Prepared remarks
Greetings, and welcome to the Primerica First Quarter 2026 Earnings Webcast. The operator will now provide instructions. Please note, this conference is being recorded. I will now turn the conference over to your host, Nicole Russell, Head of Investor Relations. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings press release issued last night, along with other materials relevant to today's call are posted on the Investor Relations section of our website. Joining our call today are our Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Tracy Tan. Our comments this morning may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. We assume no obligation to update these statements to reflect new information, and refer you to our most recent Form 10-K filing as may be modified by subsequent Forms 10-Q for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in our earnings press release. I would now like to turn the call over to Glenn.
Thank you, Nicole, and thanks, everyone, for joining us this morning. Our first quarter results demonstrate the balance and resilience of Primerica's business model. Investments in savings products continue to be a key driver of performance, while the Term Life segment remained a stable contributor to earnings growth. Slides that address our quarter results in more detail can be found beginning on Slide 7 of our Q1 investor update deck. Overall, we delivered a 9% increase in adjusted operating revenues and a 13% increase in adjusted net operating income during the first quarter compared to the prior year period. Income growth was primarily driven by a 24% increase in earnings from the ISP segment. Adjusted operating EPS increased 19% to $5.96. We continue to generate solid cash flows, which allowed us to return a total of $179 million to stockholders during the first quarter through a combination of $141 million in total share repurchases and $38 million in regular dividends while also maintaining the flexibility to invest in the business. Turning to distribution. Our entrepreneurial business opportunity continues to resonate with individuals seeking supplemental income as well as those looking for an alternative career path. The middle-income market we serve offers us meaningful growth potential and our representatives are well positioned to meet that need through our financial education-based approach. The success of the Primerica businesses built by our field leaders reflects the strength of this opportunity. While we continue to navigate environmental headwinds, we are adapting to current conditions. For example, in response to higher travel costs, we adjusted our spring and summer field event schedule by replacing larger regional events with a series of smaller local events across the U.S. and Canada. We expect higher total attendance from this localized approach. These events will also serve as a platform to launch incentives and promotions, which has historically driven improvements in distribution growth. We believe the actions underway will support improved recruiting and licensing and position us to end the year with life license sales force flat to up approximately 1% compared to December 31, 2025. Focusing on production. First quarter results reflected the differing dynamics across our two major product lines. Demand for Investment and Savings Products remained at record levels, while our Term Life business experienced softer results. While we recognize the cumulative impact of several years of cost of living pressures on middle-income families, we believe some relief is beginning to emerge. The Primerica household budget index shows that household income growth has outpaced cost increases for families for 9 consecutive months, suggesting that households are gaining ground. However, we recognize this improvement could be temporarily disrupted by higher gas prices related to conflict in the Middle East. We remain optimistic on the longer-term trajectory. Our complementary business model is designed to provide natural balance with the sales force positioned to serve middle-income families across two core product lines that often respond differently to changing economic conditions. Term Life purchasing decisions are typically made by younger families who tend to be more sensitive to cost of living pressures. In contrast, a larger portion of our investment clients are more established and increasingly focused on long-term savings and retirement planning needs. As a result, our distribution model remains very resilient. Looking at Term Life, we issued 74,054 new policies during the first quarter, a 14% decline compared to the prior year period while estimated annualized issued premiums, which include coverage additions as well as newly issued policies, declined 10%. During periods of uncertainty, our educational approach and ability to serve clients in person represent a clear competitive advantage. Although we are seeing early signs of improvement, the level of uncertainty remains elevated, and as a result, we project full year 2026 Term Life policies issued to be flat to down approximately 2%. Our Investment and Savings Products business delivered another strong quarter with sales increasing 22% to a record $4.3 billion. Sales growth was broad-based across mutual funds, variable annuities and managed accounts, reflecting several positive underlying trends. Industry trends continue to create favorable tailwinds. The younger generations are saving earlier for retirement and IRA contributions from these groups have been particularly strong. According to industry sources, Gen Z contributed approximately 30% more to their traditional and Roth IRA accounts since the start of 2026 and compared to the same period last year, creating a tailwind for systematic smaller investment contributions. At the same time, Gen X and baby boomers are increasingly focused on preparing for retirement, driving higher rollover activity and increased demand for variable annuities that provide guarantees. These trends benefit our business given our ability to efficiently process a high volume of small recurring transactions in a way other companies cannot while also leveraging the long-standing relationships we built with our more established clients over time. Client asset values ended the quarter at $127 billion, an increase of 15% compared to March 31, 2025. We also continue to see positive flows with new net inflows of $362 million in the first quarter of 2026. While we believe the favorable trends driving demand for investment products may continue for the next several years, we remain mindful of the potential for broader market volatility. Based on current projections, we expect full year sales growth to be in the upper single-digit range for 2026. Our mortgage business remained strong in both the U.S. and Canada. During the first quarter of 2026, we had $113 million in mortgage loan volume in the U.S., a 21% increase year-over-year. We also provide refinancing opportunities and new mortgages to our clients in Canada with a mortgage referral program. In both countries, we recognize higher interest rates may create a headwind going forward. As the middle-income market begins to recover from several years of cost of living pressure, the need for financial guidance and education remains as important as ever. Our ability to meet that need is a core strength of our business. While external conditions can create uncertainty, our focus remains unchanged. Our strong fundamentals are grounded in our unique ability to serve middle-income families, positioning us to capture the long-term growth opportunity ahead. With that, I'll hand it over to Tracy for the financial results.
Thank you, Glenn, and good morning, everyone. First quarter 2026 results reflected a continuation of last year's strong financial performance led by robust year-over-year growth in investments and savings products and stable performance in Term Life. Starting with the Term Life segment, operating revenues increased 1% year-over-year to $465 million, driven by 4% growth in adjusted direct premiums. Pretax operating income was $155 million, a 6% increase compared to the first quarter of 2025. Turning to mortality. Claims experience during the quarter remained favorable relative to expectations, consistent with the trend observed last year. The benefits and claims ratio was 57.3% compared to 58.2% in the prior year period. Benefits and claims in the current year included a $7.6 million remeasurement gain, reflecting a combination of favorable mortality experience and lower persistency. Excluding the remeasurement gain, the benefits and claims ratio was generally consistent. As a reminder, we see a substantial portion of mortality risk through reinsurance, which significantly reduces earnings volatility. Consequently, the Term Life business continued to exhibit financial characteristics that are more fee-based in nature. Overall, lapse rates remain elevated relative to our long-term reserve assumptions, which we believe reflects the ongoing financial impact from cumulative cost of living pressures on middle-income families. While higher lapse reduced direct premiums due to the loss of policies, they also have a favorable impact on benefits and claims costs. We observed different behaviors for various durations, and we continue to analyze them to understand the underlying trends and contributing factors. The DAC amortization and insurance commissions ratio at 12.3% along with the insurance expense ratio at 7.9% were consistent with the prior period. Finally, the pretax margin was 22.5% compared to 22.1% in the first quarter of last year. Looking ahead, we expect adjusted direct premiums to grow approximately 4% on a full year basis. We anticipate the benefits and claims ratio to be around 58%, the DAC amortization and insurance commissions ratio around 12% to 13% and the operating margin around 21%. Fiscal year guidance reflects the predictable and stable nature of our Term Life business. The ISP segment fee-based business model continues to perform exceptionally well, supported by strong sales activity and favorable equity market conditions, while stock markets may experience periodic volatility. Our ability to deliver consistent growth across market cycles is strengthened by several key factors. These include the size of our underserved market opportunity and the favorable demographic tailwinds, our expanded product lineup, more resilient fund flows compared to the industry and long-term equity market growth. During the first quarter, operating revenues increased 21%, while pretax operating income grew 24%. As the segment continues to scale, ISP now represents 40% of consolidated revenues in the current quarter and its faster growth has been an important contributor to improved return on adjusted equity. Sales-based revenues increased 23% and continued to outpace the growth in commissionable sales, driven primarily by strong client demand for variable annuities on which we earn higher commissions. Variable annuity sales increased 35% compared to the prior year period. Asset-based revenues increased 23% year-over-year compared to a 15% increase in average client asset values, reflecting a favorable mix shift towards products that generate higher recurring fee-based revenues. Demand remains strong for U.S. managed accounts, reflecting the continued appeal of these products as well as for Canadian mutual funds sold under the principal distributor model introduced a few years ago. Commission expenses for both sales and asset-based products increased largely in line with revenue growth. In the Corporate and Other Distributed Products segment, we reported a pretax adjusted operating loss of $6.7 million during the quarter compared to a loss of $8 million in the prior year period. The largest factor contributing to the year-over-year change was higher net investment income through growth in the portfolio. Finally, consolidated insurance and other operating expenses were $168 million in the quarter, up 3% year-over-year, driven primarily by higher variable growth-related costs and increased technology investment. Expense growth during the quarter was favorably impacted by the timing of project initiatives. Looking ahead, as project activity ramps up throughout the year, we continue to expect full year expense growth in the range of 7% to 8% for 2026. The second quarter outlook is currently expected to be up around 10% to 12%. Our investment portfolio remains well diversified with an average quality of A. The average rate of new investment purchases was 5% for the quarter with an average credit rating of A. The portfolio had a net unrealized loss of $154 million at the end of March compared to a net unrealized loss of $113 million at the end of 2025. We believe that the unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and the ability to hold these investments to maturity. We continued to generate strong cash flow driven by the superior growth of our fee-based ISP business, and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $556 million in cash and invested assets. Primerica Life's estimated RBC ratio was 430%. As highlighted in our latest investor deck, Primerica's consistent and high-return business model is differentiated by its revenue mix that is largely fee-like in its economic characteristics. Around 90% of our operating revenues in 2025 exhibit fee-like attributes, which includes the majority of our Term Life business where the mortality risk is largely reinsured. The remaining 10% of our operating revenues represents life insurance underwriting revenue for which we retain mortality risk. The company's financial and capital returns are similar to or better than distribution-focused peers such as investment and insurance brokerage firms, and stronger than traditional life insurance companies. With that, operator, please open the line for questions.
Questions and answers
And our first question will come from Jack Matten with BMO Capital Markets.
Just the first one on Primerica's middle-income customer base. Just given we've seen gas prices rise materially in recent months, have you seen any kind of meaningful inflection or change in trends around consumer behavior or on the producer side regarding the willingness to travel around and sell policies because of that change? Or is it really kind of the same trend you've been seeing for a little bit of time now with higher pressure and some pressure on cost of living trends?
Jack, we have not seen any noticeable change in direction. As I mentioned in my prepared remarks, what we are seeing over a little bit longer term now for about nine months in a row, our household budget index has indicated that earning power has outstripped the slowed cost of living increases. Cost of living continues to increase, but not at the rapid pace of the past and earned income for families is outstripping that. We've started to see a few positive signs from that. It could be disrupted by the sudden jump in gas prices as a possibility as we track that in the future. But so far, we're not seeing any noticeable change in activity or behavior of either our clients or our representatives based on that. If it continued or got worse for a long period of time, that's something we keep an eye on, but so far, it's been offset by other gains up to this point, and we actually believe things are moving in a positive direction for most middle-income families.
Got it. That's helpful. My follow-up is on recruiting trends. And you have the shift this year away from your usual larger conventions. I think you said more local events now. I guess do you still expect the cumulative impact of those on recruiting and engagement to be comparable to a typical larger event? And can you just offer any more color on the types of incentives and promotions that Primerica is planning to turn on this year?
Certainly. A reminder that our largest event, our convention that we do every other year, was moved to 2027 to avoid the World Cup and align with our 50th birthday as a company. So our major event is scheduled for July 2027. What we originally had scheduled for this year was regional events — three in the U.S. and two in Canada, so a total of five. But we found that people were deciding to either attend those or wait and attend the larger event in 2027, or they felt travel was a burden. We decided to move to a larger number of local events. We do believe we're going to touch more people total; it's going to create a very busy travel schedule for all of us during the middle of the year, going to more events, but we'll be closer to the people and the total attendance, we believe, will be larger. Those events are still large enough to be significant platforms for us to cast our vision and also promote our incentives. We saw a positive response to incentives. In April, we had a recruiting incentive that we had used previously and had excellent response. That was a reduced licensing fee that we've used in the past. We believe there is positive response happening when we use incentives. We saw evidence of that in the first month of the second quarter. So while the results were not what we had hoped for in the first quarter on recruiting and licensing, we believe that turns as the year goes on and becomes more positive.
And our next question will come from Wilma Burdis with Raymond James.
In ISP, what percentage of earnings is driven by AUM versus fees? I think that used to be around 50%, but it seems to have shifted, which would improve the stickiness of ISP earnings. So can you talk about that and how it's trended over time?
Percentage of earnings coming from AUM versus upfront sales — currently it's closer to 60/40: about 60% AUM, 40% sales. It is shifting more toward the AUM-based fees as our assets grow, and as our product mix shifts toward both the managed account product in the U.S. and the principal distributor model in Canada, both of which are more AUM focused. So that's what we would expect; it looks like we're at about 60/40 right now, Wilma.
You guys have always been a distribution company. Historically, it was more focused on Term Life, but certainly ISP is a compelling distribution opportunity as well. And I know you're getting into mortgages and other things. Is that kind of how you view it — more about distribution and meeting that middle-income customer? And are there any additional products that you think would make sense to distribute?
You're right, Wilma. We view our strength as our distribution capabilities. Even our Life business has distribution characteristics, which is intentional. The two products we sell create a complementary nature; when one is weak in momentum, the other tends to be strong. Very seldom are they both weak at the same time. We believe the mortgage business is a valuable addition to our distribution capability. It's still a very small business, not material to financial results at this time, but it helps clients get their debt load under control so they can deploy money for protecting and investing for the future. It also tends to generate referrals. We expect it to continue to grow and be a contributor. Beyond that, we constantly review opportunities to distribute, but other products often don't have the margins we're accustomed to and could cannibalize middle-income families' spending. We'll be very thoughtful before adding products to ensure they're a net positive for consumers and our sales force. There's nothing huge on the horizon right now, but we always keep our ear to the ground.
And we'll go next to Mark Hughes with Truist Securities.
The Life sales guidance for the full year, flat to down 2%, that assumes a pretty nice stabilization as the year progresses. You've been running down kind of double digits the last four quarters and now you're lapping that. What's your confidence or visibility that Term Life can kind of get back on track, stabilize, maybe up a little bit?
You're right, Mark. The comps do get easier throughout the rest of the year. If you study our momentum trends, momentum continued out of our record 2024 through the first quarter of last year to a certain extent. We see the comps getting easier. We also see those green shoots where middle-income families' financial conditions are stabilizing. We are taking specific actions to play into that. It's still early on that stabilization and many families don't even recognize it yet. We are focusing on helping families identify emerging positives in their budgets early so they can put those positives to work. If people don't realize their budget is getting breathing room, they tend to spend the extra money without realizing it. We're working on opening discussions with families. We have a prospecting/discussion promotion called 'Where's the Money' where we ask new and past clients that question, which opens a conversation to take a fresh look at their budget, tax refunds, tax withholding, and possible savings like lower auto insurance. When we identify opportunities, clients appreciate the value. We're also continuing to work on the value of our Life products. We introduced the next-generation product series late in 2022 and recently released what we call Next-Gen 2.0. It's not a repricing or new product line; it's continued improvements on that product set introduced in late 2022. It's a better client experience with improved and faster underwriting processes and greater accuracy in underwriting, which allows us to offer better pricing, more precise pricing to clients. All of those things combined give us some confidence that we can make a difference and start building momentum throughout the rest of this year. Also, the 12 months leading up to our convention has always been a period where we've been able to positively impact distribution, which begins in July. So we think we've got several dynamics between now and year-end that can give us momentum in that product line and in distribution as well.
Tracy, your outlook for ~21% margin, is that on the same basis as the 22.5% in Q1? And if that's the case, are there some drivers that could put pressure on that? Is that conservatism on your part?
Mark, the around 21% guidance reflects timing of activities that can drive quarterly variation. The first quarter benefited from the remeasurement gain, but much of that reflects continued favorable mortality trends. Looking ahead, we are not predicting the same remeasurement gain will recur. The timing of expense is also a factor; the favorability this quarter was impacted by timing of projects. We have a number of initiatives to improve products, underwriting, and technology to improve client experience. Those projects will ramp up starting in the second and third quarters and will increase expenses. Overall, the 21% reflects some quarterly timing differences and does not carry forward some of those remeasurement gains, which were a favorable period experience that we are not predicting to recur. Hopefully that helps.
And our next question will come from Suneet Kamath with Jefferies.
I wanted to start with the Term Life productivity metric. It's been dropping off here in recent quarters, and Q1 is actually one of the lowest we've seen. Is that a metric that you're focused on; and do you have a strategy to try to improve?
Yes. We focus on productivity because it's a simple calculation: size of the sales force divided by the number of policies issued. It's a great tracking mechanism because it's easy to identify, but it's limited by its simplicity. Coming out of 2024 we had successful efforts to grow the size of our sales force. When sales momentum slows, dividing a record-sized sales force into slowed sales momentum reduces the metric. We have to recognize what it's telling us and not overestimate its sophistication. We absolutely have efforts in place to make our sales force more productive. All the efforts I mentioned earlier about improving sales will improve the sales number and take care of the fraction. We don't focus solely on the fraction, but we are focused on productivity. We believe drivers of our capability to grow the sales force are the need for financial guidance by middle-income families and the attractiveness of our entrepreneurial business opportunity. Those dynamics give us optimism that we can grow both the sales force size and productivity simultaneously.
Got it. And then an observation about the Term business that I wanted to bounce off you. Historically, there's a natural hedge in periods of economic uncertainty where the target market may face pressure and be reluctant to buy product, but higher unemployment creates recruiting opportunities. It feels like the current environment is different: cost of living pressure exists but unemployment is still pretty good. Is this a unique period you'll have to deal with in Term, or am I not thinking about it right?
A lot of what you've said is how we perceive it. Every dynamic has both a positive and a negative that we try to maximize. We've experienced unique uncertainty over the last few years, which makes it hard to get a beat on direction. That tends to make people in the middle-income market stop and wait. I don't think strong employment numbers necessarily directly compete with recruiting because people come to Primerica looking for an alternative to a job, to build a business over time that can supplement or replace their income. Employed recruits who are frustrated can be better recruits than unemployed ones. There is an ebb and flow of positives and negatives with almost every economic dynamic. We try to maximize the positive and minimize the negative.
We'll hear next from Dan Bergman with TD Cowen.
If I got the number right, you said you're guiding to high single-digit ISP sales growth in 2026, which is very strong nominally, but would imply a somewhat lower sales run rate in the remainder of the year relative to the first quarter. Could you unpack that a little more and what that's assuming? Have you actually seen any slowdown of sales into the second quarter so far? Or is guidance more based on conservatism given potential market volatility and you're at record levels currently?
I think it's more conservatism than an emerging slowdown. We haven't seen an emerging headwind in momentum, but we are comparing to stronger and stronger comparisons as the year goes on. There is also the potential risk of market volatility. We're experiencing market volatility, but it could become more negative. We want to take that into account in our projections. It's partly the math of the comparison: we set records last year and it got stronger as the year went by, so comparisons will get tougher. We recognize the risk of volatility that could interrupt momentum, and we take that into consideration in guidance.
Got it. That makes sense. While ISP sales are really strong across all products this past quarter, the sequential improvement was largely driven by retail mutual funds, which is a little surprising given market volatility during the quarter. Can you give more insight into what you're seeing in client behavior and how they're viewing current markets and recent movements?
We saw the same dynamic and view it as a healthy sign. A retail mutual fund is the most basic product we sell and appeals to the broadest market. Younger investors appear more prone to save earlier, particularly into Roth and traditional IRAs, which is reflected in mutual fund activity. When mutual fund activity increases, it suggests broader acceptance of investing. If clients later need more sophisticated products due to volatility or changes in their condition, we have those options. We took the retail mutual fund strength as a positive sign for the future and will continue to validate that assumption.
We'll go next to Joel Hurwitz with Dowling & Partners.
Another one on ISP sales. Any color on annuity sales? You continue to significantly outpace the industry, up over 30% year-over-year in annuity sales. LIMRA data suggests total annuity sales are down a bit. What is driving your ability to grow faster than the industry there?
We see the same dynamic and have outpaced the industry. We believe it's a combination of factors: our client base is growing and maturing, clients closer to retirement want to preserve gains and seek guarantees, and we have strong partners offering appropriately priced products with good benefits. Execution and product availability have allowed us to capture demand and outstrip the industry in some periods.
Got it. And then, Tracy, on the quarter's remeasurement gains, how much of that was from mortality versus lapses? And on lapses, any color on how that's comparing to recent periods?
Joel, the remeasurement gain was a combination of both mortality and persistency. On a year-over-year basis, mortality drove a bigger improvement in the remeasurement gain in dollar terms than persistency. We've seen very good mortality performance since the second half of 2022 and made some remeasurement assumption changes in Q3 2025; we only recognized a portion of those improvements and continue to experience claims improvement. Q1 is typically heavier for claims given flu season and some COVID-related impacts, yet we saw favorable mortality variance. On lapses, during COVID we had extraordinarily high persistency, then saw a drop with higher lapses as some pandemic-era policies were less committed buyers. The earlier durations are more stable; the COVID cohorts continue to have runoff. We're observing that pattern and continuing to monitor trends before making conclusions about long-term sustainability.
We have a follow-up question from Jack Matten with BMO Capital Markets.
Just one on the RBC ratio. Is there anything notable driving the sequential movement this quarter? Was that just subsidiary dividends? Looking at Q1 last year the RBC ratio took a step up. Just wondering what was going on this quarter?
Jack, we typically like to keep RBC around 400% or above but not excessively high. When it gets closer to 500% we will take actions to manage it. We balance conservatism with capital efficiency. We want strong liquidity to support Term Life growth and to have capacity for holdco liquidity to support the business. We have doubled parts of the business in the recent two to three years and have worked to keep pace with growth while building infrastructure and improving client service. Capital strength is important to support growth and sustain through market downturns; that's our philosophy and what we're executing toward.
And we'll go next to Ryan Krueger with KBW.
In the ISP business, your net revenue fee rate has been gradually ticking up the last couple of years. What's been driving that? Is it the shift to managed accounts or something else? Would you expect it to continue?
Ryan, the ISP net revenue growth is driven by product mix. The strongest growth in recent years has been in managed accounts and variable annuities. We've stepped up our managed account platform and added many new products. We also introduced RILA and other variable annuity offerings that capture retirement demand by offering upside exposure with downside protection, which has attracted client interest. The principal distributor model in Canada has also been a strong contributor. These product mixes — managed accounts, variable annuities including RILA, and the Canadian PD model — are driving positive revenue growth and the higher net revenue fee rate you're observing.
And that is all our questions for today. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.