Primerica, Inc. Q1 FY2025 earnings call

• In Q1 2025, Primerica delivered strong financial results despite external headwinds. Adjusted net operating income was $168 million, up 14% YOY, and diluted adjusted operating EPS increased 20% to $5.02.
• Returned $153 million to stockholders through share repurchases and dividends.
• Recruited 100,867 individuals in Q1, a 9% YOY decline; new life licenses declined 5% YOY. Total life license representatives grew slightly, up 7% vs March 2024, with expected 3% growth in 2025.
• Issued 86,415 new Term Life policies in Q1, $28B in new protection, in line with prior year; productivity 0.19 policies per rep.
• ISP total sales $3.6B, up 28% YOY; net inflows $839M, strong vs prior year. Client asset values $110B, up 6% YOY but down 2% Q1 2025 due to market performance.
• Mortgage business showed strong sales growth in U.S. and Canada: U.S. closed loans $93.5M, up 31%; Canada referral program closed loans $43.3M, up 78%.

Term Life segment: Operating revenues rose 4% year-over-year to $458 million, driven by 5% growth in adjusted direct premiums. Pretax operating income was $147 million, up 6% compared to the first quarter of 2024. Investment and Savings Product (ISP) segment: Total sales during the quarter were $3.6 billion, up 28% year-over-year, driven by strong demand across U.S. and Canadian mutual funds, variable annuities and managed accounts. Net inflows for the quarter were $839 million versus $274 million in the prior year period. Client asset values ended the quarter at $110 billion, up 6% year-over-year but down 2% due to negative market performance.

• Term Life: Expect ADP to grow around 5%, benefits and claims ratio at around 58%, DAC amortization and insurance commissions ratio at around 12%, and operating margin around 22%.
• ISP: Continue to expect full year sales growth in the mid-to-high single-digits range in 2025.
• Expenses: Maintain full year outlook for expenses to increase by around $40 million or 6% to 8% in 2025, with second quarter growth consistent with guidance.
• RBC ratio: Primerica Life estimated RBC ratio was 470% at quarter end, confident in capital strength to support growth and return capital to stockholders.

• Economic uncertainty impacting recruiting and Term Life insurance sales in Q1 2025, with resistance to investment sales momentum since April.
• Market volatility affecting ISP sales, as seen in April results reflecting broader economic uncertainty.
• Seasonal variances in insurance expenses that could impact quarterly results.

Q: What's the dynamic between Term Life sales and ISP sales?

A: Our complementary business model means the two lines react differently. Life insurance momentum is decelerating due to cost of living and uncertainty, while ISP had a strong quarter but is seeing deceleration. Cost of living impacts life insurance quickly as families make priority decisions, while larger sale ISP business is less impacted by cost of living. Uncertainty is a headwind for both.

Q: Are you seeing particular products more impacted in ISP?

A: When things get bumpy, variable annuities with guarantees are attractive, leading to a mix shift towards them. Managed account business, a newer and fast-growing product line, is also seeing good percentage growth.

Q: What drove the uptick in RBC ratio?

A: Overall RBC ratio is a function of state regulatory requirements and our strong capital position. It's a quarterly variation but we believe in having a strong capital position to support growth and rating.

Q: How do you view the health of the economy in Canada compared to U.S.?

A: Similarities between the two economies; Canada's election removed some uncertainty, but business dynamics are similar. Distribution Building and Term business in Canada has been strong following pandemic, with results expected to be similar in direction and quantity to U.S.

Q: Any updates on Term business guidance?

A: ADP guidance remains around 5% growth, as the large in force block of Term Life insurance policy makes year-to-year new policies and premium a small slice of overall revenue, with the business being very stable.