Primerica, Inc. (PRI) Q2 2020 Earnings Report, Transcript and Summary

Hello. I would like to welcome everyone to the Primerica Second Quarter Earnings Results Conference Call and Webcast. [Operator Instructions] As a reminder today's event is being recorded. I would now like to turn the conference over to Nicole Russell, Head of Investor Relations. Ms. Russell, you may begin your conference.

Thank you, operator, and good morning, everyone. Welcome to Primerica's second quarter earnings call. A copy of our earnings press release, along with materials relevant to today's call, are posted on the Investor Relations section of our website, investors.primerica.com. Joining our call today are our Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Alison Rand. Glenn and Alison will deliver prepared remarks, and then we will open the call up for questions. During our call, some of our comments may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. The company does not assume any duties to update or revise these statements to reflect new information. We refer you to our most recent Form 10-K filing as modified by subsequent Form 10-Q filings for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also be referencing certain non-GAAP measures, which we believe provide additional insight into the company's operations. Reconciliations of these non-GAAP measures to their respective GAAP numbers are included at the end of the earnings release and are also available on our Investor Relations Web site. I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks, everyone, for joining us today. Alison and I will provide a recap of our quarterly results and share with you how the COVID-19 pandemic is impacting our business. Second quarter results continue to reflect the strength and resilience of our business model, including the following financial highlights shown on slide three. Adjusted operating revenues during the quarter were $522 million, up 4% year-over-year, while adjusted net operating income was also up 4%. Diluted adjusted operating income per share was $2.44, which represents a 10% increase year-over-year and ROAE was 25.6% compared to 25.1% in last year's second quarter. Before going into the details of the quarter, I'd like to provide an update on the market dynamics impacting our business, which you can see on slide four. First, the positives. We believe that our unique business model is demonstrating its strength during the COVID-19 disruption. The flexibility of our entrepreneurial business opportunity, combined with complementary business lines of life insurance, investments in our emerging mortgage distribution business have positioned us to meet the needs of the middle market. Our efforts to make fundamental improvements and build momentum early in 2020 are also paying off in this unique environment. We have seen extraordinarily high interest in our financial solutions among Main Street consumers. During this period of limited mobility, many families are taking action to improve their financial game plans which was reflected in the strong life insurance sales results we saw in the quarter. Our field and corporate leadership have responded to the environment with a high level of focus and specific action plans to drive business. For example, adding the efficiency and reach of web conferencing to our traditional face-to-face model has not only allowed us to continue to meet clients' needs, it has also allowed us to extend our reach across the U.S. and Canada through the use of nonresident licenses. While we're excited about these positive trends, we're also closely monitoring some potential headwinds and recognize the uncertainty that lies ahead. We know that change, both positive and negative, creates disruption that must be managed. In addition, distinguishing between the temporary and long-term impact of client sentiment, market forces and the effectiveness of our incentive programs is more difficult to assess. Last quarter, we discussed two key challenges that we were anticipating for the second quarter and beyond. First was the disruption in our ability to obtain paramedical exams and other underwriting requirements for traditionally underwritten life products. I'm happy to report that our providers responded quickly and our underwriting capabilities in the U.S. are back at full capacity, while in Canada, they are about 75% of normal. The second challenge we discussed, the testing, processing and issuance of permanent life insurance licenses remains impaired in most states and provinces. I will discuss how licensing administrators are responding to this disruption in just a moment. We are confident that we will meet the challenges of the current delays, and we will leverage some of the necessary changes as long-term positives. However, in the near term, these adjustments are creating noise in our numbers for comparative purposes. We are positioning our incentives aggressively during this period of disruption to focus on activities within our control such as recruiting and field training. As the licensing process begins to normalize, we will rebalance our incentives to add focus on permanent licensing. Now let's look at our business by segment, beginning with distribution on slide five. The excitement created in our field by the $49 licensing fee during the last two weeks of March led us to continue the incentive into April. We then extended this incentive program into May and June as licensing delays became apparent. Aided by this incentive program, total recruits during the quarter were $133,123, up 54% over the second quarter of 2019. In addition to creating energy in the field, increased recruiting also brings access to warm markets where field training occurs, which added a tailwind to life sales. And to ensure that recruits remain engaged, we enhanced our field training program and increased the profile of our ancillary products that can be sold without a license. As I mentioned earlier, the licensing process remains compromised. To date, 26 states have responded to processing delays in the normal permanent licensing process by issuing temporary licenses. We are preparing to convert as many as possible of those temporary licenses to permanent licenses once the licensing infrastructure reopens. But at this time, it's too early for us to project our rate of success in converting licenses. In addition, 23 states have also extended the renewal dates of existing licenses due to COVID-19 crisis. These extensions prevented a number of our reps licenses from expiring during the quarter. The total number of new licenses issued during the quarter was 12,250, up 12% year-over-year. Our sales force ended the quarter at 134,157, up 4% year-over-year and included both 3,400 COVID-temp licenses and 4,400 licenses with extended renewal dates. It's too early for us to accurately project the normalized size of our sales force as doing so would require us to know the number of COVID-temporary licenses that will convert to permanent licenses as well as how many licenses will renew when states resume normal operations. The length of time before the licensing infrastructure returns to normal will also impact these outcomes. We believe that certain challenges today could become long-term positives. The growing acceptance of remote license testing is one such example. Historically, testing has been done at exam centers, most of which are currently operating at limited capacity. Today, remote testing is alleviating some of the pressure caused by the COVID-19 pandemic and is currently available in all states and provinces for securities licensing and in 14 states for life licensing. We anticipate the rollout of remote life license testing to continue with 5 states and 7 Canadian provinces coming soon. This is an exciting development for the future because remote testing adds flexibility to the licensing process. Another challenge that could turn into a long-term positive for our business is the added efficiency with which our reps can interact with clients. Our rapid adjustment to remote client interactions has had a positive impact on recruiting and sales. Transactions completed using web conferencing technology are identical, whether the client is next door or hundreds of miles away. So many of our representatives are now able to extend their geographical reach. Sales force members do require a non-resident life license to sell life insurance outside their home states, which can be readily obtained in order to make out-of-state sales. During the quarter, our representatives received more than 8000 non-resident licenses, up 400% from the same period last year. This new trend positively impacted non-resident sales and recruiting. Our Term Life business on Slide 6 reflected the middle market's heightened interest in protecting their families with life insurance. Our ability to assess their needs and complete life insurance transactions remotely led to a 20% increase in issued policies during the second quarter. Our business model, product set, transaction technology and educational approach positioned us well for these unique times. Our sales force leadership also reacted quickly by increasing their level of engagement. Together, these dynamics resulted in a productivity rate of 0.24 policies for life insurance licensed representative per month. And while the second quarter is usually seasonally strong, the second quarter of 2020 was exceptional by comparison. Slide 7 summarizes the results from our Investment and Savings Products segment. Sales of $1.7 billion declined 13% compared to the second quarter of 2019, which was in line with our expectations. While market volatility kept many investors on the sidelines, and we saw fewer larger investment trades, investors with automatic monthly investments largely continued dollar cost averaging throughout the quarter. Net client inflows of $600 million were more than double last year's second quarter as clients remained invested during the market's volatility and continued their long-term investment plans. Redemptions were noticeably lower than expected at $1.1 billion. Client asset values ended the quarter at $68 billion, up $9 billion compared to the March quarter end, as the market rebounded from the first quarter correction, while average client asset values, which more closely correlate to revenues, were flat year-over-year at $64.6 billion. With the second quarter behind us, I'd like to take a few moments to discuss what we're seeing so far in the third quarter and then talk about our expectations for the second half of 2020. Due to continued disruptions with the licensing process, we extended our $49 licensing fee discount through the end of July. While there are still delays in the process, we returned to the $99 licensing fee in August, as we begin to balance our messaging to include greater emphasis on licensing. Projecting how long states will continue to issue temporary licenses and extend renewal dates is very difficult. It's also too early to anticipate how much disruption the delays in the process will create in our permanent licensing pull-through rate. We believe these anomalies may persist through the remainder of 2020. July showed continued momentum in recruiting and life sales. Investment sales also showed signs of improvement, but year-over-year ISP sales comparisons will be difficult due to the strength of last year's second half. Based on current trends, we would expect new issued policies to increase between 12% and 18% in the second half of the year, which would result in a full year 2020 over 2019 growth of around 15%. Our ISP business, we would expect sales to decline by approximately 10% to 15% compared to the second half of 2019, resulting in full year sales decline in the low- to mid-single digits compared to the previous year. Beyond our insurance and investment business, our recently launched mortgage distribution business is beginning to show early signs of success, and we've gained valuable insight and experience. Our focus is on refinancing mortgages and consumer debt in an effort to assist families with consolidating and accelerating payments on their debt loads. Today, we are active in four states and plan to continue expanding our program in the future. With that, I'll now turn it over to Alison.

Thank you, Glenn, and good morning, everyone. I will begin today by walking you through the quarter's key earnings drivers by segment, followed by a review of companywide insurance and other operating expenses. As I go through each area, I will highlight where COVID-19 has impacted and likely will continue to impact our financial results. I will end my prepared remarks with a discussion of our invested asset portfolio and our capital and liquidity position. Starting with the Term Life segment on slide eight. And operating revenues grew 11% year-over-year to $328 million, while operating income before income taxes increased 13% to $95 million. The Term Life margin increased to 20.9% for the quarter as higher claims were more than offset by strong persistency and lower insurance expenses. COVID-19 was the real story behind the second quarter Term Life results with four main themes emerging. The first was the expected increase in debt claims. During the quarter, we recognized $10 million in COVID-related net claims on an estimated 935 cases. Given our insured population of approximately five million lives, this equates to about 190 extra deaths per million lives. In contrast, the U.S. and Canada reported 135,000 COVID-19 deaths, which, based on the population size of 367 million, equates to a death rate of 368 per million or nearly twice Primerica's experience. Our experience reflects the younger age and lower frequency of comorbidities in our insured population relative to the general population. Our COVID-19 claims came from policies that had been enforced an average of 20 years with an average attained age of 63. As we stated last quarter, at year-end 2019, only 1% of face amount in force had an attained age of 70 or higher and 12% of 60 or higher. The second COVID-19 theme relates to persistency, which has been steadily improving over multiple quarters. As we entered the second quarter, where we typically see our strongest persistency, there was concern that economic uncertainty and unemployment rates could increase lapses. However, given the increased awareness of the value of protection products in our marketplace, persistency across all policy durations came in at very strong levels for the quarter. During the quarter, we extended some premium grace periods in accordance with state regulations but nearly all of these extensions have since expired and did not impact our persistency results for the quarter. Looking at page 10 of the financial supplement, the terminated face amount during the quarter actually decreased versus the prior year when it is expected to increase each year as the in-force block ages and grows. From an earnings standpoint, the strong persistency reduced the DAC amortization ratio to 12.3%, but did generate higher benefit reserve increases, which, when combined with the additional $10 million in COVID-19 claims led to a benefits and claims ratio of 61.5% for the quarter. Net, we believe the impact of strong persistency on reserves and DAC added about $4 million to the second quarter pre-tax earnings. The third COVID-19 theme relates to the strong level of sales that Glenn discussed earlier, which, when combined with strong persistency led to an 11% increase in adjusted direct premiums year-over-year. We estimate that ADP growth in excess of 9% growth we had expected for the period, added about $3 million to pre-tax earnings for the quarter. Finally, the fourth COVID-19 theme relates to insurance expenses, which were lower than anticipated during the quarter by about $5 million due to business travel restrictions, event cancellations and so forth. We expect many of these savings to reverse in the second half. I will discuss second quarter companywide expenses as well as the full year forecast later in the call. Looking ahead to the remainder of the year, we expect adjusted direct premium growth for the full year to be in the 10% to 11% range, considering the strong first half of the year and the expected sales growth Glenn discussed earlier. While we cannot predict the depth or length of this pandemic, based on the estimates of 75,000 to 80,000 incremental deaths in the U.S. and Canada, we expect to recognize about seven million of COVID-19 net claims in the third quarter. While Congress is currently negotiating an extension of stimulus support, future stimulus remains uncertain. We could see high unemployment, which could pressure disposable income for the middle-income market and potentially reverse part of the strong persistency we experienced during the second quarter. However, we believe the heightened awareness of mortality and the value of Term Life insurance will continue. Turning to slide nine. ISP segment operating revenues of $164 million decreased 5%, while pre-tax income was essentially flat year-over-year. Sales-based revenues declined 12% and slightly less than revenue-generating sales due to a high volume of smaller trades, which did not meet breakpoints. While asset-based revenues and average client asset values remained largely unchanged. Expenses from sales- and asset-based commissions were in line with their respective revenues, while amortization of Canadian segregated fund, DAC, was favorable by approximately $2 million due to market recovery. We ended the second quarter with $68 billion in client asset values, which were further bolstered by strong equity markets in July, and that will provide a tailwind to third quarter asset-based revenue. As a reminder, assuming today's mix remains constant, every $1 billion increase in average client asset values resulted in an additional $500,000 in asset-based net revenues per quarter. As Glenn mentioned, we expect third quarter ISP sales to be lower than the prior year by about 10% to 15%. This equates to a year-over-year decline in sales-based net revenues of $2 million to $3 million in the third quarter. On slide 10, consolidated insurance and other operating expenses of $100 million remained flat year-over-year. As I noted earlier, COVID-19 has had a real impact on both the timing and the overall level of expenditures across our organization. For example, stay-at-home orders reduced business travel and other operating expenses, while travel restrictions also led to the cancellation or modification of field-incentive meetings and other in-person events. Looking ahead, we remain committed to making strategic investments that position Primerica competitively including our technology infrastructure, digital platform and the expansion of our mortgage distribution program into additional states. Certain operating expenses, such as travel and headcount additions will continue to come in lower than originally anticipated due to COVID-19. Our current estimate is that full year insurance and other operating expenses will be about $430 million, $105 million to $107 million in the third quarter and $107 million to $109 million in the fourth quarter. We also expect second half insurance commissions, which are reflected in the Term Life DAC amortization ratio to be $3 million to $5 million higher than usual as we ramp up licensing initiatives and other non-deferrable commissions using funding from sales force meetings and event cancellations. Collectively, we expect expenses to increase by about $18 million to $20 million year-over-year versus our original guidance of $25 million to $30 million. Moving to investment income and our invested asset portfolio, on Slide 11, adjusted net investment income on a consolidated basis was $2 million lower year-over-year as lower yields on the portfolio were partly offset by growth in the size of the portfolio. At the segment level, more investment income continues to be allocated to the Term Life segment to support growth in the block of business, would be offset in our corporate and other segments. Our invested asset portfolio remains well diversified across industries and issuers. Despite significant actions by rating agencies over the past few months, we have maintained an average credit rating of A, and our below investment-grade mix remains very manageable at about 4%. Credit spreads retraced the widening from the first quarter and the portfolio moved from an unrealized loss of about $1.2 million at March 31 to an unrealized gain of almost $120 million at June 30. We continue to evaluate our portfolio for credit issues, especially in the sectors under more pressure, such as energy and air travel. We also performed a review of our commercial mortgage-backed security portfolio and believe we have a high level of credit protection in the names we hold, which is evidenced by the AA+ average rating on those holdings. For the second quarter, we had only modest investment impairment of about $500,000. Turning to Slide 12. Liquidity at the holding company remains strong with invested assets and cash of $256 million at the end of June. Primerica Life's statutory risk-based capital ratio was estimated to be 400% at quarter end. The primary reason for the drop in the RBC ratio since last quarter was the higher use of capital to fund new business that would expect that -- higher use of capital to fund new business that was expected when the second quarter dividend from Primerica Life was determined. While increased sales are a benefit long term, there is initial strain, partly offset particularly to fund the commissions and underwriting costs that we incur. We expect the RBC ratio to be back in the 420% range by the end of the year and believe our capital levels are more than sufficient to meet our operating needs. We remain committed to our dividend, which at the current rate, requires about $16 million per quarter into our planned annual share repurchase goal of $250 million, of which approximately $200 million has been completed as of July 31st. With that, operator, I will open the line up for questions.

[Operator Instructions] And the first question comes from Andrew Kligerman with Credit Suisse.

Good morning, Glenn. It's pretty impressive sales that you saw in the quarter, now you're anticipating newly issued term policies in the 12% to 18% range. And you gave some really good comprehensive outlook information. So I want to take it out to next year. You cited this incredible productivity of 0.237 policies issued per month, and that's above the high end of your range at 0.22. So what I'm wondering is, as we get to next year, and hopefully, the COVID issues kind of dissipates, will the producers still have that growth going? Or is this some kind of an environment where maybe people aren't generating enough income and they're more inclined to sell more Primerica policies. How do you think about next year? I mean maybe there's a real positive here from a sales standpoint, given COVID-19 this year.

Well, there's a lot of conjecture in trying to respond to that, Andrew, but it is something we're talking about constantly trying to evaluate and anticipate how permanent the changes in human behavior might be, both of our clients and of our sales force. I think that certainly, from a client perspective, this has been a wake-up call for middle-income families to realize they need to protect their families. They need to invest for the future. They need to get out of debt. They need to be thinking about an alternative to their careers, which may have been shaken or put in jeopardy as a result of the economic disruption. So all of that plays into actions that coming from human behaviors that help our business. The question is, how permanent will that be after life goes back to normal. But it's a great question to be asked. I don't think it's going to be any worse than it was. I think it can only be better. The question is, how much better. Is it significant? Is it something we can carry forward? The same set of dynamics we ask about the activity of our sales force. Our opportunity is more attractive than it's ever been as a result of the dynamics we just described. Our sales force is achieving more success and human behavior being what it is, success breeds success. So the more successful you are, the more excited people get and the more successful they become, in general, until there's another disruption that changes that. So the first comment I would say is coming out of this and we can't lose side of the fact that this is a terrible pandemic that is costing people lives and jobs. And so I certainly don't want our success to make anyone think that we're not conscious of that because we are. At the same time, we're trying to appropriately change our business so that we can serve these clients, serve these recruits in a way that's appropriate and help them succeed in the future and avoid this kind of disaster, at least the financial part of that. So we do believe that there are many, many positives long term, that will come out of this. We mentioned some in our prepared remarks as far as the way we do our business. The web conferencing dynamic, the use of nonresident licenses in conjunction with that to expand our reach geographically within the U.S. and Canada. And those won't go away. There are new ways of doing business that we've learned. But the motivation of humans is the part that I think is really at the heart of your question, it's very, very difficult to predict. But we do think it's a lot of upside. And so we are analyzing right now how we might capitalize on that appropriately.

And as you look at this massive increase in recruits at $133,000 in the quarter, up more than 50%, what can you say about the quality of the people that you've brought on board? Is there an issue with having brought them in at $49 as opposed to $99? How are you feeling about these folks that are coming in now in the second quarter?

Well, we feel great about them, Andrew. I don't believe that a $50 discount impacts quality. There are thousands and thousands of quality people out there looking for an opportunity, and a temporary discount of $50 is a motivating factor to a certain extent, but I don't believe it changes the net quality of the results. Now what it may change is the commitment level of the results. There may be someone that makes a decision that says, hey, I risked $49 that might not have risked $99. And so the question is how committed again, when life comes back to normal or these delays in the licensing process to extend the pathway to success that we're always working on the compressed time frame. So that's a negative of the current dynamics is the extension of time frames all that impacts, which makes it impossible other than just a guess for us to try to calculate a pull-through rate. We've got many, many models on it right now and what it could be, but there's not one that starts to stand out as one that we could rely on at this point. But I think we've got excellent quality recruits. The question is, what is their commitment level. And of course, the more success we can show as an organization and the more success they have in their experience, I think, the longer they stay and the more committed they become. So that's a positive working in that dynamic. But just there's just a lot of unanswered questions because we're in uncharted waters, we've never seen anything quite like this.

And maybe if I could just get one last question in. With regard to the investment and savings product sales, guided at down 5% to 15%. Is it just in life demand has just gotten so much stronger in the COVID-19 environment? And is there any chance that maybe you might even see an uptick in ISP sales?

Yes, there's always a chance. Of course, we're always working to improve and grow no matter what the conditions around us. But as we just look realistically around us, there's so much uncertainty and our experience has been that when there's uncertainty, the larger investors tend to step to the sidelines for a while waiting on some clarity. And so what we described, both Alison and I described in our prepared remarks, is that we see great activity levels. But generally, it's with smaller investors and moving into the products that don't have uncertainty around their futures. And so we're still seeing movements toward our mutual fund line of business and away from our variable annuity line to a certain extent, as I think, by the way, the entire industry is. It's not unique to us. But I do think that we've got some people waiting on all the uncertainties of the future to kind of get some clarity and so that's why we're anticipating the headwinds. If we can figure out a way to slide through that, that's appropriate and our advice for clients and their unique needs, then certainly, we would work for upside, but that's just how we see things right now.

And the next question comes from Dan Bergman with Citi.

Thank you. For the temporary license that were issued and the licenses that were extended due to COVID, can you provide any more color on how long those temporary licenses and the extensions last? And any additional color on how much those two items might have influenced the sales force growth in the quarter? Can we just apply kind of an overall normalized licensing rate to the temporary licenses and maybe a normalized withdrawal rate to the extensions to get a sense of what might have happened to those two things not occurred? Or are there other things we should be thinking about there?

No, there's a lot that goes into that, Dan. First of all, I'd just share with you that there's not a lot of uniformity in that whole process. I mean we had 23 -- a number of states. I think it was 26 states issued COVID-temporary licenses. And so they all have a different set of rules and time frames, and they extend as they go as emergency orders or extended both the temporary licenses and the extensions of licenses, the length of time, they're going to be in place changes. And so first of all, is we're not sure when it stops. And when we go back to our -- what we have history on and can project more accurately. But then the question becomes, as you look at each one of those groups of the extended renewals, how many would have renewed and how many would not have renewed? But does the extension of time make some renew that wouldn't and some not renew that would. And so you just got a variety of dynamics that we're trying to get our arms wrapped around. And as I said, we're running models with lots of possibilities, but there's no clarity on that between just the differences in the number of states and how each state does it. And how much longer, they'll continue to do temps. And then does the extension of getting back to the more traditional process, which normally takes a few months to get someone licensed. After having been around a few months with a temp license, you're more likely or less likely to then go through the permanent process. All that's what we're studying right now, and that's why I said in my remarks, we're anticipating noise in the comparison through the end of the year likely. But on the positive side of the coin, we are seeing productivity up. We're not bloating the size of our sales force, which would drive the productivity calculation down normally. Productivity is up. So we do believe we're getting productivity from these extra licenses and renewals. So that's good. And I think the productivity being up also helps us retain them because they're involved in some success -- at least if nothing else in the field training part, of the success of the sales. So there are a lot of positives and negatives in that recipe, and there's just no clarity on exactly where that's going come out yet.

And maybe if I can just one more, a little bit more of a high-level question. Is there a material difference? And as you look at your business and your market share and penetration in the South and West, regions compared to the Mid-Atlantic and Northeast, just given how the different geographic areas are being hit hardest by the pandemic at different time. Should we expect different impacts in terms of your mortality or maybe persistency and just overall level of business activity in the third quarter relative to what we saw in the second quarter? Just any kind of overall thoughts on that would be helpful.

Yes. I would say, Dan, that early in the pandemic, especially when the Northeast lockdown tied first, we clearly saw that impact on sales. And I think you'd also see, as you would expect, the claims trends in that direction. Canada has had very tight restrictions. And so we've seen a different impact on our business in Canada than we've seen in the U.S. as a whole. So there is some regional variety in the -- in what we're seeing. But I think that's lessening now. I think things are starting to blend. The Northeast is starting to normalize to a certain extent. Canada is working on its reopening plan and may be in a better position after having stayed longer than anywhere else. So it might turn out to be a positive. But yes, we did see that early, but now we're seeing less of that, and it looks like, to me, it's normalizing kind of North America wide. And hopefully, if not in the third quarter, we're hoping by the end of the fourth quarter, then it gets to where we can project our business and anticipate things a little better as we head into 2021.

Yes. And as you would expect, our business sort of matches up to the population. So California is, obviously, a very big state for us as is Florida and Texas as are Florida and Texas. So I don't think there's any anomalies about how we're geographically based. So if you look at the U.S. population, you could look to see where we're largely also concentrated.

And the next question comes from Mark Hughes with Truist Securities.

Glenn, did you give any specific guidance on the recruiting outlook? I know you talked about a number of parameters. But I think in times past, you've talked specifically about the ranges. Did you do that on this call?

No, we didn't this time, Mark, because we are changing from the extreme recruiting focus. And again, that was out of necessity because we have control over recruiting and to a great extent, field training, much less control over the licensing process. And so we said, "Okay, we're going to aim our incentives at the things we can control." And now we're starting to move to a more balanced approach of trying to incent both. We're going to continue to incent recruiting just in a different way than the $49. And we're also going to balance that up with a strong permanent licensing pull-through impact, all that discussion we've been having during the Q&A period. So we did not attempt to project recruiting we moved back just a few days ago to the $99. We don't anticipate that to be extremely disruptive, but if the $49 was positive; $99, you'd expect to be a little less positive. But so that's not really clear. So we've not provided a recruiting projection or any kind of guidance or direction on that through year-end at this point, Mark.

And similar, Alison, the Term Life segment margin. I think you've thought given thoughts about that in the past. Did you do that this time?

Nothing. Very good. No, we did not do that either. At this point, the truth is, we put out some numbers for mortality. It's hard to predict, quite frankly, where the deaths are going to go. I think if you had asked a few months ago, people would have thought we were on the downward trajectory, and we're not quite there at this point. So we have not gone ahead and done that. I would say, we did look back at what we had projected early on when we did our fourth quarter call. And as far as I can tell, if trends continue and even if persistency pulls back some and we hit these levels of claims, we should be relatively close to where we had originally thought. But I didn't really want to give an exact number just because it's just too hard to say specifically with mortality what is going to happen. So that's why we decided, we would just give you the facts as we knew them for the upcoming quarter and our best estimate of what the claims might be.

How about the mortgage product? You've mentioned that a couple of times. Can you talk about whatever rollout you're looking at and the extent to which or some timing where that might be material?

We are very excited about the program. As I mentioned, we've been doing business for a while now in four states: Florida, Colorado, Texas and California. We're just really starting to get Texas stood up. We picked four states for a variety of real estate markets, a variety of business styles of our own and leadership styles and a variety of regulatory regimes in place because really, we're trying to understand the dynamics of the mortgage business today versus when we were in it a decade ago or more. And so we're very pleased with what we're learning. Our partner, Quicken Loans is an excellent partner and is we're working together extremely well as a partnership. We do have a plan to add a fifth state in the next week or two. And so we that will give us yet another perspective on different strengths and weaknesses of our business in the marketplace and so forth. But we're seeing really good traction early, and we're learning the adjustments we need to make to really maximize it. And so we think in the next year or two, right now, I would say that this is a product line that should have a great impact on our business. And both financially, but also don't forget the complementary nature of this business. When we go into a home, as I said in my prepared remarks, we're focused on refinancing current debt at a lower-weighted average interest rate and then accelerating payments on debts. And so the middle-income consumers focused on their debt load has probably been replaced by the current crisis just a little bit. But historically, people lie awake at night worrying about being in debt, not being able to get it paid off in their lifetimes. So it's a very attractive discussion to have with clients. And when they do take action, it generally frees up money for them in their monthly budget, which then enables them to do other things they need to do, including protect their family and invest for the future. So it has a positive dynamic. And then clients are very happy after having done that. So they're great at referring us to other business. They love to say, I'd like to be in business with you and help my friends and family do what I've just done. So it has a tremendous halo effect on the rest of our business as well. So we're excited about the potential for it as a business in and of itself, but also the impact it can have on the rest of our company dynamics. And so we're going to continue to study it. As we see the opportunities, we're going to continue to accelerate. As Alison said, our investment in it, make it grow quickly as much as possible. And then we'll report back once it starts to have a real measurable impact on the business.

And then finally, still thinking about the Medicare Advantage, I think, was also a potential product.

Yes. We're still looking at that marketplace. Still a very interesting marketplace for us. Demand seems to continue to be growing, and there are certainly success stories in that space. And we just keep asking ourselves, how can our distribution strength be matched up with the successes that are occurring in that space to benefit clients and us and a potential partner if we could identify one. That would be interested in doing business with us as well. So we are continuing to actively study that. No action to report, but clearly, still of interest to us.

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