Primerica(US:PRI)2022-05-06 18:54Financial Data and Key Metrics Changes - Adjusted operating revenues for Q1 2022 were $693 million, reflecting a 9% year-over-year increase, driven by strong sales and equity market appreciation [7] - Diluted adjusted operating income per share was $2.11, down $0.33 from the previous year, primarily due to a $0.37 loss in the Senior Health business and elevated operating expenses [7][15] - Consolidated insurance and other operating expenses increased by $23 million or 19% year-over-year, with $8 million attributed to the Senior Health segment [23][24] Business Line Data and Key Metrics Changes - In the Term Life segment, operating revenues increased by 10% to $418 million, with adjusted direct premiums also rising by 10% [16] - The Investment and Savings Product segment saw operating revenues of $241 million, an 8% increase, while pretax income rose by 2% to $65 million [19] - The Senior Health segment faced challenges, recognizing a $19 million negative tail revenue adjustment due to higher-than-expected policy churn [21] Market Data and Key Metrics Changes - More than 71,000 Term Life policies were issued in Q1 2022, which is favorable compared to pre-pandemic levels, although down from Q1 2021 [9] - Sales and investment products remained strong at $3.1 billion, with net inflows of $1.2 billion, but sales momentum shifted due to market volatility [10] - The company anticipates a 10% year-over-year decline in second quarter sales volumes, yet expects to remain 4% to 5% above pre-COVID levels [9][10] Company Strategy and Development Direction - The company is focusing on stabilizing and improving results in the Senior Health segment while continuing to grow its sales force beyond 130,000 representatives [6][11] - Management is optimistic about the long-term potential of the Senior Health business, planning to limit sales volumes in 2022 to enhance stability [11][12] - The mortgage business is expanding into more states, with a focus on debt consolidation and purchase money mortgages, despite pressures from rising interest rates [13] Management's Comments on Operating Environment and Future Outlook - Management noted that the post-COVID business environment is evolving, with strong demand for financial solutions from middle-income families [6] - Elevated costs in certain operating expenses are expected to continue temporarily, but management is confident in the resilience of the business model [6][15] - The company is cautious about projecting 2023 earnings, focusing on evaluating current operational changes before committing to growth strategies [29] Other Important Information - The invested asset portfolio remains diversified, with an average rating of A and a duration of 4.9 years, despite an unrealized loss of $84 million due to rising interest rates [25][26] - The company repurchased $99 million of common stock during the quarter, with $207 million remaining in its buyback program [26] Q&A Session Summary Question: Senior Health outlook and earnings translation to 2023 - Management is evaluating steps taken in 2022 before making projections for 2023, aiming to grow sales volumes once operational models are stable [29][30] Question: Term Life sales expectations for Q2 - A 10% year-over-year decline is expected, but management anticipates improved comparisons in the latter half of the year due to convention announcements [31][32] Question: Persistency of policies issued during the pandemic - Policies from the first year of the pandemic are performing about 5% worse than pre-pandemic levels, but overall persistency remains favorable [35][36] Question: Recruiting impact from the labor market - The company is seeing strong interest in its business model, with no significant headwinds from the tight labor market, as it offers opportunities rather than traditional jobs [37][41] Question: Term Life margin trends for the year - The second quarter is traditionally strong for margins, with expectations to maintain around 20% for the full year [44] Question: Long-term growth initiatives for rep count - Management believes there is still demand in the marketplace to support growth in the sales force, with no immediate plans for drastic changes [52][53]