Primerica, Inc. (PRI) Q4 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the Primerica Fourth Quarter Financial Results Conference Call. All participants will be in listen only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kathryn Kieser, Executive Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to Primerica’s fourth quarter earnings call. A copy of our earnings release, financial supplement, presentation, and the 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 non-GAAP and 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 these expressed or implied are discussed in the company’s 2014 Annual Report on Form 10-K, as updated quarterly by our reports on Form 10-Q. Now, I’ll turn it over to Glenn.

Thank you, Kathryn, and good morning, everyone. In 2015, Primerica had its strong year of distribution growth since becoming a public company in 2010. We delivered record ROAE and operating EPS by successfully executing our strategy to drive organic growth, while actively repurchasing shares of Primerica’s common stock. Beginning on Slide 3, you can see operating revenues for the full-year 2015 increased 5% to $1.41 billion, driven by 11% growth in Term Life adjusted direct premiums and a 14% increase in Term Life operating income before income taxes. Investment and Savings Products sales and client asset values were slightly higher, while ISP operating income before income taxes remain consistent year-over-year. Total net operating income grew 5% to $191.1 million due to business growth with a modest 3% increase in insurance and other operating expenses in 2015. The weakening of the Canadian dollar during 2015 negatively impacted net operating income by approximately $7 million. And net investment income continue to experience downward pressure in 2015, primarily due to market conditions, lower yield on invested assets, and continued share repurchases throughout the year. Net operating earnings per diluted share increased 12% to $3.72, and ROAE increased 160 basis points to 16.9% compared to 2014. In 2016, we expect ROAE to continue to increase to around 18% for the full-year. During 2015, we increased share repurchases by $50 million to $200 million, enabling the retirement of approximately 8% of common stock outstanding as of December 31, 2014. We increased quarterly shareholder dividends by 33% from 2014. In aggregate, we’ve returned over 100% of operating earnings to stockholders in 2015. We plan to deploy approximately $150 million in 2016, and between $125 million and $150 million in 2017, in addition to stockholder dividends. In 2017, the level of capital deployment maybe modestly lower due to several factors, including the additional share repurchases in 2015, strong trends in life insurance policies issued required more capital on a statutory basis near-term, market volatility, and the Canadian exchange rate. Turning to the fourth quarter results, net operating income increased 2% to $50.2 million, while ongoing stock repurchases helped drive a 12% increase in net operating income per diluted share year-over-year to $1.01. The drivers of operating results in the fourth quarter are consistent with the full-year results I just discussed. In addition to strong financial performance, we also experienced very positive distribution results. We began the year with positive momentum, generated by solid growth in the second-half of 2014. Our underlying business fundamentals are very strong, due to the improvements we’ve made over the last several years, including changes to the licensing processes, to accelerate licensing momentum simultaneously with recruiting growth. Building on the solid foundation, we executed initiatives in 2015 to drive organic growth, including product enhancements, incentive programs, and sales force support. We introduced new innovative tech – sales technology, including cutting-edge sales tools and real-time recognition programs that appeal to a broader spectrum of representatives. Effective competitions like the six-month contest for the Atlantis trip also helped drive momentum in the second-half of the year. The result was distribution growth across the Board. As you can see on page four, our life licensed sales force grew more than 8% to 106,710 at year end versus the end of 2014, and was up 2% from the end of the third quarter. Recruiting of new representatives increased 13% and new life license – life insurance licenses increased 24%, indicative of strong recruiting trends and licensing focused in the second-half of 2015. We expect that the size of the life insurance license sales force will continue to increase in the first quarter of 2016, due to the recent recruiting and licensing trends. On a sequential quarter basis, recruiting and new life insurance licenses declined, reflecting seasonally lower activity levels in the fourth quarter. On a full-year basis, the ratio of new life insurance licenses to recruits was 17.4%, and we expect this ratio to continue to be near this range for the full-year 2016. We also expect the ratio of license non-renewals and terminations to sales force size to remain in the 8% per quarter range for the full-year 2016. The size of our mutual fund licensed sales force also continue to grow in 2015, up 5% from 2014, primarily due to ongoing growth and the size of the life insurance sales force and our continued focus on mutual fund licensing, as well as enhancing investment and savings product offerings. Our investment advisor sales force increased 13% over 2,900 representatives at year-end 2015. Now, let’s briefly review production results in the fourth quarter. On page five, you can see Term Life issued policies grew 22% in the fourth quarter, significantly outperforming the industry, which increased 3% year-over-year according to the Medical Information Bureau Life Index. Our larger life insurance licensed sales force as well as productivity that was at the high-end of our historical range drove the strong growth and issued policies in the fourth quarter. Productivity increased in the quarter to 0.22 policies issued per life licensed representative per month from 0.19 in the fourth quarter a year ago and remained consistent with the third quarter of 2015. Over the past few years, we’ve enhanced our life insurance products, underwriting technology, and point-of-sale applications to broaden our appeal to middle market clients. These long-term efforts combined with effective short-term incentives led to 18% growth in life insurance policies issued in 2015 versus 2014. We continue to see significant opportunity for our life insurance business, as the protection gap widens for middle income families and millennials makeup one in three American workers who were in the peak age for starting a family and buying homes. Turning to investment and savings products, net inflows for the fourth quarter were about $245 million, while average client asset values declined 1% to $47.5 billion from both third quarter of 2015 and the prior year period. ISP sales increased 3% to $1.41 billion from the third quarter and were down 3% from strong sales in the fourth quarter of 2014. Year-over-year the decline in the Canadian dollar value impact – impacted sales and client asset values. Sales of Canadian retail mutual funds were modestly lower even on a Canadian dollar basis. However, Canadian segregated funds continue to experience strong sales growth despite the currency headwind. The significant increase in fixed indexed annuity sales from recent product introductions, partially offset lower variable annuity and managed account sales that were impacted by slower market appreciation and volatility year-over-year. As you know, the Department of Labor has submitted the fiduciary rule to the OMB for review. It’s expected that OMB will approves the rule and the final regulation will be published in the coming months with implementation expected around year end. We’ve been very focused on planning for this potential outcome and believe our basic nonproprietary product offerings will position us to adapt to the new rule. Our team has been diligently working with our mutual fund and variable annuity product providers to develop a product set that will comply with the rule. We’re also expanding our advisory platform and product offerings, as well as working to increase our number of investment advisors. After we see the final version of the rule, we will further refine our approach as necessary. We’re confident we can make the business adjustments needed to ensure middle income families continue to have access to sound investment advice for retirement savings. In 2016, we’re working to build on our 2015 success. We began the year with a two-day senior sales force leadership of that to catch the vision for continued growth. This have been culminated with a companywide webcast to kick off the year followed in January by over 50 meetings across the U.S. and Canada that were attended by more than 35,000 representatives. We have focused the sales force on accelerating success by growing a number of license productive representatives on their teams in order to build a new generation of sales force leaders. Our business fundamentals are solid and we have significant competitive advantages, including extensive distribution in the vastly underserved target market. I feel good about where we are and our ability to leverage our core competencies to drive future growth. Now, let me turn the call over to Alison to discuss financial results in more detail.

Thank you, Glenn, and good morning, everyone. Let me share with you the key drivers behind our financial results for the quarter, as well as some insights into what we expect in the year ahead. Starting on Slide 6, our Term Life segment experienced strong growth compared with the fourth quarter a year ago. Operating revenues and adjusted direct premiums increased a 11%, reflecting the inherent growth trajectory in this segment, as well as strong sales in recent periods. Operating income before income taxes grew 17% and Term Life operating margins increased to 17.7% from the prior year period. On a sequential quarter basis, Term Life operating margin was down slightly, primarily due to seasonally lower persistency typically experienced in the fourth quarter. The benefit in claims ratio was 58.3% for the quarter, reflecting in current claims which were in line with historical levels and seasonally lower persistency. The ratio was lower than the 59.7% ratio in the fourth quarter of 2014, as persistency was somewhat lower this quarter versus last year, and benefits in their prior year period were elevated due to a revision to reserve assumptions on certain supplemental benefits. In 2015, the full-year benefits in claims ratio was consistent with 2014 at 59.4%, and we expect this ratio to remain around this level for 2016. The lower persistency this quarter versus the fourth quarter of 2014 contributed to the DAC amortization and insurance commissions ratio increasing to 17% from 16% last year. On a full-year basis, the ratio was 15.2% versus 15.3% in 2014, and should remain around this level for full-year 2016. The insurance expense ratio of 7.6% was in line with expectations in the fourth quarter of 2015. On a full-year basis, this ratio was 8.6%, and we expect it to decline slightly in 2016, as the block of business continues to build. On a full-year basis, Term Life operating margins increased to 17.3% from 16.9% last year. We believe that the Term Life segments operating income should generate – grow at a rate consistent with the growth in adjusted direct premiums with periodic fluctuations for unusual levels and incurred claims persistency and insurance expenses. We expect adjusted direct premiums to show attractive growth rate in the low double digits for 2016 with Term Life operating margins continuing to be in the 17% to 18% range on an annualized basis. Moving now to our Investment and Savings Products segment on Slide 7, you’ll see our ISP operating revenues declined 2%. Our ISP operating income before income taxes was 1% lower than the fourth quarter a year ago, reflecting market volatility in the second-half of 2015. Segregated fund DAC amortization was unusually low this quarter, largely due to a downward revision to assumptions for future redemption based on emerging experience. The lower Canadian dollar value relative to the prior year period negatively impacted the year-over-year comparison of revenue and pre-tax operating income by approximately $5.5 million and $2 million, respectively in the fourth quarter. Revenue generating product sales and sales-based revenue declined 4% and 5% respectively, when the strong results experienced in the fourth quarter a year ago. The sales-based net revenue ratio at 1.33% was lower than the prior year period, primarily due to fluctuation in the mix of product sales. Asset-based revenues were flat year-over-year in line with average client asset values declining 1%, due to volatile market performance and the lower Canadian dollar value. The asset-based net revenue ratio was 0.054%, up slightly from the prior year period due to a $1.2 million deceleration of DAC amortization related to the lower Canadian dollar values, favorable segregated fund performance, and lower revised assumptions for future redemption this quarter. Account-based revenues grew 10% year-over-year, largely reflecting the addition of a mutual fund provider to our record-keeping platform earlier in the year. Slide 8 provides a chart comparing ISP revenues by product, as well as the chart we’ve shown in past regarding potential DOL exposure areas updated for 2015 results. While the long-term economics are generally similar across ISP product, each product has different levels of sales-based, asset-based, and account-based net revenues as defined in our financial supplement. Changes in mix can drive period to period fluctuations in earnings pattern. For example, variable in fixed index annuities typically generate higher sales-based net revenues than U.S. retail mutual funds, but now account-based revenues like those are on U.S. platform mutual fund. Asset-based net revenues are relatively consistent among U.S. retail mutual funds in variable annuities, while fixed index annuities generate lower asset-based net revenues. Canadian segregated funds and U.S. managed account generated no sales-based revenues, but relatively higher asset-based net revenues in other products. Like U.S. retail mutual fund, managed accounts generated account-based revenues, while Canadian segregated funds do not. Moving to the corporate and other distributed product segment on Slide 9, the key driver of this segment’s results is allocated net investment income, which declined $5.6 million year-over-year in large part due to negative mark-to-market on the deposit asset backing a Citi reinsurance agreement. Also, contributing to the decline in net investment income was an unusually high level of income from called securities in the prior year period, a slight decline in portfolio yield and continued share repurchases throughout 2015. Our invested asset portfolio saw market pressures with net unrealized gains declining from $76.6 million at September 30, to $49.3 million at year end. The fixed income market saw significant spread widening and lower levels of liquidity at the end of the year. This was especially true in energy related issues. At December 31, approximately $143 million, or 7% of our invested asset and cash was invested in corporate funds within the energy sector. The portfolio includes 90 issuers across the energy space, including refiners’ large integrated oil companies and independent drillers, 88% of which are weighted investment grade. On a prolonged period of discussed oil prices will likely result in continued credit stress in the industry, we actively monitor our portfolio and believe our exposures to be manageable. We’ve mentioned in the past, we’re not immune to credit cycles and interest rate, we are unlike most life insurer and that our ratio of invested asset to cash to stockholders equity is low at two times and net investment income represents only 5% of our 2015 operating revenues. Now, I’ll move to a discussion of the company’s insurance and operating expenses. On Slide 10, you can see our fourth quarter expenses at $72.3 million, or $3.6 million higher than the prior year quarter and were $1.6 million higher than the third quarter of 2015. The year-over-year change reflects slightly higher employee related expenses, as well as an increase of $2.2 million for premium and gross related expenses, partially offset by a write-off of developed software in the prior year period. Looking forward to 2016, we expect to see the typical increases in insurance and other operating expenses in the first quarter with an approximate $8 million increase versus the fourth quarter, largely related to the annual grant of management equity award to retirement eligible employees that are fully expensed when granted, as well as other annual employee related expenses in the first quarter. Given the elevated expense level anticipated in the first quarter, we expect ROAE to decline to the 15% to 16% range in the first quarter of 2016. ROAE should rebound to an 18% to 19% range as expenses return to a more normalized run rate in the second quarter with an annualized projected ROAE of around 18% for 2016. While we are looking at 2016, one headwind we see is the Canadian exchange rate. Over the last couple of years, the U.S. dollar have strengthened considerably versus the Canadian dollar, resulting in a lower level of reported operating income, as well as Term Life face amount in force in ISP sales volumes and client asset values. So how you think about the potential exposure going forward? In 2015, the Canadian dollar value declined 14% on average throughout the year versus the U.S. dollar and negatively impacted our net operating income by approximately $7 million and operating earnings per diluted share by $0.14 for the full-year. As I wrap up, let me say that we remain committed to maintain a strong balance sheet by also executing the capital strategy Glenn described earlier. We continue to demonstrate a strong capital position of Primerica life Insurance company’s statutory risk-based capital ratio estimated to be around 450% and holding company liquidity at $86.5 million at the end of 2015. At the business sales that we continue to take out ordinary dividends, we expect RVC to remain in the – in excess of 400% in 2016. Now, I’ll turn it back over to Glenn.

Thanks, Alison. We achieved record distribution results in 2015. Our recurring income base and positive investment and savings products performance coupled with share repurchases continue to drive expansion of our operating EPS and ROAE underscoring the strength of our franchise. As we look to the future, we will continue to execute initiatives to grow distribution capabilities, increase earnings, and deploy capital to drive long-term shareholder value. Now, let’s open it up for questions.

Thank you. [Operator Instructions] And our first question will come from Suneet Kamath of UBS.

Hi, good morning. If I look at Page 8 of your deck, obviously the variable annuity kind of jumps out in the upper left table. So some carriers have talked about moving that product to more of a sort of a fee-based compensation arrangement versus upfront commissions and have had from what they say productive discussions with distribution partners. Just wondering, it would seem to me that that would be a big change in the compensation structure from an advisor’s perspective. So wondering how you think your advisors might react to such an arrangement.

Yes, the – I’m assuming this is in the context of DOL changes and so forth, and the impact of DOL on the variable annuity business. And as we talked about before, our first approach is to work with our product providers on a levelized or uniform compensation structure that eliminates conflict. And we include our variable annuity and/or including our variable annuity providers in that and are getting a high level of interest in working toward a solution. So, you’re right. In that that would be a significant change, not only for the Primerica model, but I think for the industry overall. And we are looking at the possibility of the – of a solution outside of the best interest contract exemption being a levelized or uniform commission structure across all products to include mutual funds and variable annuities. And, again, our product providers had a positive response to those discussions and we are in those discussions right now, and of course the solution will not only help Primerica, it would help other distribution channels as well. So it’s not unique to a Primerica issue. So that’s our first approach, and we believe there’s a good possibility, there’s a solution in there.

And just so I understand, so is what you’re saying that VAs equity funds, fixed income funds, money market funds would all have the same sort of compensation and fee structure?

That’s correct. In order to eliminate the conflicts created by different compensation that would have to be the case.

Index annuity is not fall into that, because and a lot depends on where they will land. But we think that the current exemption for FIAs will still persist in the new role. So that is true for both mutual funds and variable annuities. Money markets do raise some questions that’s how we would handle those, but for the most part mutual funds and variable annuities would fall into that.

And your manufacturing partners are working towards that solution. It just seems like such a significant change relative to what we’ve seen in the past?

Yes, we’re in those discussions right now. We’ve received positive response in those discussions, because as I said again this is an industry question, not just a Primerica question. And so it provides motivation for them to look for a creative answer that will help a number of distribution channels in many different companies. So, again, there’s a plenty of work left to do. We still haven’t seen the final rule as you know, but we are encouraged by their interest in this solution.

Understood. And I’m not trying to make those a Primerica issue, I just think you guys have valuable insight given your model. My second question is just on 12b-1 and marketing support payments received for manufactures, there has been some discussion in the market, some distributors kind of moving away from those. So can you give us a sense of how big of an impact that is your revenues and how you view those marketing support payments, if you receive them?

Well, at this point we are not in the discussions and moving away from them. The class of shares putting aside DOL, the class of share that we sell is a mid range, mid front-end load, and that provides for those ongoing types of fees. With that said, I think the whole DOL discussion and what Glenn was just describing, we’ll have that looking at how we construct our revenue sources as well as our expenses. And so I would say that there is some room for that changing. But at this point we are not looking to change, putting aside they love the share class the type of share we are selling.

Got it. And then just order of magnitude marketing support payments just roughly what percentage of revenue?

We – I don’t believe we’ve share that. But our marketing support revenues on mutual funds are very consistent with what you see in the industry. I think it’s pretty, I mean, pretty straightforward at a 25 basis point type of fee. It’s the general 12b-1 fee that we get, which is very consistent with other fund providers. We do get some other forms of marketing support, but that has a lot to do with the fact that their giving access, it has to do with their access to our distribution. So for the most part it’s the 12b-1 fee.

All right. Thank you.

And the next question will come from Ryan Krueger of KBW.

Good morning, Ryan.

Hi. Hey, good morning. I mean, you guys made a lot of helpful info on the ISP revenues and the way to think about how that could be impacted those, hoping if you talk a little bit about the potential cost and what type of cost you might expect related to complying with the new deal of those?

Yeah Ryan, let me take that one. Again, as we understand the rule today, not having seeing the final version, we continue to have the view that we will operate outside the best interest contract exemption, and that’s for a number of reasons previously discussed. But also as we study the rule, many of the additional expenses that would be created and borne by the company are created by compliance with that best interest contract exemption. And so by operating outside of it, we escape what we understand many of those to be. It’s not that the change will not cause us to incur any expenses, there will be some expenses. But they’re very much in our sweet spot. We – they’re preparing our sales force for the new way of doing business. The new conversation, understanding the difference between education and advice, so there is some upfront training, we would anticipate. There’s the cost of ongoing compliance, but we have a very robust compliance infrastructure already in place. There may be some additional costs there, but we don’t perceive those to be significant. Many of the discussions that I have heard around increased cost or the cost of compliance with buys, the need to provide additional information prior to sale and ongoing information. And so if we operate outside of buys then we don’t expect to be impacted by those. Should the best interest contract exemption be revised in a more positive way, we will reconsider it when we see it. And our understanding of the discussions is some of the revisions being discussed are exactly on this topic of the cost of implementing and living under that exemption. And so, if some of that should change, we’ll reevaluate, but right now, we don’t see that as a significant dynamic for us to deal with.

Okay, thanks. That’s helpful. And then I want to move on to the distribution force and productivity. So productivity was up quite a bit in kind of ran towards the higher end your historical range last year. Do you – is that something you think is sustainable as we move forward?

Well, we got to this point after a tremendous amount of effort over a long period of time, working on the fundamentals of our business. We really for the last couple of years have tried to look at every area of our business that we believe there was some leverage and if there was a fundamental change or improvement either in our licensing process, or sales support system, or point-of-sale dynamics, our technology, we’ve been working on that for an extended period of time. And as you saw from our results in 2015, beginning to see some very positive results from that. So I believe that means that it does give us some sustainability in both our ability to grow distribution, as well as the key productivity in a healthy position at the high-end of the range. So we feel like we’re getting results out of our efforts and we should continue to see some of this.

All right. Thank you.

The next question will come from Stephen Schwartz of Raymond James.

Hey, good morning, Stephen.

Hey, good morning. This is actually Carl Doran for Stephen Schwartz. My own question have already been answered, but I’ll add one more in Canada. I believe last quarter, Glenn you mentioned that you just couldn’t see the impact of the actual insurance licensing change, the exam change, giving the implementation on January 1?

Correct.

My question is since the implementation, have you seen any issues regarding Canada recruits since the beginning of the year?

Well, you are correct. The change was implement on January 1. That was the very beginning of the process, and of course, we’re in an overlap period right now, where we’re still seeing some runoff from the people that were involved in the old system at the end of 2015 or coming through in their licenses that are being issued. Those that entered the new system as of January 1, have to go through the pre-licensing, training process, the classroom process, then be certified by the classroom provider before they can go and take the new multistage exam, modular exam that now has four modules rather than one except in Quebec, where it has fewer modules than it used to have. And so it’s still very early in the process. Most of the people are still in the pipeline somewhere as we were just 45 days or so into the process and trying to get through the education fees, through the certification fees, and on to the province to write the actual exam. So with that level of experience, we’ve had a very good uptake in the number of people entering class and staying in class, and also writing the certification exam that’s the precursor to the actual exam, only a handful that made it to the province in a written exam. We’re seeing, because it is a modular exam, where you now pass it in four pieces. We’re seeing the advantage of people passing part of the exam. And then if they fail part of it, they only have to go back and retake the part they failed rather than the old system where they had to retake the whole exam. And so we’re seeing the positive side of that. In that a retake process is a little easier than it used to be. But we are seeing, as we expected some dislocation with a new process, any exam process that’s been in place for a number of years changes, it takes a while for the industry to adapt. And that’s the expected process we’re going through right now. It’s still so early. We don’t have any past ratio trends, or anything like that that we would be able to analyze to determine, which point it’s going. I’m encouraged by the fact that our sales force is recruiting strong, sending a large number of people through the training process, and we are having people engage too early to tell you at this point what the results might be.

Yes, sure. Fair enough. And then I know you did hire a third-party to, I guess, study whether the four modules rather than the one exam was actually harder. Was there any conclusion to that?

Yes, we did that as some of our process. But then also we ask the exam providers in Canada to hire an outside psychometrics of third-party to evaluate this process. Now, again, it’s too early. There’s not enough data for that evaluation have taken place. So that’s still to come is the regulators third-party review of that. But we did our own and that was one of our concerns was that the same exam given in four pieces, it is more difficult to pass in a single exam, all given at the same time. It’s simply, because people might have to go to an exam site more frequently than before and schedules may not permit that. So that was one of our concerns going in, addressing that concern, making those concerns known to the regulators resulted in some accommodations around that, a transition period on the front-end, where the exam continues to be marked as we review the quality of questions and accuracy of questions on the front-end. So we’re going through a transition period with the agreement of the regulators in Canada to monitor for that dynamic that you described. And we expect there to be some accommodation around it if it’s needed.

All right. Well, thank you.

The next question comes from Geoff [ph] Smith of William Blair.

Good morning, Geoff.

Good morning, everyone. The sales force showed nice growth at a percent, obviously, but recruit growth was up quite a bit more than that. Given the economic slowdown that we’re kind of going through, I guess, you think that would be down a bit. What do you think is driving that, in this the consumer maybe a little better off than certain economic indicators might suggest?

It’s always better when we’re in a period of confidence and a period of uncertainty. But it’s really difficult to tell what makes the middle market uncertain. I’m not sure they track the stock market, the indexes is frequently as the upper income market does and are impacted emotionally by that. It’s the type of thing you asked about what’s your real wallet issues for them. And while there is uncertainty and a lot of discussion about that uncertainty in media, there are also some positives out there. I’ve seen a number of stats on how much is the average family saving as a result of the drop in gas prices. And I’m seeing everything from $350 a year to $1,000 a year. That’s a real money in the pockets of the middle market to that, will positively impact our ability to recruit people as well as make sales. So there are – as always there are offsetting dynamics going on. But in the middle market, we’re feeling good. There is a sufficient amount of confidence for us to continue to have strong recruiting numbers, the results that you described, the strong results are a combination of strong recruiting, as well as strong licensing simultaneously. And that some of those fundamental support systems we’ve worked on over the years to create that. And so I think we have a good level of confidence in the middle market right now. I think it does give us the capability to continue to recruit strong numbers. Keep in mind that you are always going to have a lag time as recruits pull through the licenses of a quarter or so. And so you would always see recruits and licenses grow in exactly the same percent in any one quarter. But if you take that lag in the consideration, you’ll see a really strong recruiting quarter followed by really strong licensing quarter generally. And as we stated, we expect our pull through rate to continue at its current level, as we continue to grow recruiting, and that’s part of the results of the fundamental strength we see in the business.

Okay, great. On the share buyback front, obviously they were up quite a bit at $200 million, I think, guidance has been closer to $150 million going forward. But does the recent pullback in the stock change that calculus at all?

Well, the $200 million was a bit of a special case. We had originally planned to do a $150 million in 2015. Actually because of the pullback in the stock earlier in 2015, we actually got authority from our Board to increase that by $50 million. So we essentially hold some of what we have planned to do in the future into 2015. So that’s why the number was higher than anticipated. And while we certainly will take advantage of what we can with regard to the timing of our share buyback, we do think we’re still generating in the range of that Glenn discussed this year, and for 2015 and add about $150 million. The timing maybe moved a little bit by where the stock price is, but for the most part, I’ll stay in that range.

Got you. Okay, thank you.

And the next question comes from Sean Dargan of Macquarie.

Hello, Sean.

Thanks. Hello, Glenn, a couple of quarters ago you gave us some detail about the, I don’t want to say concentrated nature of the securities license reps. But it’s a relatively small number of the 100,000 plus that do the majority of your ISP business. And I think some folks are worried that if some changes to the business model comes down the pack as a result of fiduciary duty that those reps would leave the platform. But I’m just wondering today that those folks tend to have a larger life book that would be difficult to walk away from. I mean, do they tend to build a life book first before they become ISP specialists?

But most people enter our business, Sean, virtually all through the life insurance door and start a life insurance business first. But over time they migrate to their strengths, their personal strengths, as well as the markets they happened to be in. And so some of those high producers on the security side have a good size of life book and others are more concentrated in the investment and savings business. But I don’t think that’s the thing that you should look at determine our continued attractiveness to that group. We don’t see anything in the DOL world leader, as we understand it today or the discussions of what it might be that put us at a competitive disadvantage such that people would leave our company to go to another company. We’ve – as we’ve talked about before continue to build out our platforms and expand our product lines and become more and more attracted not only to our own people, but to people outside our company. And in this dislocation, there may be opportunities out there for us to be attracted to people that aren’t here today. But it’s generally a case of, if they have the appropriate licenses, we’ve got the product set for them to sell and our products sale is going to compete with any other companies products set. So we don’t view these coming changes is something that presents on attraction of another model that would be a threat to us in the way they perhaps that concern might of resin.

Okay. But if they did start out as Life reps, you presumably, they’re still collecting an override for…?

Sure.

In business then on, okay.

They have ongoing compensation. They have an organization underneath them. And they also have the ability to swing their business back toward life insurance, if that was something it was helpful for them in accommodating the change, which of course would be a positive for them and positive for the company.

All right. Thank you. That’s all I had.

And next we have a question for Mark Hughes of SunTrust

Yes, thank you. I apologize I just jumped on the call. Curious about the productivity was up very nice year-over-year, it’s been up all year. Is that a function of the conference, do you think or would you expect it to be sustained at a higher level in coming quarters?

I think the productivity increase is most things the Primerica is a combination of things. First of all, I do believe it’s based in the fundamental improvements that we’ve made over the last few years to the business, working on that specific item of what can we do to make our products more attractive, make our sales process easily – easier and more technologically advanced, more attracted for the process and so, and then also the wise use of incentives in advance on top of that. I think what you see is, if we don’t have strong fundamentals, then you don’t get the sustainability, you get a temporary impact of an incentive whether it would be in an event like our convention, or a contest, or a monthly incentive sales campaign, where you really get benefit as when you have both strong fundamentals and effective incentives and that’s how we describe where we are today.

Right. And I’m sorry, I missed it. But did you get any sense of how recruiting trends have been recently here in Q1, whether this very good growth is being sustained?

Yes, we continue to see very positive trends in our business. As I stated the events to kickoff the year, we recognized we had a strong growth year last year and we’re going to have to make sure we’re at the top of our game to continue that growth on top of growth. And so we invested a tremendous amount of time and effort in January and making sure that we had an effective kickoff to the year in meeting and communicating with both our senior leadership – at a senior leadership meeting in a company webcast, as well as going out into the field those 50 events that I mentioned were all attended by home office leaders to represent the company and present the company message, cast, vision for continued growth. And so we feel like we had a very positive impact with that, and we’re seeing some good results. So we’re encouraged by that.

Thank you.

And next we have a follow-up question from Ryan Kruger of KBW.

Hey, thanks for the follow-up. I had one for Alison. On the buyback for 2017, is it still possible that you could do another reserve financing transaction to offset some of the headwinds that you discussed, or are those probably kind of nearing the end given PBR implementation in a couple of years?

So, that’s a great question. The only year that we – the only year, as I should say that, we will have that will not be by 2017 that will not already have been financed will be 2015 and 2016. So there’s conceivably before PBR goes in, the thought – well, that we could do something for those two issue years. Obviously, those reserves take a little bit of time to build. So it won’t be all that substantial, but we certainly could look into doing it to just get those two issue years on the same level as all the enforce would otherwise be. At this point it’s a little bit too soon to tell, given the one thing I can say is that with the new rules that have come out whatever financing we did would most likely be to a level that’s consistent with “PBR” reserves rather than truly economic reserves like we were able to do prior to the rule changes. So most likely we’d like to wait to see what the actual PBR reserve rules come out at, because I think that would be the gating position as to what you could finance to.

Okay, thanks. Very helpful.

And we are showing no further questions at this time.

Great. Well, thank you, everyone, for joining us today. We appreciate your time. We look forward to talking to you next quarter.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.