Primerica Aktie

Good morning, and welcome to the 2026 Annual Meeting of Stockholders of Primerica. I am Rick Williams, Chairman of the Board. I now call this meeting to order. I would like to introduce Ms. Katherine Smith, who the Board has appointed to act as our Inspector of Elections.

Good morning, and thank you, Mr. Williams.

At this time, I would like to recognize our directors who are joining us by phone today: John Addison, CEO of Addison Leadership Group and former Co-Chief Executive Officer; Joel Babbit, Co-Founder and Chief Executive Officer of Narrative Content Group; Amber Cottle, VP of Government Affairs of Genentech Inc.; Cynthia Day, the President and CEO of Citizens Bancshares Corporation and Citizens Trust Bank; Sanjeev Dheer, Founder and Chief Executive Officer of CENTRL Inc.; Glenn Williams, the company's Chief Executive Officer; Darryl Wilson, Founder, Chairman and President of the Wilson Collective; Barbara Yastine, former Chairman and CEO of Ally Bank.

Two of our directors, Gary Crittenden and Beatriz Perez have chosen not to stand for reelection. Each of them advised the Board that their decision is not related to any differences or disagreement within the company, the Board, management of the company's operations, policies or practices. Mr. Crittenden has served as a Director since 5/2013; and Ms. Perez has served as a Director since May 2014. We thank them for their years of distinguished service and contributions to the Board.

The Corporate Governance Committee has commenced a search to fill these two vacancies with qualified candidates who will add background skills, experiences to our Board that will enhance its strength and ability to serve our stockholders. As the search is ongoing, no nominees are being presented for election at this annual meeting with respect to these Board seats, and our Board will have two vacancies immediately after this annual meeting.

Here with me is Stacey Geer, Executive Vice President, Deputy General Counsel, Chief Governance and Risk Officer and Corporate Secretary of the company, who will act as Secretary of this meeting. I would also like to recognize our other senior executives who are also joining us by phone today: Peter Schneider is our President; Tracy Tan is our Executive Vice President and Chief Financial Officer; Lisa Brown is our Executive Vice President and Chief People Officer; Bobby Peterman, Jr. is our Executive Vice President and Chief Operating Officer; Ben Rogers is our Executive Vice President and General Counsel; and Julie Seman is our Executive Vice President and Chief Marketing and Innovation Officer.

At this time, I am pleased to introduce Paul Brennan and Dan Eldridge of our independent registered public accounting firm, KPMG. Both of them are joining us in person.

The Inspector of Elections has reported that holders of at least 90% of the outstanding shares of common stock, as of the record date, are present in person or represented by proxy. A quorum is present and the meeting is duly convened. Each of you were provided with a copy of the agenda and rules and procedures for this meeting -- for today's meeting. According to Ms. Geer, a notice of the meeting was distributed on or about April 2, 2026, to all stockholders of record on March 23, 2026. A list of all stockholders of record as of that date is available for inspection by stockholders at any time during the meeting.

There are three matters for consideration today. These; matters are listed in the notice of annual meeting that is attached to the proxy statement. Under our bye-laws certain procedures must be followed for Director nominations and other business proposals to be brought before the meeting. No nominations or other proposals have been received other than those described in the proxy statement. Therefore, nominations for Directors are closed and no proposal other than those described in the proxy statement may come before the meeting.

Only holders of the common stock on March 23, 2026, the record date for this meeting, or persons holding a valid proxy for such shares, may address the meeting. If you are a holder -- record holder and you have voted by proxy, you do not need to complete a ballot in person at this meeting. If you wish to revoke a proxy previously submitted and vote in person or if you have not previously submitted a proxy and wish to vote in person, please raise your hand and a ballot will be brought to you.

It is now 8:35 a.m., and the polls are now open for anyone who wants to cast a vote or change an earlier vote.

Stockholders will consider the proposal in our proxy statement to elect 9 Directors to serve until the Annual Meeting of Stockholders in 2027. Information about each nominee is contained in the proxy statement, along with the recommendation of the Board for the election of our 9 nominees. Is there any discussion on the state of Directors? Please raise your hand, and I will call on you.

I see that there are no questions at this time.

The stockholders will consider the proposal in our proxy statement to approve, on an advisory basis, our executive compensation, Say-on-Pay. Is there any discussion on this proposal? Please raise your hand, and I will call on you.

I see that there are no questions at this time.

The final item of business is consideration of a proposal to ratify the appointment by the Audit Committee of KPMG LLP as the company's independent registered public accounting firm to audit the financial statements, books and records of the company for the fiscal year ending December 31, 2026. Mr. Brennan of KPMG is available to answer questions. Is there any discussion on this proposal? Please raise your hand, and I will call on you.

I see that there are no questions at this time.

[Voting]

I hereby declare that the polls on the matters presented at this meeting are now closed and as of 8:36 a.m. today.

The proxies will be held in the possession of the Inspector of Elections. The Inspector of Elections will now count the votes.

We will now report on the results of the voting. Ms. Geer, do you have the preliminary report of the inspector?

Yes, I do. The inspector reports that more than 91% of the votes represented at this meeting have been voted for the election of each of the 9 Directors recommended and nominated.

More than 98% of the votes represented at this meeting have been voted on an advisory basis in favor of our executive compensation.

Over 99% of the votes represented at this meeting have been voted for the ratification of the appointment of KPMG as the company's independent registered public accounting firm for the 2026 fiscal year.

The inspector will furnish me with a written report of his final vote count with respect to these matters, which will be included in the minutes of this meeting. Final results, including the results for each Director nominee will be included in our Form 8-K filed with the SEC within 4 business days, and it will be posted on our Investor Relations website.

Thank you, Ms. Geer. I declare the report of the inspector is approved and that based on the preliminary results, the nominees for Directors have been duly elected, the advisory vote on executive compensation has been approved, and the appointment of KPMG for fiscal year 2026 has been ratified.

I will now begin the general question-and-answer period. If you are a stockholder and wish to ask a question, please raise your hand, and I will call on you. Please state your name and the number of shares you own or for which you hold a valid proxy. If you represent an institutional owner, please also state the name of your firm. Please adhere to the 2-minute time period and the limit of 2 questions per stockholder as described in the meeting procedures as a courtesy to all present.

Seeing no questions, I would like to again thank you for your support and continued confidence in Primerica. The 2026 Annual Meeting of Stockholders of Primerica is hereby adjourned.

Greetings, and welcome to the Primerica First Quarter 2026 Earnings Webcast. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Nicole Russell, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings 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 our 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 Act. We assume no obligation to update these statements to reflect new information, and 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, which we believe provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in our earnings press release.

I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks, everyone, for joining us this morning. Our first quarter results demonstrate the balance and resilience of Primerica's business model. Investments in savings products continue to be a key driver of performance, while the Term Life segment remained a stable contributor to earnings growth. Slides that address our quarter results in more detail can be found beginning on Slide 7 of our Q1 investor update deck. Overall, we delivered a 9% increase in adjusted operating revenues and a 13% increase in adjusted net operating income during the first quarter compared to the prior year period.

Income growth was primarily driven by a 24% increase in earnings from the ISP segment. Adjusted operating EPS increased 19% to $5.96. We continue to generate solid cash flows, which allowed us to return a total of $179 million to stockholders during the first quarter through a combination of $141 million in total share repurchases and $38 million in regular dividends while also maintaining the flexibility to invest in the business.

Turning to distribution. Our entrepreneurial business opportunity continues to resonate with individuals seeking supplemental income as well as those looking for an alternative career path. The middle-income market we serve offers us meaningful growth potential and our representatives are well positioned to meet that need through our financial education-based approach. The success of the Primerica businesses built by our field leaders reflects the strength of this opportunity.

While we continue to navigate environmental headwinds, we are adapting to current conditions. For example, in response to higher travel costs, we adjusted our spring and summer field event schedule by replacing larger regional events with a series of smaller local events across the U.S. and Canada. We expect higher total attendance from this localized approach. These events will also serve as a platform to launch incentives and promotions, which has historically driven improvements in distribution growth. We believe the actions underway will support improved recruiting and licensing and position us to end the year with life license sales force flat to up approximately 1% compared to December 31, 2025.

Focusing on production. First quarter results reflected the differing dynamics across our two major product lines. Demand for Investment and Savings Products remained at record levels, while our Term Life business experienced softer results.

While we recognize the cumulative impact of several years of cost of living pressures on middle-income families, we believe some relief is beginning to emerge. The Primerica household budget index shows that household income growth has outpaced cost increases for families for 9 consecutive months, suggesting that households are gaining ground. However, we recognize this improvement could be temporarily disrupted by higher gas prices related to conflict in the Middle East. We remain optimistic on the longer-term trajectory. Our complementary business model is designed to provide natural balance with the sales force positioned to serve middle-income families across two core product lines that often respond differently to changing economic conditions.

Term Life purchasing decisions are typically made by younger families who tend to be more sensitive to cost of living pressures. In contrast, a larger portion of our investment clients are more established and increasingly focused on long-term savings and retirement planning needs. As a result, our distribution model remains very resilient. Looking at Term Life, we issued 74,054 new policies during the first quarter, a 14% decline compared to the prior year period while estimated annualized issued premiums, which include coverage additions as well as newly issued policies declined 10%.

During periods of uncertainty, our educational approach and ability to serve clients in person represent a clear competitive advantage. Although we are seeing early signs of improvement, the level of uncertainty remains elevated, and as a result, we project full year 2026 Term Life policies issued to be flat to down approximately 2%.

Our Investment and Savings Products business delivered another strong quarter with sales increasing 22% to a record $4.3 billion. Sales growth was broad-based across mutual funds, variable annuities and managed accounts, reflecting several positive underlying trends. Industry trends continue to create favorable tailwinds. The younger generations are saving earlier for retirement and IRA contributions from these groups have been particularly strong.

According to industry sources, Gen Z contributed approximately 30% more to their traditional and Roth IRA accounts since the start of 2026 and compared to the same period last year, creating a tailwind for systematic smaller investment contributions. At the same time, Gen X and baby boomers are increasingly focused on preparing for retirement, driving higher rollover activity and increased demand for variable annuities that provide guarantees. These trends benefit our business given our ability to efficiently process a high volume of small recurring transactions in a way other companies cannot while also leveraging the long-standing relationships we built with our more established clients over time.

Client asset values ended the quarter at $127 billion, an increase of 15% compared to March 31, 2025. We also continue to see positive flows with new net inflows of $362 million in the first quarter of 2026. While we believe the favorable trends driving demand for investment products may continue for the next several years, we remain mindful of the potential for broader market volatility. Based on current projections, we expect full year sales growth to be in the upper single-digit range for 2026.

Our mortgage business remained strong in both the U.S. and Canada. During the first quarter of 2026, we had $113 million in mortgage loan volume in the U.S., 21% increase year-over-year. We also provide refinancing opportunities and new mortgages to our clients in Canada with a mortgage referral program. In both countries, we recognize higher interest rates may create a headwind going forward.

As the middle-income market begins to recover from several years of cost of living pressure, the need for financial guidance and education remains as important as ever. Our ability to meet that need is a core strength of our business. While external conditions can create uncertainty, our focus remains unchanged. Our strong fundamentals are grounded in our unique ability to serve middle-income families, positioning us to capture the long-term growth opportunity ahead.

With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning, everyone. First quarter 2026 results reflected a continuation of last year's strong financial performance led by robust year-over-year growth in investments and savings products and stable performance in Term Life.

Starting with the Term Life segment operating revenues increased 1% year-over-year to $465 million, driven by 4% growth in adjusted direct premiums. Pretax operating income was $155 million, a 6% increase compared to the first quarter of 2025.

Turning to mortality. Claims experience during the quarter remained favorable relative to expectations, consistent with the trend observed last year. The benefits and claims ratio was 57.3% compared to 58.2% in the prior year period. Benefits and claims in the current year included a $7.6 million remeasurement gain, reflecting a combination of favorable mortality experience and a lower persistency. Excluding the remeasurement gain, the benefits and claims ratio was generally consistent. As a reminder, we see a substantial portion of mortality risk through reinsurance, which significantly reduces earnings volatility. Consequently, the Term Life business continued to exhibit financial characteristics that are more fee-based in nature.

Overall, lapse rates remain elevated relative to our long-term reserve assumptions, which we believe reflects the ongoing financial impact from cumulative cost of living pressures on middle-income families. While higher lapse reduced direct premiums due to the loss of policies, they also have a favorable impact on benefits and claims costs. We observed different behaviors for various durations, and we continue to analyze them to understand the underlying trends and contributing factors.

The DAC amortization and insurance commissions ratio at 12.3% along with the insurance expense ratio at 7.9% were consistent with the prior period. Finally, the pretax margin was 22.5% compared to 22.1% in the first quarter of last year.

Looking ahead, we expect adjusted direct premiums to grow approximately 4% on a full year basis. We anticipate the benefits and claims ratio to be around 58%, the DAC amortization and insurance commissions ratio around 12% to 13% and the operating margin around 21%. Fiscal year guidance reflects the predictable and stable nature of our Term Life business.

The ISP segment fee-based business model contributes to a performance exceptionally well, supported by strong sales activity and favorable equity market conditions. While stock markets may experience periodic volatility. Our ability to deliver consistent growth across market cycles is strengthened by several key factors. These include the size of our underserved market opportunity and the favorable demographic tailwinds, our expanded product lineup, more resilient fund flows compared to the industry and long-term equity market growth.

During the first quarter, operating revenues increased 21%, while pretax operating income grew 24%. As the segment continues to scale, ISP now represents 40% of consolidated revenues in the current quarter and its faster growth has been an important contributor to improved return on adjusted equity. Sales-based revenues increased 23% and continued to outpace the growth in commissionable sales, driven primarily by strong client demand for variable annuities on which we earn higher commissions. Variable annuity sales increased 35% compared to the prior year period.

Asset-based revenues increased 23% year-over-year compared to a 15% increase in average client asset values, reflecting a favorable mix shift towards products that generate higher recurring fee-based revenues. Demand remains strong for U.S. managed accounts, reflecting the continued appeal of these products as well as for Canadian mutual funds sold under the principal distributor model introduced a few years ago. Commission expenses for both sales and asset-based products increased largely in line with revenue growth.

In the Corporate and Other Distributed Products segment, we reported a pretax adjusted operating loss of $6.7 million during the quarter compared to a loss of $8 million in the prior year period. The largest factor contributing to the year-over-year change was higher net investment income through growth in the portfolio.

Finally, consolidated insurance and other operating expenses were $168 million in the quarter, up 3% year-over-year, driven primarily by higher variable growth-related costs and increased technology investment. Expense growth during the quarter was favorably impacted by the timing of project initiatives. Looking ahead, as project activity ramps up throughout the year, we continue to expect full year expense growth in the range of 7% to 8% for 2026. The second quarter outlook is currently expected to be up around 10% to 12%.

Our investment portfolio remains well diversified with an average quality of A. The average rate of new investment purchases was 5% for the quarter with an average credit rating of A. The portfolio had a net unrealized loss of $154 million at the end of March compared to a net unrealized loss of $113 million at the end of 2025. We believe that the unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and the ability to hold these investments on to maturity.

We continued to generate strong cash flow driven by the superior growth of our fee-based ISP business, and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $556 million in cash and invested assets. Primerica Life's estimated RBC ratio was 430%.

As highlighted in our latest investor deck, Primerica's consistent and high-return business model is differentiated by its revenue mix that is largely fee like in its economic characteristics. Around 90% of our operating revenues in 2025 exhibit fee-like attributes, which includes the majority of our Term Life business where the mortality risk is largely reinsured. The remaining 10% of our operating revenues represents life insurance underwriting revenue for which we retain mortality risk. The company's financial and capital returns are similar to or better than distributed -- distribution-focused peers such as investment and insurance brokerage firms, and stronger than traditional life insurance companies.

With that, operator, please open the line for questions.

[Operator Instructions] And our first question will come from Jack Matten with BMO Capital Markets.

Just the first one on Primerica's middle-income customer base. Just given we've seen gas prices rise materially in recent months, have you seen any kind of meaningful inflection or change in trends around consumer behavior or on the producer side regarding the willingness to travel around and sell policies because of that change? Or is it really kind of the same trend you've been seeing for a little bit of time now with kind of higher pressure and some pressure on cost of living trends.

Jack, we have not seen any noticeable change in direction. As I mentioned in my prepared remarks, what we are seeing over a little bit longer term now for about 9 months in a row, our household budget index has indicated that earning power has outstripped the slowed cost of living increases, obviously, cost of living continues to increase, but not at the rapid pace of the past and earned income for families is outstripping that. And we've started to see a few positive signs from that.

Clearly disrupted by the sudden jump in gas prices as a possibility as we track that in the future. But so far, we're not seeing any noticeable change in activity or behavior of either our clients or our reps based on that. I'm sure if it continued or got worse for a long period of time, that's something we keep an eye on, but so far, it's been offset by other gains up to this point, and we actually believe things are moving in a positive direction for most middle-income families.

Got it. That's helpful. My follow-up is on recruiting trends. And you have the shift this year kind of away from your usual larger conventions. I think you said more local events now. I guess do you still expect the cumulative impact of those on recruiting and engagement to be comparable to a typical larger event? And can you -- just any more color you could offer on the types of incentives and promotions that Primerica is planning to turn on this year?

Certainly. A reminder that our largest event, our convention that we do every other year was moved to 2027 to avoid the World Cup, a little challenge finding facilities during the World Cup year, plus it aligned beautifully with our 50th birthday as a company. So our major event still scheduled and unchanged for July 2027. What we originally had scheduled for this year was what we call regional events and large regions, 3 in the U.S. and in East and West in Canada, so a total of 5.

But what we found out is that people were making decisions to either attend those or wait and attend the larger event in 2027 or just felt like that travel was a burden. And so we kind of call an audible at the line of scrimmage working with our sales force and say, let's move to a larger number of local events. And indeed, we do believe we're going to touch more people total with it's going to create a very busy travel schedule for all of us during the middle of the year, going to more events, but we'll be closer to the people and the total attendance, we believe will be larger.

And those events are still large enough to be significant platforms for us to cast our vision and also promote our incentives and so forth. And we do believe a healthy sign is that we do get positive response to our incentives. In the month of April, we had a recruiting incentive that we had used previously. We had excellent response to that. And so that was a reduced licensing fee that we've used in the past. And so we do believe there is positive response happening when we use incentives. We saw evidence of that in the first month of the second quarter. And so we believe that combination is going to be effective. And that's why while the results were not what we had hoped for in the first quarter on recruiting and licensing, we do believe that turns as the year goes on and becomes more positive.

And our next question will come from Wilma Burdis with Raymond James.

In ISP, what percentage of earnings is driven by AUM versus fees? I think that used to be around 50%, but it seems to have shifted, which would improve the stickiness of ISP earnings. So can you talk about that and how it's trended over time?

Okay. Percentage of AUM earnings coming from AUM versus upfront sales, that might not be want to have a finger to it.

Yes, I'm sorry. Yes.

That's alright. I think our current is closer to 60-40, 60 AUM, 40 sales. And so you're right, it is shifting more toward the AUM-based fees as our assets grow, that would be expected. And also as our product mix shifts toward both the managed account product in the U.S. that Tracy mentioned as well as the principal distributor model in Canada, both of those are more AUM focused. So it's exactly what we would expect. It looks like we're at about 60-40 right now, Wilma.

And really, you guys have always been a distribution company. I guess, typically, it was historically more focused on term life, but certainly ISP is compelling distribution opportunity as well. And I know you're getting into mortgages and other things. Is that kind of how you view it? Just it's more about distribution and meeting that middle-income customer? And are there any additional products that you think would make sense to distribute?

You're right, Wilma. We do view our strength, our unique competitive advantages, our distribution capabilities. And that's the reason even our Life business has distribution characteristics principally, even though it's our own product. And that is very intentional. And the two products that we sell, our major product lines today create an amazing complementary nature as we see right now when one is weak in momentum, the other tends to be very strong. And occasionally, we can get them both strong at the same time. Very seldom are they both weak at the same time. And that's a true strength, we believe, of our business model.

We do believe that the mortgage business is an interesting addition to our distribution capability. It's still a very small business, not necessarily material to our financial results at this time. But it also frees up money as we help clients get their debt load under control that can then be used to be deployed for both protecting and investing for the future. So it helps our two major product lines.

And we find it's also a business that clients feel very good after we've helped them with their debt load and tend to refer us to everyone they know in a way that may not even happen with life or investments. And so we think the mortgage business has a real positive impact beyond just its own financial capabilities, even though we do expect it to continue to grow and be a financial contributor.

Beyond that, we constantly review opportunities to distribute, but what we generally find is that other products don't have the margins that we're accustomed to. And then if they cannibalize the pocket books of middle-income families, we're simply trading a high-margin sale for a low-margin sale. So it's -- we're going to be very thoughtful before we add any additional products because we want to make sure that they're a net positive, first of all, for the consumer, of course, also for our sales force in Primerica. So there's nothing huge on the horizon right now that we're setting, but we always keep our ear to the ground.

And we'll go next to Mark Hughes with Truist Securities.

The Life sales, your guidance for the full year, flat to down 2%, that assumes a pretty nice stabilization as the year progresses. You've been running down kind of mid-teens the last 4 quarters and now you're lapping that. And so you've got easier comps or not mid-teens, but kind of double digits. What's your confidence or visibility that the Term Life can kind of get back on track, stabilize, maybe up a little bit?

You're right, Mark. It starts with the comps do get a little easier throughout the rest of the year. If you kind of study our momentum trends, momentum doesn't pay much attention to the calendar, but it continued out of our record 2024 through the first quarter of last year to a certain extent. And so we do see the comps getting easier. We also see that those green shoots I mentioned that middle-income families' financial conditions are stabilizing. And then we are taking specific actions to try to play into that.

It's still early on that financial stabilization I mentioned, and many families don't even recognize it yet. And so what we're doing as a part of our effort to bring value to those families is actually have a focus on helping families identify the emerging positives that might be happening in their budgets early so that they can put those positives to work. I mean if people don't realize that their budget is getting a little breathing room in it, they tend to spend the extra money often without even realizing it.

And so we're working hard on opening discussions with families. We've got an interesting prospecting/discussion promotion that we call where's the money, that we're actually asking new and past clients that question. And of course, the first response, they say, it what money? And that opens up a conversation of let's take a fresh look at your budget. Let's take a look and see if in spite of gas prices bouncing up on us, if you've got a larger tax refund, if your tax withholding is down, is the cost of auto insurance down, which is the case in many cases, people are changing their auto insurance and saving several hundred dollars a year. And then we can redeploy that toward their other financial needs. And often, when we are the first to identify that for them, they appreciate the value that we bring in that process. And so it's -- that we see a change in their condition. We are using that opening that, that change in their financial condition brings to bring more value to them.

And then we're also continuing to work on the value of our Life products. We introduced the next-gen product series late in 2022, and we've recently released what we call [ next-gen 2.0 ], which is -- it's not a repricing or a new product line. It's simply continued improvements on that product set that we introduced in late 2022. It's a better client experience. It's improved and faster underwriting processes, greater accuracy in our underwriting, which allows us to offer better pricing, more precise pricing to clients. And so all of those things combined give us some confidence that we can make a difference, and we can start building on this opportunity to create momentum throughout the rest of this year.

The other thing that we think is an advantage is the 12 months leading up to our convention has always been a period of time that we've been able to use positively to impact both building distribution, our Life business and our Investment business, and that begins in July. So we think we've got several unique dynamics happening between now and the end of the year that can give us some momentum in that product line and in distribution as well.

Yes. Very good. Tracy, your outlook for 21% margin, is that on the same basis, the 22.5% in Q1? And if that's the case, are there some drivers that are in play that could put pressure on that? Or is that -- I know you've kind of held out that 21% guidance is a good long-term result, but it's been better lately. And so is that just conservatism on your part?

Mark, again, I would say that the 21%, around 21%, there's certainly some timing of activities that's driving it. And each quarter, the margin may vary some. The first quarter on the performance for Term Life, we definitely benefited from the remeasurement gain, but a lot of that really underlying the continued favorability of our mortality trend. So -- with looking ahead, the other aspect of the favorable expenses due to timing, both of those, for example, we are not going to predict that the mortality is exactly going to show up in the remeasurement gain. That's one aspect. But if it continues to show up, and that could be a favorable activity based on the current claims experience sort of prediction.

And then the other part is timing of expense, which is a negative aspect on the future quarters just because the favorability of projects that we ramp up, and we have a good amount of initiatives that continue to drive, as Glenn mentioned, the growth aspect of our business, because we are continuing to improve our product, improve our underwriting, but also modernize our technology to give the best experience to the clients. So we have several major projects that we continue to work on to get our clients' experience better, and those projects will ramp up starting second, third quarter, we really, really start to have a lot more activities and expenses.

So overall, the 21% reflects some of the quarterly activity, timing differences, but also did not carry forward some of those remeasurement gains, which is the favorable period experience that we're not predicting them to be in the remeasurement gain. So hopefully, that helps.

And our next question will come from Suneet Kamath with Jefferies.

I wanted to start with the Term Life productivity metric. I mean it's been dropping off here in recent quarters, and I think 1Q is actually one of the lowest we've seen. Is that a metric that, a, you're focused on; and b, have a strategy to try to improve?

Yes. We definitely focus on it because it's a very simple calculation. It's simply the size of our sales force divided by the number of policies we issue. And so first of all, you need to recognize that it's a great tracking mechanism because it's easy to identify. At the same time, it's limited by simplicity. The dynamic that we experienced coming out of 2024 with very successful efforts to grow the size of our sales force. And then when sales momentum slows, simply dividing a record-sized sales force into slowed sales momentum makes the percentage go down.

So I think we have to recognize what it's telling us and not overestimate its sophistication because it's not very sophisticated, it's very simple. But it's important because it's an easy-to-track dynamic over time. And we absolutely -- all of the efforts that I mentioned in response to Mark's question about improving sales, we want to improve the sales number, and that will take care of the fraction. We don't focus on the fraction necessarily, but we absolutely have efforts in place to make our sales force more productive as it is today.

As we continue to work against that fraction by growing the sales force at the same time, that puts pressure -- downward pressure on that percentage. So -- but we're absolutely focused on productivity, a number of efforts. I mentioned a handful of them just now, and we do believe that will improve over time. But at the same time, we're going to continue to work on growing the sales force.

We do believe that the drivers of our capability to grow the sales force are the need for financial guidance and solutions by middle-income families, which we believe is greater than ever and the attractiveness of our entrepreneurial business opportunity, which is more successful than ever. So we've got the two most important things that drive the size of our sales force are as dynamic as they've ever been, and that gives us some optimism that we can grow both the size of the sales force and productivity simultaneously.

Got it. That makes sense. And then I just had an observation about the Term business that I wanted to sort of bounce off you and see if I'm thinking about it right. Historically, as I thought about this business, it felt to me like there's sort of a natural hedge that exists in periods of economic uncertainty, where the target market may be facing some pressure, maybe reluctant to buy product, but higher levels of unemployment also creates opportunities on the recruiting side. So like I said, kind of a natural hedge.

It feels like the current environment is different where we are seeing the cost of living pressure, but I think the latest job numbers would suggest that unemployment is still pretty good. So is this just sort of a unique kind of different period of time that you're going to have to deal with here in Term? Or am I not thinking about that right?

No, I think a lot of what you've said, Suneet, is the way we perceive it. I think I would consider that almost every dynamic in our environment has both a positive and a negative, that we're trying to maximize the positive and minimize the negative. I do think we're experiencing unique uncertainty or have experienced it over the last few years. To me, that's what's unique. It's a little hard to get a beat on the direction of things. And I think that tends to make most -- maybe people in every market, but certainly in the middle income market stop and wait and see what's happening.

I don't think that strong employment numbers necessarily directly compete with our recruiting because remember, people come to Primerica looking for an alternative to a job, not a paycheck on Friday, but to build a business over time that can supplement or replace their income. And so large numbers of poor quality jobs probably help us. And I'm not saying that's exactly what's happening right now. But when that occurs, that probably helps recruiting because people become very frustrated with their employment. A better recruit is an employed recruit that's frustrated, not an unemployed recruit.

But yet, there's an ebb and a flow of a positive and negative with almost every one of those economic dynamics. And what we try to do, again, is maximize the positive of the dynamic around us and minimize the negative. So I think you can look at it the way you described, but don't forget that there might be a counterbalancing positive to each negative and counterbalancing negative to each positive.

We'll hear next from Dan Bergman with TD Cowen.

If I got the number right, I think you said you're guiding to high single-digit ISP sales growth in 2026, which is very strong nominally, but would imply a somewhat lower sales run rate in the remainder of the year relative to the first quarter. So I was just hoping you could kind of unpack that a little bit more and what that's assuming. Like have you actually seen any slowdown of sales into the second quarter so far? Or is guidance more based on just some conservatism given the potential for market volatility and obviously, you're at record levels currently.

Yes. I think it's more of the second than the first. I mean we really haven't seen an emerging headwind in that momentum, but we are comparing to stronger and stronger comparisons as the year goes on. So a bit of that is the math of the comparison. And we also recognize that there is a potential risk of market volatility. We're experiencing market volatility, but it could become more negative. And so we just want to make sure that we take that into account in our projections.

So it's the increasingly difficult comparisons over continue -- we're setting records over last year's records. As the year goes on, we had a very strong year last year, and it got stronger as the year went by. And so those comparisons will get tougher as we go forward. And it's just recognizing that there is that risk of volatility that could interrupt momentum. We don't know how, but we try to take that into consideration in that guidance. So it's the combination of those things, I would say, Dan.

Got it. That makes a lot of sense. And then I guess a related question, but while ISP sales are really strong across all products this past quarter, the sequential improvement was really largely driven by retail mutual funds, which I was a little surprised by given the market volatility and pressure we saw during the quarter. So as such, I was just hoping you could give a little more insight into what you're seeing at your clients, their behavior and kind of how they're viewing current markets and the recent movements.

It's interesting, Dan. We saw that as well, and we take that as a very healthy sign because we consider a retail mutual fund to be the most basic product we sell and the most appealing to the broadest market. I mentioned some of the trends that the industry has identified of younger investors being more prone to save maybe than the last generation or two earlier in their lives. And that is that mutual fund market, particularly within their Roth or traditional IRAs.

And so we take that as a positive sign that there's a broader interest and acceptance of investing. We're still trying to validate all of that, but that's just our early reaction to it that -- when that happens, that means that generally preferred investment to a broad marketplace are being more highly accepted. That's a good sign. And then as time goes by, if they need those more sophisticated products due to changes, volatility in the market or changes in their own financial condition, we've got the answer to those as well. But we did see that. We took it as a positive sign for the future, and we'll continue to track it to see if we can validate that assumption.

[Operator Instructions] we'll go next to Joel Hurwitz with Dowling & Partners.

Another one on ISP sales. Glenn, just any color on annuity sales, right? You guys continue to significantly outpace the industry, right, up over 30% year-over-year in annuity sales. I think if I look at the LIMRA data that just came out, total annuity sales are actually down a little bit. Just what do you think is driving your ability to grow faster than the industry there?

Joel, I agree. We see the same dynamic that you've -- generally for the last few quarters, it's been the same direction as the industry. We've just been more accelerated. And we see that from the same combination we've talked about previously. We see our client base as they amass larger and larger assets based on the returns that have happened in the market over the last few years. The closer they get to retirement, the more important it is to preserve those assets and have guarantees underneath them. So future market volatility doesn't take away their gains.

And so I think we've got the kind of dynamic of our growing and maturing client base. I think we've got excellent partners in that business that continue to present great products that are appropriately priced and have great benefits. They're not unnecessarily aggressive, but they are, I would say, as good as any in the industry. And so it's a combination of a number of fundamentals, I think, where we've executed well on that opportunity, maybe a little better than the industry as a whole. I think there are other peers that have done as well as we have, but I do think we've outstripped the industry through just some strong blocking and tackling in that area.

Got it. And then, Tracy, on the quarter's remeasurement gains, how much of that was from mortality versus lapses? And then on lapses, any color just how that's comparing to recent periods?

Joel, on the remeasurement gain, as I mentioned, that it is a combination of both mortality and persistency. In terms of a comparison on the remeasurement gain over the prior quarter of 2025, the bigger part of the contribution on the year-over-year size of remeasurement gain, actually, mortality drove a bigger improvement on the remeasurement gain quarter-over-quarter compared to prior year than persistency in terms of dollar amounts and the size of contribution. And mortality is one that we've mentioned since 2022 second half, we've seen very good performance. And we made some remeasurement assumption change in third quarter of 2025.

But that being said, we only recognized a portion of those improvements, and we continue to experience the claims improvement. First quarter was typically in the industry, as we all know, with the flu season and probably higher prong COVID, first quarter would have been a little bit heavier claims period from the instance, and all of that perspective. But we saw pretty good experience variance on the mortality side, and we're happy to see that.

On the lapse side, I would say that for the lapse performance, and we mentioned that during the COVID, we had extraordinarily high persistency. And then we followed with the drop of persistency with higher lapses because we do know that some of the policies brought on during the pandemic period may not be the most committed buyers. And in terms of looking at the trend, I would say that the earlier durations are more stable, the ones that we continue to see compared to our long-term expectation that is more pronouncedly further in terms of distance is actually the COVID cohorts continue to have some runoff. And I've mentioned in the recent past that we're still observing that pattern and observing when that runoff would be.

So from a remeasurement perspective, we continue to observe the pattern and see what the underlying trend might be before we make any conclusions of the long-term trend being sustained.

We have a follow-up question from Jack Matten with BMO Capital Markets.

Just one on the RBC ratio. Is there anything notable kind of driving the sequential movement this quarter? Was that just subsidiary dividends? Just curious, looking at the first quarter of last year, the RBC ratio took a step up. So just wondering what was going on this quarter?

Jack, on the RBC ratio, I think we typically try to have a little conservatism on RBC to be 400% or above, and that's where we like to see. But we, at the same time, don't like to run up too high. When it gets to closer to 500%, we typically will take some actions to manage it. One of the reasons that we like RBC to be conservative but not overly high is for just capital use and efficiency on how we deploy the capital.

From a management standpoint, I would say that we have the ability -- to the degree we can, provide strong liquidity for our growth on the term Life. As Glenn has mentioned that there's obviously an ebb and flow in the business, but we do believe that convention as being our largest event and the excitement towards our 50-year anniversary is going to drive some changing trend as we get closer to the next year of 50th year anniversary. So we are managing the RBC to be to our more ideal ratios as much as we can, at the same time, keeping enough strong capital at the holdco to support the growth of the Term Life business.

But also the security, as I mentioned that in the recent past, we've doubled that business in the recent 2, 3 years, if you think about it. And we have tried very hard to keep pace with the growth of that business while building infrastructure, improving our ability in terms of even serving the clients better with how fast the business grows. So the capital strength is very, very important to support the strong growth of securities over current period and the long haul, but also have enough liquidity to sustain any sort of market downturn. And that is our philosophy, and that's what we're executing towards.

And we'll go next to Ryan Krueger with KBW.

Just a quick one. In the ISP business, your net revenue fee rate has been gradually ticking up the last couple of years. What's been driving that? Is that -- I don't know if it's the shift to managed accounts some or if there's something else going on. But can you give any color on why that's happening? And would you expect it to continue?

Ryan, the ISP business growth on the net revenue, I think some of that definitely has to do with the mix of the products. As Glen -- as we have mentioned and Glenn had mentioned earlier, we certainly see strong growth from mutual funds. But if you look at the percentages where the strongest growth has been in the last 2, 3 years, the #1 and #2 is percentages-wise, depending on what period is between managed account and variable annuity.

Now the managed account growth has been a sustained strength and we introduced those managed account, more sophisticated advisory services not that long ago. It's probably no more than a couple of decades, if you think about it, and we really, really stepped up on improving our platforms a few years ago, and we added 57 or 56, close to 60 new products on that platform. And we also introduced on variable annuity RILA product, which is more than 60% of our offering.

So that product, RILA, as an example, Glenn mentioned about the retirement needs to have some guarantee, but that product also allows the clients to take advantage of the equity market strong performance while having a bottom line guarantee security from that perspective. So that has captured a lot of interest for our clients to want to retire, but meanwhile, not lose out on the strong equity market potential that they can make a higher yield on. Those attracted certainly a lot of client demand and those products certainly are driving the revenue growth.

And then the PD model from Canada, that has been a tremendous growth of our product and its growth can compete with the other two in recent years. And all these 3 products are great mix that is driving the positive revenue side of the growth and the makeup and the contribution that you are seeing.

And that is all our questions for today. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings. Welcome to Primerica's Fourth Quarter 2025 Earnings Webcast. [Operator Instructions] Please note that this conference is being recorded.

At this time, I'll turn the conference over to Nicole Russell, Head of Investor Relations. Thank you, Nicole, you may begin.

And thank you, operator. Good morning, everyone. Welcome to Primerica's fourth quarter earnings call. A copy of our earnings 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 our 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 Act. We assume no obligation to update these statements to reflect new information, and refer you to our most recent Form 10-K filing as the -- 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 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 in our earnings press release.

I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks, everyone, for joining us this morning. 2025 proved to be another record year for Primerica, evidenced by solid earnings growth and strong cash flows that reflected the strength, stability and balance of our business model. Our sales force also set records in several areas, including $968 billion in total in-force protection for our clients and a new high watermark as client asset values reached $129 billion. Stockholders were awarded with 79% capital return through a combination of share repurchases and dividend payments, along with a 200 basis point increase in ROAE.

Highlights of our financial results included a 16% increase in fourth quarter adjusted net operating income and a 22% increase in diluted adjusted operating income per share. On a full year basis, adjusted net operating income increased 10% to $751 million, while diluted adjusted operating income per share of $22.92 increased 16%.

Let's take a look at distribution results. Both recruiting and licensing activity were down compared to the fourth quarter of 2024 and on a full year basis. These results reflected the uncertainty associated with the 2025 economic environment as well as challenging comparisons to 2024's record-setting activity. We ended the year with 151,524 life licensed reps largely unchanged from the prior year-end level. Included in this group were 25,620 representatives who hold a securities license enabling them to assist clients with their long-term savings and retirement goals.

As we start 2026, we see our business opportunity continuing to resonate with new recruits, particularly its appeal for supplementing household income. We expect full year growth in both recruiting and licensing, which should translate into approximately 1% growth in our life license sales force in 2026.

Turning next to production. Sales results were mixed in 2025 with headwinds from higher cost of living pressures adversely impacting demand for term life insurance coverage, while investment in savings product sales continued to set new records.

Starting with Term Life. We issued 76,143 new policies during the fourth quarter, providing $26 billion of new term life protection for our clients. On a full year basis, the number of new policies issued declined 10% compared to the prior year record levels while estimated annualized issued term life premiums which include coverage additions as well as newly issued policies declined 7% compared to the 12 months ending December 31, 2024. We believe it's useful to look at annualized issued premiums to get a more complete understanding of the financial impact of our Term Life business.

As we look at 2026, we believe cost of living pressures have started to ease as wage growth begins to outpace inflation. We see small but consistent monthly improvements in the Primerica household budget index data. Our sales force is well positioned to help middle-income families who could benefit from U.S. tax relief as well as moderating inflation and real wage gains in both the U.S. and Canada. We continue to support our representatives with targeted sales training to enable them to better assist clients in prioritizing financial needs, and we believe these efforts will result in productivity improvements over time. Until we see clear evidence that these trends are materializing, we are maintaining a conservative outlook for full year policy growth during 2026 in the 2% to 3% range.

Turning next to ISP results. Performance remains very strong, reflecting the importance of the financial education provided by our investment license representatives in helping clients stay focused on long-term goals and saving for the future. During the fourth quarter, Investment and Savings Products sales of $4.1 billion grew 24% compared to the fourth quarter of 2024. Results for the full year were just as strong with total sales of $14.9 billion, up 24% on a year-over-year basis.

ISP growth continues to be driven by strong demand across all major product lines. This momentum is supported in part by favorable demographic trends as clients approaching retirement seek annuity solutions that provide income stability and protection as well as by increased interest in the broader range of investment options now available on our managed account platform. We also see greater engagement from our sales force as representatives recognize the opportunity in this product line in the benefits of diversifying their business.

Client asset values ended the year at $129 billion, up 15% compared to December 31, 2024, on solid annual net inflows of $1.7 billion and sustained momentum in the equity market throughout most of the year. Looking ahead, we believe favorable demographic trends will remain supportive for several years. We also recognize that this business is sensitive to market equity -- to equity market conditions and that uncertainty remains elevated. Preliminary January results reflected continued growth. We remain mindful of a possible market downturn and maintain a conservative approach to our full year sales projection. We currently expect sales growth of around 5% to 7% and during 2026.

Finally, we remain well positioned to help middle-income families obtain a new mortgage or refinanced to consolidate consumer debt. In the U.S., we ended the year with nearly 3,500 licensed representatives who closed more than $500 million in mortgage loans volume in 2025, a 26% increase compared to the full year 2024.

We also bring refinancing opportunities and new mortgages to our Canadian clients with a mortgage referral program and saw more than 18% growth in volume on a year-over-year basis. As we approach our 50th anniversary next year, we're already laying the groundwork for our 2027 convention, which we expect to be our largest event ever.

We kicked off 2026 with a senior leadership meeting that included over 1,000 participants. We use this forum to reinforce our long-term vision, including the importance of building a balanced business by growing across all major product lines, while also strengthening recruiting and licensing to expand our distribution footprint. All our efforts in 2026 will be focused on accelerating momentum, and we're optimistic about the opportunities ahead.

With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning, everyone. Overall, we delivered very strong financial performance in 2025, outperforming on all major fronts, including record adjusted operating revenues of $3.3 billion, up 8% and record net operating income of $751 million, up 10% and record earnings per share of $22.92, up 16% compared to full year 2024 results. This performance reflects the benefit and balance of all of our fee-based businesses and our Term Life business, which exhibits financial characteristics similar to a fee business. They also demonstrate our capital efficiency and consistent execution.

The strength of our model was also evident in a 200 basis point increase in our return on adjusted equity to 33.1% this year, led by accelerating growth in the Investment and Savings Products segment. The ISP segment has performed exceptionally well, with pretax operating income growing at a compound annual rate of 21% over the last 2 years, and we continue to see meaningful opportunities ahead driven by retirement savings needs. The financial result in ISP are entirely fee-based with sales commissions and advisory fees driving revenue growth.

In the Term Life segment, a substantial portion of revenues continue to be driven by recurring premiums on a large in-force [indiscernible] of life insurance policies. When combined with our use of reinsurance, to substantially eliminate mortality risk, the income profile of this segment drives sustainable earnings performance, resulting in a stable business with characteristics similar to those of a fee-based model. Adjusted direct premiums continue to drive Term Life revenue growth to a total of $457 million in the fourth quarter.

Pretax income for the quarter was $147 million, up 5% compared to the prior year period, driven by the impact of a remeasurement gain in the current period compared to a remeasurement loss in the prior period. Keep in mind that even with a 15% decline in the number of issued policies during the fourth quarter, both direct premiums and ADT still grew in the period, reflecting the stability of our in-force block and the benefit of a substantial portion of revenues being generated by recurring premium payments.

Turning to our key financial ratios. The benefits and claims ratio for the quarter was 57.8% compared to 58.6% in the prior period. Benefits and claims in the current year period included a $5 million remeasuring gain, reflecting a combination of favorable mortality experience and lower persistency. Lapse rates remained elevated relative to our long-term reserve assumptions, although stable on a year-over-year basis. We believe that persistency will gradually normalize as middle-income families adjust to current economic pressures and we will continue to monitor our assumptions as policyholder experience continues to evolve.

The DAC amortization and insurance commissions ratio remained stable at 12.2% while the insurance expense ratio at 8.5% was up modestly compared to 8% in the prior year period, primarily due to expense timing and ramp up on technology investment at the end of the year. Finally, the Term Life operating margin for the quarter was stable at 21.5% compared to 21.3% in the prior period.

Looking ahead to 2026, we believe the fundamentals of our business remain strong. We expect adjusted direct premiums to grow approximately 4% as the benefit of coinsurance agreement continues to fade. Key financial ratios should remain stable, with the benefits and claims ratio at around 58% and the DAC amortization and insurance commissions ratio at around 12% to 13%. We expect full year operating margin to be around 21% with some possible seasonal variation between quarters.

Turning to the Investment and Savings Product segment, our fastest-growing segment and an increasingly meaningful contributor to consolidated results. To put this in perspective, ISP represented 32% of consolidated operating revenues in 2022, now increasing to 38% of revenues in 2025. Focusing on fourth quarter results, operating revenues were $340 million, up 19% compared to prior year period. Pretax income increased 23% to $101 million. Sustained equity market appreciation continues to support strong sales activity and pushed client asset values higher.

Sales-based revenues increased 21%, slightly outpacing the 17% increase in commissionable sales, primarily driven by strong demand for variable annuities. Asset-based revenues were up 21% year-over-year compared to a 14% increase in average client asset values, reflecting a favorable mix shift towards products that generated higher recurring fee-based revenues. We continued to experience higher demand for U.S. managed accounts due to the increased appeal of these products and Canadian mutual funds sold under the principal distributor model, which was introduced a few years ago. Commission expenses for both sales and asset-based products increased relatively in line with revenues.

The continued growth of our fee-based ISP business has accelerated the company's overall growth profile with recurring commissions and investment advisory fees driving strong returns on invested capital.

In the Corporate and Other Distributed Products segment, we recorded a pretax adjusted operating loss of $0.3 million during the quarter, compared to a loss of $1 million in the prior year period. The largest factor contributing to the year-over-year change was higher net investment income from growth in the portfolio, partially offset by higher operating expenses. Finally, consolidated insurance and other operating expenses were $163 million during the quarter, up 7% year-over-year. The growth in expenses was driven by a combination of higher variable growth-related costs in the ISP segment and the ramp-up in technology investments at year-end. We expect full year 2026 consolidated expenses to grow around 7% to 8%.

The first quarter expenses on a dollar basis is expected to come in a little higher than other quarters due to annual equity compensation vesting and towards the lower end of the first year guidance percentage range.

Our invested asset portfolio has a duration of 5.2 years. The portfolio remains well diversified with an average quality of [indiscernible]. The average rate on the new investment purchases in our life companies was 4.92% for the quarter with an average credit rating of A+. The net unrealized loss in our portfolio has improved modestly, ending the December quarter with a net unrealized loss of $113 million. We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and ability to hold these investments until maturity.

We continued to generate strong excess cash, driving by superior growth of our fee-based ISP business and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $521 million in cash and invested assets. Primerica Life's estimated RBC ratio was 455%.

In 2025, we returned approximately 79% of net operating income through a combination of share repurchases and dividend payments, a level that is typically well above lives and health insurance peers, underscoring our capital-light and disciplined approach to capital deployment. In closing, we're in a strong financial position. In both good and bad economic times, Primerica has been able to deliver solid earnings, strong cash conversion, and superior return on equity.

With that, operator, please open the line for questions.

[Operator Instructions] And the first question comes from the line of Joel Hurwitz with Dowling & Partners.

I wanted to start on your term sales outlook, the 2% to 3% growth for '26. Just want to understand what's sort of driving that because it would suggest pretty strong growth off of the sales levels that we've seen in the back half of '25?

Yes. And Joel, I think you'll see that emerge over the years that increasing momentum is what we're anticipating as the year goes by. We do believe that we went through some unusual circumstances in 2025 with a lot of economic and policy uncertainty as well as the continued cost of living pressures. I think some of that uncertainty, I don't know whether it's clarifying or not, but it's probably being accepted if nothing else. And we do believe there's a little good news on the purchasing power front and middle income families as we are seeing in our own household budget index that I referenced in my prepared remarks, we saw it up consistently last year, improving 10 of 12 months; in midyear, it crossed over the 100% mark, which is the baseline to determine that purchasing power is now outstripping the cost of living in the kind of narrow context that we use for middle-income families. So that is a good leading indicator.

We believe, as I said, we want to see that work its way through the system, and that may take some time. But overall, I do think the middle income families are going to have just a little more flexibility in their budgets. We are working hard to get out and be the good news bearers of that to make sure middle-income families see that. And before that money is put to use or just not recognized -- put it to use toward protecting families and investing for the future. So we do think the conditions are a little different in '26 externally in the environment. And we're working hard to play into those advantages. So we do think we'll see some increasing momentum as the year goes by.

Got it. That's helpful. And then I guess just sticking to sales, right? It's term's been a little challenged in the back half. ISP continues to be very, very strong. I guess any theory on your part, on why there's the diverging trends in the 2 businesses? Is it change in the targeted consumer for both? Is distribution shifting more towards retirement? Just any thoughts on why you're seeing those trends in the 2 businesses?

Yes, I would say that within our middle income market, there are segments of the market that react differently to the conditions. Our investment business has helped. There's a tailwind from money in motion being moved from retirement accounts as Tracy mentioned in her remarks, particularly to annuities that have income guarantees as we all age and get closer to retirement. So you've got one segment of the market that's kind of looking at their month-to-month budget. They're the buyers of term insurance for the first time and often those that are beginning to invest systematically. And then you have a separate segment that's moving money to a more appropriate place that they've accumulated over their lifetimes. And so you get 2 different sets of behaviors. Unfortunately, that's what I love about our business model because they often complement each other. And when one is weak, the other is very strong. And that's exactly what we're seeing now.

So it's not both being driven by people investing $25 to $100 a month or buying insurance with $25 to $100 a month. The Investment segment is being driven more by the big dollars in motion right now and that has a different set of stresses and is more driven by the demographics. I think the good work that we've done in preparing with our product sets and training, expansion of our sales force and also the market returns -- the strong market returns are clearly a tailwind for us.

Our next question is from the line of Wilma Burdis with Raymond James.

Could you talk a little bit about the potential impact of AI in your business model given this is a hot topic in the markets right now, especially as it is in regard to salespeople?

Certainly. It certainly is a hot topic. And of course, we're monitoring that as we see the discussions going on and well aware of it. We see AI as an opportunity for improvement of our business. We do think we can increase efficiencies and reshape workflows, both in our home office processing as well as in our sales process, and make the sales process more intuitive for the reps and the clients. So there are a lot of opportunities to use.

And in fact, we already have AI in play in a number of areas. For example, in licensing, we've got AI powered training tools that personalized study paths to help us improve pass rates. We've got employee productivity tools. We've got language -- AI language tools to help in translation to our various market segments that speak different languages. So we're clearly seeing benefits from that and have plans to use it to improve our financial needs analysis and our quoting system as well as our client app. So we are very positive on the impact of AI.

The negativity that we've seen in recent days or weeks is a question of can AI replace our business model of what we do or the other business models that are being negatively impacted? And I think it's interesting because in looking at the discussion that I see, the term insurance, I think, on the insurance side has seemed to be a more simple product and easier to understand, which is true and often someone comes to the conclusion that are easy pickings for AI to take that out because that's the simpler type of life insurance product but it's not necessarily a simpler sales process.

There's still the evaluation of a client's families need, the personalization of the solution and most of all, the motivation to act, and we see that as our clear advantage. It's an advantage with current models. I think it will continue to be an advantage as AI becomes more prominent because we have the advantage of the relationship with clients. Remember that most of our reps are dealing with clients that had a pre-existing relationship the empathy that those reps have as well as the common life experience and ultimately, the motivation. And we don't see that as a threat of AI anytime in the near future.

So we think we can benefit from it, but we think we're insulated from the downside and the uniqueness of our relationship business probably gives us an edge in the marketplace that maybe others might not have. So we don't feel threatened by it, but we're looking for the opportunities we can create around it.

Great. Could you dig in a little bit more on some of the distractions that you're seeing in the middle market? Is it equity market volatility, changing political [indiscernible] more financial? And can you just talk about -- are you seeing some of these letting up near term? Just maybe give us a little bit more color.

Well, as I said, if you look at the 2 extremes of the middle market that we serve, you've got those with extremely tight budgets, and we do believe that we're seeing a little more economic breathing room in those budgets. And that's the main distraction as we go into homes and help people find money within their budget to reprioritize and repurpose because almost nobody has had extra money in their budget over the last 3 or 4 years in the middle market. And so we have to help them reprioritize and move -- let go of less important purchases in order to prioritize protecting their family and investing for the future.

And we are starting to see some of that cost of living pressure eases as wages out outstrip the increasing cost of living, and that increases their purchasing power, but also some of the other distractions, the uncertainty of everything from tariffs to other governmental policies and economic policies, I think people are starting to get a little more -- I don't know comfortable, but at least you use to them, and they're not frozen in their tracks quite as much. And so that's what we're anticipating may give us a little running room on the term side of the business.

On the investment side, we've been in a strong market for a long time. So we're a little hesitant just to project that market returns are going to continue at the rates they have in the past throughout the year. So we're stepping back a little bit just to accommodate any kind of market correction that might occur. But as far as the demand for the product other than that, we see that demand continuing. We think we've got the right products in the right place at the right time for the demographics and the movement. And I would say that the industry is experiencing -- we're not unique, the industry is experiencing similar trends. So I think that we've got some running room on the ISP side unless the market returns changed radically during the year.

Our next question is from the line of Dan Bergman with TD Cowen.

Just maybe to start following up on the Term Life sales. I think last quarter, you mentioned a number of initiatives such as product changes, faster underwriting issuance and more sales force training with the aim of offsetting some of those external pressures and improving the term sales. So just hoping for an update on how those initiatives are progressing? And any updated thoughts on how soon we might expect them and have an impact on the sales trajectory?

Yes. I think all of that, Dan, is tied to the previous discussion is, it's a little bit different sales approach when budgets are extremely tight. And what we try to do is change our messaging and our training to help our representatives understand how to navigate that with families, probably a little different flavor now as we see and anticipate that the purchasing power of middle income families will improve, we're trying to play into that. We're trying to be an early arrival and be the first to let families know that we see this coming overall, not happening to every family, obviously, but families ought to be looking at their budgets, they'll be looking at their incomes and seeing if a little breathing room is emerging -- around tax time, we don't anticipate that there are probably some larger tax refunds than people anticipated.

And what we want to do is equip our reps to have that discussion with families so that, that money just doesn't flow through their budget almost unnoticed, which can happen in anybody's budget. And so now we're talking with our reps and challenging them to be out early, be having this discussion. Don't wait on a client to call and say, hey, I suddenly see room in my budget. Can you come help me. But they may never see it. And so we need to be proactive and get out to them. It's very early.

And so what -- how to measure the impact of that is still too early to tell, but we are anticipating that will be a positive during the year. So that is a change. And as we message to our reps and train them around this and message to our clients, we'll try to take all that into consideration.

Got it. That's very helpful. And then just on the sales force, I think growth was flat this last year following a period of elevated growth in the past couple of years. I think you guided to 1% growth in 2026 in the prepared remarks. Just any more color on how confident you are in the ability to grow the sales force from the current base, about 150,000 agents. And do you still expect a higher level of growth beyond this year and over time?

And as we think about those drivers, I mean, do you feel that improved recruiting, the licensing rate or attention, which of those would be kind of the biggest potential opportunity?

Yes. We do believe, overall, Dan, that there is a much larger market out there that we're addressing. And that means that there is no limit that we can see in sight on our opportunity. So we always get the question because our sales force is so large and a larger sales force is a little hard to grow percentage-wise. But we've been asked can we grow any larger since we crossed 100,000? And we continue to believe that we can. Now some years are going to be more positive than others as we've seen according to what the conditions around us are. But we believe there's a demand for our opportunity. It's certainly very successful.

Our existing reps were more successful last year than they've ever been before in the financial rewards from the opportunity we offer. It's very attractive, both on a part-time basis to offset the expenses of families. It's a great part-time opportunity, but it's also a great career. And we've got a tremendous track record on both fronts. So we think we can continue to grow. Obviously, the bigger we get, the more lift that takes.

We replaced the attrition first. Our attrition rates are very stable. I don't see -- we don't see that those have changed very much. Although they do tend to fluctuate a little bit year-for-year based on previous year's licenses, normally licenses in the U.S. renew every 2 years. So we'll be renewing this year the 2024 record, 7% growth in the sales force in 2024 is coming through as license renewals in 2026. And so that just means we'll have to give extra effort to that because it's a larger number, but we don't really anticipate the nonrenewal percentage of total sales force to change radically. But we see that, we're aware of it and we're dealing with it.

So we do think that our opportunity is attractive. We think that we can get that message out there and demonstrate our track record. We think that the lack -- or the more certainty, I don't think things are certain. But I think they're more certain this year in the marketplace as far as economic and governmental policy less disruption, all of that probably helps us. We think we get back on a growth track this year.

Our next question is from the line of Jack Matten with BMO Capital Markets.

Just one more follow-up on the Term Life growth outlook. The cost of [indiscernible] is starting to ease. Are you seeing that play out so far this year and any of your sales or recruiting growth metrics? Or is it really more that just the kind of the leading macro indicators are getting better and that gives you more confidence in the outlook for this year?

It's very early, Jack. We -- our January results, which were still tough comparisons because we had extraordinary momentum not only during the calendar year 2024, but it was really through January '25 before we started to see real headwinds that slowed our momentum down in both distribution, building of our sales force and the term business. But we had a strong January and encouraging January. And I think it's very early, but we do believe there's an opportunity to play into this. And again, we were conservative in our projections because we don't know exactly how long it takes to be able to get some traction around it. So we're being conservative in our approach, but we do believe it's real, and we do believe there's an opportunity here that we can take advantage of.

That's helpful. And then a follow-up on like the Term Life margin outlook. I think Tracy mentioned 21% of the guide for this year. I think it's a little bit below where Primerica has been running over the past few years. So just hoping you could unpack some of the moving pieces there. Is there anything around like mortality trend assumption that you're seeing? I think maybe that the DAC and insurance commission run rate is expected a bit higher. So just wondering about the moving pieces in the margin outlook there?

Yes, Jack. So when I look at the term life business, I see that it is very stable. When you look at the margin, one thing I'll definitely point out is, as we see the benefit in claims ratio. The first thing I'll point out is that, that ratio is overall stable. The one item to consider is that as the insured [indiscernible] age increase, obviously, the reserve aligned with it would typically go a little bit higher, but the net investment income is there to offset some of that time value of money. Our investment income is in another segment. So when you put it back into where the benefit ratio would be, the benefit ratio is actually pretty much stable, no change at all. So that's one thing to just think about is the fact that we don't marry the investment income against the benefit reserve typically otherwise when combined is really a very stable piece.

In terms of the DAC, that is to a degree, a function of the growth as well. For example, the commission last year, as Glenn to talked about earlier, we had a little bit of slower growth on the recruiting, for example. So fourth quarter, our commission dollars that were not put into DAC was very light in fourth quarter. So when you start to have some growth going on and you're going to have a little bit more commissions going in is one of the things to think about. And then DAC also is a function of how fast ADP grows. And the faster the ADP growth, the higher the DAC ratio. So some of those are some of the detailed elements to it.

But overall, if you put in the net investment income back, it's still relatively stable. And very sustainable piece of growth because most of the premiums is really recurring. So even when we didn't have a whole lot of policy growth in the fourth quarter, we still see the ADP growing at a reasonable rate. I hope that helps.

Our next question is from the line of Mark Hughes with Truist Securities.

Glenn, any way to judge that substitution effect you've been talking about some of these shifting demographics between the 2 groups -- people getting ready for retirement, putting money in their ISP accounts? And I think you've talked in the past about how the reps kind of go where the opportunity is. And so there's a natural kind of internal shift in addition to those maybe demographic trends. Any sense of what the magnitude of that might be, again, just people spending their time on ISP rather than Term Life?

Yes. It's pretty hard to measure, Mark. I think you're right. I think what has momentum, what's succeeding is attractive and you see people shifting their attention in that direction. And because of the unique dynamic in our business where, as I mentioned before, one of those major segments is often strong when the others weak is it keeps business diversified. It keeps people looking at both sides. And so we're going through a period right now where obviously, the ISP is so strong, it's very attractive. But at the same time, I don't think that's unhealthy. I actually think it's healthy because it smooths out the ups and downs of our overall business for the company as well as for our representatives.

So we are seeing a lot of interest in our ISP business. That gives us some tailwinds. Although that licensing process is much different than life and much more difficult in life. We are seeing more people stepping up to get their license. We're seeing more productivity of those with licenses, as you would expect with that kind of success.

At the same time, that's probably -- that is a more experienced group of our sales force. And so you really enter the investment business generally after a few years with us, and then as you age in your peer group, it gets closer to retirement, you tend to service more of them and over time, move that direction. But still, we're tracking a tremendous number of young entrepreneurs of the future to our business, and they really drive the other side of our business to see generally a little bit younger as well as earlier in their evolution as a financial family on their journey. Those that are younger and establishing families generally money is a little bit tighter. So they're more likely on the protection side.

So it's a very natural movement. It's something we've seen over our 50 years of service well. We do always remind our sales force of the business that you're not focusing on right now is still an important business. And that's part of the opportunity we have is dependent on [indiscernible] toward life insurance just to pick up some momentum there, which we think it will over time. So -- but giving you specifics of a certain set of numbers or how the [indiscernible] works, a little difficult because of the diversity and age of our sales force.

Understood. And Tracy, I'm sorry if I missed this, but did you give an expense outlook for the full year?

Yes, Mark. Our expense outlook for the full year is about 7% to 8% on a full year basis. Yes. And then first quarter, typically on a dollar basis is a little bit higher than other quarters because of the compensation and investing of incentives. But on a percentage basis, it's still on the lower end of that whole year guidance. Now on the expense side, one thing I will point out is because of our strong capital position and how much we expect our growth potential is still in the long run, we are making proactive organic investments. Those investments, some are highlighted by Glenn already on sales training, we're actually already actively deploying very modern technology to enhance a lot of the areas, and we also are further investing in our technology so that we can really help support the productivity for our home office to handle the growth.

Think about how much we have grown in securities business. We basically doubled that business in 2, 3 years and the volume has exploded. So we continue to invest in our infrastructure, our ability to handle our clients with the best service levels and also investing in our also support for our clients on policy handling, claims, handling their transactions on security side. We expanded our securities product to more than 50 some new products or managed account, and we obviously moved to a new platform a few years ago. So all of those are investments we're making.

So for 2026, we continue to make those investments so that we can support that tremendous growth. We continue to expect securities over the long run and then our growth in term which we do think when we turn 50, there will be even more momentum that we would be expecting. So we are investing in our business that drive some of that expense growth.

The next question is from the line of Suneet Kamath with Jefferies.

Glenn, I wanted to first ask about your money in motion comment, which I happen to agree with. But I think there's 2 things that sort of could become headwinds for what you're describing. And so I just want to pick your brain on them. The first is that a lot of the 401(k) companies are now rolling out wealth management businesses to presumably offer to clients the same solutions that your folks do. And then second, and this is probably more of a longer-term risk in my view. But if we do get a lot more usage of in-plan guarantees automatically in the 401(k) plans, is that something that could negatively impact your sales outlook?

Thanks, Suneet. That's a great question. I do think that every company in this space is looking how to take advantage of the opportunities that are emerging. And that flight to guarantees or that movement to guarantees, I'm not sure it's flight, as people age is an obvious one. And I do think the 401(k) providers are going to try to do what they can to preserve their business. But the other side of that, again, it's a little bit like the AI question. The advantage that we have is that we have deep relationships with our clients, personalized service, often at the kitchen table or across the desk in the Primerica office face-to-face. And what we see is that's a more powerful lever than the 401(k) provider sending an e-mail and saying if you've got questions or even calling and saying, we now have wealth management, there's just not that natural relationship there.

And so the relationship and the personalized service and the motivation that one human provides to another is really our advantage. And I don't think that changes with 401(k) providers trying to step into that gap because that's what they're doing. They're seeing why the money is moving out of 401(k)s, okay? And it is because people want a broader wealth management view or their guarantees, they can get elsewhere that are not. And so they're going to try to stand in that gap.

But I don't think that's going to make a huge negative impact. It will be part of a series of headwinds and tailwinds that we'll manage. But I think the way we overcome is with our relationships, our personalized advice, it served us well, and it continues to overcome all those innovations we see in the marketplace. So we think we can compete on that front and overcome that should it arise.

Okay. That's helpful. And then the second one, maybe going the other way is, we're hearing from the annuity writers that there's a lot more competition. And I would think if the -- if that continues to develop, it would presumably put the ball more in the court of the distributors like yourselves. And so I'm just wondering, is that an opportunity for you if there is more competition, do commissions typically change and could that benefit your financial results in ISP?

Yes, I do agree that the competition makes for better product sets. And as we've said before, we keep a fairly narrow shelf of a handful of providers. We don't try to have a distribution relationship with every provider out there. But as innovations are created by companies that we don't represent, they're often adopted by companies that we do represent because we believe we represent the best of the best. And they've done an excellent job at improving their products over the recent years. So I think, absolutely, as that becomes an even bigger part of the overall Wealth Management business then companies are going to continue to step up and provide better products. Usually, we see that in terms of better value for the consumer. The compensation often doesn't change radically. There's a pretty tight band of compensation among products, a lot of supervision and regulation around that.

So I don't think that you're going to see an annuity company suddenly come out with significantly higher compensation going to attract everybody over there. I think what they'll do is pass those improvements through on client value and clients will get better guarantees, better flexibility in the products and so forth. That's where I would expect to see it.

The next question is from the line of John Barnidge with Piper Sandler.

You talked about cost of living pressures improving, which is fantastic to see. And then I think you talked about encouragement with January's performance, I know there's some tough comparables. But was the growth rate in January greater than the '26 guidance assumes across ISP and Term Life?

Yes, I don't think we're ready to put that out until we get to our quarterly assessment because there's a lot of ways of measuring that. And so it wasn't encouraging January and we continue to see momentum, particularly in the ISP business continue to be strong. But I think we'll give you the detail around that at the first quarter report.

And then maybe on free cash flow conversion, and I get you put out the $475 million, but earnings have been emerging quite strong in the last several quarters and there's some dislocation in the stock. Do you ever opportunistically consider increasing the level of free cash flow conversion during those times?

Yes, John. I think on the cash conversion front, we have a very consistent performance in terms of converting our cash in a pretty narrow band. And historically, we've converted in recent past about 80 some -- around 80%. And so we typically obviously make decisions looking at multiple years out. Obviously, the Board is going to be actively involved in any decision to make any changes. But we are confident, John, that we provide superior on the high end of the conversion and return when we look at in the peer group. So I think we're going to focus on continued strong, consistent performance, obviously, any change with the board involvement.

The next question is the follow-up from the line of Joel Hurwitz with Dowling & Partners.

Tracy, sort of following up on John's question there on capital. Last quarter, you talked about having plans to draw down excess capital from the [indiscernible] it looked like that may have occurred in the quarter. Can you just elaborate on what you did there? And I guess the expected uses of that capital, right? I think you said your holdco liquidity is now over $500 million as of year-end.

Yes, Joel. Yes, you're absolutely right. We have been actively managing our cash conversion. So for 2025, we had certainly a good amount of planning and activity. We were given indication in the third quarter release that we may be stepping up on the conversion from the life side of the companies, and we were able to arrange a loan between our click, our U.S. life company with a holdco. So we were able to have some excess conversion coming out that helped the holdco cash amount.

And as I mentioned, we continue to step up our return to our stockholders, and we stepped up our buyback from [ $450 to $475 ], and that's certainly a need to continue to support that. And then we also increased our dividend by 15% on the dividend payout that's coming out that we just announced. So all of those are part of the reason. And more importantly, we're also going to continue to spur our organic growth, as we have mentioned just previously earlier. So the -- all of this management is to make sure that we have a high conversion and contribution to our continued confidence in our business and organic investment for the long-term growth.

Thank you. This now concludes our question-and-answer session, and will also conclude today's conference. Thank you for your participation. You may now disconnect, and have a wonderful day.

Greetings, and welcome to the Primerica Third Quarter 2025 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Nicole Russell, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Melissa, and good morning, everyone. Welcome to Primerica's Third Quarter Earnings Call. A copy of our press release issued last night, 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, 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 Act. We assume no obligation to update these statements to reflect new information, and refer you to our most recent Form 10-K filing as may be modified 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 will also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in our earnings press release.

I would now like to turn the call over to Glenn.

Thank you, Nicole, and good morning, everyone. Primerica delivered solid earnings growth and generated strong cash flows during the third quarter of 2025, underscoring the resilience of our business model and consistent execution as our clients gradually adapt to economic headwinds. Our complementary product lines have proven to be a key advantage and powerful differentiator, while our sales force's commitment to serving middle-income families continues to set us apart.

Starting with a snapshot of third quarter financial results. Adjusted net operating income was $206 million, up 7% year-over-year, while diluted adjusted operating EPS increased 11% to $6.33 we remain disciplined in our capital deployment strategy and returned a total of $163 million to stockholders through a combination of $129 million in share repurchases and $34 million in regular dividends during the quarter. for a total of $479 million returned year-to-date.

Looking more closely at our distribution results, both recruiting and licensing were down compared to the prior year period, which benefited from elevated post convention activity. However, current levels remain healthy relative to historical trends in nonconvention years. During the quarter, more than 101,000 recruits became part of Primerica nearly 12,500 people obtain a new life license. Positioning us to end the year at around 153,000 life license representatives. This projection is slightly above last year's record level.

Looking at our life sales results. During the quarter, we issued 79,379 new term life policies, down 15% year-over-year compared to record performance in the prior year period. Those policies contributed $27 [ million ] in new protection for our clients for a total of $967 million of in-force coverage.

Productivity at 0.17 policies per rep per month was below our historical range, driven by a combination of lower life sales and continued growth of our life sales force over the last 12 months. As we close out the year, we project the total number of policies issued in 2025 to decline around 10% compared to 2024 as record-setting pace.

Lower life sales are largely driven by cost of living pressures in the middle market. However, our conviction in the future potential for our life business remains unchanged. Primerica is well positioned to reach and serve middle-income families, one of the largest and most underserved market segments. We're working toward improving productivity on several fronts.

First, we continue to improve the accessibility and -- of our term life products. Our next generation of products recently received approval for solo state in the State of New York. For all U.S. states and Canada, we continue to work toward more convenient and faster underwriting and issue processes to make sales simpler for our reps and clients.

In addition, we've introduced improved life product training for newer representatives with the goal of positively impacting their productivity. In the coming months, we will evaluate the effectiveness on productivity of this training alongside increased focus by field leadership with expectations of a positive impact.

Looking to our ISP segment where results continue to outpace our guidance. Sales grew 28% year-over-year to a record $3.7 billion during the third quarter of 2025. We continue to see strong demand for all product categories, including managed accounts, variable annuities and U.S. and Canadian mutual funds. Net inflows for the quarter were $363 million, comparing favorably to $255 million in the prior year period, while client asset values ended the quarter at $127 billion up 14% year-over-year.

Over the last few years, we've made meaningful improvements to our platform and fund offering, including the addition of over 50 new investment portfolios. In Canada, the principal distributor model continues to be well received and is driving strong sales. We believe demand for investment solutions will continue to benefit from inflows as the baby boomer and Gen X populations prepare for retirement. Given the strength in the equity markets and continued momentum, we expect full year ISP sales to grow around 20% in 2025.

Through our mortgage business, supported by more than 3,450 licensed representatives, we remain well positioned to help middle-income families obtain a new mortgage or refinance to consolidate consumer debt. We're now licensed to do business in 37 states with the recent addition of South Carolina. Year-to-date, we closed only $370 million in U.S. mortgage volume, up 34% compared to the first 9 months of 2024. We also have a mortgage referral program in Canada, bringing refinancing and new mortgages to our clients there.

As 2026 approaches, we're laying the foundation for strong momentum by launching a series of major regional field events in the spring. Our goal is to build excitement and field engagement as we move toward our 50th anniversary convention in 2027, a milestone we're proud to share with our sales force. We remain focused as we close 2025 and look forward to the exciting opportunities ahead.

With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning, everyone. Our third quarter financial results were strong across all segments, giving us confidence that we're well positioned to end 2025 with solid year-over-year growth in both revenues and earnings.

Starting with Term Life segment. Third quarter revenues of $463 million rose 3% year-over-year, driven by a 5% increase in adjusted direct premiums. Pretax income was $173 million compared to $178 million in the prior year period, down 3% year-over-year.

Results during the quarter included a $23 million remeasurement gain compared to a $28 million gain in the prior year period. Excluding the impact of these remeasurement gains, pretax income remains largely unchanged.

As required under LDTI accounting, we completed our annual review of actuarial sessions and made certain changes to our long-term assumptions, which resulted in a $23 million remeasurement gain in the current period. In the largest portion of the gain was from mortality assumption change, reflecting favorable trends observed since the pandemic, in addition to a positive experience variance from the quarter. As a reminder, the prior year period included a remeasurement gain of $28 million, primarily driven by an adjustment to our best estimate assumptions for the disability incident rate under our waiver of premium rider.

Persistency remained stable on a year-over-year basis in aggregate, although losses remained above our long-term LDTI assumptions. We believe that our clients are resilient over the long term and value our services and products.

Based on historical trends, we expect persistency to normalize as clients adapt to the evolving economic environment. As a result, we did not make a change to our long-term lapse assumptions during the recent review cycle.

Turning next to our key financial ratio. Excluding the impact of the remeasurement gain, the Term Life margin at 22% and the benefit and claims ratio at 58.3% remains consistent with our guidance. Our other key financial ratios also remained stable with the DAC amortization and insurance commissions ratio at 12.2% and the insurance expense ratio at 7.5%.

Given the size of our in-force block and the stable nature of our term life business, we maintain our full year guidance to the ADP growth at around 5%. After revising our updated mortality assumptions, we expect the benefits and claims ratio to remain stable at around 58% in the fourth quarter.

Guidance for the DAC amortization and insurance commissions ratio remains unchanged at around 12% and the operating margin at around 21% for the quarter with expectation for some accelerated technology investments to support growth. This will result in full year operating margin above 22%. I will provide full year guidance for 2026 in February.

Turning next to the results of our Investment and Savings Products segment. which continued to perform well on the strength of robust sales momentum and increasing client asset values. Third quarter operating revenues of $319 million increased 20% from prior year period, while pretax income rose 18% to $94 million. Sales-based revenues increased 23%, slightly outpacing the 20% increase in commissionable sales, primarily driven by strong demand for variable annuities.

Asset-based revenues increased 21% year-over-year compared to a 14% increase in average client asset value as we continue to benefit from a mix shift due to customer demand for products on which we earn higher asset-based commissions, namely U.S. managed accounts and 10 Canadian mutual funds sold under the principal distributor model. Sales commissions for both sales and asset-based products increased relatively in line with revenues.

In the Corporate and Other Distributed Products segment, we recorded pretax adjusted operating income of $3.8 million during the quarter compared to a pretax loss of $5.7 million in the prior year period. The year-over-year change is due to a higher net investment income primarily from growth in the size of the portfolio and the $5.2 million remeasurement loss on a closed block of business in the prior year period.

Finally, consolidated insurance and other operating expenses were $151 million during the quarter, up 4% year-over-year. The growth in expenses was driven by a combination of higher variable growth-related costs in the ISP segment and to a lesser degree in the Term Life segment, as well as higher employee-related costs. We continued to see year-over-year growth in technology investments and anticipate some acceleration as we move towards the fourth quarter. We expect fourth quarter expenses to grow around 6% to 8% and resulting in full year growth towards the lower end of our original guidance of 6% to 8% as we have realized expense savings that offset some of the investments we made this year.

Our invested asset portfolio remained well diversified with a duration of 5.4% -- 5.4 years and an average quality of A. The average rate on new investment purchases in our life companies was 5.25% for the quarter with an average rating of A plus. The net unrealized loss in our portfolio continued to improve, ending the September quarter with a net unrealized loss of $116 million. We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and ability to hold these investments until maturity.

We continued to generate strong cash, driven by the superior growth of our fee-based ISP business, and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $370 million in cash and invested assets. Primerica Life estimated RBC ratio was 515%. We have plans to increase capital relief from our insurance companies in the fourth quarter and to continue our effective capital conversion for the long run. We are confident in our strong capital position to fund growth initiatives absorb economic volatility and to provide superior return on equity to our stockholders.

With that, operator, please open the line for questions.

[Operator Instructions]. Our first question comes from the line of Joel Hurwitz with Dowling & Partners.

Tracy, just wanted to start with your last comments there on the planned capital drawdown from the insurance entity. Just can you elaborate on what you're expecting in the fourth quarter and maybe going forward?

Yes, our capital position remains very strong, particularly because of the excellent cash generation our in-force block. And in the third quarter, we also had a really nice improvement on profitability from our statutory entities, and that's part of the reason why the RBC got higher. And from a cash generation standpoint, the continued strength of our profitability on the term life being consistent and being resilient is a big part of why the RBC ratio continued to be very strong.

And as you know, that our ability to take the cash out of the Life business is really based on the regulatory conditions as a limitation of how much you can take out as a percent of or limited by the prior fiscal year income. So we are taking maximum amount out as we speak.

However, in the fourth quarter, we do have plans to increase that conversion from our insurance entities. The specific plan clearly will help us reduce that RBC ratio and while keeping a strong enough ratio above 040% to help support the growth. And as we continue to anticipate a growth for the long run for life insurance business, we know when the growth pace start to pick up, it's going to consume more cash because of how the cash flow is more front loaded for a policy issuance.

So that is part of our long-term plan. But for the fourth quarter, we have actions in place that could possibly include in the long run, looking at how dividend can be converted out not excluding special dividend but also including some other actions that we are putting in place to certainly increase that conversion rate.. I hope that helps answer your question.

Yes. No, that's helpful. I look forward to seeing what you do in Q4. Maybe shift for my second one, shifting to the term sales. Can you just help unpack, I guess, sort of what you're seeing and what you think the drivers of the weaker sales relative to your prior expectations. Is this all cost of living or are you starting to see other headwinds emerge that are impacting sales?

Yes, Joel. We think it's primarily cost of living and other general uncertainties. It seems like every day, there's something new about the future that's unknown that you thought you did the day before. And so it's -- as far as we can tell, it's all external, as I said in my prepared remarks, Obviously, we don't want to just be victims of the environment. We want to push back as hard as we can. So as we look at making our processes easier and faster, I had some conversations with some of our reps yesterday about the difficulties in the marketplace, and they're saying the conversations are taking longer. Clients are having to dig deeper into their budgets to reprioritize because their budgets are tighter. And so the discussions take longer. The decisions are harder for clients and we want to be able to work through that with them. We're not going to just say, okay, thanks. We'll check with you and things get better.

And so that's part of the training process we were talking about earlier is to help our reps have those conversations with clients. They can get them deeper into their budgets for prioritization, understanding the importance of protection and their family of putting in force and keeping it in force. But there's still that uncertainty there that has people in a wait and see mode in general.

And I've told our kind of an informal poll of a number of our reps that were in yesterday for a training session and said how many feel like it's harder to make a life insurance sale this year than last year because of the economic and social circumstances around they all raised their hand. They said, life has gotten harder investments for those clients that have money has gotten easier. And so I think what we're seeing is the result of the path of least resistance. And we've seen that before in our business. When one line of business goes up and another one struggles a little bit and then it turns around in future years.

Our next question comes from the line of Jack Matten with BMO Capital Markets.

First one on the ISP business. Just wondering if you could talk about the sustainability of these kind of strong sales growth levels and certainly the VA or rather market -- been tailwind but also thinking you always having some structural advantages given your kind of built-in customer base. I know you've been adding new products and funds. So just curious, putting together whether there's kind of an underlying kind of growth rate we should think about over time?

Yes. As we look forward, Jack, we do -- we are pleased that we see the both across the product line. So we've seen a strong growth of mutual funds, variable annuities, managed accounts, Canadian business. And that breadth gives us -- adds to our confidence that this is a trend that probably has some legs.

That said, a sudden turn in the market, a lot of discussion out there about is the market higher than it should be as a correction out on the horizon. Those are the types of things that can really turn this momentum around, again, far beyond our ability to control them. But the fundamentals of the breadth, the fundamentals that I mentioned in my prepared remarks, in remarks of the demographics Long term, we think there's true growth opportunities here. It might be a little choppier than it's been in 2025 if the market starts to reverse direction on us in a significant way or for an extended period of time. So I think we just have to keep that in mind. But the fundamentals are sound in that business.

Got it. Makes sense. And can I just follow up on the cash flow outlook. I guess, are you suggesting that there is like the potential to have maybe a structural improvement in your cash flow conversion ratio over time? Or are your comments more willing just to this year where you've had better experience and so maybe more cash flow coming out and then it normalizes heading into next year?

Jack. So cash performance, what I would comment about is the question in terms of cash conversion was more specific about cash conversion out of life insurance. business to the holdco, where the RBC ratio is. I think we have plans in the fourth quarter to improve that conversion. Even though that conversion is largely limited by the statutory requirement. We do have plans that could help improve that conversion.

Now in terms of a long-term cash flow generation, I think we're very confident of the ability to generate very positive cash flow. First and foremost, is that our fee business has been really outperforming in terms of the ability to generate cash and that conversion continues to be very strong. And we have very good momentum on those fee business growth beyond just what the market normal growth rate is. And as we look at our growth rate on these businesses, we've been outperforming the market. in the comparatives. So that generation has been very strong, and that gives us a very good long-term potential from the fee business cash generation. when I look at in the longer term when I'm looking at more 4, 5 year out.

At the same time, our term life is an extraordinarily important business that produce very consistent strong cash flow because of how big the in-force block is and how consistent that business performs. If you look at the margins, it doesn't really vary all that much more than 200 basis points.

So combined, our total business profitability is very, very sound at over 20%, if you look at the overall profitability. So the consistency, the resilience and our ability to just convert the cash from subs into holdco and our ability to return from holdco to the stockholders. I mean, we've been performing at around 79% -- 80% capital return to stockholders, which really is superior to the health and life performance. And you look at our conversion from our stuff of insurance to our holdco is around 80% and some years higher, possibly. And that's also superior to our peers.

So overall, our cash performance has been fantastic. And that's why that's also part of in the long run, look at our ROE performance at $0.30 return dollar of investment, that's also superior to many peers as well. So overall, we're confident about our ability to generate cash and our ability to return a good amount of cash back to the stockholders in various ways.

Our next question comes from the line of Ryan Krueger with KBW.

I had a question on the 21% margin in the fourth quarter in term life. You had mentioned some higher investments. Can you elaborate on what you're doing there to start?

Yes. So our term life Yes, our term life performance has been relatively consistent. Really, when we look at the ratios, they don't really vary more than 50 basis points much at all. Some quarters, there is a little bit of a pattern may be higher than the other quarters due to just the spending patterns.

So in terms of looking at the fourth quarter, we do have some activities of accelerated technology investments that will be continuously supporting our growth potential from the front end. And if you look at the overall ratio on the term life business, it's pretty steady. If I look at the benefit and look at the DAC ratio and look at the expense ratio, they're very consistent overall on a total year basis to our guidance. and the margin for the year is going to be well over 22% as well for the total year.

Now in terms of our fourth quarter, we do believe that some of these acceleration is specifically targeted addressing our front-end productivity side of the improvement, purposes that makes the reps journey easier and that will continue to be a focus of ours to support the technology side of the improvement in the digital marketing and then the reps and the clients' experience. I hope that answers your question, Ryan.

Yes, it does. And then the follow-up was in the ISP business, your net fee rate has been kind of gradually trending up for the last several quarters. Is there any specific thing that's driving that? I know you are growing the managed account platform more, which I wonder if maybe that had slightly higher revenue rates. But is that -- do you have any color on what's driving that? I mean if this trend may continue going forward?

Yes, Ryan. This is a great observation. I think certainly, on the ISP side, we do have a mix shift because of the clients demand. and this is particularly driven by where the highest growth rates are. If you look at our -- the growth rate managed account, it significantly outpaces most of the other categories and then variable annuity, as an example, also outpaces the other categories. All of those on a relatively basis, compared to mutual fund, they have higher from a margin -- the variable side of the story, it's a little bit of a higher ending trend that pushes some of the improvement you see on the ISP business.

Now again, as we talked about from previously when Jack even talked about the variable annuities there on the tail end, I will say that some of this certainly has the impact of where the interest rate is that pushes people to try to capitalize on the opportunity to launch in the higher rates. But secondarily, more importantly, is the demographic shift of people to Glenn's point, preparing for retirement as well as certain needs to avoid volatility possibly from an equity market standpoint. All of those help push our good performance on the ISP rates and margins.

Our next question comes from the line of Willma Burdis with Raymond James.

Do you expect any forward impact from the assumption review? And maybe you can just walk me through this a little bit, but how is the assumption would be so outsized given the 90% mortality reinsurance.

Good morning, Wilma. Our assumption review in the third quarter generated $23 million of remeasurement gain, in relative terms, it is a still a small percent when we consider reinsurance. And that's actually on the comparative speaking, terms of size, if we didn't have reinsurance, this would have been several times bigger of an adjustment number. So looking at our overall mortality performance. We've been experiencing very good mortality for several years since middle of 2022. So we took a portion of that profit -- of that improvement and adjusted our long-term best assumptions.

Now to your point, what the size would have been, well, without the reinsurance treaties in the size that 90% YRT that we reinsure this would have been several times larger of numbers. So this $23 million in total remeasurement gain in the third quarter is a very, very small percent in terms of what the size could have been. Hopefully, that helps answer the question.

Yes. And I realize you guys have given quite a bit of color on the term life sales. But I guess I'm just wondering what might change the trajectory of those sales. I've been looking at your recent surveys on your on households. And I'm not saying that the trends appear sharply worse than they have in some of the recent results. So I'm just wondering if there's anything else that might contribute the pressure that could potentially run off nearer term?

Well, you're right. Fortunately, we have seen kind of some flattening of the increases in cost of living. As we talk to our reps and our clients and survey them, we find that the cumulative effect is still causing some struggles. So while it's not getting worse as fast, it's not getting better very fast either.

But we do believe that clients are adapting. Over time, people become accustomed to where they are. I'm not going to say they like it, but they become accustomed to it and learn to deal with it. And that's where we've often seen these types of pressures start to add some is after a period of time. But clearly, it's better if we can have household incomes really start to gain some ground, prices aren't going to come down significantly, I don't think, but it's household income catching up. that will help us get out of this. We are seeing some of that begin to happen. I think it just takes time to get some traction.

And fortunately, we've seen this kind of dynamic in the past. So we believe, number one, it is a temporary situation and that we can take some actions to help clients work their way through it. because we've seen it before. If you look at our history as an almost 16-year-old public company, we've had a number of years where we see this exact dynamic that recruiting and life insurance is down investments is up. We've seen other years where recruiting and life insurance is up and investments is down, and we've seen a lot of years, which is what we strive for, whether where everything is up at the same time.

So it's not unprecedented by any means. It's probably a little more severe than we've seen in probably 15 years or so and taking a little longer to get out of it. And then I would say they're also what we've termed government policy uncertainty that other things in life that aren't directly financial, there's everything from the government shutdown. We've got several employees on furlough right now. They're saying, well, let's wait until this is over before we make a buying decision. So there's just an unusual amount of uncertainty to add to the financial pressure. But again, we think it's temporary, and we eventually will get out of it, and we think we can take some actions to work through it and sort of turn the tide along the way.

Is there anything that you think is going to change near term for your customer base? So I know that there's some different tax impacts that are coming in next year. Is there anything like that, that you see on the horizon that could provide some relief?

Wilma, not anything that we have enough confidence in to count on. I mean we always keep our ear to the ground on the types of decisions that might be made at government policy level or taxation level that will be helpful for the middle market. And you're right, there are some discussions out there that might provide some relief and that kind of thing. We want to build a plan about what we can control. And then if we get some brakes that are beyond our control, it will just be icing on the cake.

So we're not counting on those to turn the direction, but we do know there are all types of discussions going on because I think everyone recognizes the pressure at the middle income families are under. There's a universal agreement. I think among all the divisions in our 2 countries where we do business right now is that middle-income families are under a significant amount of pressure. So hopefully, there would be some relief that would give us a tailwind.

Our next question comes from the line of John Barnidge with Piper Sandler.

Cost of living headwinds, I think the competition is clearly with space in your core customers' wallet. It's been talked about that rates are going lower. It's also been talked about rates are going lower for seemingly longer time as well. But with the refinancing of a mortgage, when that does occur, how much on average do you save a consumer versus average life policy premium.

I can give you some directional answers, John, I don't have the averages at my fingertips. We can maybe follow up with you on that. But you're exactly right. Another area of uncertainty is the direction of interest rates. I think the entire mortgage industry has been struggling with that for a while. We assumed for a long time, they were going to come down and then they did and they actually went the other direction. And I think that's common among all in that business.

When we help a family refinance, in addition to their mortgage, we are also looking at their consumer debt generally at a much higher rate interest rate than their mortgage and trying to bring all that in together to maximize the savings. When we're able to do that, we also can adjust the term as needed to make things affordable or to accelerate, which is what we'd rather do accelerate their payment.

But generally, when we help a family on the mortgage side, it frees up more than the cost of the life insurance policy. And actually can, where appropriate, not only provide them the funding for that, but also get a systematic investment plan started. And that's the reason that we like that business.

I've said many times we get approached all the time by the people, periodic providers wanting us to load additional products into our distribution system. And more products tend to cannibalize existing products. And so we're very resistant to that. I think the product that doesn't do that is a refinance of a mortgage where we can lower the average interest rate and pull in those consumer debts that are at high interest rates and high payments, and then we can get the clients on better financial grant. So that's one of the reasons that we think that business is important.

As you know, it's a highly regulated business. So we've got a significant licensing process to take people through to enter the business. And then it's also highly regulated as you transact the business. So it's a more complicated and sophisticated business, and so it will move at a slower pace in our growth than us being able to add on term life insurance represented. But you hit directly on why we love that business is because it does free up money for clients to get on a better financial footing.

My follow-up question. Do you track the amount of sales maybe on churn life? Any given year to government employees? I'm just trying to get a size of how much your towable addressable market is directly impacted by the shutdown in 4Q as the revised or the term life guidance for the year suggests acceleration in the decline of term life policies issued.

Yes. John, I wouldn't attribute the government shutdown specifically to a change or magnifying a change in the fourth quarter. I'd just use it at another level of uncertainty that we hear that we're dealing with. I mean, we don't target government employees, but we cover a slide to the middle market that includes everything that's out there. And so there are government employees included in that. And it's just 1 more level of uncertainty that our reps have to deal with to get around.

So I don't think it's the difference maker. It's just one more issue that I would add to the list Again, I don't have the percentage of our clients that are government employees at my fingertips. But I wouldn't attribute everything that happened in the fourth quarter to that. I would just say the uncertainty continues to be a headwind for us.

Our next question comes from the line of Dan Bergman with TD Cowen.

To start, I guess, it sounds like with the fifth year anniversary coming off, the next convention was pushed out to 2027 stereotypical biannual pattern. In the prepared remarks, I believe you mentioned a number of field events next year instead. So just given that the convention typically drives outside sales force and new business momentum. I was just hoping you could provide more color on your plans for next year and whether the events are expected to offset the lack of a convention. And I guess just with the -- will the timing of these events drive any change in your typical seasonal pattern of sales and recruiting as we look into next year?

Sure. You've read that exactly right. We moved the convention out for 2 reasons. One was it does coincide with our 50th anniversary being in '27. The other reason was because of the World Cup in 2026, you can't rent a stadium in the U.S. or Canada. And so it was convenient that it gave us a reason to push it out and have a payoff there that it does sync up with our 50th anniversary.

But we do recognize the importance of those events and generating momentum and excitement and cashing a vision for our business. So we certainly didn't want to go for another year in '26 without big events, but we also didn't want to compete with the '27 convention. It had to be big enough a plan to make a difference, small enough not to take anything away from the drop we have going already to the '27 convention.

So working with our free leaders, we've run in the past, it's probably been more than a decade. But it's regional events, 5 locations, 3 in the U.S., 2 in Canada, that will run in the spring, starting at the end of April for the first one, and we have one every week or every other week through the first week in June. So it's during the second quarter. It's a little earlier than our convention. That was intentional to give us more benefit during the year by getting them out there a little earlier. We wanted to avoid the kickoff for the year because we still do encourage all of our teams to have a big kickoff and engage quickly at the beginning of the year. We didn't want to step on that. We wanted to get beyond bad weather for travel. And so that's the reason we chose the spring. It was really early in the year as possible.

So these will not be the size of our convention. But if you add them all together, they should be as big as our convention -- is the thinking in attendance. And so we'll treat them differently. It will not be as long in have been, it's a Friday afternoon, evening, Saturday event as opposed to a 4-day event so people can get in and out more easily, geographically being closer. We think it makes it more convenient and less expensive for people to attend. And we have other events that we've consolidated to offset the expense of doing these -- so we're doing it kind of in a virtual an expense-neutral plan for our events budget next year by doing it this way, we're going virtual with some of our other events make these live events possible.

So we're excited about it. Something has been done in a while. It should have the type of impact we would expect around the convention Remember, the convention is not just the event itself that drives momentum. It's the incentives that we announced and use around the convention. We used the convention as a platform to announce those incentives. And it's the combination of those 2. So we'll be doing a slightly smaller version of that. We'll have some incentives in play around these 5 events. We'll use this big stage as a recognition platform. We have people competing right now to be recognized on those stages. That's always an important driver of our business. And so we think in combination, this gives us an opportunity to really come off of what has been a slow year compared to the previous year in our distribution and life business, add some momentum to those 2 businesses and continue to maximize the momentum in our ISP business as we hit into '26.

Got it. Very, very helpful. And then maybe just following up on the earlier questions around the rise in your RBC ratio so far this year. Is there any way to break down the drivers further, I guess, specifically, how much of the improved capital generation has been due to strong in-force earnings versus less capital strain from the lower level of life sales. I guess what I'm trying to understand is if life sales do remain somewhat subdued for a period of time, could this allow for an ongoing outsized level of dividends to the holding company and ultimately, share repurchases to help offset the slower sales trends for a period of time. So any way to size that or how you're thinking about that would be great.

In terms of the RBC ratio being higher, obviously, 1 of the reasons is the higher profitability in income generated from the statutory side. Clearly, the statutory side of the cash impact is one of the reasons why RBC ratios are higher. But still primarily the reason is the overall ability to convert the cash out based on the regulatory restrictions of the 12-month rolling combined cash you can take out as an example, not exceeding prior statutory income.

So as our income gets to be higher in the future period than the prior period combined and you're limited to how much you can take out. So just by continuingly improving profitability on a statutory basis. As an example, there is a possibility of cash generating more than what your prior profitability combined would allow you to take up that being part of the reason we clearly are looking at plans that we're going to putting in action in fourth quarter to help us be able to convert more cash out. And you will see when we get into the fourth quarter, how those actions take place.

And to your point, the faster growth of the term life business will consume more cash when it's at a slower pace. And that's part of the reason why when we look at the future rates, that we want to keep for RBC. We always want to have a little bit of a cushion should when we get towards the 50th anniversary as the excitement starts to build and the momentum start to get stronger, we wanted to make sure that there is sufficient cash in place to capture that growth potential.

Currently, we're relatively lower growth speed compared to prior year because it was at such a record pace. But if you look at it on the longer 20-year term, 30-year term, our growth is still at pretty consistently good levels. Just the fact that last year was higher, doesn't necessarily say the current growth is somewhat really unseen in the past.

So that being said, that's part of what's driving our decisions on how much we keep in those entities and how much we take out. But in the long run, I think we have anticipation of keeping a relatively high historical level of conversion, some periods could even possibly exceed what you've seen historical ratios. But overall, I think we're confident in to keep at that very high-end performance in the old peer -- compared to all the peer sectors being able to continue that relatively predictable trend in terms of the ratios that we predict and use.

Our next question comes from the line of Mark Hughes with Truist Securities.

Excellent. The asset-based revenue, you point out that has been growing faster than the underlying as -- different categories. But is that -- should that sustain a positive trend?

Mark, we lost you for the entire middle part of your question. Would you mind restating? Mark, we're only getting 2 or 3 words out of that. I apologize. I don't know if you've got a bad speaker or we're only hearing every other word or so of your question. So it's not coming through.

Yes. Can you hear me now, Glenn, is this...

Much better. Much better, much better.

All right. Appreciate that. The faster growth in asset-based revenue relative to assets, is there any reason that should that trend should not continue?

I think, as Tracy said, it's driven by product mix and our managed account business and then also the principal distributor model in Canada, which has similar dynamics. Both are kind of our -- some of our fastest-growing product lines. They're smaller. And so on the percentage basis, they tend to grow faster, but they're also beginning to catch up in the overall mix. So we would expect barring some unforeseen disturbance that, that should have some legs and should continue. You're right. That direction is not something we anticipate would change.

And then, Tracy, the YRT ceded premiums, if you look at those relative to adjusted direct premiums, those have been moving up, that ratio has been moving up. What is the update on how that should trend over the next year or so? Will it just continue that upward drift. And again, this is YRT ceded premiums as a percentage of adjusted direct premiums in term life?

I think the YRT ceded premium as compared to the adjusted direct premium is because for those life policies as the insured age the ceded premiums start to creep up to cover for the higher mortality risk. So when you look at it, you actually don't want to look at it in a silo. You want to add it through the actually the benefit cost. So when you combine those as a percent of ADP is relatively steady, that's how you want to look at it.

Our next question comes from the line of Suneet Kamath with Jefferies.

First question just on the assumption update. Tracy, you had mentioned that you took a portion of the mortality or favorable mortality that you're seeing and put it through your assumptions I'm not expecting a specific answer, but can you give a rough sense of like what proportion of the favorable mortality you put inside, was it half? Was it 20%? Just a rough estimate would be helpful?

Yes. So our mortality performance since 2024, middle of that year has been consistently favorable. We had thought that it was possibly a pull forward from the pandemic increased unfavorable mortality experience and that it would end at some point, but we continue to see that consistently. It's been reasonably good size of favorability. So we took a portion of it.

In terms of what the proportion is, I think the theory really is that we believe our best estimate assumption is that we've taken the portion that we think for the long run, it's the best estimate on what the mortality experience would be in the long-term trend.

So if we had thought that it needs to be higher, we would have taken it in our assumption review. So this is our -- truly our best estimate. In terms of what we could expect for the future, I would say that because we have had favorable experience, possibly bigger than what we've taken. So it wouldn't be unlikely that we might have some favorable period claims and mortality favorable experiences from period to period. But long-term trend, we have taken our best estimate on what that trend would be.

Got it. And just, again, I don't want to box into a corner, but is it like 20%, 25% of what you'd expect -- what you think just more than half, just trying to get a sense of size?

Yes. So that's a great question. No, the challenge really is there's a lot of complications of really deciphering the mortality performance. on the cohorts and with that predictable trend with cohort is a predictable trend for the long run. So I think what our combined study looking at our experience really tells us this truly is the best estimate. So the future is uncertain. We believe that the portion we've taken truly represent what the long-term trends would be given our best estimate. So the period variance that we will experience will continue to monitor and size that. If that continue to be a pattern that we think becomes a long-term trend at that point, then we will recognize that if that were to come through.

Okay. That's fair. And I guess my second question just on the annuity sales. So we've seen sales volumes increase for both you and the industry. Now some of that could be driven by just higher markets as essentially 401(k) rollover as -- asset balances are higher, and so the rollovers are higher. So another way to think about growth would be growth in the number of contracts that you write. So I'm just wondering if you have any data on that.

And then sort of relatedly, Glenn, do you think you're increasing the total addressable market for the annuity business? Or are you effectively selling products to the existing customer base, so you're seeing a lot of exchange activity. Any color on that would be helpful.

Sure. Don't have a specific stats, but I can give you some directional answers on that, Suneet. The annuity business is attractive. Again, some of it is a demographic change. I think Tracy mentioned it in an earlier answer, the demographic direction, the aging demographics, people have accumulated some amount of money, and they are looking ways to preserve that in uncertain times or expecting volatile markets down the road. And so the guarantees within variable annuities, the floors that are created and the guaranteed income coming out of them are what makes them attractive. And as we've said before, our product providers have done a great job in making those products as attractive as actuarially possible. So they've done well there. changes in interest rates and their ability to provide those guarantees maybe adjust it. So it's nothing's forever. But I think the product providers have done a good job making their products attractive.

I think our sales people have used that to both help existing clients as well as be referred out to other clients. So we are seeing not only larger transactions, but increasing transaction volume and we believe that's coming not only from our existing clients where we would be able to see a move if it was out of one of our products into a variable annuity, but we have existing clients who have assets elsewhere outside of Primerica that bring them to Primerica to join the other assets that we already have with and we see some of that we see brand-new clients as well as those satisfied clients as happens throughout the industry refers to others. So we're getting some of all of what you described, Suneet, that's driving that business.

Okay. That's helpful. Thank you, Glenn.

Glad to help.

Thank you. Ladies and gentlemen, this concludes our Q&A session, and we'll conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.

Greetings, and welcome to Primerica's Second Quarter 2025 Earnings Webcast. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the conference over to your host, Nicole Russell, Head of Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Welcome to Primerica's Second Quarter Earnings Call. A copy of our earnings press release issued last night, along with other materials related 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 will contain forward-looking statements in accordance with the safe harbor provision 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 filing as may be modified by subsequent Form 10-Q for a list of risks and uncertainties that could cause actual results to materially differ from those that are 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 results to the respective GAAP numbers are included in our earnings press release.

I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks, everyone, for joining us. Primerica delivered another strong quarter with results that reflect the consistent performance of our business. Despite continued economic and government uncertainty, our investment clients remain committed to their long-term savings goals, our life insurance clients recognize the importance of protecting their income and our business opportunity is attracting a significant number of recruits.

Our sales force plays a critical role in delivering protection and investment solutions to middle-income families when they need it most. As we sometimes see, our 2 main product lines respond differently to changes in the business environment, creating a good balance in our business model and financial results.

Starting with our financial results. Adjusted net operating income was $180 million during the second quarter of 2025, up 6% year-over-year while diluted adjusted operating EPS increased 10% to $5.46. These results reflect the continued strength within our investment savings products business and a steady contribution from our Term Life business. We continue to generate solid earnings growth and maintain our commitment to returning in capital to stockholders. During the quarter, we returned a total of $163 million to stockholders through a combination of $129 million in share repurchases and $34 million in regular dividends.

Looking at distribution, we recruited over 80,000 individuals during the second quarter and licensed nearly 13,000 new representatives, down 10% from the second quarter record set last year. This level of activity continues to fuel growth in our sales force. We ended the quarter with 152,592 life license representatives, up 5% compared to June 2024. Recruiting in the third quarter also started strong. Using a recruiting incentive, which has been affected in the past we added over 50,000 new recruits in the month of July. We remain committed to growing our sales force and expect to grow between 2% and 3% in the full year of 2025.

Turning to our sales results. We issued 89,850 new Term Life insurance policies during the second quarter and put in place over $30 billion in new Term Life protection for our clients bringing our total face amount in force to a record $968 billion. On a year-over-year basis, the number of new life insurance policies and face amount issued declined 11% and 9%, respectively. We believe the decline reflects a combination of continued cost of living pressures and ongoing uncertainty compounded by comparison to exceptionally strong results in the prior year period.

Productivity at policies per life insurance license representative per month was within our historical range of $0.20 to $0.24 million Considering these stronger-than-expected headwinds, we're now projecting the total number of new life policies issued to decline around 5% in 2025 compared to full year 2024.

Turning next to the ISP segment. Results were once again stronger than anticipated with total sales during the quarter of 15% to $3.5 billion. We continue to see strong demand for variable annuities and managed accounts, while U.S. and Canadian mutual funds grew at a more modest pace. Net inflows for the quarter were $487 million versus $227 million in the prior year period and client asset values ended the quarter at $120 billion, up 14% year-over-year. We see more clients focusing on saving for retirement, driving higher transaction volume and increased average sales size. This trend has the potential to continue based on the large number of individuals in the baby boomer and GenX populations who are approaching retirement age.

Given our momentum in the first half of 2025 and strong sales in July, we expect full year ISP sales growth to be more than 10%. During the quarter, we discovered a need to correct our methodology for calculating outflows and market value for Canadian mutual fund assets included in our consolidated client asset roll-forward statistical data. We updated the roll-forward table in our financial supplement to provide investors with restated historical statistics. This direction had no impact on our financial statements ISP product sales nor the average or ending client asset values during the relevant periods. Net flows were impacted, but remained positive.

Our mortgage business showed solid year-over-year growth in both the U.S. and Canada during the second quarter of 2025. In the U.S., we had $133 million of closed loan volume, up 33% year-over-year. We are licensed to do business in 35 states through a total of nearly 3,400 licensed mortgage loan originators. Our referral program in Canada had USD 45 million of closed loan volume up 30% from a year ago. While mortgages currently represent a relatively small portion of our business, they provide our clients with a valuable financial tool while also creating a diversified income stream for our mortgage licensed sales force.

The unique characteristics of each of our product lines can cause them to respond differently to changing business conditions. This quarter highlighted their complementary nature with ISP -- with record ISP sales helping to offset the headwinds in Life sales. Despite the pressure on new Life sales, The size and stability of our Life business continues to provide consistent earnings even in an uncertain environment. We remain well positioned to deliver long-term value for our clients, our field and our stockholders.

With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning everyone. The company's financial performance across all segments was very strong. Starting with Term Life second quarter revenues of $442 million rose 3% year-over-year, driven by 5% growth in adjusted direct premiums. The segment delivered a solid performance with pretax income of $155 million, up 5% compared to the prior year period.

Our key financial ratios remain consistent with expectations and largely in line with the prior period. These included the benefits and claims ratio at 57.5%. The DAC amortization and insurance commissions ratio at 12%, the insurance expense ratio at 7.6% and the operating margin at 23%. Overall, lapse rates for the quarter remained elevated and were stable compared to the prior year period in aggregate. We continue to believe higher lapse rates are primarily driven by cost of living pressures and their impact on middle-income families. We believe that our clients are resilient over the long term and value our services and products.

Based on historical trends, we expect persistency to normalize as clients adapt to the evolving economic environment. Therefore, we do not expect any significant changes to our LDTI lapse assumptions. We started to experience favorable mortality in the second half of 2022 and continued to see favorable mortality trends relative to our expectations.

Given the stable nature of our Term Life business, our full year guidance remains unchanged. To reiterate, we expect ADP to grow around 5% with a benefits and claims ratio at around 58%. The DAC amortization and insurance commissions ratio at around 12% and the operating margin at around 22%. As a reminder, we will conduct our annual assumption setting review in the third quarter, which may impact our future guidance for key ratios. Continued sales momentum and growth in our client asset values drove record revenues in our Investment and Savings Product segment.

Second quarter operating revenues of $298 million increased 14% from the prior year period while pretax income rose 6% to $79 million. Sales-based revenues increased 15%, slightly outpacing the 11% increase in relevant sales, primarily driven by strong demand for variable annuities. Asset-based revenues increased 17% year-over-year compared to an 11% increase in average client asset values as we continued to benefit from strong client demand for products on which we earn higher asset-based commission namely U.S. Managed accounts and Canadian Mutual Funds sold under the principal distributor model.

Sales commissions for both sales and asset-based products increased relatively in line with revenues. The Corporate and Other Distributed Products segment recorded pretax adjusted operating income of $3 million during the quarter compared to $1 million in the prior year period. The year-over-year change was driven by an increase in net investment income, primarily due to the growth in the size of the portfolio.

Finally, consolidated insurance and other operating expenses were $154 million, up 8% year-over-year. The growth in expenses was primarily driven by higher variable growth-related costs in our ISP and Term Life segment and higher technology and infrastructure investments to support our sales force and business growth.

We reiterate our full year outlook for expenses to increase in 2025 by around $40 million or 6% to 8%. Our invested asset portfolio remains well diversified with a duration of 5.3 years and an average quality of A. The average rate on new investment purchases in our Life companies was 5.65% for the quarter with an average rating of A. The net unrealized loss in our portfolio continues to improve ending the June quarter with a net unrealized loss of $158 million. We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and ability to hold these investments on to maturity.

We continue to generate significant deployable capital, underscoring the strength and reliability of our capital-light distribution model. The steady cash flow from our Term Life business is driven by the sizable in-force block of insurance policies and our use of reinsurance, which limits our exposure to mortality risk. The fee-based nature of our ISP business supports strong cash flow generation and the high rate of earnings conversion. This model allows us to consistently return value to stockholders while also investing in long-term growth opportunities.

Our holding company ended the quarter with $371 million in cash and invested assets. Primerica Life's estimated RBC ratio was 490%. We remain confident in our ability to maintain a strong capital position while supporting ongoing growth initiatives and continuing to return capital to stockholders. In both good and bad economic times, Primerica has been able to deliver strong earnings, solid cash conversion and superior return on equity.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from John Barnidge with Piper Sandler.

Can you talk about the decline in Term license sales and the revised guidance? I know it's a point of sale than a monthly contributor like ISP. There's been concerns about cost of living as you've noted in your prepared remarks. Did that accelerate post Liberation Day?

Well, I think it's a combination, as we said, John, of cost of living and then just some uncertainty, which has led, I think, for most middle-income families living on a month-to-month type of budget and a lot of wait-and-see attitude. Let's see how prices turn out moving from here, let's see what happens to interest rates, let's see what happens to other issues that may not be clear yet. And of course, very difficult to get a beat on that based on what media might be feeding the middle class on either side of any one of those issues.

So we've seen cost of living pressures for a number of years. I think we outstripped them last year and we're able just to overcome them and show positive growth. But adding that wait-and-see element is what we see for those middle-income families that really have a very tight budget. And that, of course, impacts our Term Life sales as well as our monthly investments in the ISP side of our business.

The larger ticket investments as we've discussed in the past, that move -- are not really related to a monthly budget. They're transfers of retirement accounts, they're estates that move from one generation to another. Those types of things are not impacted as much, at least by monthly cost of living. So we see it first in our Term Life business and we do believe that as Tracy pointed out this is a temporary issue. We do believe that middle-income families adapt to this over time, and the uncertainty becomes certainly may be different from last year's challenges, but at least it becomes certain and then they begin to adapt and move forward.

So I think we're in a wait-and-see period right now that we've experienced and that we see that first in Term Life sales.

My follow-up question, you talked about a lot of wait-and-see mode on how the cost of living pressures will be at the pushback. When you're talking about adding over 50,000 recruits in July, are these pushbacks actually an opportunity to recruit new agents?

I'm sorry, I didn't hear you. Is what an opportunity to recruit new agents?

The cost of living pushbacks, I mean you -- there's a pushback like, hey costs are going up. I don't know if I can commit to this. Well, okay, we'll consider being agent, maybe you can get some part-time work.

Absolutely. There are generally both a push and a pull for most economic dynamics on a lot of what we do. But the positive side of financial stress and recruiting is people looking for additional income. And so the attraction of our part-time opportunity absolutely plays into that. As we've said in the past, ramp up unemployment does not help us because that creates the need for someone to get a paycheck on Friday, not build the business over a long period of time.

So when things get extreme, it may work a little differently. But yes, while cost of living pressures and to a certain extent, employment uncertainty are reasonable, they actually give us a little bit of a tailwind for recruiting while they might provide a headwind for that month's life insurance sales. So yes, absolutely, you defined that correctly.

And your next question comes from Joel Hurwitz with Dowling & Partners.

Tracy, you had mentioned in your prepared remarks that mortality continues to be favorable in the quarter. Can you just unpack the level of favorability versus expectation? And then -- and then in terms of the Q3 assumption review, I know you mentioned no change to the lapse rate, but any potential for changes to the mortality assumption as part of the review?

Yes, Joe. So mortality has been a trend we've been observing very closely. And in the second half of 2022, we started to experience favorable mortality. And for over more than 10 quarters at this point we had initially been waiting to see if this was just a pull-forward impact from COVID, which means that there could be a earlier accelerated DAC rate and then somehow it's going to stabilize over what the trend could turn out to be. But so far, we continue to see that the mortality has been favorable, especially last 4 quarters and 12 months, and we've seen that trend stabilizing downward.

At this point, I think there is a potential likelihood that this is a trend to stay. And clearly, in terms of magnitude we're quite a few percentages lower than our long-term pre-pandemic baseline actuarial assumptions. So in the third quarter, the annual reviews, we will certainly take a very close look and make a decision if we change our long-term assumption to recognize this trend.

Got it. That's very helpful, Tracy. And then moving to ISP, really good sales in the quarter. I guess just a question. When I look at the sales base margin it was 123 basis points in the quarter. That's a bit below where you've been running the past several quarters. Any color on the driver there?

In terms of ISP margins, I think the part of the expenses is the impact because of the variable growth related expenses that we have. And we also have commissions that is slightly higher than what you've seen in terms of dollars. We do try to true up as much as we can by midyear point where we see that the total year trend is running favorable. So we do a true-up in the middle of the year, which may make the second quarter slightly higher than the first quarter but it's in terms of the magnitude based on the running rate of our growth and what the commission is headed.

And the other part to consider also is as we see the growth trend of ISP last year was growing more than 20%, 25%. And this year, we're continuing on a pretty strong double-digit top line growth and our infrastructure has been a little bit stressed in terms of catching up with the volume. So we continue to invest in technology and infrastructure to support our ISP sales. So some of those are part of what we had announced earlier in the year in terms of expense investments that would be supporting our growth. So that's what you're seeing coming through for ISP. And that segment really deserves that build up on technology and infrastructure.

Your next question comes from Ryan Krueger with KBW.

I had a question on ISP sales. I know you mentioned they were still strong in July. I was hoping maybe you could give a little more color on that. The reason I ask is I think you said you'd expect them to be grow above 10% or more this year, but they were up over 20% in the first half of the year. So maybe the above 10% is what you're emphasizing. But -- so I just wanted to see if you expected any slowdown? Or should we kind of see the same momentum in the second half?

Ryan, we've always asking how long can that far into the double-digit momentum continue particularly when you lap yourself annually and you start comparing to the strong second half results from last year. So we've been signaling that we do expect the comparisons to get more difficult bringing the percentage growth down but we continue to see stronger-than-anticipated growth kind of month-over-month. So we did tick up the expectation now to above 10% above in the double-digit growth range when we've guided to something less than double digits last quarter.

So we are seeing continued strength, the comparisons with the second half of last year do get more difficult because this real momentum that we're experiencing today started in the second half. So we're seeing continued strength but we're expecting it to moderate on a comparison basis.

Got it. Makes sense. And then just one quick follow-up on lapses in Term Life. Are they still running basically similar to what they were in the first quarter? Or have you seen any change?

Yes. In terms of lapse we continue to see, in aggregate, the elevated lapse compared to our long-term LDTI assumptions, which is prepandemic. But in terms of comparative to prior year, the overall trend is pretty steady. And we started to see the lapse rate stabilizing a few quarters earlier meaning that they're not elevating because during pandemic we have extraordinarily low lapse rates. And then after pandemic, we see them run up because of the people who are committed and during the pandemic period. And that is part of the reason that, for example, duration 5 maybe the duration that we continue to see most of the fall off in terms of lapse and ability to persist.

But we're obviously still waiting for that to run off. And to us, that it is going through the [indiscernible] at some point that falls off. In aggregate, I think we're seeing a stable trend. And we do believe that our consumers over the long term, if you look at the history of our 40 years, they learned to adapt as the economic conditions evolve. So they're going to continue to value the policies and we do believe that it's going to stabilize over time. And by the way, our ADP assumption of growth that we give the guidance on of 5% already considered this elevated lapse rate.

Your next question comes from Jack Matten with BMO Capital Markets.

Just a follow-up on the recruiting outlook in Term Life. I think you referenced over 50,000 recruits in July. Can you talk about the incentive centre strong level in the second quarter was pressure on recruiting more prevalent early in the quarter in April when it improved? Or was there a different trend, I guess?

Some of the comparison, Jack, is because we had incentives in play in a slightly different calendar last year, which was kind of the perfect positive storm. We had the convention last year gives us an opportunity to communicate these incentives to be in -- a large portion of the sales force all at the same time rather than put it out through our normal communication channel. So you get a bigger response during the commission year -- during a convention year.

So we decided to rerun the play that we did at the last convention. If you want to become part of Primerica and you have an insurance license, there's absolutely no cost to become part of Primerica to join. If you don't have an insurance license, we have a process to help you get one, and we do it at a very low rate. We discounted that licensing fee in July. And of course, that stimulated the communication about that opportunity from our recruiters and our team to those that recruits. We were very pleased considering all the other kind of negative economic headwinds and uncertainties we talked about earlier to know what kind of response we might get. We were very pleased to see that it was a powerful response. Our entrepreneurial opportunity is attractive or maybe even more attractive than ever and we had good excitement about spread and using good response to it.

So you've got a convention year last year, we're comparing to, you've got a little bit of different timing in the calendar. You have to kind of look through all that to really understand the results, but we were extraordinarily pleased with the response we got in July. It gave us a good start to the third quarter.

That's helpful. And then maybe just one on capital. The ratio moved up again, I said it to 490% this quarter. I'm curious like when or if you might gain some of that excess up to the holding company. I mean I think Primerica's having a relatively low-risk asset and [indiscernible] liability profile. So just curious why you're kind of running what looks to be a pretty conservative RBC ratio at the moment?

Yes, Jack, our RBC ratio has a couple of things to take into consideration when you evaluate it. The first thing is that the RBC ratio oftentimes is an impact also from the statutory regulatory restrictions meaning how much it can take out has a rule by the -- defined by the state that you're domiciled in and you can only take out a certain amount based on your prior year statutory income. So we practically are taking out the maximum we can given that restriction and we do our best to estimate what that might be and take out all we can.

And second part to consider is we do have an overall desire to keep a very strong RBC ratio partly because when we look at Life Insurance, if we have stronger growth we wanted to be able to support that growth. And when the growth occurs, there is a capital requirement need to write that policy and put up the reserve for the claims. So that is another part to consider. But over the long haul, I think we do value to have a strong rating that really helps give clients and sales force the confidence when they look at using our production -- protection product. So all of these are consideration.

Now that being said, we are looking at all the options and alternatives on the best long-term strategy, capital deployment, and certainly, in consideration of supporting the holdco for buybacks, for dividends and all the support of the growth and we're going to evaluate all the options to keep that ratio in reasonable range in terms of supporting growth and as well as being able to take it out when we can to do all the things we need to do for our stockholders and growth.

Your next question comes from Dan Bergman with TD Securities.

Just digging into your ISP sales a little more this quarter, there's really strong continued growth in variable annuities and managed accounts, but a little closer to flattish in U.S. mutual funds, there's still a really strong nominal level of sales there. But I was just hoping you could talk a little more about the dynamics in these different product areas? And do you view the mix shift this quarter as a one-off given the high equity market volatility in the U.S. or part of an ongoing trend given the shift towards more retirement savings?

I think it's some of both, Dan. I think we do have a longer-term kind of demographic tailwind as I mentioned in my script, from just kind of our aging society people moving toward retirement, which would be positive for retirement products like variable annuities. I do think the uncertainty that we talked about that probably impacts everyone to a certain extent, Our view is for investors, they look for guarantees in uncertain times or volatile times. And while I think there's confidence in the overall direction of the market if you look at the history this year, it's been tremendously volatile. And so that's where the variable annuity guarantees, the guaranteed income options or the upside market protection of the index-linked variable annuities have real appeal to consumers. And I do think that the product providers have played into that and have continued to improve their products and make them appropriately more attractive to that marketplace.

So my guess is, and again, I'm into a crystal ball, so it's just entirely opinion. Is that as people move towards retirement and want security, there's likely the potential for a long-term trend here. Our other products continue to grow and continue to serve a fantastic purpose. Our Managed account business that you mentioned is a newer business, and you would expect it to be faster growing coming off a smaller base than it is. And it's something that our sales force, more people are getting licensed and getting more experienced with that.

And so we would expect that to grow faster than an established business, but our mutual fund business is the largest of all those businesses and it still performs an important, important function, particularly as we see those middle-income families moving through their periods of life. Many times, they start in mutual funds because the minimums are smaller, they're simpler products. They can understand they're appropriate because they're simpler and then later they move into more sophisticated products. So our product set works together very, very well. We do see the mix shift according to economic conditions, but it's very much what we would expect from this product sale.

Got it. That's very helpful. And then I think the mortgage volume showed some nice growth this quarter. I think it was the highest it's been in a while. Just any more color on the trends here and the outlook for growth? And just maybe big picture thoughts on how much room is there for continued incremental growth if interest and mortgage rates remain elevated.

We're very excited about the potential for our mortgage business. Canada has had some rate reductions and that gave some early momentum to the referral program there. I think we're still waiting on rate reductions in the U.S. But back in times when rates were lower as this program came off the ground, it got a very fast start in the 2019 to 2021. And then we kind of stalled out and we've treated a little bit, but now we're regaining that momentum. I think there's tremendous potential if we do get some rate reductions. A lot of our advice around mortgages is around reducing debt and reducing your weighted average interest rate as a family. As interest rates come down, there are opportunities for refinancing, pulling in high interest rate credit card debt, all of that comes on the table with falling interest rates. So we're optimistic about potential for the program and could be a real player in the future for our company. Already, as we stated in the prepared remarks, important for clients and families and for our sales force, but there's upside for Primerica as well in the future.

And your next question comes from Wilma Burdis with Raymond James.

Could you talk about a little bit more specifically about what drove the good expense results in 2Q. I realize that you guys reiterated the full year guide, but is there any sustainable element to the lower expenses in the quarter? Or is it more of a timing related to the ISP tech investments?

The expenses in second quarter was certainly an aspect of timing and some of it also has to do with our investment in technology. So the combination of those, the projects obviously are long-term projects, many of those. So the timing of the start and when they get ramped up, could be more likely towards the third and fourth quarter at this point. And we obviously also are experiencing variable growth-related expense that is associated with how top line is going.

And as ISP, for example, continue to be strong and you see some of the expenses coming through that segment a little bit stronger. Now in terms of full year guidance, I think we remain in the 6% to 8% range and just depends on how accelerated some of those technology and investments can be so that there could be some timing variable depends on those as well.

And then can you talk a little bit more about your efforts to grow the ISP sales force and also to increase the diversity of sales to selling both Term Life and ISP across the sales force?

Sure, Wilma. We feel it's very important to continue to grow that sales force size as well. It's not as directly related to production as it is on the Term Life side, There's a very close relationship in most circumstances between our Life and Sales force size and Life production. But on the security side, there are so many more factors involved, like confidence in the market like we're seeing today appeal of product set, mix shift, all the things that we talked about earlier. But we still believe having a growing base of the sales force is critical. The process is more difficult for getting securities licensed individuals even if they're going to be with a limited securities license as opposed to the full stock and bottom line at Series 7, We generally use the Series 6 and 63 and that has proven to be more difficult and grow more difficult over time. .

So that has provided somewhat of a hurdle in that growth rate. However, we're pleased to -- we're beginning to see some traction. We had very good experience so far this year and seeing some traction and growth in our security sales force as well as the mortgage sales force that we discussed just a minute ago. So those other licenses are beginning to come through and we're going to continue to feed that process and improvement. We have a lot of efforts going on among our team here and working with field leaders to try to make sure that we provide all the resources to kind of navigate through the difficulties of that licensing process. So we generally talk about the sales force just once a year and give a stat on it, but we are seeing growth in it this year, And we're pleased that some of our efforts are beginning to show results, but it does grow generally more slowly than our Life sales force.

Your next question comes from Mark Hughes with Truist Securities.

The ISP momentum continuing in July, are you seeing a little more mutual fund activity with the market having bounced back? I think you said the April was very poor. Sentiment was soft in your last call. Is that picking up some steam?

The mix shift, Mark, it usually is not quite that real-time responsive. I mean if we have a month or 2 or a quarter of positive returns, it's not like suddenly people go, "Oh, I don't need those guarantees anymore. Let's move back over here into the lower guarantee or no guarantee business. It happens over longer-term trends and longer-term sentiment. So I don't have the data in front of me on the mix exactly for the month of July. .

But my tells me that it's similar to what we've seen in the past. And if it does change, it will change slightly over time rather than take a hard turn. So I don't think you've got much difference in mix shift probably just for the single month.

Understood. When you think about the Term Life sales, How do you think you stack up relative to the industry? Some of the industry data seems to be -- it hasn't been great, but it's been a little more stable than your results. I wonder whether you think that's not reflective of your particular end market or I'm just sort of curious how you see your experience versus the industry?

Yes, that's a great question, Mark. I was looking earlier this morning at numbers that were released this morning on application activity in the industry. And what we're seeing is a lot of the industry positive is at the upper end of the age spectrum, 60 and above even 70 and above an extraordinarily large face amount. The growth in the under 30 year-to-date was just barely 0.3% under 30 and 1.2% between ages 30 and 50, which that pretty much covers the vast majority of all the sales that we do since our philosophy is that term insurance is a temporary need while you're in income-earning mode. .

So we're not that far off the industry. I think the whole industry is struggling with the exception of those selling to older ages and larger face amounts for estate planning purposes. We may be a little behind the industry this year just slightly. But I think we're way ahead of the industry last year. So it goes back to those difficult comparisons. But I think we're experiencing a lot of the same things that our peers are. And as Tracy pointed out, we do believe the resiliency of the middle income market always amazes me. They do adapt over time and what's uncertain today, the same conditions will be considered certain after you live through them for a few months. And so we think it's a temporary issue that will correct itself over time, Perhaps even turn into positive, cost of living, discussion at some point in the future. But certainly not for the immediate future. So I think we're traveling pretty much in the pack for our age group, Mark, maybe a little behind this year because we were hit last year and we believe it's something that will correct itself over time.

And your next question comes from Jeff Schmitt with William Blair.

Glenn, just curious how you're thinking about productivity here with it at the low end of the historical range. Do you think it could move below that? And what do we need to see for that to really turn around?

I think productivity is just the math on the headwinds we talked about. You've got a couple of dynamics. It's a pretty simple calculation actually. So as we grow the sales force, the denominator becomes larger. It makes it more difficult to stay in the range just by the sheer number. But you've also got new people entering the sales force and entering today at a time when those headwinds we've discussed are probably a little more significant than they were a year ago or maybe even 2 years ago. .

So you've got a couple of mathematical dynamics working there. It is possible we could peak out the bottom of the range for a period of time due to that math. It wouldn't surprise me or concern me just based on those things. But we do know that over time, we tend to move back to the middle. And so as we address issues of confidence in this kind of environment for salespeople, maybe we get a little, if not relief from cost of living, at least we accommodate the cost of living in the middle market. We tend to move back to the middle of the range over time. So I think you won't continue to see pressure on that ratio for the rest of this year. But over the long haul, we'd expect it to get back more toward the middle.

Okay. And does that suggest, I guess, that the surge in the sales force last year you may have brought on some sort of less committed or just lower productivity sales agents and maybe that kind of corrects itself over the next year or 2?

That's possible, Jeff, but I got to tell you that our sales force is so large, and we've been doing this for so long. And we go for excellent quality individuals. I'm so proud of our sales force and the quality of what they do. I think it's the more difficult sales environment, not the commitment or ability of the salespeople that we're seeing today. And so I think that's possible, but I don't think that's probable. I think it's the environment. We've got people entering the business in a tougher sales environment now than we did in the past. And I think that environment will change over time. And their skill set will grow just like the middle market will adapt to living in a high cost of living environment, sales people adapt to selling in a high-cost environment get better at. So I don't think it's quality or commitment. .

And your next question comes from Suneet Kamath with Jefferies.

So I had a question on annuity sales. if I just think back to historically they've been about 1/4 of ISP sales roughly. And just over the past few quarters, we're now about 1/3. If we stay at that mix, does that impact the P&L at all? Does it cause it to change relative to maybe what we're used to seeing. Just wondering if that's going to be something that we should focus on?

I think than we view profitability of products as being very similar. It's a timing of where we're compensated on products. Variable annuities tend to have more upfront at the point of sale compensation and a little less compensation based on assets. But the profitability of the product is pretty close to some of the others, most of the others. So I think you see it as we've seen this quarter, when the mix shifts toward variable annuities, you see sales-based commissions outstripping the total. And then if the product mix shifts back, it kind of corrects itself as well.

So we have never tried to manage product mix and say, "Oh my gosh, too much of it is going toward product, that's a little less profitable because the profitability over time is so close. " So I think the shift that we're seeing again is happening because of the conditions and because of the excellent response to the current economic and market conditions, of our product providers that are stepping up and providing features of products that meet the needs of consumers. So they're becoming very attractive. But that's kind of the front end view. I'll go to Tracy and see if you think P&L was impacted by mix shift toward variable annuities in any way to help to Suneet with that.

Yes, I agree with Glenn. I think it's more of a timing and most of the products in the long run, it kind of evens itself out. .

Okay. That makes sense. And then I guess sticking with variable annuities. Glenn, as a distributor, I think you have a good sense of product design. And we're starting to hear a little bit from some of the carriers about some aggressive features, particularly in the [ Rila ] market. Just wondering what you're seeing, if you're seeing any of that. And when you think about your product providers, you tend to stick with the same sort of handful of carriers? Or do you sort of swap in and out kind of over time?

Yes. Let me take those questions in reverse order because I think your second question helps answer your first question. We absolutely stick with a narrow shell of very high-quality product providers that we have a long-term relationship with which is important for our business relationship with them, but it's also important so they understand our philosophy around these products.

The annuity business, during my 40-plus career being here has been prone to excess at various times. And so we're always on alert watching for companies that are going a little bit beyond the payroll and what they're offering and the type of risk that they're puttingon the client. We've always stayed away from that. I mean we were very careful entering the variable annuity business. We've been more careful entering the indexed annuity business because years ago before the financial crisis is probably full of excess.

But those prices tend to work those excesses out and then they come back with better products. But fortunately, the high-quality partners we have don't follow that path. They take a long-term view. They want to make sure they have a lifetime relationship with clients, just like we do. And so they tend not to get over into the red zones that some of the other product providers that we don't represent. That said, we do have a committee, a team that analyzes products, determines if they're suitable for our clientele before we put them on our product shelf, even among our high-quality providers. So yes, there is the tendency to need for companies to do that. We're on guard against that all times and I don't see us bearing any risk at that point of getting over into inappropriate products that some others mind.

And that was our last question for today. So with that, we will conclude today's call. All parties may now disconnect, and have a great day.