PRI - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the Primerica's Third Quarter 2018 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers remarks, there will be a question and answer session. Instructions]. [Operator you. Thank turn Vice now over Kathryn to I of the Investor Executive President Relations. Kieser, will call

You may begin your conference.

Kathryn Kieser

non-GAAP financial for of prepared These deliver Thank Rand, will you, then quarter measures earnings questions. webcast copy third investors.primerica.com. release We call press remarks, website Alison are certain limitations, Williams, to Welcome non-GAAP and available and call. release, of our up on will Officer, today's Krista. Good reconciliations and and earnings open our Financial morning, call. Chief our everyone. and reference Officer; attached supplement, are between press we measures to financial have Chief a this release. our presentation in at GAAP it on financial our Primerica's our non-GAAP Glenn A Executive measures

strategy. quarterly that make We statements Form are events The update materially harbor information, implied reflect with provisions actual those cause Company's Reform from the will new the accordance Form uncertainties on these not by could safe in Act. Securities revise changes or events or in differ in updated Litigation to our Company will annual of as also statements to report expressed or XX-K forward-looking the XXXX on reports XX-Q. discussed and Risks subsequent

will turn I Now, the call to Glenn.

Glenn Williams

strong good Thanks pleased returns of quarter another Primerica. again. of Kathryn report morning and to We're

enhance X distribution income performance operating see We continue of adjusted can expanding and you On strategy XX%. to presentation, our by growth grew our prudently drive our deploying execute and to capital. Page net

with X% third expanding solid XXX basis focus the in returns adjusted operating quarter on increase produce savings the of built EPS retirement are focused markets the point middle ROAE the has an representatives discretionary grown foundation of growing investments excitement for The achieved of over generated size few strength licensed middle platform over Series the business. increased The More same we've the we've life-time of among also this the our advisors, time, economy enhancements representatives force adjusted mutual The The and clients. of is income. to on opportunity. a need obtain a last has incremental years on fund created including to and also our as positive greater income XX% been ever license We investment sales embracing XXXX. force savings financial more working and increase of and registered our in the is year-over-year interest compared than XX,XXX the as success income representatives. sales At XX meeting across has needs well mutual license. our products fund to for investment our business and operating

from move provide will situation. decision a life individual client the guide ISP pre-filled is on help in the mobile will information mobile investment a streamline our and seamlessly EZ-Key This client's alternatives decision. allow X,XXX, application an This will savings to of investment our capabilities as client's up over to distribution product plan year has of third launch our we working of called representatives. number We're XXXX. increased the experiences, from for tool well By expand end, representatives end investment the advisor quarter Our X% sales process investment through insurance the ultimately based to and EZ-Key. enhance representatives to application. as investment

top to features also capability investment our drive are as distribution more and ISP This mutual representatives a our aid more and tool model producers. long-term We productivity create obtaining our executing to digital transitions representatives should confidence fund new expect in and efficiencies will that high-touch provide the license. encourage additional added consider

strategic committed increasing actively to remain to stockholder deploying we value growth, by initiative to addition capital. In drive organic

deliver distributable are strong significant generate the to continue among best streams industry. us the earning to diverse returns cash which enabling strong Our free in flow

continued We to of We common quarter total full year million shares of XXXX. for sheet million $XXX stock the of third million repurchase balance about the by a XXXX. $XX.X September $XXX.X plan XX, in for repurchasing repurchased optimizing our year-to-date through

business at confidence the prospect of future provide in the Our force ability $XXX capital increased deploy the to third XXXX, addition license XXX,XXX with our results to or of year-over-year and of life distribution on in million X% Shifting sales dividends. stockholder quarter. in the Page to end our should almost at insurance representatives above us X, to size

disaster force the representatives declining levels following recruiting insurance periods. In representatives in we As the XXXX independent size business last on non-renewal full to year the remain the did not designated you a application prior range we areas the new of expect a waiving representatives and sales basis. declined may number of which license hurricane-impacted year quarter recruits largely third of in ratios from fee on both and efforts third quarter life third in of quarter around fee-waive period, XX,XXX the a business resulting FEMA areas. basis. the XXXX, the the by recall, in recur anticipate generated in remain digit to year-over-year in engaged year the mid-single recruitment year, Those The XXXX, to licensing in in the incentivized new new our obtaining of grow ago, consistent of in recent a with recruits

at productivity insurance historical license license on of back representative from levels see issued life While breakout In experienced month. life X, three we the life X.XX sales in term the Page size per force the years. productivity policies in grow, quarter, continues has to can the third pulled past per the our our range you was

offer coverage near benefits We them. grow clients In grew to our policies year-over-year past few a increases remain of as an over annualized although As XX% period interaction throughout after declined they Today, amount amount add term receive. issued on issued the automatic high policies, the an offering our a to the years, life Term estimated client increasing clients the versus new changing initiatives accept levels increase initial of or annually. a year a life we prior the use result, basis. to as continue ability can to meet the premium needs an achieved premiums life this has their coverage by insurance new in which total the which April, process of policy. most rider, additional our X% clients automatically of benefit launched rider life with their

in client issued quoted coverage new resulted has a refund. the systematic amount same programs facets increase of of for This rather the the from if business momentum a qualifies investment the for underwriting premium sale, class, premiums premium better to our a they For adjust offering business. our where their momentum help can to look life distribution and growth at to messaging recalibrate year-to-date. monitoring receiving all frequently incentive of necessary. trends We're than and in and insurance, additional constantly We time

to record our market as business sales a years. many the for Right few performance, reasons including solid of force sales the seeing of product term ability growth as few. life to shifts momentum we're business and new strengths after great leaders now complementary is model our life savings segments. and returns and deliver economic name the One investment and Shifts environmental refocus the stabilize term of our introductions, past factors occur between even segment products the can

term X.X% of Following levers be we estimate to basis. around will with year policies down life full XXXX XXXX drive growth, compared on issued executing the process a

a We policies favorable a expect well our product market as XXXX. in increase increase about momentum time, recent by enhancements. more issued gained the year-over-year of result investment to has regulatory same X% as and environment, At business as

Investment and Products client's sales recent quarter sales enhancements by increased Variable the Platform reflecting Investment success versus client in quarter, XX% sales of year XX% The partners performance the segment Positive not growth in on quarter. drove Since client asset record and volatility more average asset a growth strong in the percent we the our managed year impact XX% a product investments market billion resulted the seeing ago pressuring accounts the that quarter was Total from year-over-year. ISP in benefits. continued Market value the annuity in sales. planned fourth driven XX% product on on than sales in offer a by Savings client strategy the both performance timing third cost also attractive Our period. of long-term that and Lifetime market growth. prior investment increased them the but we market. values, to educate average averaging retirement are focuses our dollar is in negative of ISP majority accounts, rather time $XX.X are assets in the

products higher to the commitment generally assets. education So, insulated at income better are to and rates work in families with financial and providing is there our We our unwavering. clients firms that in is excel market, volatility them slightly with are redemption more when and sales our middle short-term

on focus distribution expanding to to better and productivity serve continue increasing enhancing needs. We their

record success stakeholders. will proven of and of a a results. value to now We through financial our have continue and strategy growth all walk to deliver Alison, you for our long-term track execute

Alison Rand

normal expenses business morning the XXXX and the XX.X%. In which favorable Term other our year period, basis, taxes. then and ratio growth quarter, to XX% on to business of XX% premiums level both will everyone. perform grow year million, earnings the Adjusted year today in XX.X% quarter. claims a continues historical versus and Life X, well, was we in adjusted pre-tax margins income continued the comments segments around benefits with taxes claims direct My $X and XX.X% before similar operating benefits by Slide income a with good by be and in generating reflected XX.X%. margin core consistent of prior of to approximately income results around volatility. financial to on direct you, to favorable the claims quarter Term Life and experience. client's a Glenn, achieve premiums review full strong and with a and revenues to The Starting expect the insurance for On conclude which attribute Thank cover and results companywide prior were increased we third third trends

commission a full benefits year the in be we ratio We smaller for at this claims level, ratio and DAC in also XX.X% was to was to adjusted in generally made our program XXXX to XX.X% basis, the a shifted quarter, XXXX we commission, consistent with expect the a increase initiatives to to amortization that business and and the The net modestly equity ratio The remain persistency $X DAC year ratio the DAC be expect reflect around sales generally prior about The spending typical for this levels for non-deferred insurance with quarter. from the XXXX. force related amortization interest was to ratio full Persistency expense reflects resulting quarter. consistent expense On on incremental fourth year the from also around year-over-year million amortization XX% quarter XXXX. of expect period. deferred line seasonality change expense. in

year, net we expect X%. Life to For ratio around the expense insurance be Term full the

look XX%. towards we we direct that As will XXXX, around grow by anticipate premiums adjusted

direct years, which this few the seen While than in had growth others favorably continued is we've last to industry. in premiums in lower the compare the adjusted to

impact continue block. we've premium this that reaching growth state the main adjusted years. policy premiums additional modest. future composition X growth and The as dynamic. how initial in initial growth well pre-IPO in coinsurance direct growth level growth, steady run that retention To of XXXX on main impact a contributed their including on expected policies the have diminishing The the rates positively to policy bottom exchange of XXXX. coupled the been chart results. the up IPO term transactions the to XXXX, It of with these in chart the policy term XXXX. lesser incremental Slide have in of in The of XX% recent the direct provided of drivers to shows as with growth The and although estimate top As benefit the the also their starting block discussed had as policies for over past, post-IPO transactions, X sales the has adjusted degree driver Slide issued continue the due been beyond coinsurance now illustrates retention continue is the considered beyond growth IPO

life Glenn of meaningful level will provided discussed has earnings the life over growth. step XXXX an up Earlier are policies XXXX. become premium of The emerged and in direct adjusted increasingly targeting policies XXXX insurance issued normalized, around drivers two issued in call, in policy. the XXXX, these policies life insurance driver X% the of we for value issued and the ongoing as that growth As

and overall impact ratios growth profitability amortization the we help the and XX% consistent expect on sustain be it small very and the only claims direct adjusted a in to XX.X%, our in From into and around DAC reported XXXX future. with had will While XXXX this benefits results, perspective, at levels XXXX, premiums respectively.

a modest platforms insurance be The as to on impact and relatively increase expense to segment build We we expect technologies ratio continue overall minor. the invest in to margins business. the in

income Moving ISP over performance third revenues grew previously Investments on revenues operating platform those year Positive increasing record continue income $X record managed a based about inflows Product X pre-tax year XX% number primarily revenues for Provisions results. last to revenue Also and on prior earn of product resulted a generating XX% we million fees. on of a discussed. to the account X% increase in account based the our sales reflecting in asset in market keeping in Sale based of of been account strong and the over to XX%, net significant made with before quarters earnings other commissions positive accounts Slide achieve reduction and based few led sales commissions product variable Total taxes revenues the contract year-over-year impacting increase increased very year-over-year sales. in past our and had annuity in quarter. impact and the line net to quarter. segment, XX%, respectively which and net income period. keeping with expenses, this increased we

fleet moved and portfolios. account Investment from from As managed Lifetime our Platform – have our our to clients the

see expect is at full We platform the in XXXX this trend Lifetime completing. transition the to stabilized to

ISP revenue. expenses Now I'll year. can last million changes or discussion insurance $XX.X I you Company's other move by by as of and that the this of $XX.X the was a than already offset million to expenses increased Slide quarter quarter million our than contract The expenses. higher our On of X, to incremental operating third see mentioned more $X.X recordkeeping third

We also expenses business. had growth support the $X.X to in million of additional

million. the to ahead expenses Looking to fourth of expect $XX about we XXXX, quarter be

in previous are earnings digital described development investments technology we other As initiative. and in call, making incremental

year we we groundwork gathering continuous systems, laid enable end-to-end around and million around original estimate which $X multi-year of and the $X incurred XXXX, have to million is anticipate in We than the processes timing. a initiatives, on the these a for data million full costs to less third to due modernize quarter. our initiative spending Year-to-date During $XX $X to delivery support innovation. million largely basis, of

to full We that XX.X% effective a We to income XXXX income with month. are year finalizing tax deferred and our effective our is this made rate of XX.X%. an plans adjustment Tax expectations call. The rate The for XXXX of third our XX.X%. excluded was later rate impact to income quarter rate provide quarter be to earnings due effective rate. tax was operating XXXX, reviewed quarter's Reform the million income during next $X of related to the fuller In effective the be expected expense on the the tax of plan has transition the initiative picture from operating board been XXXX tax operating

with I holding committed capital the quarter. end up, me estimated at strong to company say maintaining around remain million Primerica we risk-based As see balance third you statutory to about the and Company's wrap be can XX, capital ratio Life $XXX that position. XXX% let Insurance On at sheet is Page liquidity of a

RBC We the to a low of our from to available Life the ratio mid-XXX extent in out maintaining continue dividends take will Primerica range. with ordinary goal near-term to

for up it open let's questions. Now,

Operator

line Your go ahead. Mark of from SunTrust. Instructions] the from Hughes [Operator Please comes question first

line is open. Your

Mark Hughes

the you do quite have that quarter a quarters? are Is up catch launch – so subsequent in or product may like people excited that? strong you of one sales. The just big in phenomenon? impact variable a annuity effect – and two get might be How spike a quarter, in you see about kind a know usually it's there think it when we Is or something follow-through sales when that

Glenn Williams

and product perfect right, our don't growth make rate do it's for, rolled new job. their are kind lot out. new of way, brand have are and you a – happens I a products that you does have major that we at new We the their represent those attractive to in Mark, are product think create are something to of features following up that products players more good doing really the point partners the doing that features great so in of but don't think improvement I add expect to see it contraction more adds something improving the in products we things industry a the already to We a the client's of then normalize and road around to needs you'd quarters and fire job they fuel conditions. the the is better meet efficient way, somewhere. if of where because does to chassis that will, the have, and down and you momentum, excitement a

but strong the it, rolled as continued up excitement. performance, new spikes see are expect products We in around you will

it's I'd described are So, not say they as correct. but exactly you directionally it,

Mark Hughes

X% anticipation reversion in just growth that issued is life a in or productivity? stabilization sort of of policies XXXX, in The

Glenn Williams

that business Yeah, our at times. a happening are of you've number all got to factors

is going look we our future, as on the business. we pros try cons think forward so, And the in into to everything of and consideration,

of advantage every know, is extraordinary from, rates At to always the and time, itself. think same shot And be. past. see or normalization know try think you we within that look best presents year opportunity some we'll there the think our You growth now, that's a a take from do from be now. of I would we where working to the year we're that we where

right we into where we the looking see future. it's stand where things So, now from

Mark Hughes

I've a life metrics XXXX. for the business, term question you've Final given assumed number on us of

a think the impact. year-over-year that steady look adjusted net in the I be said for bit up, perhaps think direct little Would a business? you've to the guess relatively not margin, life I be might but we the expenses term insurance margin big I –

Alison Rand

for reason I anticipated me caveat month is through excuse is the and obviously our to expenses Yes, board, we're later budget this our go the with meeting XXXX.

see depends decisions it lot So, between allocate those of the final we really where we land, segments. also how on a once

and holistic will basis, are segment to I on segments, So, core will usually operating sure I'd segment DAC our said, about claims. bring we and you really course sort little the two how the in expenses, we doing, That XXXX. as allocate how we what with are stable of margin bit. two business, between a up the the extremely end drivers and like that you of split exactly so to component say a large know remaining we of what drivers the down talk to which believe I'm a being business on term more have is not towards But fundamental benefits critical is not on some of components block of of that focus basis. the life, obviously the of anticipate would may that wanted consider

Operator

line KBW. comes Your the Please go of ahead. from next from question Kruger Ryan

line is Your open.

Ryan Kruger

I the guess rep just fourth towards your in in guidance good on – quarter? the down a kind decline ago of relative Term productivity I quarter fairly that had X.X%, XXXX of had take it the the guess issued. a a I to Just fourth per year policies quarter. lower-end is normalizing implies a question if we Life meaningful

Glenn Williams

what that's Ryan. is Yeah, exactly it

is leadership lines, important field of prepared we the in build very they we're You of product complimentary our three work so pace. in move stated do business always the the as that the course and same sell know strength the life also three and thing, as over they And same success those the they distribution, of our of they sell nature insurance remarks, direction but long-term, investments. they all to create we don't in supporting at

in we're same right momentum Life certain to so, move And a cycles natural areas. and bit the more the distribution itself and presented the of are is cycle. lot direction ISP now, it's you momentum tend of time leveraging at little see business, course ISP different opportunity, to a same in in And the other our because business the that and tandem, extent. different

things are those so, at that time. managing all we're And

spurts will see growth normalize. will of You that then

little to it with of well working three see interact you a the you each to there right bandwidth headwind all an over that but normalize, leadership, much Sometimes do attention long-term other, a creates the now as the tends their will focused get some lag bit point, on with after later it and with our then will where and that momentum, is where kind limitation at is macro, correct of not itself. what's little but

So, to take some our in and we're that just accustomed model. that of seeing give dynamic we're

Ryan Kruger

and has of products? Thanks in force higher just terms you the existing on getting also mostly agents then – productivity or sell traction licensed it field of been licensed seeing ISP, to is some investment more of

Glenn Williams

Xi they and it and and – would. lagging on live normalize numbers behind It our didn't reported a as I the in we the up that's fund anticipated been mean of as mutual increase ISP, actually the investment remarks, X% we both. in strong size catch side, on the the side, some is we is you force know so Series prepared sales the have

involved the business that people for So, are that great becomes only business, in involved that ISP is people to business. working, it that case are when business, not provides not momentum in in attractive yet more this it the the the

ground been engage results, the to we've make very fertile that get hard that and people attractive to licensed and it foundation more so, And then business. it the to lay makes to more working in to get produce a

seeing So, we're actually both.

Operator

the Daniel line from Please Bergman comes go from of Citigroup. Your ahead. next question

open. Your is line

Daniel Bergman

where recent That's have Thanks, in sales the rated quarters. in force they third been for versus somewhat elevated increased non-renewal rate the morning. good quarter

Any or helpful. you more this get wanted part color quarter outlook So, on thoughts be trend. and could if you the i the whether to provide just know sense, anomaly the on will as that in of a expect dynamics

Glenn Williams

licensing quarter, when get quarter how workload. pipeline, were in in the ended, based at and Absolutely. you and also of the large when our lot you that provinces had whether when states look quarter anything others, up quarters renewals states a in are on on are certain a various provinces basis, noise in Well, there the in or weekends caught many

seeing anything would our their that on pull we both in now, licenses we've we're to so, traditional terminations of as through expect recruit year right I And think an rates full termination little the said and our ranges, over third bit there and from in so to period stay rate the you got quarter. a anomaly

some You think business but timing I quarter, front-end where the also we're very took our at on and out particularly the was on the second our had of in look with third of expectations of if some on metrics, any into much the past. new year-to-date licenses, those line you strong quarter

Daniel Bergman

could I a provide to how amount sales path should glide And moderating, premium wanted it's closer thinking to growth? any know like XX% direct post level, then you growth that what maybe just if more XXXX, in look XXXX just be the down the might XXXX, terms so maybe quickly of the we guidance, decent base in believe see about in adjusted so you you of just that color I around said

Alison Rand

the that added presentation think do the we in is I chart and useful. Sure,

And use It's I on so, of Page reference. a believe. that point definitely we'd as X

happening sale of IPO the from less has quite more if stabilization as well the you it to So, more end of sort do as transactions what's and side of we maturation from do frankly at block. the coming of and term it the from the down look see

how fairly not really and fall can to the happens know to in you years. in Really, spikes been bit some of a that's – run sort we business really get of you block running sort of is that both that the not we then do I that gradually did off. change that end transactions, trend off think see We those started added much little do over off that is of will are, have really does flowing get what into trend. the to So, XXXX on is think continue what off try the a when for but and we've you and of happen, going could following offset big term is, in the their IPO what you It's piece, that the and and of blocks consistent see benefit come the from piece. you reason couple XXXX, fast the really anything, off run I next retaining have you you you will end-of-term were sales the that and will in think's more IPO if were of really

things so, we think don't will sales. level one say is of meaningful the I or I can we will what as maintain be, really with to do of what forward. completely meaningful And sales big is drop expect becomes I points it move can but we another our X in that XXXX,

you're to pressure sales that slow first can a drive the then number, in to to pace, So, the but pretty and overall I two meaningful that really have pace growth see chart on what going relatively run off continue change. think be at a a on items at does

Operator

SunTrust. question from Your Mark line of next Please comes ahead. go from Hughes a

Your line is open.

Mark Hughes

that have early you've How when think been different of years. the really I at of revenue am from on you any operating environment facing or early curious if asset influences the quarter do here volatility few look sales? couple sales market fourth last you or of kind in the years volatility your in kind you the read maybe based

Glenn Williams

that a We Mark, an volatility we've to flooded our the seems is minute historically too the is in what in of business, while insulation it happening bit do from by seen relatively clients dramatic. what's market. are it have exactly brief not and minute in our

water major. it's kind if And we'll little times, lot too not relatively rough skip so, a brief across of of and a

I've said as far, sales, our on that's in so we've kind my what And comments of seen.

So far momentum really usual are we have in the the sales haven't experiencing. impact an volatility we seen

and does the amount our market react think in or as be do hand, Wall don't that other see. as firms radically drops front. the AUMs, on marketplace our our which Street traditional and speed obviously, maybe quickly with recovers just and our model the it the as it On will I But might we important impact quite clients so if more

Mark Hughes

had good again is much account, third managed on I very there Then the we how of you on the elevated Is naturally quarter. internal the those just – growth a How can putting shift, I'll that push is there sustained are accounts? growth? or managed you be expect in happening kind you're mean cover emphasis XX%, How of that that out? that? Should play sort much to a

Glenn Williams

years Well, some entered that Platform we improved like of to were felt then of Lifetime Investment the because opportunity that ago not the and we course capturing. business we

have upper options, do longer longer, we amass and are assets market middle they that of and part that us of and well. larger clients new end income there need in larger and of clients other business middle with As the – kind then course as the

it's a and haven't something to there because focused and believe sales force that meet. line And we so, on had capturing the the out new place it's opportunity we are we product in

from normally in product rather sales captured business we to will just new capturing have that normalize numbers and said anyway. simply another moving than time. we're that starting seeing from With trajectory had been would over that that were are we one growth So, not tremendous the zero

of business, of about we the very that all we continuing first we're expect more going the some those the do numbers capitalize we the and fastest of excited you are still few years to but that. market opportunity see will and growing – the on we're that's down, industry numbers that and investment in come So to so part really –

Operator

We the back further this turn to will over at I have presenters. no time. the questions call

Glenn Williams

everybody. us. Thank great appreciate We today you time have day. for your a joining you Everybody

Operator

This concludes call. you participation. Thank today's conference you your now may And disconnect. for

Primerica (PRI) 7 Nov 182018 Q3 Earnings call transcript