this morning on application activity in the industry. And what we're seeing is a lot of the industry positive is at the upper end of the age spectrum, 60 and above, even 70 and above in extraordinarily large face amount. The growth in the 30 year to date was just barely grow 0.3% under 30 and one 0.2% between ages 30 and 50, which that pretty much covers the vast majority of all the sales that we do since our philosophy is that term insurance is a temporary need while you're in income earning mode. So we're not that far off the industry.

[Glenn Williams, CEO at Primerica]

I think the whole industry is struggling with the exception of those selling to older ages and larger face amounts for estate planning purposes. We may be a little behind the industry this year just slightly, but I think we were way ahead of the industry last year. So it goes back to those difficult comparisons. But I think we're experiencing a lot of the same things that our peers are. And as Tracy pointed out, we do believe the resiliency of the middle income market always amazes me.

[Glenn Williams, CEO at Primerica]

They do adapt over time. And what's uncertain today, the same conditions will be considered certain after you've lived through them for a few months. And so we think it's a temporary issue that will correct itself over time, perhaps even turn into positive cost of living discussion at some point in the future, but certainly not for the immediate future. So I think we're traveling pretty much in the pack for our age group, Mark, maybe a little behind this year because we're ahead last year, and we believe that's something that will correct itself over time.

[Mark Hughes, Analyst at Truist Securities]

Very good. Thank you.

[Glenn Williams, CEO at Primerica]

Thank you.

[Operator]

And your next question comes from Jeff Schmitt with William Blair. Please state your question. Morning.

[Jeff Schmitt, Research Analyst - Financial Services and Technology at William Blair & Company, L.L.C]

Glenn. Just curious how you're thinking about productivity here with it at the low end of the historical range. Do you think it could move below that? And what do we need to see for that to really turn around?

[Glenn Williams, CEO at Primerica]

I think productivity is just the math on the headwinds we talked about. You've got a couple of dynamics. It's a pretty simple calculation actually. So as we grow the sales force, the denominator becomes larger. It makes it more difficult to stay in the range just by the sheer number.

[Glenn Williams, CEO at Primerica]

You've also got new people entering the sales force and entering today at a time when those headwinds we've discussed are probably a little more significant than they were a year ago or maybe even two years ago. So you've got a couple of mathematical dynamics working there. It is possible we could peak out the bottom of the range for a period of time due to that math. It wouldn't surprise me or concern me just based on those things. But we do know that over time, we tend to move back to the middle.

[Glenn Williams, CEO at Primerica]

And so as we address issues of confidence in this kind of environment for salespeople, maybe we get a little, if not relief from cost of living, at least we accommodate the cost of living in the middle market. We tend to move back to the middle of the range over time. So I think you're going to continue to see pressure on that ratio for the rest of this year. But over the long haul, we'd expect it to get back towards the middle.

[Jeff Schmitt, Research Analyst - Financial Services and Technology at William Blair & Company, L.L.C]

Okay. And does that suggest, I guess, that the surge in the sales force last year, you may have brought on some sort of less committed or just lower productivity sales agents and maybe that kind of corrects itself over the next year or two?

[Glenn Williams, CEO at Primerica]

That's possible, Jeff. But I got to tell you that our sales force is so large and we've been doing this for so long and we go for excellent quality individuals. I'm so proud of our sales force and the quality of what they do. I think it's the more difficult sales environment, not the commitment or ability of the salespeople that we're seeing today. And so I think that's possible, but I don't think that's probable.

[Glenn Williams, CEO at Primerica]

I think it's the environment. We've got people entering the business in a tougher sales environment now than we did in the past. And I think that environment will change over time. And their skill set will grow just like the middle market will adapt to living in a high cost of living environment, salespeople adapt to selling in a high cost environment and get better at it. So I don't think it's quality or commitment.

[Jeff Schmitt, Research Analyst - Financial Services and Technology at William Blair & Company, L.L.C]

Okay. That's helpful. Thank you.

[Glenn Williams, CEO at Primerica]

Certainly.

[Operator]

And your next question comes from Suneet Kamath with Jefferies. Please state your question.

[Glenn Williams, CEO at Primerica]

Good morning, Suneet.

[Suneet Kamath, Senior Research Analyst at Jefferies]

Hey, Glenn. How are you? So I had a question on annuity sales. If I just think back to historically, they've been about a quarter of ISP sales roughly. And just over the past few quarters, we're now about a third.

[Suneet Kamath, Senior Research Analyst at Jefferies]

If we stay at that mix, does that impact the P and L at all? Does it cause it to change relative to maybe what we're used to seeing? Just wondering if that's going to be something that we should focus on. Thanks.

[Glenn Williams, CEO at Primerica]

I think we view profitability of products as being very similar. It's a timing of when we're compensated on products. Variable annuities tend to have more upfront at the point of sale compensation and a little less compensation based on assets. But the profitability of the product is pretty close to some of the others, most of the others. So I think you see it as we've seen this quarter when the mix shifts toward variable annuities, you see sales based commissions outstripping the total.

[Glenn Williams, CEO at Primerica]

And then if the product mix shifts back, it kind of corrects itself as well. So we have never tried to manage product mix and say, Oh my gosh, too much of it's going toward product that's a little less profitable because the profitability over time is so close. So I think the shift that we're seeing, again, is happening because of the conditions and because of the excellent response to the current economic and market conditions of our product providers that are stepping up and providing features of products that meet the needs of consumers, so they're becoming very attractive. But that's kind of the front end view. I'll go to Tracy and see if you think P and L was impacted by mix shift toward variable annuities in any way to help Suneet with that.

[Tracy Tan, EVP & CFO at Primerica]

Yes, I agree with Glenn. I think it's more of a timing. And most of the products, in the long run, it kind of evens itself out.

[Suneet Kamath, Senior Research Analyst at Jefferies]

Got it. Okay. That makes sense.

[Suneet Kamath, Senior Research Analyst at Jefferies]

And then I guess sticking with variable annuities, Glenn, as a distributor, I think you have a good sense of product design and we're starting to hear a little bit from some of the carriers about some aggressive features particularly in the RILE market. Just wondering what you're seeing, if you're seeing any of that? And when you think about your product providers, do you tend to stick with the same sort of handful of carriers or do you sort of swap in and out kind of over time? Thanks.

[Glenn Williams, CEO at Primerica]

Yes. Let me take those questions in reverse order because I think your second question helps answer your first question. We absolutely stick with a narrow shelf of very high quality product providers that we have a long term relationship with, which is important for our business relationship with them, but it's also important so they understand our philosophy around these products. The annuity business during my forty plus career of being here has been prone to excess at various times. And so we're always on alert watching for companies that are going a little bit beyond the pale in what they're offering and the type of risk that they're offloading on the client.

[Glenn Williams, CEO at Primerica]

And we've always stayed away from that. I mean, we were very careful entering the variable annuity business. We've been more careful entering the indexed annuity business because years ago, before the financial crisis, it was probably full of excess. But those prices tend to work those excesses out, and then they come back with better products. But fortunately, the high quality partners we have don't follow that path.

[Glenn Williams, CEO at Primerica]

They take a long term view. They want to make sure they have lifetime relationship with clients just like we do. And so they tend not to get over into the red zones that some of the other product providers that we don't represent do. That said, we do have a committee, a team that analyzes products, determines if they're suitable for our clientele before we put them on our product shelf, even among our high quality providers. So yes, there is the tendency, Suneet, for companies to do that.

[Glenn Williams, CEO at Primerica]

We're on guard against that all time and at all times, and I don't see us bearing any risk at that point of getting over into inappropriate products that some others might.

[Suneet Kamath, Senior Research Analyst at Jefferies]

Got it. Thanks, Glenn.

[Glenn Williams, CEO at Primerica]

Thank you.

[Operator]

Thank you. And that was our last question for today. So with that, we will conclude today's call. All parties may now disconnect, and have a great day.

Participants

Executives

• Nicole Russell, SVP - IR
• Glenn Williams, CEO
• Tracy Tan, EVP & CFO

Analysts

• John Barnidge, MD & Senior Research Analyst at Piper Sandler Companies
• Joel Hurwitz, Lead Analyst at Dowling & Partners
• Ryan Krueger, Managing Director at Keefe, Bruyette & Woods (KBW)
• Jack Matten, VP - Equity Research at BMO Capital Markets
• Daniel Bergman, Research Associate at TD Cowen
• Wilma Burdis, Director at Raymond James Financial
• Mark Hughes, Analyst at Truist Securities
• Jeff Schmitt, Research Analyst - Financial Services and Technology at William Blair & Company, L.L.C
• Suneet Kamath, Senior Research Analyst at Jefferies