Primerica, Inc.

Good morning and thank you for attending today's Primerica's first quarter 22 earnings webcast. My name is Austin and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Nicole Russell, head of investor relations. Nicole, please go ahead.

Thank you, Austin, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our 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, Allison Rand. Glenn and Allison will deliver prepared remarks, and then we'll open the call for your 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 refer you to our most recent Form 10-K 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 these non-GAAP measures to their respective GAAP numbers are included at the end of our 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. Primerica's results in the first quarter reflect the ongoing middle market need for our financial solutions and the strength of our business model. As the post-COVID business environment continues to emerge, our methods are evolving and our mission remains unchanged. We're seeing strong response to our business opportunity and recruiting numbers that remain elevated compared to pre-COVID levels, although down from their peaks during the last two years. Our efforts to improve licensing pull-through are beginning to show results, pushing our licensed sales force number above 130,000 once again. Results for term life insurance sales and investments are normalizing on slightly different tracks, yet both remain above pre-COVID levels. And results indicate that our mission to serve the financial needs of middle-income families is more important than ever. As we look more closely at our financial results, the resilience of our business model is clear. Our main lines of business continue to deliver solid results despite the unknowns of the post-pandemic environment, while our newly acquired senior health business presents an area where more work is still needed. As we continue to transition to a more normalized operating environment, we are experiencing a temporary period of elevated cost in certain operating expenses. Allison will expand on this trend in her prepared remarks. Starting on slide three, Adjusted operating revenues of $693 million increased 9% year-over-year as both our core term life insurance and investment businesses benefit from two-plus years of strong sales and robust equity market appreciation. Diluted adjusted operating income per share of $2.11 fell 33 cents compared to last year's first quarter. due to a 37 cent loss in our newly acquired senior health business and temporarily elevated overall operating expenses. Turning to slide four, recruiting remains quite strong versus pre-pandemic levels with nearly 85,000 new individuals joining Primerica during the first quarter of 2022. Throughout most of 2020 and 2021, recruiting incentives were heavily used to maintain momentum. Now, as we emerge from the pandemic, we are shifting to more focused use of recruiting incentives. Adding to the recruiting momentum is the record performance of our independent Salesforce leaders during the last two years, which has created a compelling recruiting message and given them the confidence to share this message more often. Recent shifts in labor markets have further amplified the attractiveness of our business model with its flexibility in setting work hours and earnings potential. Our efforts to drive licensing are starting to gain traction. Despite a slow start in January, we saw meaningful improvements in February and March. In total, nearly 10,000 individuals were licensed during the quarter, including 4,000 new life license reps in March alone. Strength in new life license reps continued in April with another 4,000 new licenses added. As we approach our convention at the end of June and the beginning of July, we anticipate a lull in recruiting and licensing activity during the two weeks around the event due to time out of the field. Post-convention, we expect high activity levels during July. The combined recruiting and licensing momentum supports our ability to continue to grow the size of the Salesforce beyond the current 130,000 reps. Based on current trends, we believe the Salesforce could grow slightly above our prior full year 2% estimate. Turning to slide five, we continue to see solid demand for protection products with more than 71,000 policies issued during the first quarter, which compares favorably to the 2019 pre-pandemic period. Although we saw a decline in the number of issued policies compared to the first quarter of 2021, Estimated average annualized issued premium per policy increased by 2% year-over-year, and face amount in force ended the quarter at a record $910 billion. We believe that COVID has had a longer-term impact on our target market by renewing their awareness of the value of protection products. While second quarter sales volumes are expected to be down around 10% year-over-year, they should remain 4% or 5% above 2019's pre-COVID levels, and we expect continued strength in average premium per policy. On slide six, sales and investment products remain strong at $3.1 billion during the quarter, and net inflows of $1.2 billion continue to reflect our clients' long-term approach to investing. However, momentum during the quarter has clearly shifted as market volatility eroded investor confidence. We continue to see slowing sales in April while redemption activity remained normal. Market volatility and economic uncertainty make it difficult to predict sales levels for the second quarter. Our best estimate is that second quarter sales will be down around 7% year over year, making our full year projections roughly in line with 2021. Turning next to eTelequote in the senior health market on slide seven, we made progress in reducing contract acquisition costs during the quarter. However, policy churn during the January 1st annual renewal cycle was much higher than expected, particularly for the 2021 cohort. This, combined with refinements in our prediction models that Allison will discuss later, led to a $19 million negative tail adjustment in the quarter. We believe policy churn has been largely driven by increased advertising and policyholder shopping and switching plans. Many of our competitors have indicated that they are pulling back on growth at any cost, which should help reduce churn. Our carrier partners continue to recognize the importance of brokers like eTeleQuote, which account for approximately half of our key carrier partner Medicare Advantage sales. The level of marketing development funds we received from CARES in the first quarter increased year over year. We recognize that LTVs have declined and that we must adjust our operating expenses and consider process enhancements to better retain clients. As a result of this, we're going to continue to limit sales volumes for 2022. E-teleport agent recruiting has improved, and we are not having any difficulty recruiting agents in this market. Our pullback in recruiting has been intentional as we work to stabilize and improve results in our senior health segment. We continue to make progress in lead sourcing and productivity, driven by improved marketing spend strategies and data science. We expect pressure on contract acquisition costs in the second and third quarters due to seasonally lower lead generation or lead conversion rates as the ability for individuals to purchase these products during these periods is lessened. By the time AEP occurs in the fourth quarter, we plan to have emerging processes around lead acquisition and conversion, as well as policyholder retention in place to drive profits into 2023. We also believe that Primerica can be an important source of leads for eTeleQuote. Early indications are that approved policies that were referred by a Primerica rep have favorable early persistency and higher expected LTVs. We recognize that we have a lot of work ahead, and we continue to believe that the business can generate acceptable stockholder returns over the long term. We're working diligently to change the momentum and growth trajectory of the business. Finally, our mortgage business continues to gain traction as we expand into more states with the addition of Arizona and Hawaii, bringing the number of states in which we're currently doing business to 19. The recent increase in interest rates is significantly pressuring refinance activity. However, we continue to see good demand for debt consolidation and purchase money mortgages. Our sales force is uniquely positioned to identify opportunities to help clients consolidate and manage debt. With that, I'll now turn it over to Allison.