Primerica, Inc.

Good morning. My name is Chad and I will be your conference operator today. At this time, I would like to welcome everyone to the Primerica Inc. Q2 earnings results conference call. Our 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 followed by the number two. Thank you. Please note, today's event is being recorded. I would now like to turn the conference over to Nicole Russell, head of investor relations. You may begin your conference.

Thank you, Chad, and good morning, everyone. Welcome to Primerica's second 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 section of our website. Joining our call today are Chief Executive Officer Glenn Williams and our Chief Financial Officer Alice Ram. Glenn and Allison will deliver prepared remarks, and then we will open the call up for questions. During our call, some of our comments may contain forward-looking statements in accordance with the State Harbor provision 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 file with our 8-K, dated July 1, 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 will provide 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 also available on our investor relations website. I would now like to turn the call over to Glenn.

Thank you, Nicole, and thank you, everyone, for joining us today. Second quarter results were very strong, reflecting continued progress in both our term life and our investment and savings segments. Leveraging the fundamental strengths of our business model, we were positioned to meet the middle market's increased demand for financial security, which has been revealed by the COVID pandemic. Starting on slide three, Adjusted operating revenues of $654 million increased 25% compared to the second quarter of 2020, while diluted adjusted operating income per share of $3.25 rose 33%. ROAE also increased to 27.8% compared to 25.6% during the same quarter last year. Turning to slide four, We attracted nearly 90,000 new recruits during the quarter. Year-over-year comparisons are difficult to evaluate because of the varying impact of the pandemic in each period and the tailored recruiting incentives we deployed each quarter. Looking beyond this noise, we believe that we are using the right mix of messaging and incentives to continue to drive recruiting and to increase the appeal of our business proposition. More than 10,000 individuals obtained a new life insurance license during the quarter and we are encouraged by those results. We have seen some improvement in the licensing process over the last few months. Testing windows are now generally available and many states have caught up on processing backlogs, although there remain some pockets where processing is still taking longer than usual. Licensing candidates today also have more flexibility to access pre-licensing classes in both in-person and remote options widely available. We continue to see a higher success rate for candidates choosing to attend in-person classes, but there is some hesitancy about assembling in classrooms. As COVID social distancing measures eased, we noted a greater degree of distraction among our licensing candidates. After a prolonged period of lockdown, some people were prioritizing social activities and travel over the pursuit of their life license. Since the beginning of the year, our message to the field has been focused on getting new recruits engaged and licensed. We provide resources and coaching to assist new recruits on the most effective path to licensing. We also offer incentive credits and consistent messaging on the importance of new licenses and growth of the sales force. We believe our prioritization and support will help overcome the recent obstacles to the licensing process over the next few months. We ended the quarter with about 132,000 life license representatives, including a total of 2,400 individuals with either COVID temporary licenses or a license with an extended renewal date. As time wears on, we believe the majority of these licenses will largely age out. Excluding all 2,400 of these licenses from our total sales force provides a more appropriate and conservative understanding of the underlying size of our sales force and the foundation for future growth. The pandemic presented us with numerous unique challenges over the last year, yet we were able to navigate these obstacles by adapting quickly to a remote framework, remote work environment, and by embracing web conferencing tools that will have a lasting benefit to our sales force. We remain committed to growing our sales force and expect to end the year at around 131,000 life license representatives after all the COVID temp licenses and extended renewals have expired compared to a normalized count of 130,700 at the end of 2020. Turning to slide five, consumer sentiment for the value of life insurance remains strong, which is most evident in our persistency levels. Sales are also robust. However, we are finding that some individuals, both clients and reps, are also focused on resuming normal, everyday activities, which competes with their urgency to obtain insurance coverage. Nonetheless, we issued nearly 90,000 new life insurance policies during the quarter, a figure that is slightly below last year's second quarter record levels, yet outstanding by historical standards. Productivity remains above our historical range at .23 policies per life license representative per month, and total face amount glued to $887 billion in force at quarter end. Looking ahead, as we see trends normalizing, we project full year-over-year life sales to decline approximately 5% versus last year's elevated levels. Turning to slide six for a review of our investment and savings product segment results. Sales exceeded $3 billion for the first time in history with solid demand from both the U.S. and Canada clients and across all product lines, including mutual funds, annuities, and managed accounts. strong equity markets continue to contribute to investors' confidence and help drive sales. Net inflows at $1.2 billion during the quarter were twice the level in the prior year period and slightly above the $1.1 billion in the first quarter of 2021. This level of sustained net inflows is a function of strong sales and investors' decisions to stay invested. We believe our redemption levels remain well below industry rates. we ended the quarter with client asset values of $92 billion, a 34% increase year over year, combining strong equity markets and nearly $3.5 billion of net new inflows over the last 12 months. Barring an unforeseen period of market uncertainty, which would have a negative impact on investor sentiment, we expect third quarter investment sales to grow in the 30% to 40% range versus last year's third quarter. We're making steady progress in our U.S. mortgage distribution business and continue with our deliberate efforts to expand distribution. We are now actively engaged to do business in 15 states with about 1,000 licensed representatives. We estimate the mortgage business will earn around $4 million in pre-tax earnings during the second half of 2021 for a full year total of $7 million. Because of the positive impact we believe the mortgage business brings to recruiting, life and ISP sales, and client satisfaction, we've begun a mortgage referral program in Canada. While providing similar positive overall business dynamics, this referral program does not require licensing of our representatives in Canada and provides much smaller economics for the company. We're seeing good response from our reps and clients to this offering, which rounds out the full service client experience. Our acquisition of eTeleflow closed on July 1st, and we're excited about adding senior health offerings to Primerica's financial solutions for middle-income families. In addition to eTeleflow's existing distribution model, we're in the process of rolling out a pilot referral program, leveraging Primerica's strong relationships between our sales force and our clients. I look forward to updating you on our progress in the coming quarters. Now, I'll turn it over to Allison.