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Greetings, and welcome to the Primerica Fourth Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicole Russell, SVP, Investor Relations. Thank you. You may begin.

Thank you, operator. And good morning, everyone. Welcome to Primerica's fourth quarter earnings call. A copy of our press release issued last night 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 our 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 statements to reflect new information and refer you to our most recent Form. We assume no obligations to update these ten k filing as may be modified by subsequent form really differ from those expressed or implied. We also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliation of non-GAAP measures to their respective GAAP numbers are included at the end of our earnings 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 this morning. Our fourth quarter and full year results highlight an outstanding year for Primerica, with record-breaking results across the board. These range from the expansion of our distribution network to achieving unprecedented investment sales and delivering solid financial performance. These milestones highlight the strength of our business and our ability to create value for all stakeholders. Starting with a quick recap of our financial results, the prior year period. Fourth quarter adjusted net operating income increased 11% compared to while diluted adjusted operating income per share increased 17%. On a full-year basis, adjusted net operating income increased 14% and adjusted operating income per share increased 20%. These results reflect a very strong sales volume and higher client asset values in our investment and savings product segment. Continued support. And look forward to sharing more updates as we progress through the year. With that, I'll hand it over to Tracy.

Thank you, Glenn. Good morning, everyone. In my prepared remarks today, I will review our full quarter financial results and then provide an outlook for key financial measures for 2025. We ended the year with great momentum. Reaching the $3 billion revenue mark for the first time and delivering strong performance for our stockholders. Starting with term life segment. There to the rate at our financial ratios. Fourth quarter revenue of $451 million increased 4%. The benefits and claims ratio during the fourth quarter of 2024 was 58.6% compared to 58.2% in the prior year. Benefits and claims were adversely affected by a $4.2 million remeasurement loss recognized during the period. That resulted from a refinement to our actuarial model for estimating reserves. Which was not related to any assumption changes. Excluding the model assignment, the benefits and claims ratio was 57.9% favorable to the prior year period. Primarily due to better mortality experience and in line with our full-year guidance, of around 58%. A DAC amortization and insurance commissions ratio at 12.2% was largely consistent with the prior year period. Overall, last rate remained elevated but year-over-year trends appear to be stabilizing. We believe persistency will normalize over time. While we recognize that higher can constrain future ADP growth, they have not meaningfully affected our key financial ratios. The fourth quarter insurance expense ratio increased from 7.1% in the prior year period to 8% in 2024. This year-over-year change was driven primarily by increased variable expenses, associated with growth in direct premiums, recruiting and licensing, higher performance-based employee incentive compensation, as well as higher ongoing technology investments in digital tools. Finally, the Term Life operating margin was 21.3% compared to 22.6% in the prior year period. Well, pre-tax income remains unchanged year over year. As we look ahead, we expect ACP growth of around 5% in 2025. We believe the benefits and claims ratio and the DACs amortization and insurance commissions ratio will remain stable at around 58% and 12% respectively. For the full year, we expect the operating margin to be around 22%. Although we foresee some level of variability due to the normal seasonality inherent in insurance expenses. As a reminder, our first quarter expenses are usually higher due to the annual grant of management equity awards to the retirement eligible employees that are fully expensed when granted. As well as other annual employee-related and operational expenses unique to the first quarter. Turning next to the investment and savings product segment. Fourth quarter revenues of $286 million increased 29% due to a combination of favorable equity market conditions driving client asset values higher and strong demand for our investment solutions. Pretax income of $82 million increased 31%. Sales-based revenues increased 42% while revenue-generating sales rose 39%. Revenues grew at a higher rate than sales due to continued strong demand for variable annuity, while sales save commission expenses generally rose in line with correlated sales. Asset-based revenue increased 27% slightly outpacing the growth in average client asset Valley. Due to continued growth in the US managed accounts, and Canadian mutual funds sold under the proprietary distributor model for which we earn higher asset base fee. Asset base commission expenses grew at similar pace to correlated revenues when including commissions on Canadian segregated funds which are recognized as insurance commissions and debt amortization. The corporate and other distributed product segment incurred a pre-tax adjusted operating loss of $1 million during the fourth quarter of 2024 compared to a pretax adjusted operating loss of $5.4 million in the prior year period. The improvement was due in part to a $3.3 million adjustment to the ceded reserve for a closed block of non-term life insurance business in the prior year period, and the $2.6 million of higher net investment income the settlement continues to benefit from higher yielding investments, and the growth in the size of the portfolio. The segment also incurred higher operating expenses which I will address shortly when I review total consolidated operating expenses. Our invested asset portfolio ended the year with a net unrealized loss of $206 million versus the net unrealized loss of $131 million the end of September. Believe the change in unrealized losses during the quarter was a function of interest rate movement and not underlying credit concerns. And we have no present intention to dispose of them. The portfolio is well diversified and of high quality with an average rating of eight. Finally, fourth quarter consolidated insurance and other operating expenses were $152 million up 13% year over year. The primary drivers of expense growth or higher variable cost associated with growth of our ISP and term life segment higher employee-related incentive compensation, due to the company's overall strong performance in 2024, as well as increased investments on technology. Looking ahead to 2025, we expect full-year consolidated insurance and other operating expenses to increase by around $40 million or 6% to 8%. This includes $12 million to support the growth in the business, $12 million in higher employee staffing costs and $16 million higher technology costs. As I mentioned earlier, we expect operating expenses on a dollar basis to be elevated in the first quarter with year-over-year growth rate in line with our full-year guidance. We also expect fourth quarter 2025 expenses to normalize compared to prior year, due to strong performance, driven in 2024 higher expenses. Moving to our capital position. The holding company had cash and the invested asset. Of $497 million at the end of December 2024. As of December 31st, 2024, Primerica Life estimated RBC ratio was 430%. With that, operator, I open the line for questions.

Thank you. We will now be conducting a question and answer session. May press star two to remove yourself from the queue. Up your handset before pressing the star key. One moment please while we poll for your question. Our first questions come from the line of Wilma Burdis with Raymond James. Please proceed with your questions.

Good morning, Wilma.

Hey, good morning. Could you talk about is 5% ADP growth a good run rate or is there still a boost in that figure from the IPO reinsurance transaction? Thanks.

Good morning, Wilma. ADP growth guidance of 5% growth have considered the runoff of co coinsurance. And clearly, the ADP growth is directly impacted by the large in force block that we have and the premiums that it continues to generate as well as the new sales that get layered on. And we also have considered the higher lapses in this guidance as well. So the 5% does consider the code insurance runoff as you know, that is running off at a faster pace. That's being considered as well. Thank you, Romer.

Okay. Great. And then, could you talk about what's driving this strong ISP sales despite a little bit of pressure on the life side due to cost of living? Pressures? And then along those same lines, how do you see lapses trending in the 2025? Is there some evidence that we've had a peak? Thanks.

Sure. Let me take the first part of that, and then we'll turn to Tracy for the lapses, Wilma. Yeah. Fortunately, our two businesses are complementary, but they also have different dynamics that drive them in different directions at different times. And I think that's part of the uniqueness of our model. So while we are seeing cost of living pressures that are a headwind for our life business and even for the small transaction business on the ISP side, the systematic savers often that are saving $25, $50, $100 a month, they're under the same kind of budgeting pressures at home that are life they're the same people as our life so they're experiencing the same pressures. What we see gets a little bit or a lot exempt from that are those that are rolling over retirement plans particularly are moving retirement plans either out of a 401k from former employer or a previous plan sponsor over to Primerica. Those aren't generally impacted by call of living. They are retirement plans, so people are not prone to withdraw from them as often either, so that money's a little stickier. So the bigger tickets aren't impacted by cost of living pressure, and that's really what drives the volume in a significant way or the large sales that It takes a lot of small sales to add up to one large sales. And so those large sales, that money is still in motion. I think we're experiencing that, and I think most of our peers are experiencing a lot of movement between big accounts. And so we're benefiting from that and not experiencing the headwind from cost of living. On that front. Tracy, do you wanna talk a little bit about how we see persistency?

That's right. I will. On the persistency and the last experience for 2024, Overall, we continue to see elevated lapses but we have seen the trend stabilizing. Fourth quarter, clearly, there was a leveling of Elastic. So we're not seeing that increasing on a year-over-year basis. One thing I definitely wanna point out is 2024 had adverse impact from the prior year last risk restriction. So overall 24, if you remove that, last restriction, the 2024 trending is coming down in terms of the lab's elevation levels. And also higher lapses are across multiple durations, but mostly pronounced in earlier durations. Two to five, for example. And the persistency for those you know, when we look at an accumulative basis, is actually really improving and slightly better on a cumulative basis than pre-pandemic period. So during the pandemic period, we had extraordinarily low last Those that would have lapsed stayed on with those policies and after the pandemic, and we see elevated lapse It's because of the catch up. But, overall, the cumulative impact when we look at from the 2020 forward it's actually better than pandemic period now. And we also believe that the higher lapses is mostly driven by the cost of living pressure on the middle-income families, which it takes a few years for them to get back, and it depends on the speed and the degree with which they're purchasing power and the ability to afford improves. But over time, we do believe that we will be returning to our normal levels and our ADP guidance, also already considered, those elevated labs as well. So hope that helps, Wilma.

Wilma, did that get you what you needed, or is there more we can share?

No. I think I think that covered it. Thank you, guys.

Thank you. Our next question's come from the line of John Barnidge with Piper Sandler. Good morning, John.

Good morning. Thank you for the opportunity.

Certainly.

Just kind of building on that comment about cost of living pressures and it taken a couple years to correct. What's the expected duration of that catch up? And can that really be corrected without improvement in the cost of living?

I think we are going to need to see more improvement in the cost of living. So I think there's there's a buildup of high expenses of people bridging their budget withdrawing savings and credit card usage while it's going on. And so that would indicate that we need improvement for a sustained period before we start to see it flow through and see some easing of people's buying habits it comes to buying life insurance or small investments, So I I I think that's a complete yes, John, to know exactly long it takes because we're not sure how how much longer the cost of living pressures might be here. You know, we we saw a little bit of a surprise this morning. I think the market reacted to that they're still here. They haven't gone away. But I would say once we get on the other side and things get normalized, you know, you measure that in in a in a year or more, that you'll still see some of that impact, It'll improve over time, and and we're watching forward in the numbers, Tracy, just described. We see it as well in persistency, obviously, as well as sales. But but that's an entirely just, I guess. We don't we don't have any empirical evidence to or a formula for that. It's just consumer behavior.

Thank you for that. My follow-up question with that, what's the opportunity in that backdrop to increase operational leverage through improved speed, automation, So maybe what took ten minutes can take three, and then it allows the application volume to increase and the average agent to be more productive.

Sure. That's a great question and one that is on the top of our minds all the time. Tracy mentioned some of the expense numbers and the largest number she mentioned was for technology, higher technology costs. And those are some of the types things in addition to reacting to regulatory demands and requirements and and other cost of doing business. But we're always looking for a way to make our process easier for both clients and representatives under these assumption that you get two benefits. Number one is they're more likely to complete the process themselves. Someone who's already motivated and in the purchasing process is more likely to follow through if easy, if it's short, if it's quick, convenient, and all of that. It's and and, obviously, that's more efficient as well. And then that frees up more time for our representative to see more clients should should their should the limit on their productivity be? I got more people to see than I can get to. Often, it's not having enough people to see. So it doesn't solve that problem. But absolutely, that's a big part and as we introduced our our new product and process a couple of years ago for NextGen, we had significant improvements in all of that. And now, of course, we're going back through to see what we take in In the field, as well as processing and issuing policies and doing that faster and more efficient here in the home office. So all of that is on our technology menu to see what we can accomplish as we move through 2025.

Thank you.

Thank you. Our next question is come from the line of Mark Hughes with Truist Securities. Please proceed with your questions. Good morning, Mark.

Morning, Glenn. Morning, Tracy.

Good morning.

The the good VA activity, you're talking about how the large transactions drive volumes. There's a lot of money in motion. Is it a demographic tailwind that should persist?

It is driven by demographics as we see the, you know, older generations that have accumulated something moving that money to get in the best place for their next phase of life as they move from accumulation to distribution. And so there's definitely a piece of that. It's also the not quite ready for retirement or not preparing for retirement yet. That are changing jobs and just changing careers as as more job changes happen more people move their 401k's out of the previous employer. So it's something that we're benefiting from at Primerica. We have long relationships with our clients and and generally, as you know, we're a middle market focused company. So we may be a higher level of hands-on service to middle market clients than maybe some of our peers have. So as the demographics move in our favor, in that range, we are there to kind of service those clients in a way that maybe some of our peers are not. So it is driven demographically, It's it's driven by more options as we stated, VA's particularly. With the, you know, the income guarantees that are are in there as people move into income mode. They wanna make sure they don't outlive their income. So it's a combination of of a lot of hard work on behalf of our team, both in the home office and the field, over the years to be ready Product improvements and the demographic changes and then the consistency of, you know, we've had a couple of years of good market performance in a row that builds confidence where people are willing to you know, look for alternatives and maybe improve the returns on their retirement accounts. So I think we have all four of those things working in our favor right now. And some of the conservatism that you heard is because of the uncertainty not pessimism, It's just uncertainty as we move into new administration with new policies and new methods not sure how that's gonna turn out. So we kind of approach 2025 with a little bit of an air of conservatism based on those unknowns.

Thank you for that. And then, Tracy, anything on the mortality front, any changes you might have observed either in the US or Canada?

Yes, Mark. Mortality front, our experiences have been very stable and favorable. So for entire 2024, we've been observing pretty positive trends on mortality. Both in the US and Canada mortality is very, very low. And really not much you know, unfavorable experience to talk about, but US has seen real improvement. And, particularly in the fourth quarter, So we are hoping to see that continued trend that would be beneficial. And in terms of long term, obviously, mortality is difficult to to predict, but we do think that pandemic probably has taken off some of the population that now there are some benefits on the mortality improvement that we've seen a across industry and we in particular with our demographics. And the experience during pandemic certainly has a positive trend currently going on. Hope that helps, Mark.

It does. And then final question just for my at a You said the re measurement loss is not related to assumption changes, but a refinement of the model Can you say what the refinement was? Or is it just more technical?

Yeah. The refinement is really more a tech software improvement that we've made on the actuarial side of calculation. And, you know, since that we've moved down to LDTI, we continue with to look for ways to make our know, calculation more accurate and looking at ways to improve how we produce our results on on the method side. So this really has nothing to do with either experience or, you know, long term trend, assumption changes. So this is really technical side item, and it's a small immaterial in the magnitude of seven billion of reserves that we have.

Thank you for that. Help.

Thank you. Our next question is coming from the line of Suneet Kamath with Jefferies. Please proceed with your questions.

Hello, Suneet.

Hey, Glenn. Hey, Tracy. Good morning. So wanted to focus on the Life segment just for a minute. It looked like the rep count was up I guess, 7% year over year, but policies issued was up maybe 1%. And I guess, shouldn't we see a tighter sort of correlation between those two growth rates?

Yeah. Generally, Suneet, there's there's been a very close relationship between the size of the sales force and our policy growth. Often, there is a difference in timing on that. We did have a significant amount of growth in a relatively compressed period of time. And so one of our productivity dynamics that we're working on in 2025 is to bring that new class of licenses up to productivity level, and and that's an opportunity on the upside for us in 2025. You know, the the the math of productivity works against you as you build the sales force. And the denominator gets larger, particularly with brand new reps. But we do think there's a lag there as always in getting them up to the average productivity level. But we believe there's some upside as we put it all together with the the headwinds of the cost of living we talked about earlier. And maybe some of the other uncertainty headwinds in middle-income families on the positive side potential tailwinds or that productivity catch up and we would expect to see some of that in 2025.

Got it. That that makes sense. And then I guess, if I heard correctly, it sounds like your guidance for life agent growth for 2025 is around 3%, which is you know, lower than than I think it's been historically. Is there something unusual about 2025, or are you sort of getting to the point where the Salesforce is kinda so big, it just becomes harder to grow on top of these big numbers?

I I think it's a bit of us reverting to the means, Suneet. If you look back in the years prior to that, our sales force growth has been around four ish percent. I think prior to last year, over multiple years, And so we we just see after a year where we had, you know, so many things go in our favor just a dose of conservatism and and things reverting to average in the next year kinda getting back to that range. And so and and again, the uncertainty of just not knowing what's in front of us this early in the year. As the year progresses, we'll refine that projection some but it's starting out pretty close to what a normal year primarily is. Maybe just a little less but that's the uncertainty factor in it.

Got it. If I could just sneak one more in just on the VA You currently sell the the RYLA product. Is that a big part of what you're you're selling these days?

Yeah. The index linked to variable annuity. Correct. Bill book? Yeah. Yes. We do. And we are seeing our product mix shift more and more toward that just like the industry is. They're a very similar kind of mix shift dynamic to the rest of the industry. With a significant proportion of the VA sales moving to the Index Link VA product.

Got it. Glenn. Thank you.

Thank you. Our next question is come from the line of Dan Bergman with TD Cowen. Please proceed with your question.

Good morning, Dan.

Hey. Good morning. I guess to start with the higher share repurchase authorization for 2025 and and the, you know, pretty big increase in the dividend. Capital return looks like it'll take another Yep. Size will step up this year. Earning unusual in the 2024 statutory earnings or any other one-time items that are boosting that? Or should we of this as a pretty sustainable level going forward. And I guess, relatedly, with capital return, I think it was 79% of earnings in 2024. Is that around where we should expect that ratio to remain longer term?

Good morning, Dan. This is a great question. One of the features of our Primerica business that we are very much focused on and continue to support is our ability to generate consistent sustainable, cash and capital return as a percent of earnings. And as you know, historically, we've been very strong on our business being able to generate free cash on a consistent basis very resilient regardless of the economics and environment that's going on, and that's what we continue to see. So in 2024, we were able to return 79%, which is right around 80%. This also highlights our distribution model which is that we're able to grow on a sustainable level and not tying up our capital as we scale up. And as you see the step up on the share buyback and the dividend is another evidence of that continued trend. Of, you know, we're able to deliver the around 80% in 2025. So from a business model standpoint, the characteristics of our business model really helps provide that consistency, and we have the confidence in terms of, you know, our features of our distribution model and the reinsurance of mortality that we have along with our independent sales force that also helps with the upfront acquisition cost and the growth on operating expenses. All of those features help us. You know, provide this level of capital return as a percent of earnings, which is very much in line with a typical distribution model company. And, you know, this is what we are pretty much focused on. Hope that helps then.

Yeah. It was very helpful. Thanks. And and then maybe And and and hold on. Again Go ahead. Let me let me answer the question about statute.

Yeah. There's nothing unusual around that line, and we really are you know, pretty much focused on having a very healthy capital at our insurance side of the business. In the RBC ratio, we typically strive to be around 400% as much as possible. It's very conservative that gives us plenty leg room as Glenn put out the vision to continue to drive the top line growth, we're very, you know, well positioned to provide that capital to drive our top line growth.

Got it. For every half of the month. Yeah. Very, very, very helpful. And then maybe switching gears a little bit, following up on the earlier comments around technology, it sounds like higher tech spend is a big driver of the growth in the insurance and operating expenses you're guiding to 2025. So should we think of this higher technology spend as a new run rate going forward, or are there any lumpy expenses in there that should subside going forward, guess maybe said differently what inning you know, are you in regarding upgrading your technology capabilities? So any color, just around that would be great.

Yeah. This this is very much in line with looking at our capital return and how we used our cash. A part of, you know, other priorities in addition to generating very strong you know, capital return as a percent of earnings to shareholders. The remaining cash is very much focused on supporting our growth in terms of having enough capital to support our insurance and non-insurance business as well as investing in organic growth. And we are very confident in our ability to drive our sales force to serve our clients, reach more demographics, that we intend to help, that's underserved. So that part of the organic investment into technology is very much in line with our strategic vision. And long term, to help improve productivity both on the processing of transactions as well as our ability to provide unified communications with our sales team sales force, improving client experiences, all of those are part of the technology improvement. So that the client can have easier, better way to look at your investments, look at the handle the life insurance transactions, and also giving our sales force continued improvement on the tools to improve their product as well as our call center, making our call center more scalable to go along with a larger growth sales force as well as number of transactions. So in terms of trends, we we're gonna continue to you know, while focusing on strong return for our stockholders, using the remaining capital effectively to help support our organic growth.

Perfect. Thanks so much.

Thank you. Our next question's come from the line of Jack Matin with BMO Capital Markets. Please proceed with your question.

Good morning, Jack.

Hey. Good morning. Had a follow-up question on the outlook for for term life issued policies. Talked about cost of living headwinds that put pressure on lapse rates. Wondering if you can unpack or quantify how much of a headwind it's been to sales levels over the past year and how much is influencing the the guidance for 2% growth mission policies this year I think you you mentioned may have been a somewhat of a conservative estimate.

Yeah. Jack, I don't think we've broken out exactly what we think our growth might have been if there weren't headwinds. So there's multiple factors playing the economic headwinds, which as I mentioned, were created not only by prices, but it's also a function of wage growth or lack thereof. For our clients. It's really difficult to say if if the cost of living had been neutral to middle-income families, we believe sales would have been what they were plus another percentage point or two or three or however many. There's there's so many other factors involved as well. We can we just know that the time we spend with clients helping them prioritize their budgets in order to make room they're every dollar is in play when we stand with the family. It's not like they they call us over and say, look, I've got this eighty dollars, hundred dollars a month. I don't know what to do with. Can you come talk to me about life insurance? We're having to sit down and help them reprioritize their budgets and that's where we identify that the headwinds because as we look at budgets, there's not a lot of waste in them. And so we really have a tough prioritization discussion with clients to free up what they need to begin to protect their incomes and and hopefully begin some type of small investment program. And so it's more of a a qualitative reporting in in some of our serving that we do through our financial security monitor you may be familiar with in the household budget index. All of that is to try to figure out exactly how much resistance is out there. But quantifying and saying it was we would have been 2% greater if we'd had mutual cost of living dynamics. A little difficult to do. So we know the headwinds out there. We know we've been able to overcome it last year. We grew and spite of the headwinds, and we are projecting that we can continue to grow, but we do know there's some resistance. To growth as a result of that. So sorry. I can't give you something more specific on how much that is.

That's that's very helpful. Thank you. And just a question on the ISP redemption rates. Like outflows as a percent of beginning assets have started to trend lower in recent quarters. I guess, could you could you just talk about some of the drivers impacting that? Do you expect some some upper pressure still from some of those cost of living challenges? You can just give them that client asset values or higher levels following kind of the strong market performance over the past couple of years.

It it generally, it's gonna be more driven at at Primerica in in the smaller accounts and and homes that are closer to the financial edge, redemptions are gonna go up when money gets tight, when cost of living pressures happen. We coach our we coach our clients not to do that unless you have to, working against yourself by redeeming. But one buffer against that is three quarters of our accounts are retirement accounts. They're for long term and often, if they're IRAs or other types of qualified plans, registered plans in Canada, there are penalties for withdrawals. So that's another kind of offense around the accounts that prevent them just putting and taking. We also recommend that people set up an emergency fund, and that's their put and take account. So the result of all that is we do believe that we have significantly fewer redemptions percentage wise than most of the companies in our space. It comes from the good coaching. It comes from primarily long-range retirement planning. And and and so we we protect and build against that. And teach continue to systematically invest in good times and bad. But we do see that move a little bit with cost of living. Fortunately, we haven't seen it move a lot and again like the discussion we had earlier about what drives volume, You know, the big accounts many times that are moving that are significant part of our volume, 401k and and mature retirement accounts, those are people who are struggling quite as much month to month, and so they're not making large redemptions. We see an increase in in number of smaller redemptions in tough economic times but it doesn't really impact the large accounts as much as often. Unless people go into distribution mode after they return start a systematic withdrawal plan. But our our withdrawals rate is very healthy, lower than the industry average we believe. And we expect that to continue even if some financial stress does continue on families through 2025.

Thank you.

Certainly.