Primerica, Inc.

Good morning. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primerica, Inc. Q4 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star then two. Please note this event is being recorded. Thank you. I will now turn the call over to Nicole Russell, Head of Investor Relations. You may begin your conference.

Thank you, Kate, and good morning, everyone. Welcome to Primerica's fourth quarter earnings call. A copy of our earnings press release. Along with materials that are relevant to today's call are posted on the investor relations sections of our website at investors.primerica.com. Joining our call today are Chief Executive Officer Glenn Williams and our Chief Financial Officer Allison Rand. Glenn and Allison will deliver prepared remarks and then we'll open the call up for questions. During our call, some of our comments may contain forward-looking statements in accordance with the safe harbor provision of the Securities Litigation Reform Act. The company does not assume any duty to update or revise these statements to reflect new information. We do refer you to our most recent Form 10-K, as modified by subsequent Forms 10-Q, for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also reference certain non-GAAP measures, which we believe provide additional insight into the company's operations. Reconciliations of non-GAAP measures to their respective GAAP numbers are included at the end of our earnings press release and are available on our investor relations website. I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks to everyone for joining us. I'll start my prepared remarks today with some highlights from 2020. Then I will provide a review of our most recent quarter and end with a few observations as we start the new year. In many ways, 2020 was a record year for Primerica. We began the year with strong production momentum across our business. In January, February, and the first half of March, prior to the onset of COVID-19, we had significant growth in recruiting, licensing, life sales, and investment sales. As the pandemic began to impact our production, we saw a brief disruption followed by record demand for our financial solutions and our business opportunity. For many middle-income families, the disruption revealed the weaknesses in their financial game plan and their career outlook. Primerica's ability to quickly adapt and meet this demand resulted in annual production records across our business, including annual term life placed in force of over $109 billion, investment sales of over $7.8 billion, and client asset values totaling $82 billion at year end. In addition, the uncertainty in job stability and business sustainability led to record recruiting. The disruption to state and provincial licensing processes negatively impacted our permanent license pull-through rates and slowed the growth of our permanently licensed sales force. These production results led to strong financial results. Starting on slide three of our presentation deck, you can see we reported yet another strong quarter, which, when added to the first nine months of the year, led financial results in 2020 to an all-time high. Looking first at fourth quarter results, adjusted operating revenues of $595 million increased 12% compared to the fourth quarter of 2019. while diluted adjusted operating income per share of $2.45 increased 10% compared to the fourth quarter of 2019. Full year results set new records with adjusted operating revenues of $2.2 billion growing 9% and diluted adjusted operating income per share of $9.70 growing 15%. Adjusted operating ROAE during the quarter was 23.4% Thank you for joining us today. and a total payout rate of 76% of adjusted operating earnings. Total share repurchases in 2020 were slightly below our target. We accelerated our buyback activity early in the year when markets were severely disrupted by the onset of COVID-19, which increased the impact on the number of shares outstanding, and we chose not to resume buybacks. The strength and stability of our business gives us confidence to continue capital deployment. Earlier this month, the Board of Directors authorized the repurchase of up to $300 million in common stock through June 2022. Additionally, the Board raised the first quarter dividend by 18% to 47 cents per share. Turning next to slide four for a closer review of our distribution results. We added 80,599 new recruits and 12,119 new life license representatives during the fourth quarter. This represents a 33% increase in new recruits and a 9% increase in the number of permanent or temporary licenses year over year. Temporary licensing and extended renewal measures during the COVID crisis continue to impact licensing in the size of the sales force. We ended 2020 with 134,907 life licensed insurance reps. Included in the year-end count were approximately 3,600 COVID temporary licenses and approximately 2,500 licenses with extended renewal dates. While it's very difficult to predict how many individuals with temporary licenses will take the steps necessary to obtain a permanent license or how many licenses with extended renewal dates will be renewed, early indications suggest that approximately 4,200 licenses included in the year-end total could eventually be eliminated. Turning to slide five, As I noted earlier, we continue to see strong demand for term life insurance products. During the fourth quarter, we issued 87,307 new policies, a 22% increase compared to the same period in 2019. Our productivity rate at 0.21 policies per life insurance license rep per month compared to 0.18 in the prior year period. Highlights from our investment and savings product sales segment are presented on slide six. Sales of $2.1 billion during the quarter increased 4% year-over-year. Sales of mutual funds and managed accounts continue to show solid year-over-year growth, while demand for variable annuities remains subdued. Fourth quarter net client inflows were robust at $642 million, and as we've seen all year, quarterly comparisons significantly outpaced the prior year period due to a combination of higher sales and lower redemptions. Despite continued challenges posed by the pandemic, 2021 is off to a strong start. We kicked off the year with a virtual version of our traditional senior leadership meeting. This event brings our most senior Salesforce leadership together over two days to share our vision for the new year, as well as improvements to our business and incentives to create excitement. This event was followed by five virtual regional vice president meetings covering the U.S. and Canada. These events allow us to engage with the most influential leaders in our Salesforce and set the tone early in the year to generate excitement and sustain momentum. Response to the virtual format was extremely positive and our messages were successful in casting a powerful vision for 2021 and beyond. As we look further into 2021, the current level of uncertainty related to the COVID pandemic and the social distancing requirements that might still be in place this summer, we've made the decision to reschedule the biennial Primerica Convention to the summer of 2022. This event attracts approximately 50,000 attendees and always generates a lot of excitement. Rescheduling the convention was the appropriate decision under the current circumstances to ensure that we experience the maximum positive impact and that no one misses the opportunity to be recognized for their sales achievements, to hear powerful messages from field leaders, and to network with our business partners and peers. In lieu of the live event this year, we are planning a series of virtual meetings and incentives to help sustain momentum. January 2021's preliminary production results are positive, even compared to our strong pre-COVID results from 2020. In January, we saw growth across our business in recruiting, live sales, and investment sales. Licensing continues to be challenged due to the lack of classroom training opportunities and exam backlogs. A key question for 2021 will be whether we see sustained client sentiment in favor of our products and opportunity. Our view is that the disruption in 2020 clearly revealed client needs in these areas and a record number of clients took action. These needs that suddenly became priorities have existed for many years and will continue to exist in 2021 and beyond. However, it remains unknown how they will be prioritized by potential clients in the future. We're going to face some noisy comparisons as we approach the one-year anniversary of various measures that were put in place to help us navigate the business challenges caused by the pandemic. In the term life segment, licensing and the size of the sales force should begin to normalize as the licensing process stabilizes. However, the noise from temporary measures instituted in 2020 will make year-over-year changes difficult to evaluate. We also anticipate sales volume to moderate from record 2020 levels. Due to the pandemic's decelerating impact during 2021, production may be lower compared to the prior year period starting in the second quarter. At the same time, there are too many variables for us to accurately forecast 2021 sales, but we expect that they may normalize below 2020 levels. In the ISP segment, we're assuming a relatively normal year as our clients continue to invest for the future despite the pandemic. January preliminary results are showing year-over-year growth as momentum continues. While it is still very early, we believe first quarter sales will be at or slightly above first quarter 2020 levels. We believe we'll also see some long-term positives coming out of the pandemic, such as remote testing, which provides an alternative path to licensing, and more usage of web conferencing tools, which can improve efficiency. With that, I'll turn it over to Allison.