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Edited Transcript of PRI earnings conference call or presentation 8-Aug-18 2:00pm GMT

Q2 2018 Primerica Inc Earnings Call

DULUTH Oct 1, 2018 (Thomson StreetEvents) -- Edited Transcript of Primerica Inc earnings conference call or presentation Wednesday, August 8, 2018 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alison Sue Rand

Primerica, Inc. - Executive VP & CFO

* Glenn Jackson Williams

Primerica, Inc. - CEO & Director

* Kathryn Kieser

Primerica, Inc. - EVP of IR

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Conference Call Participants

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* Daniel Basch Bergman

Citigroup Inc, Research Division - VP

* Jeffrey Paul Schmitt

William Blair & Company L.L.C., Research Division - Associate

* Mark Douglas Hughes

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Ryan Joel Krueger

Keefe, Bruyette, & Woods, Inc., Research Division - MD of Equity Research

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Presentation

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Operator [1]

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Good morning. My name is Dan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primerica Incorporated Q2 2018 Earnings Results Conference Call. (Operator Instructions).

I will now turn the call over to Kathryn Kieser, Executive Vice President of Investor Relations. You may begin your conference.

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Kathryn Kieser, Primerica, Inc. - EVP of IR [2]

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Thank you, Dan. Good morning, everyone. Welcome to Primerica's Second Quarter Earnings Call. A copy of our earnings release, financial supplement, presentation and webcast of today's call are available on our website at investors.primerica.com. Glenn Williams, our Chief Executive Officer; and Alison Rand, our Chief Financial Officer, will deliver prepared remarks, then we'll open it up for questions. We reference certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures have limitations, and reconciliations between GAAP and non-GAAP financial measures are attached to our press release. We will also make forward-looking statements in accordance with the Safe Harbor provisions of the Securities Litigation Reform Act. The company will not revise or update these statements to reflect new information, subsequent events or changes in strategy. Risks and uncertainties that could cause actual results to differ materially from those expressed or implied are discussed in the company's 2017 annual report on Form 10-K as updated by our quarterly reports on Form 10-Q.

Now I'll turn it over to Glenn.

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [3]

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Thanks, Kathryn. Good morning, everyone. Today, I'll share performance highlights and accomplishments that position us for continued growth, and Alison will cover our financial results. We're constantly striving to drive long-term value for all of our stakeholders by executing our strategy and evaluating uses of free cash flow. We've had great success driving organic growth over the past few years and we continue to assess opportunities to provide more solutions for our clients and support for our sales force. Our strategy continues to be maximizing sales force growth and productivity, broadening protection product offerings, expanding client investment options and developing digital capabilities to deepen client relationships. We're pleased to report strong returns and continued distribution growth in the second quarter. We achieved 42% growth in adjusted operating earnings per diluted share year-over-year, and 24.5% ROAE in the second quarter, reflecting solid performance, ongoing share repurchases and the benefits of Tax Reform. Our sales force leadership continues to perform well with the size of our life insurance licensed sales force exceeding 130,000 representatives at the end of the second quarter.

As you'll note on Slide 3, we continued delivering solid earnings growth across the business and returning significant capital to stockholders. Our adjusted operating revenues increased 13% to $466.9 million, and adjusted operating income before income taxes increased 17% to $112.8 million year-over-year, driven by increases of 23% for Term Life and 9% for the Investment and Savings Products segments. Net adjusted operating income increased 36% to $86 million from the prior year period, reflecting the benefit of Tax Reform. We have experienced strong adjusted operating EPS and ROAE expansion year-to-date and expect annualized ROAE to increase to approximately 22% for the full year of 2018. Our strong and diverse cash flows have allowed us to return a significant amount of operating earnings to our stockholders. In the second quarter, we continued to optimize capital by repurchasing approximately $87 million or 891,000 shares of Primerica's common stock for a total of $134 million or about 1.4 million shares during the first 6 months of 2018. We plan to repurchase a total of about $200 million in shares during 2018 in addition to paying stockholder dividends, and we plan to deploy capital at or above this level in the future.

Moving to distribution results, on Page 4, you can see our life licensed sales force grew 7%, primarily driven by 5% increase in new life insurance licenses compared with the prior year period. Recruiting of new representatives declined slightly from the second quarter a year ago, which had benefited from strong recruiting in connection with our 2017 biennial convention. In the third quarter, we anticipate that recruitment of new representatives will decline year-over-year due to the 17,000 recruits in the third quarter of 2017, who had their independent business application fees waived in hurricane-affected areas. Besides, the life licensed sales forces is expected to continue growing on both year-over-year and the sequential quarter basis in the third quarter of 2018. Turning to page 5, you can see Term Life issues policies were consistent with the strong results in the year ago period. Productivity remained at the high-end of historical levels at 0.22 policies per life insurance license representatives per month in the quarter versus 0.23 in the second quarter a year ago.

As the growth in Term Life issued policies in prior years has compounded, the aggregate level of policies issued makes it challenging to sustain the issued policy growth for the rest of the year. We currently expect issued policies for the full year of 2018 to be consistent with the 2017 level. Continued issued policy growth at these record levels requires ongoing focus and effective use of incentives as we continue to work to maximize productivity. In the second quarter, we achieved strong investment and savings product sales of $1.8 billion of 12% year-over-year led by the significant growth in managed account sales. In addition, our variable annuity sales were up 22% compared with the second quarter a year ago, reflecting a more favorable market environment. Our annuity providers have also enhanced product features over the past year, which has made these products more attractive to our clients and representatives.

Net flows were positive $261 million, and average client asset values increased 10% year-over-year to $61.3 billion. Our new state-of-the-art advisory platform has expanded our opportunity to serve clients with significant assets. Managed accounts were our fastest-growing client asset value product class, increasing 41% from the second quarter of 2017. While managed accounts do not generate sales-based revenue, they produce higher levels of recurring asset-based revenues than other U.S. products and this will benefit the business longer term. Our business model is balanced by 2 major complementary business segments with proven track records of delivering positive results. The flexibility in our model enables us to deliver solid returns and long-term value during product mix shifts and rebalancing of momentum. As we head into the second half of the year, we remain focused on building on our solid foundation and executing initiatives to drive organic growth. We continuously strive to enhance the business for our clients, representatives and stockholders, and we are well positioned to deliver meaningful long-term value to all of our stakeholders.

Alison will now walk you through our financial results.

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Alison Sue Rand, Primerica, Inc. - Executive VP & CFO [4]

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Thank you, Glenn, and good morning, everyone. My comments today will cover the earnings results for our core business segment and then will conclude with a company-wide review of insurance and other operating expenses and income taxes. Starting on Slide 6 with Term Life. In the second quarter, revenues increased 14% with 15% growth in adjusted direct premiums. Revenue growth outpaced the growth in benefits and expenses yielding a 23% year-over-year increase in pretax income and a 20.5% pretax margin for the quarter. Growth in adjusted direct premiums was driven by strong sales levels in the past few years and the runoff of business subject to the IPO coinsurance. We are seeing about a 6% annual decline in premium ceded to IPO reinsurers, now that policies that continue beyond the end of the initial level premium period are no longer ceded to them. When combining these factors with our sales projection for the remainder of 2018, and the weakening of the Canadian dollar since the beginning of the year. We expect adjusted direct premiums to grow around 13.5% in the second half of the year and between 14% and 14.5% on a full-year basis.

In the second quarter, the DAC amortization ratio was 14.6% consistent with the prior year period. Persistency in the quarter was generally in line with 2017 levels and we expect persistency to remain at this level adjusted for typical seasonality for the remainder of 2018. The DAC amortization ratio also reflects a small increase related to insurance commissions from a change made to our 2018 sales force equity program that modestly shifted expense from deferred to nondeferred expense. While this change -- while this shift changes the timing of expense recognition, it did not impact the overall economics of the program. We expect the DAC amortization ratio to be around 16% on a 2018 full-year basis consistent with 2017.

Moving to benefits and claims. Normal claims volatility positively impacted benefits and claims by approximately $4 million in the second quarter, which resulted in a benefits and claims ratio of 57.5% versus 59.4% in the second quarter of last year. Year-over-year claims were $6 million favorable as the prior year period had $2 million of negative experience. On a full-year basis, we expect the 2018 benefits and claims ratio to be around 58.5%.

The net insurance expense ratio increased 50 basis points year-over-year to 8.2%, primarily due to $3.6 million of investment in key constituent initiatives using savings from Tax Reform as well as digital development initiatives in the quarter. For the full year, we expect the Term Life net insurance expense ratio to be slightly higher than 2017, reflecting these incremental investments in the business. Even with these increased investments, we expect the full year 2018 Term Life margin to remain between 18.5% and 19%.

Let's move to our Investment and Savings Products segment, where we again saw solid growth. On Slide 7, you'll see ISP revenues and income before income taxes grew 13% and 9% respectively over the prior year period. Revenues grew faster than income primarily due to revisions made to our record-keeping platform contracts in December. These changes resulted in account-based revenues and operating expenses both increasing year-over-year, with a positive impact on pretax income of about $1 million in the second quarter. Sales-based revenues net of commission increased 6% year-over-year, outpacing growth in revenue generating up sales, largely due to the 22% increase in variable annuity sales.

Total product sales grew 12% over the prior year period, primarily driven by strong growth in managed account sales from the rollout of our Lifetime Investment Platform at the end of the second quarter last year. The momentum in this program combined with positive net inflows and year-over-year market performance led to a 10% increase in asset-based revenues net of commissions in the second quarter. Given the successful Lifetime Investment Platform rollout and enthusiastic adoption by our clients and representatives, I'd like to spend a few moments highlighting the contribution that Lifetime can make our future earnings.

Since the launch of this program in mid-2017, we have seen tremendous growth in our managed account business with quarterly sales increasing from about $60 million in 2016 to over $200 million in the second quarter of 2018. While managed account sales do not generate sales-based revenue, they do provide recurring asset-based earnings above what we receive for other U.S. products.

The chart on Slide 8 depicts how earnings can emerge due to the accumulation of assets from new lifetime sales over time. In the illustration, we take 2017 lifetime sales at the current projection of 2018 sales of about $700 million and layer on 3 more years at the 2018 sales level. While we believe managed account sales will continue to grow, to simplify this illustration, we're not assuming that future sales increase from 2018 levels. We identify hypothetical assumptions of a 5% market return and a 7% redemption rate to the asset. Using these assumptions, the accumulation of lifetime sales would generate net asset-based revenues defined as revenues less commissions and platform, administration and advisory fees, but before internal operating expenses of over $17 million in 2021, up from $4 million in 2018. This is a meaningful contribution to our ISP segment results.

Now I'll move to a discussion of the company's insurance and other operating expenses. On Slide 9, you can see our second quarter expenses of $98.5 million, or $16.3 million higher than the second quarter of last year. The changes to our ISP record-keeping contracts increased expenses by $6.3 million, and as I mentioned earlier, this was more than offset by incremental revenues. We also had about $4 million of additional expenses to support growth in the business. As Glenn described in previous earnings calls, we are committed to investing a portion of the financial benefits from Tax Reforms in our key constituents including our communities, our people and our clients. Year-to-date, we have recognized around $5 million of expense in support of these initiatives, most of which was incurred in the second quarter. We anticipate spending around $10 million on a full-year basis and expect these expenditures to remain part of our expense based going forward.

On recent calls, Glenn also described our commitment to digital development to enhance the effectiveness of our representatives and deepen client relationships. In 2018, we are laying the groundwork for a multiyear initiative to modernize, end-to-end systems, data gathering and processes to enable continuous delivery of innovation. These efforts began to ramp-up in the second quarter of 2018 with planning efforts well underway and exceptional talent to drive many of the initiatives on board. During the second quarter, we incurred around $2 million towards these efforts and believe we are on track to spend around $8 million more in the second half of the year. As we get closer to year-end, we will assess our progress and provide guidance on plans for 2019.

Looking ahead to the third quarter of 2018, we expect expenses to be around $100 million including about $6 million split equally for digital development and key constituent initiatives from Tax Reform savings.

Moving to income taxes. In the second quarter of 2018, the effective income tax rate was 23.8%, about 70 basis points below our guidance for the quarter. This benefit was primarily a result of a higher proportion of pretax earnings coming from the U.S. with a lower statutory tax rate and a lower proportion from Canada with a higher statutory tax rate than was originally estimated.

We still expect our full-year effective tax rate to be about 23.5%. Let me reiterate our commitment to maintain a strong balance sheet and capital position with holding company cash and investment to $86 million as of June 30, 2018. As you are likely aware, the NAIC has proposed changes to the statutory risk-based capital ratio, which we believe will reduce Primerica Life RBC by about 45 percentage point to around 430%. The impact is lower than the 70 to 80 percentage point previously indicated, given that other calculation refinements have been proposed in addition to adjusting for the new federal tax rate. We consider this level of RBC to be more than sufficient to support our business needs going forward. In closing, we are very excited to report that Moody's recently upgraded Primerica Inc.'s senior debt rating to be Baa1 and Primerica Life insurance company's insurance financial strength rating to A1, citing our strong profitability and financial flexibility as drivers of the upgrade.

Now let's open it up to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Ryan Krueger.

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Ryan Joel Krueger, Keefe, Bruyette, & Woods, Inc., Research Division - MD of Equity Research [2]

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Glenn, I was hoping you could talk a little bit more about the productivity trends in Term Life, certainly you're still at the higher end of your historical range, but as you mentioned, it has come down some from last year. Could you just provide a bit more color on what you're seeing there?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [3]

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Sure, Ryan. You're exactly right, we continue to be at the upper end of what we've seen historically. But slightly down from the kind of breakout levels we were at a year and maybe 2 years ago. And for us, that's just part of the cyclical nature of the business. We're always striving to improve productivity over whatever it was previously. We have people working on that 24/7, but we recognize there is a little bit of a cyclical nature -- there's a lot of a cyclical nature to all areas of our business. But even and within the Term Life, you see periods of strength, periods where a breadth is taken and then you run at it again. And we just feel like that's what we're seeing right now. We're very pleased that we're still at the upper end, but we're working hard to focus our incentives and refresh them and make sure that our leadership is focused on continuing to grow and push that up as high as we can get it. So our commitment has not lessened.

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Ryan Joel Krueger, Keefe, Bruyette, & Woods, Inc., Research Division - MD of Equity Research [4]

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On expenses, so it sounds like the constituent initiatives will kind of continue going forward beyond this year. On the digital side, I know you're going to give more color as we get towards the end of the year, but is there probably some aspect of accelerated expense there that could decline going forward?

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Alison Sue Rand, Primerica, Inc. - Executive VP & CFO [5]

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There's definitely, I think just to reiterate what you said, we do feel like the expenses that we've added associated with the benefits of Tax Reform will be part of our ongoing expense base. With regard to the digital initiatives, as we described in the past, a lot of what we're doing this year is really focused on -- we keep our franchise repaving the road if you will, but really, moving our systems and our capabilities into more of a modern technology age. And so there's a lot of work to be done there and we are progressing pretty well along those lines. Now as we move into the future, and we look at what we want to spend, it'll be more correlated towards what we think the financial or the business type benefits are associated with those expenditures. And so without being a -- at this point, I can't say exactly what we think the expenses will be, but I can say that as we move through 2019 and beyond, we do expect there to be obviously real economic benefits to the business for the things that we plan to do. So we will continue to update you on how we move forward with that as well as the things that we are focusing on to drive the business results.

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Ryan Joel Krueger, Keefe, Bruyette, & Woods, Inc., Research Division - MD of Equity Research [6]

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And then just last question from me, thanks for the illustration on the managed account platform. One follow-up would be, how should we think about corporate overhead and expenses that -- like we -- in the example that you gave, would you be -- would there, I guess, be operate -- positive operating leverage when we think about expenses that will be allocated there?

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Alison Sue Rand, Primerica, Inc. - Executive VP & CFO [7]

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So the short answer is yes. I mean, you're happy just look at overhead and general operating expenses and recognize that a lot of that is in fact fixed in nature. We do expect as the volumes continue to grow obviously, our staffing need will go up just in order to make sure the business is processed properly that we are keeping compliant and the like. That was -- that being said certainly it's not one for one in a sort of step-variable nature to that. So we do expect the operating expenses associated with this business to grow, but would agree with what your original point was is that the leverage associated with those expenses should improve.

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Operator [8]

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Your next question comes from the line of Jeff Schmitt.

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Jeffrey Paul Schmitt, William Blair & Company L.L.C., Research Division - Associate [9]

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(technical difficulty) Sales, which have been good in the double-digits. Are you seeing growth in the number of agents that are licensed to sell securities or how does that pipeline look?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [10]

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Jeff, we -- you broke up on the very first part of that question. Do you mind to asking that again just to make sure we have it right?

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Jeffrey Paul Schmitt, William Blair & Company L.L.C., Research Division - Associate [11]

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Yes, sure. The -- I was just wondering about the growth of agents that can sell securities, how is that number looking and what's the pipeline looking like?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [12]

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Yes, as we've discussed in the past that number -- the new licenses and the total size of that sales force is continuing to grow, generally, it's lag to growth rate of the life insurance sales force by a few percentage points. But at the same time, over the longer period, those 2 grow closer together. There is -- we generally try to focus on 1 thing at a time is our primary focus, and then have a secondary focus. And so, yes, we have seen -- we're continuing to grow in new licenses and in the total size of the sales force. The rate of growth that we normally talk about at year-end is slightly less than the life sales force.

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Jeffrey Paul Schmitt, William Blair & Company L.L.C., Research Division - Associate [13]

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Okay. And then on new recruits, it sounds like you think that number is going to be pretty flat or even down this year. Is -- do you view this sort of 300,000 level as kind of the high watermark or total saturation level? Or are there things that you can do next year to take it above that?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [14]

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Well, I wouldn't -- definitely wouldn't use the word saturation, the need for what we're doing in the middle market is growing much faster than we are. It's more a function of are growth rate sustainable as they compound, the difficulty level gets harder as the numbers get higher. But the dynamic that we talked about in the prepared remarks was simply a function of what we did last year. We had the series of hurricanes that impacted Puerto Rico, Texas and Florida. And as we often do in counties, it's a county-by-county focus generally that are declared disaster areas by FEMA, then often what we do to encourage people in that area and keep them focused is we waive the IBA fee, the independent business application fee for joining the company and that's what we did last year. It covered a much -- well, Texas and Florida are 2 of our biggest states and it covered a much -- a large are of both of those states and so we had a significant number of those come in without IBA fees, $17,000. We're not expecting to do that again this year, and so you've got a different dynamic in the comparison. So the comparison of the numbers from '17 or '18 is driven around that dynamic. As we look forward, we believe there is room to continue to grow our business, to continue to grow recruiting, the response to our message as a business opportunity, is very strong and so we believe there is upside there and that we can continue to grow the sales force as well. So we believe there is more upside out there.

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Operator [15]

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And your next question comes from the line of Mark Hughes.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [16]

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A question on the mutual fund sales and managed account sales. How should we think about that dynamic? Your mutual fund sales were up 1% this quarter, managed account continues to be quite strong, presumably, there is some mix shift that's going on, that -- it's influencing your near-term sales-based revenue, but as you show in the example that will be replaced over time with more asset-based revenue. How much -- are we going to see these mutual fund sales decline and managed accounts take their place? How should we think about the relative growth in those categories?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [17]

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Right. I would probably describe it more as focused shift to than mix shift. We have had a very successful launch of the managed accounts platform and it's gone well. I think the platform itself is something to be proud of, and I think the way that our team has rolled it out in the way that our sales forces is responded to it, it's all been excellent. And so we are getting a lot of focus on that and a lot of upside. And I do think that over time, that becomes a more normal part of our business and it's not the shiny object that attract so much attention, and you'll see a normalizing of our business shift.

The other thing that we mentioned in the call is the rebound in variable annuity sales and I think our rebound is very much in line with the industry, as there's more certainty in the marketplace. And as a result of that product providers are taking advantage of that natural momentum to improve their products and attract even more attention to them. So that's -- all of that I think is something that is detracted focus from mutual funds. I would expect over time, you would see things rebalance, it's all on the pendulum that swings one way and then the other and then really over time normalizes. So I wouldn't look at this as something that over time you would see mutual fund sales suffer long-term as a result of what we're doing. It will just rebalance itself.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [18]

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Understood. And then the expenses associated with the managed accounts, are the commissions similar to the -- what you've had in the sales-based category? More like 70%, 75%?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [19]

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Yes, that's correct. All of our -- our grid, everything we do is product agnostic to make sure that we are not creating a conflict where it's possible. And so our grids are the same for all products. So we push the amount of compensation created by the product out through the same grids, they're in that 80% top in range, 75% to 80% kind of average range.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [20]

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And Alison, on the -- that decline in premium ceded to the IPO coinsurer, any thoughts about how that will progress over time? I think there was maybe some discussion about depending on how blocks were issued in the past that might influence the way that number progresses. It's been -- the ratio has been declining looks like pretty steadily, 60, 70 basis points per quarter for the last several quarters. Is there any reason why that wouldn't continue be the case?

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Alison Sue Rand, Primerica, Inc. - Executive VP & CFO [21]

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No, not in the near term. We do expect it to run off by around 6% a year and I say that will continue -- I don't know exactly on the year, but at least for the next several years. I think the pace will slow down a little bit at that point. Again it has a lot to do with the size of these blocks, and I know it's just the nature of the book of business and what the duration is of the policies that are subject to that reinsurance trading. So that being said, I expect it to run off less than 6% sort of after a few years. I think the important thing to remember is that business is going to remain on the books for a long time. So I think it gets -- it already starts here at 6% and you in your head do math and say, oh, it's going to be gone after a few years. It's going to be around for a very, very long time. So I just think that's what's really important to remember when you think about this, but for the next couple of years, I think the 6% run rate is a good one.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [22]

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And then Glenn, you talked about the cyclical nature of the business that sometimes you stop to take a breath, your outlook here for policies issued to be relatively stable year-over-year. What -- simple question is, kind of why -- what -- this time around as you look at the business, what's the influence on that kind of newer outlook for stable rather than up?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [23]

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Yes, we are always monitoring the momentum that we have in each of our lines of business and I think of our business really in 3 big chunks, the building of distribution and then obviously, our life insurance business and our investment savings business. And at all times, we're looking for the natural momentum in those 3 areas that we can kind of throw fuel on the fire on, and then we're looking at the obstacles to those 3 and in a certain sense, they're incredibly complimentary. One of the things I'm proudest of about our business model is that we can shift between those lines and manage the natural fluctuations in the business and still have strong results even as momentum and product mix shifts. But the 3 do compete with each other to a certain extent and so as we've seen a burst of momentum in our investment and savings business that attracts little attention much in the same vein as I just described about the managed account business within the ISP segment. And so the good news is, we're seeing gaining momentum in that business as we're seeing momentum stabilize in the life business and overall, both for our company and for our sales force, it continues to provide an opportunity that's moving forward. So a certain amount of it is just that we've been -- we've had 4 incredible years of extraordinary growth on the life side of our business. We are taking little bit of a breath and then -- and refocusing on that, but at the same time, we're seeing a huge burst of momentum on our ISP businesses we reported today. So I think it's just part of the natural shift of the business and one of our jobs is to manage that so that we don't let anything get too extreme. So we're very focused on getting stronger momentum on the life side. We wanted to share to date as we saw things as of today, but that doesn't lessen our commitment to continue to work on it for the future.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [24]

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Then just final point or question, is it fair to say that in the back half, you've had some tough comps in terms of the sales force and recruiting growth relative to last year? And so that will make it harder to make as much forward progress on the overall headcount? And if productivity is relatively stable than policies issued are also relatively stable, is that a fair way to look at it?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [25]

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Yes, as we said for the next quarter. In the current quarter that's underway right now, we do expect to see continued growth in the size of the sales force. As you've noted, it slowed down slightly in the last couple of quarters and so it's still growing at a slightly less pace, but I think -- a slower pace, but I think that that -- we expect that not to be impacted as directly as the life momentum has been.

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Operator [26]

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(Operator Instructions) Your next question comes from the line of Dan Bergman.

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Daniel Basch Bergman, Citigroup Inc, Research Division - VP [27]

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To start, I guess, within investment and savings with another strong quarter of variable annuity sales. I was just hoping you could elaborate a little bit more on the year-to-date growth in the VA sales and generally just what you're seeing there. Is the DOL rule and regulatory uncertainty receding a big driver of that? Or more due to product changes that are making the guarantees more attractive? I guess any thoughts on that would be appreciated.

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [28]

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Sure, Dan. We believe it's a combination of the 2. Our growth rate is similar to the industry as a whole and I think that reflects both dynamics that you mentioned. The certainty, a little more certainty in the future for the product has clearly made the entire industry feel like it's safe to go back in the water, and so I think people are taking advantage of that. And then, I would commend the annuity providers as they recognize that natural momentum that's created from that dynamic. At the same time, they're introducing product improvements that make the product more attractive to clients, as is often the case. I believe in our industry and probably all others is when a product is threatened for any reason, and then you realize that you -- there is a future, you use that opportunity to go back and improve the product at the client level, make it more attractive to product -- to the client. And I think that's exactly what the industry is doing, and so I think the large numbers, the growth percentages that you're seeing both at Primerica and at other distributors is a result of both of those dynamics.

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Daniel Basch Bergman, Citigroup Inc, Research Division - VP [29]

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Got it. And then I just wanted to see if there's any update or updated thoughts you could provide just on the regulatory front in general in terms of where things stand with the SEC best interest proposal or any potential new suitability or best interest rules coming out of the NAIC or New York State et cetera?

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Glenn Jackson Williams, Primerica, Inc. - CEO & Director [30]

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Sure, both of those we're very familiar with and very involved in that. As we've stated before, we appreciate the fact that the SEC is acting under their authority and they're taking a very thoughtful approach and a thoughtful process. They've requested a lot of input from the industry and of course we continue to provide that as we have with previous processes, and not only do we participate actively, but we also were monitoring the entire rule-making process. So we believe that is on the track it should be on. Where it comes out, too early to tell. We continue to be involved in that and give our view and provide our input as it's asked for. And so we'll continue to be involved in that and keep you posted as more certainty arrives on that front. On New York, it's a very similar process. They have finalized a regulation that applies the best interest standard to the sale of annuities and insurance products. The NAIC and even other states might do similar things in the future, and so once again, we're at the table involved, providing comment and starting to triangulate what type of adjustments might be needed in our business. On the New York front, we're particularly pleased that the New York DFS recognized that term insurance should be treated differently for more complicated products. And so it is a simpler product and therefore figuring out what the best interest is should be a little easier and less disruptive. And that appears to be the direction things are going right now. Again, we're continuing to work on the fine details and plan our adjustments, but we're involved in it and feel like we have a handle on it and we can make the adjustments that would be required assuming things progress as they appear to be directed now.

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Operator [31]

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And we have no further questions in the telephone queue at this time. I would like to thank everyone for attending today's conference call. This will conclude our call, and you may now disconnect.