Primerica, Inc.

Greetings and welcome to the Primerica's first quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nicole Russell, Head of Investor Relations. Thank you. You may begin.

Thank you, Operator, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings press release, along with other materials 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 Chief Financial Officer Tracy Tan. Our comments this morning may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. We assume no obligation to update these statements to reflect new information and refer you to our most recent Form 10-K filings, as may be bona fide by subsequent Form 10-Q, 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 measure 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. Our first quarter's results reflected the fundamental strength of our main lines of business, term life, and investment and savings products, as well as the continued growth of the sales force. The resilience of our model is illustrated by our ability to deliver this growth in the face of ongoing economic pressures facing middle income families. Starting with a quick recap of our financial results, adjusted net operating income of $137 million increased 4% compared to the prior year period, while adjusted operating income per share of $3.91 increased 10%. The earnings power of our core businesses was partly offset by the underperformance of our senior health business, which incurred a $14 million loss during the quarter. On the capital employment front, we repurchased $109 million of our common stock and paid $26 million in regular dividends during the quarter. As noted in our release, the Board recently declared a 75 cents per share dividend payable in June. We're pleased with our sustained momentum in growing our distribution capabilities. Our representatives play an important role in educating middle-income households and helping them find appropriate financial solutions. During the first quarter, we recruited over 110,000 individuals, representing a year-over-year increase of 18%. New life licenses continue to benefit from the strong pipeline of new recruits. During the quarter, nearly 13,000 reps obtained a new life license of 16%, fueling 5% year-over-year growth in the size of our sales force to end March with a total of 142,855 life licensed reps. The appeal of our business opportunity continues to resonate And the current economic uncertainties can be a catalyst to motivate individuals seeking additional income opportunities or an alternative to their current employment. Our model is unique. Recruits who already have a life insurance license become part of Primerica at no cost. Unlicensed recruits pay a licensing fee of $99 to cover the cost of the entire exam preparation and licensing process for both life insurance and securities licenses. The vast majority of our new reps also pay a technology fee of $25 per month, providing communications, training, record keeping, and transaction capabilities. Both the licensing and technology fees offset the company's hard costs. None of our representatives are compensated from these fees. We continue to see good traction in recruiting, and we have a solid process in place to help new recruits prepare for their licensing exam. which leads us to anticipate full year growth in the size of the sales force in 2024 will be above 3%. Let's look more closely at sales results. During the first quarter, we issued 86,587 new term life policies representing a 2% increase over the prior year period. We believe household financial pressures from compounding increases in the cost of living may be causing some headwinds to new sales. Productivity, is measured by the number of issued policies per life license rep per month was 0.20 compared to 0.21 in the prior year period and within our historical range. Looking ahead, we anticipate full year growth in the number of policies issued to be around 3% to 5%. First quarter total investment product sales were $2.8 billion, up 20% compared to the prior year period. We are seeing strong demand for products across the board, including U.S. and Canadian mutual funds, variable annuities, and managed accounts. Preliminary results show that April sales are similarly strong. However, we remain mindful of the impact that current economic uncertainty can have on middle-income families. Barring an unexpected change in the market sentiment, we anticipate full-year sales to increase by as much as high single digits during 2024. Ending client asset values continue to benefit from strong equity market appreciation, ending the quarter at $103 billion. This marks the first time in our history that client assets have exceeded $100 billion and serves as an important reminder of the role that Primerica plays in helping middle-income families save for the future. The latest Department of Labor fiduciary rule is now final, with an effective date in late September 2024 and a one-year period for complete implementation of the rule. With almost 75% of our ISP business in retirement accounts, we made changes to our process in response to the 2020 version of the rule. For example, we already acknowledged fiduciary status for most retirement recommendations. We're reviewing our Salesforce programs and will consider making adjustments as needed. Should the rule become effective on schedule, we expect no more than modest additional changes in our sales processes if changes are needed. Turning next to senior health sales results, the number of approved policies during the quarter declined 18% year over year. As we saw last quarter, some of the pressure on new sales was due to us having 16% fewer eTeleQuo agents compared to the first quarter of 2023. There were also headwinds due to an issue verifying the eligibility of applicants for both Medicare and Medicaid because of a service disruption at Change Healthcare that impacted the entire industry. The second quarter is showing sales growth with more approved policies in April year over year, which represents the first time we've seen year over year application growth since acquiring IntelliQuote. Early indicators from our revised agent recruiting and onboarding process are showing promising results, and tenured agent attrition is down 40% compared to last year. Our first quarter financial results were adversely affected by a $7.8 million negative revenue tail adjustment to reflect lower renewals. An increase in policy churn was created by certain carriers making modifications to plan benefits this year, driving up competition in plan switching. Some of the switching occurred among applicants who were eTelequote clients both before and after the switch, but are still included in the churn calculation. As I noted last quarter, we've been carefully studying how to grow eTelequote into a profitable long-term business. We retained a global management consulting firm to help us thoroughly understand the opportunities and challenges in this business. We concluded that the senior health industry remains attractive with an aging population that will continue to need assistance in selecting a healthcare plan appropriate for their situations. It's also clear that Primerica representatives serve as a valuable source of referrals for eTelequote and provides us with a unique advantage. However, the industry is continuing to evolve and unknowns remain. such as the recent CMS rulemaking and competition among carriers to attract new clients. With the first quarter results final, we expect a loss of around $25 to $30 million in 2024. We're taking measured steps as we continue to evaluate this business, and we do not anticipate a need to contribute capital to the business during 2024. At the end of the quarter, we confirm that a $50 million payment will be made to us under a representation and warranty insurance policy that we purchased in connection with our acquisition of eTeleQuote, the full amount we sought under the policy terms. Agreements providing for the payments have been signed and we expect to receive a fund shortly. The proceeds of the claims will be recognized as a gain in earnings in the second quarter and excluded from the company's adjusted operating results to provide comparability to the prior year results. We've seen tremendous change in the senior health industry since acquiring eTeleQuo and its financial results are lagging our expectations. However, the results for our core business segments are strong. Primerica is solid and our business is well balanced. Finally, excitement is building as we head into our convention in July. The event is possibly impacting current momentum and we expect strong activity afterwards. Our convention is an important element of our larger vision to continue to grow and serve middle-income families across North America. With that, I'll hand it over to Tracy.