• Adjusted Net Operating Income: $163 million, increased 12% year-over-year.

• Diluted Adjusted Operating Income Per Share: $4.71, increased 18% year-over-year.

• Common Stock Repurchases: $143 million during the second quarter.

• Dividends Paid: $26 million in regular dividends during the second quarter.

• Recruitment: Over 96,000 individuals recruited, a 12% increase year-over-year.

• Life License Representatives: 145,789 as of June 30, 2024, up 6% year-over-year.

• New Term-Life Policies Issued: Over 100,000, a 4% increase year-over-year.

• Investment Product Sales: $3.1 billion, increased 29% year-over-year.

• Client Asset Values: $105 billion, increased 15% year-over-year.

• Net Flows: $423 million during the quarter.

• Term Life Segment Operating Revenues: $427 million, increased 4% year-over-year.

• Pre-Tax Operating Income (Term Life): $148 million, increased 5% year-over-year.

• Operating Margin: 23.1%, unchanged year-over-year.

• Investment and Savings Product Segment Operating Revenues: $261 million, increased 22% year-over-year.

• Pre-Tax Operating Income (Investment and Savings): $75 million, increased 26% year-over-year.

• Senior Health Segment Revenues: $12 million, with a pre-tax adjusted operating loss of $11 million.

• Adjusted Consolidated Insurance and Other Operating Expenses: $150 million, up 6% year-over-year.

• Warning! GuruFocus has detected 7 Warning Sign with PRI.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Primerica Inc (NYSE:PRI) reported a 12% increase in adjusted net operating income, reaching $163 million, and an 18% increase in diluted adjusted operating income per share.

• The company repurchased $143 million of its common stock and paid $26 million in regular dividends during the second quarter.

• Recruitment efforts were strong, with over 96,000 individuals recruited, marking a 12% increase compared to the prior year period.

• Investment product sales increased by 29% to $3.1 billion, driven by strong demand for mutual funds, annuities, and managed accounts.

• Client asset values benefited from strong equity market appreciation, ending the quarter at $105 billion, a 15% year-over-year increase.

Negative Points

• Primerica Inc (NYSE:PRI) decided to exit the senior health market due to increasing policy churn and regulatory uncertainty, impacting anticipated profitability.

• The company recorded a $254 million write-off of remaining goodwill intangibles related to the senior health business exit.

• Higher cost of living pressures are impacting low-income families, contributing to elevated policy lapses.

• The senior health segment reported a pre-tax adjusted operating loss of $11 million, with revenues and adjusted operating income unfavorable compared to the prior year.

• Adjusted consolidated insurance and other operating expenses increased by 6% year-over-year, primarily due to higher variable expenses and employee-related costs.

Q & A Highlights

Q: Could you talk a little bit about the recruiting trends and what we should expect to see in the back half of the year? A: Glenn Williams, CEO: Our convention has significantly boosted recruiting momentum. We saw strong recruiting activity in the second quarter and expect this to continue into the second half of the year. We anticipate full-year growth in our sales force to be around 5% to 6%.

Q: It seems like the mortgage balance has increased. Could you discuss the mortgage sales program and its future momentum? A: Glenn Williams, CEO: We are seeing increased activity in our mortgage business, driven by expectations of rate cuts. We have about 3,000 licensed mortgage loan originators in the US and expect continued growth, especially if interest rates decline.

Q: What is driving the strong demand for investment and savings products (ISP)? A: Glenn Williams, CEO: The primary driver is investor confidence due to strong equity markets. Additionally, our preparation, product set expansion, and increased licensing have positioned us well to capture this demand.

Q: How does the convention impact licensing and recruiting? A: Glenn Williams, CEO: The convention boosts recruiting by energizing our recruiters and recruits. We expect to see the benefits on licensing in the coming months, with a similar pull-through rate leading to more licenses.

Q: How does the household budget index relate to new policies and lapses? A: Glenn Williams, CEO: The index indicates middle-income families' buying power. Although it's back to 100%, families are still dealing with past financial pressures, affecting their ability to maintain policies. Persistency remains in line with expectations.

Q: How are you ensuring compliance with policies and procedures? A: Glenn Williams, CEO: We have a robust, multi-layered compliance plan, including surveillance, communication, and annual office visits. Our simple product set and extensive training help minimize compliance issues.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.