Primerica, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Primerica quarter one 2020 earnings results conference call and webcast. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to turn the conference over to your speaker today, Nicole Russell, head of investor relations. Thank you. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings release, along with materials that are 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 Allison Rand. Glenn and Allison will deliver prepared remarks and then we will open the call up for your questions. During our call, some of our comments may contain forward-looking statements in accordance with the Safe Harbor provisions of the Securities Litigation Reform Act. The company assumes no obligation to update these statements to reflect new information. We refer you to our most recent Form 10-K, as modified by subsequent Form 10-Q, and the press release filed on our Form 8-K, dated April 19, 2021, for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We 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 everyone for joining us. First quarter results reflect a very strong start to 2021. The fundamental strength in our business model continues to build, and we have benefited in part to consumers' response to the COVID pandemic. Year-over-year term life sales are up 16%, investment and savings product sales are up 27%, and recruiting is up 12%. We are also seeing steady progress in mortgage sales, and we received an enthusiastic response from our sales force, employees, and other constituents to our newly announced intent to acquire eTeleQuote, which will add a senior health solution to the products we offer to middle-income families. Let me expand on these themes. Starting on slide three, adjusted operating revenues of $637 million increased 18% compared to the first quarter of 2020, while diluted adjusted operating income per share of $2.44 rose 19%. ROAE also increased to 22.2% compared to 21.8% in last year's first quarter. Turning next to slide four, Continuing its strong momentum, recruiting was up double digits as nearly 95,000 individuals joined Primerica during the first quarter of 2021. Our efforts to improve and communicate the appeal of our business opportunity are reinforced by our recent success and heightened career uncertainty caused by the pandemic. We continue to see a record response from individuals seeking freedom and control in their work lives. The licensing process continues to create a bottleneck for individuals trying to obtain a permanent life license. During the first quarter, nearly 11,000 individuals obtained a life license, less than we would normally have anticipated given our success in recruiting. The licensing process we see emerging out of COVID has both positive and negative repercussions. Virtual and online licensing classes have added flexibility for our candidates who are preparing to take a state or provincial exam. However, candidates who select the in-person route historically have a greater success rate due to the focused instructor-led learning. Social distancing measures and a general hesitancy to attend group classes currently limit the availability and appeal of live classes. We expect this dynamic to improve over time. On the positive side, 41 states and provinces have now rolled out remote testing capabilities. Remote exams are more accessible and convenient than in-person exams and have a similar pass rate. Even with this advantage, with fewer candidates completing in-person classes and attempting the exam, licensing remains below expectations. We ended the quarter with about 132,000 life license representatives. This number includes approximately 2,400 individuals with COVID-related temporary or extended licenses that we believe will eventually fall out of the count. Turning to slide five, we continue to see solid demand for term life insurance products and issued almost 83,000 new policies during the first quarter, a 16% increase compared to prior year sales. Year over year, comparisons continue to benefit from the fundamental strengthening of our business as well as COVID's positive impact on consumer sentiment. Consequently, our productivity rate remains at the top of our historical range at 0.21 policies per life insurance licensed rep per month, compared to 0.18 in the prior year period. Our investment and savings product segment continues to set new sales and AUM records. Turning to slide six, first quarter sales rose 27% to $2.9 billion. Sales of mutual funds and managed accounts were up 43% and 34% year-over-year respectively, while sales of variable annuities were up for the first time after three consecutive quarters of year-over-year declines. We owe much of our ongoing success to the efforts of our sales force and the breadth of products we offer our clients. Our success is amplified by technology support, which has improved client interactions and enhanced communication and connectivity. The strength of the financial markets along with emerging optimism has also helped motivate clients to invest for the future, as evident by net client inflows surpassing the billion-dollar mark for the first time in our history. We continue to see progress in our mortgage distribution business and remain deliberate in our efforts to expand into more states. The appeal of this opportunity is also leading eligible reps in both new and existing states toward obtaining the appropriate licenses to expand their business into this new area. We believe this program will contribute about $8 million to 2021 pre-tax earnings, then grow by $5 million to $7 million per year thereafter. Assisting clients with mortgages and managing their debt load also has a positive impact on life sales, ISP production, and recruiting. As we enter the second quarter and the COVID impact continues to moderate, we recognize that year-over-year recruiting and life production comparisons will be difficult to evaluate. Comparability will be further distorted by significant recruiting and production incentives we used in 2020 to preserve momentum as the pandemic worsened. In addition, states adopted temporary licensing measures to manage through COVID-related shutdowns, and these measures are starting to sunset. As we look ahead, we see continued momentum in recruiting compared to pre-COVID levels and expect licensing to continue improving as states and provinces' processes return to normal and social distance measures ease. However, it will take another quarter or two until we have a better view of the growth rate in our sales force. As we shared last quarter, we expect year-over-year comparisons for life sales to be slightly negative in the second quarter, and full-year sales are projected to decline by approximately 5% compared to the elevated levels in 2020. However, 2021 sales are projected to be approximately 10% higher than pre-pandemic levels. Preliminary sales of investment products were very strong in April. We expect second quarter growth to meet or exceed the first quarter's year-over-year growth rate of 27%. We believe momentum for investments product sales will continue, barring a resurgence of market uncertainty. Now I'll turn it over to Allison.