Primerica, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• 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. Returned $163 million to stockholders through $129 million in share repurchases and $34 million in regular dividends.
• Sales Force: Recruited over 80,000 individuals during the second quarter and licensed nearly 13,000 new representatives, down 10% from the prior year. Ended the quarter with 152,592 Life-licensed representatives, up 5% compared to June 2024. Expect to grow the sales force between 2% and 3% in the full year of 2025.
• Sales Results: Issued 89,850 new term life insurance policies during the second quarter and put in place over $30 billion in new term life protection. Project the total number of new life policies issued to decline around 5% in 2025 compared to full year 2024.
• ISP Segment: Results were stronger than anticipated with total sales during the quarter up 15% to $3.5 billion. 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.
• Mortgage Business: U.S. closed loan volume was $133 million, up 33% year-over-year. Canada referral program closed loan volume was $45 million, up 30% from a year ago.

Segment Performance

• Term Life: Second quarter revenues were $442 million, up 3% year-over-year, driven by 5% growth in adjusted direct premiums. Pretax income was $155 million, up 5% year-over-year. Key financial ratios included benefits and claims ratio at 57.5%, DAC amortization and insurance commissions ratio at 12%, insurance expense ratio at 7.6%, and operating margin at 23%.
• Investment and Savings Product (ISP) Segment: Second quarter operating revenues were $298 million, increased 14% from the prior year period, while pretax income rose 6% to $79 million. Total sales during the quarter were up 15% to $3.5 billion. 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. Expect full-year ISP sales growth to be more than 10%.
• Corporate and Other Distributed Products: Recorded pretax adjusted operating income of $3 million during the quarter compared to $1 million in the prior year period, driven by an increase in net investment income primarily due to portfolio growth.

Guidance

• Adjusted net operating income was $180 million during the second quarter of 2025, up 6% year-over-year, and diluted adjusted operating EPS increased 10% to $5.46.
• Expect the sales force to grow between 2% and 3% in the full year of 2025.
• Expect full-year ISP sales growth to be more than 10%.
• Term Life full-year guidance unchanged: ADP to grow around 5% with the benefits and claims ratio at around 58%, the DAC amortization and insurance commissions ratio at around 12% and the operating margin at around 22%.

Risks

• Economic and government policy uncertainty affecting business performance.
• Cost of living pressures impacting middle-income families' ability to commit to life insurance and investment products.
• Mortality trends and lapse rates being factors that could impact financial results.
• Potential impact of the annual assumption setting review in the third quarter on future guidance for key ratios.

Question and Answer

• Q: Can you talk about the decline in Term Life sales and the revised guidance? A: A combination of cost of living and uncertainty, with middle-income families having a wait-and-see attitude. Believes this is a temporary issue expected to normalize over time.
• Q: 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 in terms of the Q3 assumption review, any potential for changes to the mortality assumption as part of the review? A: Mortality has been favorable for over 10 quarters, with a potential to stay. The third quarter assumption review will closely examine and may change the long-term mortality assumption.
• Q: 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 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? A: Mortality has been favorable, with a trend stabilizing downward. The Q3 review will consider changing the long-term mortality assumption if the favorable trend continues.
• Q: Your next question comes from Ryan Krueger with KBW. I had a question on ISP sales. 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 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 -- I just wanted to see if you expected any slowdown? Or should we kind of see the same momentum in the second half? A: Expect comparisons to the second half of last year to get more difficult, but continue to see strong momentum. Expect growth to moderate on a comparison basis but remain in the double-digit range.
• Q: 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 incentives that drove that strong level? And then in the second quarter, was pressure on recruiting more prevalent early in the quarter in April and then improved? Or was there like a different trend, I guess? A: Incentives included discounting the licensing fee in July and rerunning a successful play from a prior convention. Recruiting response was strong despite economic headwinds, with the entrepreneurial opportunity being attractive.
• Q: 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? A: Mix shift is influenced by demographic tailwinds and market volatility. Variable annuities have appeal due to guarantees, and there's potential for a long-term trend as people move toward retirement seeking security.
• Q: 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? A: Expense results were due to timing and technology investments. The full-year guidance remains in the 6% to 8% range for expense increase, with timing of technology investments affecting the pace.
• Q: 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 that April was very poor, sentiment was soft in your last call. Is that picking up some steam? A: Mix shift is not immediately responsive to short-term market changes. It occurs over longer-term trends and sentiment, so no significant change expected in the single month.
• Q: Your next question comes from Jeff Schmitt with William Blair. 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? A: Productivity is affected by math related to sales force growth and headwinds. Possible to see the bottom of the range temporarily, but expect it to move back to the middle over time as the sales environment improves.
• Q: 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? A: Profitability of products is similar over time. Mix shift is due to market conditions and product design, and it evens out in the long run.
• Q: 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? A: Profitability of products is similar over time. Mix shift is due to market conditions and product design, and it evens out in the long run.