Q2 2020 Primerica Inc Earnings Call

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Well I would like to welcome everyone to other Primerica second quarter earnings results Conference call I'm webcast.

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No it's not a conference over to called Russell head of Investor Relations. There's also you may begin your conference.

Thank you operator, and good morning, everyone welcome to Primerica's second quarter earnings call.

A copy of our earnings press release, along with material relevant to today's call I posted on the Investor Relations section of our website.

Factors that primerica dotcom.

Joining our call today, our Chief Executive Officer, Glenn Williams, and our Chief Financial Officer, Alison Rand, Glenn and Alison will deliver prepared remark and then we'll open the call up for questions.

Your your call some of our comments may contain forward looking statements in accordance with the Safe Harbor provision of the Securities Litigation Reform Act. The company does not assume any duties update or revise these statements to reflect new information.

We refer you to our most recent form 10-K filing as modified by subsequent form 10-Q filing for list of risks and uncertainties that could.

Actual results to materially differ from those expressed or implied.

We will also be referencing certain non-GAAP measures, which we believe provides additional insight into the company's operation.

Reconciliations of these non-GAAP measures to their respective gap.

The call over to Glenn.

Thank you Nicole and thanks, everyone for joining us today.

Oh listen and I will provide a recap of our quarterly results and share with you have to cope with 19 pandemic is impacting our business.

Second quarter results continue to reflect the strength and resilience of our business model, including the following financial highlights shown on slide three.

Adjusted operating revenues during the quarter were $522 million, a 4% year over year, while adjusted net operating income was also up 4%.

Diluted adjusted operating income per share was $2.44, which represents a 10% increase year over year, Anoro AG was 25.6% compared to 25.1% in last year's second quarter.

Before going into the details of the quarter I'd like to provide an update on the market dynamics impacting our business, which you can see on slide four.

First the positives, we believe that our unique business model is demonstrating its strength during the cold in 19 disruption.

Flexibility of our entrepreneurial business opportunity combined with complimentary business lines of life insurance investments in are emerging mortgage distribution business have positioned us to meet the needs of the middle market.

Our efforts to make fundamental improvements and build momentum early in 2020 or also paying off in this unique environment.

We have seen extraordinarily high interest in our financial solutions among main street consumers.

During this period of limited mobility. Many families are taking action to improve their financial game plans, which was reflected in the strong life insurance sales results, we sell in the quarter.

Our field and corporate leadership have responded to the environment with a high level of focus and specific action plans to drive business.

Example, adding the efficiency and reach of web conferencing to our traditional face to face model is not only allowed us to continue to meet clients' needs. It is also allow us to extend our reach across the U.S. in Canada through the use of non resident licenses.

Well, we're excited about these positive trends were also closely monitoring some potential headwinds and recognize the uncertainty that lies ahead, we know that change both positive and negative creates disruption that must be managed in addition, distinguishing between the temporary and long term impact of client sentiment market forces and the effectiveness.

Most of our incentive programs is more difficult to assess.

Last quarter, we discuss two key challenges that we were anticipating for the second quarter and beyond.

First was the disruption in our ability to obtain pair medical exams and other underwriting requirements for traditionally underwritten life products.

I'm happy to report that our providers responded quickly and our underwriting capabilities in the us or back at full capacity, while in Canada. They are about 75% of normal.

The second challenge, we discussed the testing processing in issuance of permanent life insurance licenses remains impaired in most states and provinces.

I will discuss how licensing administrators are responding to this disruption and just a moment.

We are confident that we will meet the challenges of the current delays and we will leverage some of the necessary changes as long term positives.

Formalize, we will rebalance our incentives to add focus on permanent licensing.

Now, let's look at our business by segment, beginning with distribution on slide five.

Excitement created in our field by the $49 licensing fee. During the last two weeks of March led us to continue the incentive into April.

We then extended this incentive program into May and June as licensing delayed became apparent.

By this incentive program total recruits during the quarter were 133123 up 54% over the second quarter of 2019.

In addition to creating energy in the field increase recruiting also brings access to warm markets, where field training occurs which added a tailwind to life sales.

And to ensure that recruits remain engaged we enhanced our field training program and increased the profile of our end silvery products that can be sold without a license.

As I mentioned earlier the licensing process remains compromise to date 26 states have responded to processing delays in the normal permanent licensing process by issuing temporary licenses, we were preparing to convert as many as possible of those temporary licenses to permanent licenses once the licensing infrastructure reopens, but at this.

Time, it's too early for us to project our rate of success in converting licenses.

In addition, 23 states have also extended the renewal dates of existing license is due to cope with 19 crisis. These extensions presented a number of our reps licenses from expiring during the quarter.

The total number of new licenses issued during the quarter was 12250 of 12% year over year. Our Salesforce ended the quarter at 134157, a 4% year over year and included both 3400 cobot temp licenses and 4400 licenses with extended renewal dates it's too.

Too early for us to accurately project the normalized size of our Salesforce is doing so would require us to know the number of cobot temporary licenses that will convert to permanent licenses as well as how many licenses will review when stage resumed normal operations.

The length of time before the licensing infrastructure returns to normal will also impact these outcomes.

We believe that certain challenges today could become long term positives the growing acceptance of remote license testing is one such example, historically testing has been done it exam centers most of which are currently operating it limited capacity.

Today remote testing is alleviating some of the pressure caused by the code 19 pandemic and is currently available in all states and provinces, where securities licensing and in 14 states for life licensing.

We anticipate the rollout of remote life license testing to continue with five states and seven Canadian provinces coming soon.

This is an exciting development for the future because remote testing as flexibility to the licensing process.

Another challenge it could turn into a long term positive for our business is the added efficiency with which our reps can interact with clients.

Our rapid adjustment to remote client interactions has had a positive impact on recruiting and sales.

Transactions completed using web conferencing technology are identical whether decline is next door hundreds of miles away. So many of our representatives are now able to extend their geographical reach.

Salesforce members do require a nonresident life license to sell life insurance outside their home state, which can be ratably obtained in order to make out of state sales.

During the quarter, our representatives received more than 8000 nonresident licenses at 400% from the same period last year.

This new trend positively impacted non resident sales and recruiting.

Our term life business on slide six reflected the middle markets heightened interest in protecting their families with life insurance.

Ability to assess their needs and complete life insurance transactions remotely led to a 20% increase in issued policies during the second quarter.

Our business model product set transaction technology, and educational approach positioned us well for these unique times. Our Salesforce leadership also reacted quickly by increasing their level of engagement together. These dynamics resulted in a productivity rate a 0.24 policies for life insurance license representative per month.

While the second quarter is usually seasonally strong the second quarter 2020 was exceptional exceptional by comparison.

Slide seven summarizes the results from our investment and savings product segment.

Sales of $1.7 billion declined 13% compared to the second quarter of 2019, which was in line with our expectations.

While market volatility kept many investors on the sidelines and we sell fewer.