Primerica, Inc. Q4 FY2024 earnings call

• Glenn Williams highlighted record-breaking results across the board, including expansion of distribution network and strong financial performance.
• Tracy Tan reviewed full quarter financial results, noting reaching $3 billion revenue for the first time, and provided outlook for 2025 financial measures.
• Discussed expense drivers: higher variable costs associated with segment growth, employee-related incentive compensation, and technology investments.
• Mentioned capital position: Holding company had cash and invested assets of $497 million, Primerica Life RBC ratio 430%.

Term Life Segment

• Fourth quarter revenue: $451 million, increased 4%.
• Benefits and claims ratio in Q4 2024: 58.6% (excluding model remeasurement loss, 57.9% favorable to prior year).
• DAC amortization and insurance commissions ratio: 12.2%, largely consistent with prior year.
• Operating margin: 21.3% compared to 22.6% in prior year.

Investment and Savings Product Segment

• Fourth quarter revenues: $286 million, increased 29% due to favorable equity market conditions and strong demand for investment solutions.
• Pretax income: $82 million, increased 31%. Sales-based revenues up 42%, revenue-generating sales up 39%.

Corporate and Other Segment

• Incurred pre-tax adjusted operating loss of $1 million in Q4 2024, compared to $5.4 million in prior year period. Improvement due to reserve adjustment and higher net investment income.

• Term Life: Expect ADP growth of around 5% in 2025; benefits and claims ratio and DACs amortization ratio to remain stable at ~58% and 12% respectively; operating margin around 22%.
• Investment and Savings: Full-year consolidated insurance and other operating expenses expected to increase by around $40 million or 6%-8%.
• Capital return: Share repurchase authorization and dividend increase, with capital return expected to be sustainable at around 80% of earnings.

• Cost of living pressures impacting life segment sales and lapse rates.
• Uncertainty around consumer behavior and economic conditions affecting persistency and sales.
• Technology and regulatory costs as potential operational risks.

Q: Could you talk about is 5% ADP growth a good run rate or is there still a boost in that figure from the IPO reinsurance transaction?

A: ADP growth guidance of 5% considers runoff of co coinsurance and higher lapses, directly impacted by in-force block premiums and new sales, with runoff of co insurance considered.

Q: What's the expected duration of cost of living catch up and can that really be corrected without improvement in the cost of living?

A: Need improvement in cost of living; impact on buying habits will improve over time but uncertain, with no empirical formula for duration.

Q: What's the opportunity in that backdrop to increase operational leverage through improved speed, automation?

A: Looking to make processes easier for clients and representatives to free up time, with technology investments being a key part, including improvements in policy processing and agent productivity.

Q: The good VA activity, you're talking about how the large transactions drive volumes. Is it a demographic tailwind that should persist?

A: Driven by demographics of older generations moving money for retirement, job changes, and VA product features like income guarantees, with market performance and team efforts also contributing.

Q: Any changes observed in mortality front in US or Canada?

A: Mortality experiences have been very stable and favorable in 2024, with US seeing real improvement, likely benefiting from pandemic-related trends.

Q: The remeasurement loss is not related to assumption changes, but a refinement of the model. Can you say what the refinement was?

A: Refinement is a tech/software improvement on actuarial calculation, immaterial in magnitude, related to LDTI calculation improvement.

Q: Focus on the Life segment, rep count up 7% year over year, but policies issued up maybe 1%. Should we see tighter correlation?

A: Generally close relationship, but lag in new reps reaching productivity level, with potential upside in 2025 as new reps are brought up to speed.

Q: Guidance for life agent growth for 2025 is around 3%, lower than historical. Is there something unusual?

A: Reverting to mean, with sales force growth historically around 4%, and uncertainty at start of year affecting projection.

Q: Higher share repurchase authorization and dividend increase. Any one-time items boosting?

A: Consistent with sustainable capital return, around 80% of earnings, driven by business model features like distribution and reinsurance.

Q: Higher tech spend is a big driver of expense growth. Should we think of this as new run rate?

A: Technology spend is part of strategic vision to improve productivity, client experience, and sales force tools, continuing long term to support organic growth.

Q: Outlook for term life issued policies, cost of living headwinds on sales levels and guidance for 2% growth.

A: Cost of living headwinds create prioritization challenges for clients, making it difficult to quantify exact impact, but known to be a resistance to growth.