Good morning. My name is Casey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primerica Inc. Q1 2018 Earnings Results Conference Call. [Operator Instructions]. Thank you. I now turn the call over to Kathryn Kieser, Executive Vice President of Investor Relations. You may begin your conference.

Thank you, Casey. Good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings release, financial supplement, presentation and a 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 GAAP and non-GAAP financial measures are attached to our press release. During the call, we will 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 events to differ materially from those expressed or implied are discussed in the company's 2017 annual report on Form 10-K and may be updated by our quarterly reports on Form 10-Q. Now I'll turn the call over to Glenn.

Thanks, Kathryn. Good morning, everyone. Today, I'll share performance highlights and accomplishments that position us for continued growth, and Alison will cover our financial results. Our focus as a company and our messaging to our sales force leaders is to continue to build on the strong growth we've achieved over the past few years. The need in the middle income market for what we do is greater than ever. We're executing business enhancements and launching initiatives focused on distribution growth to broaden our reach and to help create more financially independent families on Main Street. We successfully expanded our distribution capability in the communities we serve by increasing the size of our life insurance licensed sales force 8% year-over-year to over 127,000 representatives. Beginning on Slide 3, you can see in the first quarter of 2017, we continued delivering solid earnings growth across the business and returning significant capital to shareholders. Our adjusted operating revenues increased 14% to $462.9 million, and adjusted operating income before income taxes increased 15% to $85.9 million year-over-year. Net adjusted operating income increased 27% to $66.2 million from the prior year period driven by increases of 22% and 8% in the Term Life and ISP segments, respectively, and the benefit of tax reform. We achieved 32% growth in adjusted operating EPS, and our ROAE expanded to 19.0%. We expect annualized ROAE to increase to about 21.5% for the full year 2018. Our diversified business generates solid earnings and returns a significant amount of capital to our stakeholders. In the first quarter, we repurchased approximately $46 million or 468,000 shares of Primerica's common stock. We plan to repurchase a total of about $200 million of shares during 2018 in addition to paying stockholder dividends and we plan to deploy capital at or above this level in…

Thank you, Glenn, and good morning, everyone. My comments today will cover the earnings results for each of our business segments and then conclude with a company-wide review of insurance and other operating expenses and income taxes. Starting on Slide 6. In the first quarter, our Term Life segment revenues and adjusted direct premiums both increased 15.5%, outpacing growth in benefits and expenses and delivering a 22% increase in income before income taxes year-over-year. Solid growth in adjusted direct premiums was driven by strong sales levels in the past few years; the runoff of business subject to the IPO coinsurance; and policies that continue beyond the end of the initial level premium period, which are no longer ceded to the IPO reinsurers. As we've discussed in the past, the coinsurance transactions entered into at the time of the IPO have given us a long runway for double-digit growth in adjusted direct premiums. The tremendous growth in issued policies over the last few years, the strengthening of the U.S. dollar in 2017 and the additional end-of-term premiums we began retaining last year led to adjusted direct premiums increasing 15.4% in 2017. As the post-IPO block of business has grown, the benefit of the IPO coinsurance continues to diminish. Given this, combined with stable exchange rates and our 2018 expectation for issued policies, we anticipate the growth rate in adjusted direct premiums to be between 14.5% and 15% in 2018 on a full year basis. In the first quarter, the DAC amortization ratio, which also includes non-deferred insurance commissions, was 16.6% versus 16.8% in the prior year period. Persistency in the quarter was generally in line with 2017 levels, and we expect persistency to remain at this level adjusted for typical seasonality throughout 2018. During the quarter, we experienced heightened lapses in…

[Operator Instructions]. And your first question comes from Sean Dargan with Wells Fargo Securities.

I realized that the first quarter is seasonally weak, but the production ratio is lower than it's been in recent years. Just wondering if there's anything behind that?

Yes, Sean. As we've said in the past, we've enjoyed productivity at the very upper end of our historical range for quite some time. And what we've seen is it edged back into the middle of the range very consistent with other first quarters. We see this as just normal fluctuation in productivity that happens over time as incentives come and go and we transition from one incentive program to the next. Also, as you've noticed, we had quite a gain in momentum on the ISP side of our business. And often, our 2 major products compete with each other for attention. And so you'll see as one advances, the other tends to contract just a little bit. So we believe what we're seeing is just the normal change in productivity. We have a lot of programs, a lot of efforts in place to make sure that we do everything possible to keep productivity as high as possible. But it's just normal trending as far as we see it.

Okay, great. And then if I can ask a question about where we stand with fiduciary duty. We had I believe it was the Fifth Circuit vacate the DOL rule, and then we have the SEC vote on something. I'm just wondering if you can give us an update to where you feel you stand in terms of your payout structure and your compliance and whether this is going to be a benefit relative to where you were a quarter ago.

Yes. Well, I think you got it right, Sean. The SEC has stepped in as the DOL rule was dealt with by the Fifth Circuit. The SEC has stepped up. And as we've often said, we believe they're the appropriate regulator to be dealing with fiduciary standard. So we're appreciative that they've acted under their authority and are taking a thoughtful approach to their recent rule proposal. They've requested substantial input from the industry as a normal part of this process, and that's where we are in the process right now. And so of course, we're participating in that, along with other industry participants and groups. So in a way, the process has started again, and it's not just begun, but it's in process. We're in that comment period, and so knowing exactly where it comes out is always hard to predict at the early -- at this early point. That said, we do believe this is the appropriate direction. And we are anticipating continuing to be able to do business as we've done in the past and continue to grow our business. So we don't see any new or unexpected hurdles. It's a process we deal with as we go. We'll comment on the proposal. I'm sure there'll be future versions of the rule that will be adjusted, and then we'll see where this comes out.

Your next question comes from Dan Bergman with Citi.

First, I just wanted to see if you could provide some more color around how the Term Life claims and persistency performed in the quarter relative to your expectations. It sounded like it was roughly consistent year-over-year, but I thought that the first quarter of '17 experience might have been a little bit unfavorable for those 2 items. Just wanted to see if you could separate out the typical seasonal impact and then any variation above and beyond that, if there was one. And to the extent that there was a difference versus expected, any quantification would be helpful.

Sure, sure. So first on claims, we do think this is definitely seasonal experience. We have [indiscernible] -- if you look back over the last 8 or 9 years, I'd say 6 or 7 of them, the first quarter had been elevated. So this is not atypical from what we've seen. And in fact, it was elevated in last year as well. This year, I'd say the claims were about $3 million-or-so elevated vis-à-vis whether it be a historical norm on an average-quarter basis, which was actually slightly better than it was last year, but relatively in line. We did see sort of that experience last year maybe a little closer to the $4 million range. So again, we don't look at that as having any ongoing issues and in fact, believes like I said, that it's pretty consistent with what we've seen in the first quarter in the past. With regard to persistency, there's a couple of things going on here. We generally believe that our persistency levels are pretty much stabilized as -- at where they are right now. We've been doing a lot of work on this just to make sure we're comfortable with it. And in fact, some of the things that we've seen have to do a little bit with the disasters -- natural disasters that unfortunately the country was faced with last year and quite frankly the year before. We specifically saw last year a block of policies that we had been asked to not lapse come and lapse in Louisiana in the first quarter of 2017. This year, we've been actually accruing, if you will, for that expected lapses even when states have asked us to restrict lapses. That being said, when we look at our first quarter experience, we are seeing a bit of an ongoing lag in a couple of regions that really were impacted, Puerto Rico, Louisiana being 2 of them. And so there is some of that, which we hope will taper out throughout the rest of the year. The other thing to mention, and it is -- we shortcut this and say it's the DAC ratio. But I will remind you that the DAC amortization ratio actually includes the line item of insurance commission. And because of this one program that we changed with our sales force, the compensation program, we can no longer defer the expense. So you're actually seeing it hit quickly or hit now rather than being deferred and amortized. That being said, it doesn't change the overall economics of the program. The amount of compensation total outlay is the same. But we do think that that's impacting the ratio by about 20 basis points year-over-year. And so if you ultimately look at it, I think what we've said is that on a full year basis, we expect the ratio to be around 16, which is really very consistent with what it was in 2017.

Got it. That's very helpful. And then if I could, just moving to the tax rate guidance. I was hoping you could provide a little more color on the GILTI provision, how that impacts Primerica? And then just given that I think the revised 23.5% guidance provided was specifically for 2018, should we think about the tax rate impact from that GILTI provision as kind of steady in longer term? Or is there a chance that, that impact or pressure moderates as we go beyond 2018?

Yes. And I just love the acronym in and of itself. I think it's just well said. But for those who don't know what GILTI is, it's the global intangible low-taxed income provision. And really, what it's meant to do is be a penalty for companies that have a lot of offshore earnings in low-tax jurisdictions. We, of course, have only offshore earnings in Canada, which now is actually, a higher tax jurisdiction than the U.S. So theoretically, and when we first did our analysis, we didn't feel that this would even apply to us. Given the rapid nature in which the legislation was written, and you probably heard this from other companies, there are a lot of things that need to probably have language cleanups done. This is one where the language was written where it, in our view, accidentally forced us to not be able to take full credit for a foreign tax credit. There has been some discussion by folks at the IRS and others that they will look at how this provision has been written, so we are fairly optimistic that a rewrite will occur that would allow us to actually reverse the vast majority of this tax. But at this point, given there has been no formal change, we felt it appropriate to go ahead and adjust the rate and accrue it. So before I talk about really next year, we are still hopeful that there are some modifications this year that curtail some of the impact.

[Operator Instructions]. Your next question comes from Mark Hughes with SunTrust.

The annuity sales rebounded this quarter. Was there anything in particular behind that? Why do you think they've gotten better here?

There was nothing specific I would point to, Mark. I would say that I think that this -- the clearing -- the parting of the clouds from a regulatory perspective has probably led some to be a little more confident in the future direction of the product and therefore consider recommending it again. During the period of grave uncertainty about variable annuities, I think a lot of people said we're just going to put those on the shelf and not talk about them and then we'll see what the future holds. And now I do think there's a little bit of clarity that's arrived and a little more confidence. And so that's what I would attribute it to. It's no special program or anything unusual that would create a spike in sales. It's just a little return of confidence, would be my opinion.

The outlook for 5% to 8% growth in policies, I think you expressed it in policies for the balance of the year, maybe premium. What gives you confidence that, that is going to reaccelerate?

Yes, that's policies issued, which is -- it's easier for us to transact -- for us to track transactions because sometimes size of transactions fluctuates, and so it's a good kind of fundamental stat for us to track. And as you know, our business is driven -- our insurance business production is driven by 2 major factors, the size of our sales force and productivity. We feel very good about the health and the growth and the size of the sales force, and so that's a fundamental factor that's in place growing at the 7% to 8% kind of range according to which metric you look at. And so we think that gives us an advantage if we can -- if we're successful in working on our productivity because the sales force has grown, then that's the other half of the equation. And that gives us a -- kind of leg up on the process since the sales force is larger. So if we can be effective in our incentives between now and our convention next year and through our convention next year, then we think we've got an opportunity to get that growth rate back up closer to the sales force size.

And then one more question. The sales force growth, I think you suggested you anticipate a little continued increase. I think last quarter, you had suggested it would increase at kind of high-single digit pace. Is that -- were you making a distinction with your outlook this quarter? Or is that -- you just happened to leave out that specific detail?

No, I think we're saying very much the same thing. I mean, as we all know, as you look at various quarters in the past and in the future, you got some quarters are more difficult comparables than others. And so I think you'll get some fluctuation by quarter, but there was not an intent on my part to create any difference there in the way we described it.

And if I could just sneak in one more. The asset-based revenue as a percentage of average assets, if I understand it properly, as you sell more of the managed account, that should help support that number or move it upwards? I think this year, down just a little bit year-over-year. Is there some point at which that stabilizes or the shift to managed accounts start to have a more material impact on that asset-based revenue number?

Yes, I think that is exactly what we expect to happen, that it would be -- it would -- it should bolster that rate. It's certainly a -- as we -- as I mentioned in my prepared comments, it has a higher asset-based earning stream than our other U.S. products. There's a little bit of noise in that ratio right now because of the DAC amortization in Canada. Just so you know, that's a little bit of what's causing the quarterly number to be off. But we do expect that number to continue to grow. We've talked about I think 40% growth this quarter year-over-year in those assets. The real thing you got to look at to gauge when it will be truly impactful is when that block of assets itself becomes sizable enough in relation to some of the other assets like the mutual funds in the U.S. So as that continues to grow, it will become more and more impactful. And so we're growing it at a pretty rapid pace. So I do expect that to become valuable to the ratio in short order.

So short order would be a couple of years? A year?

I think certainly, and I haven't done the actual math. And of course, you have to take into consideration all the other oddities that may happen from quarter-to-quarter like the Fed fund experience. But with that said, I would say you're already really seeing it, but by next year you should see it more pronounced.

Is Kathryn getting ready to cut me off here?

No, I'm not. You're welcome to ask some more questions, Mark.

No, I'm sorry. I couldn't resist.

And ladies and gentlemen, there are no further questions at this time. Thank you for joining. This concludes today's conference call, and you may now disconnect. Have a great day.