Primerica, Inc.

Welcome to Primerica's fourth quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. I will now turn the conference over to Nicole Russell, Senior Vice President of Investor Relations. Nicole, you may now begin.

Thank you, Rob, and good morning, everyone. Welcome to Primerica's fourth quarter earnings call. A copy of our earnings press release along with materials relevant to today's call are posted on the investor relations section of our website. Joining our call today are our Chief Executive Officer, Glen Williams, and our Chief Financial Officer, Allison Rand. Glen 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 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 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 expressed or implied. We will also reference certain non-GAAP measures during this call, 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 today. At Primerica, 2022 was a year of progress as we adjusted to a post-COVID environment and advanced our position as one of the largest providers of financial education and guidance to middle-income families in the U.S. and Canada. Among our proudest achievements in 2022 was issuing over $100 billion of term life insurance protection for the third consecutive year, bringing our total face amount in force to $917 billion at year end. In our ISP business, our investment license reps play an important role in helping their clients stay focused on long-term goals. Despite significant market volatility and economic uncertainty, our clients continue to invest, contributing $10 billion in new sales during 2022 and making this our second largest sales year, exceeding pre-pandemic levels by more than 30%. At year end, our life license sales force exceeded 135,000 representatives, providing a solid foundation from which we can continue to meet the needs of our clients. Our success reflects the value that middle income families place on protecting their incomes, saving for the future, and the benefit of doing so in a face-to-face setting with a Primerica representative. Turning our focus to fourth quarter results, Adjusted operating revenues of $685 million declined 5% year over year due to the negative impact of market volatility on client asset values and lower revenue generating investment product sales. Pressure from our ISP segment was offset by strong term life segment results driven by low benefits and claims ratio, while the senior health business contributed $4 million to pre-tax income. Diluted adjusted operating income per share grew 19% year over year, to $3.49, and ROAE was very strong at 27.1%. Allison will provide more details on fourth quarter financial results later in the call. Our distribution building capabilities remain strong. More than 77,000 individuals joined Primerica during the fourth quarter, representing a 5% increase year over year, as we continue to capitalize on the attractiveness and flexibility of our entrepreneurial opportunity. Our success through various disruptions in recent years and our efforts to improve field support and technology have further strengthened Primerica's appeal with new recruits. We are gaining traction in licensing and have made good progress throughout the year. During the fourth quarter of 2022, more than 11,000 individuals obtained a new life insurance license, which represents a 20% increase compared to the same period in the prior year. Licensing is always the most difficult part of building distribution. It takes constant focus to manage the process, which varies by state and province. We have made improvements to the licensing process over the last few years to remove as many pain points as possible, and we continue to communicate the importance of licensing new recruits to our field leaders. As always, we remain committed to growing the size of our sales force, and we ended the year with 135,208 life license sales reps, which represents a 4.4% increase year over year. Looking ahead, we expect the sales force to grow at around 3% in 2023. Turning next to the fourth quarter term life segment results, issued policies were down 4% year over year due to a slow start in October as reps anticipated and prepared for the launch of our new generation of insurance products. Following a successful product launch, we started to see improved sales volumes in November and December. We also believe the increased cost of living negatively impacted sales to some degree during the period. Productivity at 0.18 policies per life license rep per month remained within our historical range. One of the changes we made to our new product series involved how policies are structured in relation to individual lives. Historically, two adult lives could be covered under a single policy by adding a spouse rider. The usage of this rider has dramatically decreased over time. Just prior to the launch of the new products in October, only 15% of issued policies included a spouse rider. To better match risk and pricing in our new product series, we eliminated this rider so that going forward, each policy will cover only a single life. Given the timing of the new product launch and the time required to complete the underwriting process, approximately two-thirds of policies issued in the fourth quarter were from the old product series. Results for the quarter reflected additional policies issued due to replacing the spouse rider with a separate policy in the new product series. Adjusting to a consistent basis of lives per policy, issued policies would be down around 7% for the quarter. Beginning with 2023, virtually all policies issued will be from the new product series with a single life per policy. To make 2023 year-over-year comparisons easier and more consistent, we will provide an estimate of 2022 issued lives by quarter in our first quarter 2023 financial supplement along with the historically reported issued policies. The change in relationship between lives and policies will also modestly change our productivity range to 0.20 to 0.24 policies per life license representatives per month going forward versus our historical range of 0.18 to 0.22. As we look ahead, we believe the new product series will provide momentum for growth, while inflationary pressures will likely remain a headwind in the near term, leading to a slow start to 2023. We believe momentum will build as the year progresses. We expect first quarter sales to grow around 1% versus an adjusted policy count of approximately 83,000 in the prior year period. Our current expectation is that full year 2023 term life issued policies will increase by mid-single digits compared to the 2022 adjusted policy count of approximately 33,000. Turning to the investment and savings product segment, prolonged equity market volatility continued to pressure ISP results. Sales were $2.1 billion during the fourth quarter, declining 31% from a very strong fourth quarter in the prior year. And ending client asset values declined 14% year over year to about $84 billion. However, net flows remain positive at $649 million for the quarter, which we believe compares very favorably to industry trends. Clients remain committed to their long-term investment goals, and we continue to see strong transaction volumes and little change in automatic monthly investments, which comprise about one quarter of mutual fund sales. Likewise, we have not seen a notable rise in the quarterly redemption rate during 2022. Ongoing market volatility and uncertain economic conditions do put pressure on our larger trade activity. We've historically seen these clients wanting to see a period of market recovery before reengaging in the market, making it difficult to project sales for 2023. Taking into consideration the current market conditions and the very strong first quarter sales last year, we believe year-over-year ISP sales could be down as much as 25% in the first quarter of 2023. We expect that our licensed representatives will continue to play an important role in education and keeping clients focused on the goal of a more financially secure future, while improvements in CRM technology and apps such as My Primerica allow clients and reps to get information and stay connected real time. In our senior health segment, approved policies were down 35% compared to the 2021 AEP as a result of deliberately slowing senior health sales while we underwent efforts to improve tax and stabilize LTVs. Our focus has been on producing increased agent sufficiency, driving a revised lead buying strategy, and revising agent incentive compensation. These efforts, combined with reducing our employees' senior health agent count by approximately 50%, resulted in a meaningful improvement in agent productivity compared to 2021 AEP. Productivity increased on average 25% across all agent tenure bands. The ratio of approved to submitted policies was 90%, which is an improvement over the fourth quarter of 2021. Contract acquisition costs per approved policy also declined 21% year over year to $722. As it relates to LTVs per approved policy, The $888 recognized in the fourth quarter reflects our current best estimate of future commission collections on a constrained basis. We'll have a better understanding of how 2022 AEP business performed as well as 2023 renewal levels by the end of the first quarter and we'll adjust future LTVs as necessary. We're encouraged by the emerging results the senior health business is producing and we recognize there's much work still to do. Our collective efforts are working toward achieving a sustainable and healthy business that will produce acceptable returns. We are also committed to the long-term opportunity in the mortgage business and continue to execute against our plan to expand our reach by gradually adding more states and increasing the number of mortgage license representatives. However, the current interest rate environment continues to put pressure on loan volumes. As we look to 2023, we do so with confidence in our ability to grow the sales force and and bring value to underserved middle-income families. We're encouraged by the response to our new-term life products as well as the emerging trends in the senior health business. Market volatility and economic uncertainty may continue to cause headwinds, especially in our ISP business. We know the fundamental strength in our ISP business, which is focused on long-term retirement savings, will continue. We have a high degree of confidence in our ability to create long-term stockholder value. Now I'll turn it over to Allison.