Primerica, Inc. (PRI) Q1 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the Primerica First Quarter 2026 Earnings Webcast. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Nicole Russell, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Primerica's first quarter earnings call. A copy of our earnings press release issued last night, along with other materials relevant to today's call are posted on the Investor Relations section of our website. Joining our call today are our Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Tracy Tan. Our comments this morning may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. We assume no obligation to update these statements to reflect new information, and refer you to our most recent Form 10-K filing as may be modified by subsequent Forms 10-Q for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in our earnings press release. I would now like to turn the call over to Glenn.

Thank you, Nicole, and thanks, everyone, for joining us this morning. Our first quarter results demonstrate the balance and resilience of Primerica's business model. Investments in savings products continue to be a key driver of performance, while the Term Life segment remained a stable contributor to earnings growth. Slides that address our quarter results in more detail can be found beginning on Slide 7 of our Q1 investor update deck. Overall, we delivered a 9% increase in adjusted operating revenues and a 13% increase in adjusted net operating income during the first quarter compared to the prior year period. Income growth was primarily driven by a 24% increase in earnings from the ISP segment. Adjusted operating EPS increased 19% to $5.96. We continue to generate solid cash flows, which allowed us to return a total of $179 million to stockholders during the first quarter through a combination of $141 million in total share repurchases and $38 million in regular dividends while also maintaining the flexibility to invest in the business. Turning to distribution. Our entrepreneurial business opportunity continues to resonate with individuals seeking supplemental income as well as those looking for an alternative career path. The middle-income market we serve offers us meaningful growth potential and our representatives are well positioned to meet that need through our financial education-based approach. The success of the Primerica businesses built by our field leaders reflects the strength of this opportunity. While we continue to navigate environmental headwinds, we are adapting to current conditions. For example, in response to higher travel costs, we adjusted our spring and summer field event schedule by replacing larger regional events with a series of smaller local events across the U.S. and Canada. We expect higher total attendance from this localized approach. These events will also serve as a platform to launch incentives and promotions, which has historically driven improvements in distribution growth. We believe the actions underway will support improved recruiting and licensing and position us to end the year with life license sales force flat to up approximately 1% compared to December 31, 2025. Focusing on production. First quarter results reflected the differing dynamics across our two major product lines. Demand for Investment and Savings Products remained at record levels, while our Term Life business experienced softer results. While we recognize the cumulative impact of several years of cost of living pressures on middle-income families, we believe some relief is beginning to emerge. The Primerica household budget index shows that household income growth has outpaced cost increases for families for 9 consecutive months, suggesting that households are gaining ground. However, we recognize this improvement could be temporarily disrupted by higher gas prices related to conflict in the Middle East. We remain optimistic on the longer-term trajectory. Our complementary business model is designed to provide natural balance with the sales force positioned to serve middle-income families across two core product lines that often respond differently to changing economic conditions. Term Life purchasing decisions are typically made by younger families who tend to be more sensitive to cost of living pressures. In contrast, a larger portion of our investment clients are more established and increasingly focused on long-term savings and retirement planning needs. As a result, our distribution model remains very resilient. Looking at Term Life, we issued 74,054 new policies during the first quarter, a 14% decline compared to the prior year period while estimated annualized issued premiums, which include coverage additions as well as newly issued policies declined 10%. During periods of uncertainty, our educational approach and ability to serve clients in person represent a clear competitive advantage. Although we are seeing early signs of improvement, the level of uncertainty remains elevated, and as a result, we project full year 2026 Term Life policies issued to be flat to down approximately 2%. Our Investment and Savings Products business delivered another strong quarter with sales increasing 22% to a record $4.3 billion. Sales growth was broad-based across mutual funds, variable annuities and managed accounts, reflecting several positive underlying trends. Industry trends continue to create favorable tailwinds. The younger generations are saving earlier for retirement and IRA contributions from these groups have been particularly strong. According to industry sources, Gen Z contributed approximately 30% more to their traditional and Roth IRA accounts since the start of 2026 and compared to the same period last year, creating a tailwind for systematic smaller investment contributions. At the same time, Gen X and baby boomers are increasingly focused on preparing for retirement, driving higher rollover activity and increased demand for variable annuities that provide guarantees. These trends benefit our business given our ability to efficiently process a high volume of small recurring transactions in a way other companies cannot while also leveraging the long-standing relationships we built with our more established clients over time. Client asset values ended the quarter at $127 billion, an increase of 15% compared to March 31, 2025. We also continue to see positive flows with new net inflows of $362 million in the first quarter of 2026. While we believe the favorable trends driving demand for investment products may continue for the next several years, we remain mindful of the potential for broader market volatility. Based on current projections, we expect full year sales growth to be in the upper single-digit range for 2026. Our mortgage business remained strong in both the U.S. and Canada. During the first quarter of 2026, we had $113 million in mortgage loan volume in the U.S., 21% increase year-over-year. We also provide refinancing opportunities and new mortgages to our clients in Canada with a mortgage referral program. In both countries, we recognize higher interest rates may create a headwind going forward. As the middle-income market begins to recover from several years of cost of living pressure, the need for financial guidance and education remains as important as ever. Our ability to meet that need is a core strength of our business. While external conditions can create uncertainty, our focus remains unchanged. Our strong fundamentals are grounded in our unique ability to serve middle-income families, positioning us to capture the long-term growth opportunity ahead. With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning, everyone. First quarter 2026 results reflected a continuation of last year's strong financial performance led by robust year-over-year growth in investments and savings products and stable performance in Term Life. Starting with the Term Life segment operating revenues increased 1% year-over-year to $465 million, driven by 4% growth in adjusted direct premiums. Pretax operating income was $155 million, a 6% increase compared to the first quarter of 2025. Turning to mortality. Claims experience during the quarter remained favorable relative to expectations, consistent with the trend observed last year. The benefits and claims ratio was 57.3% compared to 58.2% in the prior year period. Benefits and claims in the current year included a $7.6 million remeasurement gain, reflecting a combination of favorable mortality experience and a lower persistency. Excluding the remeasurement gain, the benefits and claims ratio was generally consistent. As a reminder, we see a substantial portion of mortality risk through reinsurance, which significantly reduces earnings volatility. Consequently, the Term Life business continued to exhibit financial characteristics that are more fee-based in nature. Overall, lapse rates remain elevated relative to our long-term reserve assumptions, which we believe reflects the ongoing financial impact from cumulative cost of living pressures on middle-income families. While higher lapse reduced direct premiums due to the loss of policies, they also have a favorable impact on benefits and claims costs. We observed different behaviors for various durations, and we continue to analyze them to understand the underlying trends and contributing factors. The DAC amortization and insurance commissions ratio at 12.3% along with the insurance expense ratio at 7.9% were consistent with the prior period. Finally, the pretax margin was 22.5% compared to 22.1% in the first quarter of last year. Looking ahead, we expect adjusted direct premiums to grow approximately 4% on a full year basis. We anticipate the benefits and claims ratio to be around 58%, the DAC amortization and insurance commissions ratio around 12% to 13% and the operating margin around 21%. Fiscal year guidance reflects the predictable and stable nature of our Term Life business. The ISP segment fee-based business model contributes to a performance exceptionally well, supported by strong sales activity and favorable equity market conditions. While stock markets may experience periodic volatility. Our ability to deliver consistent growth across market cycles is strengthened by several key factors. These include the size of our underserved market opportunity and the favorable demographic tailwinds, our expanded product lineup, more resilient fund flows compared to the industry and long-term equity market growth. During the first quarter, operating revenues increased 21%, while pretax operating income grew 24%. As the segment continues to scale, ISP now represents 40% of consolidated revenues in the current quarter and its faster growth has been an important contributor to improved return on adjusted equity. Sales-based revenues increased 23% and continued to outpace the growth in commissionable sales, driven primarily by strong client demand for variable annuities on which we earn higher commissions. Variable annuity sales increased 35% compared to the prior year period. Asset-based revenues increased 23% year-over-year compared to a 15% increase in average client asset values, reflecting a favorable mix shift towards products that generate higher recurring fee-based revenues. Demand remains strong for U.S. managed accounts, reflecting the continued appeal of these products as well as for Canadian mutual funds sold under the principal distributor model introduced a few years ago. Commission expenses for both sales and asset-based products increased largely in line with revenue growth. In the Corporate and Other Distributed Products segment, we reported a pretax adjusted operating loss of $6.7 million during the quarter compared to a loss of $8 million in the prior year period. The largest factor contributing to the year-over-year change was higher net investment income through growth in the portfolio. Finally, consolidated insurance and other operating expenses were $168 million in the quarter, up 3% year-over-year, driven primarily by higher variable growth-related costs and increased technology investment. Expense growth during the quarter was favorably impacted by the timing of project initiatives. Looking ahead, as project activity ramps up throughout the year, we continue to expect full year expense growth in the range of 7% to 8% for 2026. The second quarter outlook is currently expected to be up around 10% to 12%. Our investment portfolio remains well diversified with an average quality of A. The average rate of new investment purchases was 5% for the quarter with an average credit rating of A. The portfolio had a net unrealized loss of $154 million at the end of March compared to a net unrealized loss of $113 million at the end of 2025. We believe that the unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and the ability to hold these investments on to maturity. We continued to generate strong cash flow driven by the superior growth of our fee-based ISP business, and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $556 million in cash and invested assets. Primerica Life's estimated RBC ratio was 430%. As highlighted in our latest investor deck, Primerica's consistent and high-return business model is differentiated by its revenue mix that is largely fee like in its economic characteristics. Around 90% of our operating revenues in 2025 exhibit fee-like attributes, which includes the majority of our Term Life business where the mortality risk is largely reinsured. The remaining 10% of our operating revenues represents life insurance underwriting revenue for which we retain mortality risk. The company's financial and capital returns are similar to or better than distributed -- distribution-focused peers such as investment and insurance brokerage firms, and stronger than traditional life insurance companies. With that, operator, please open the line for questions.

[Operator Instructions] And our first question will come from Jack Matten with BMO Capital Markets.

Just the first one on Primerica's middle-income customer base. Just given we've seen gas prices rise materially in recent months, have you seen any kind of meaningful inflection or change in trends around consumer behavior or on the producer side regarding the willingness to travel around and sell policies because of that change? Or is it really kind of the same trend you've been seeing for a little bit of time now with kind of higher pressure and some pressure on cost of living trends.

Jack, we have not seen any noticeable change in direction. As I mentioned in my prepared remarks, what we are seeing over a little bit longer term now for about 9 months in a row, our household budget index has indicated that earning power has outstripped the slowed cost of living increases, obviously, cost of living continues to increase, but not at the rapid pace of the past and earned income for families is outstripping that. And we've started to see a few positive signs from that. Clearly disrupted by the sudden jump in gas prices as a possibility as we track that in the future. But so far, we're not seeing any noticeable change in activity or behavior of either our clients or our reps based on that. I'm sure if it continued or got worse for a long period of time, that's something we keep an eye on, but so far, it's been offset by other gains up to this point, and we actually believe things are moving in a positive direction for most middle-income families.

Got it. That's helpful. My follow-up is on recruiting trends. And you have the shift this year kind of away from your usual larger conventions. I think you said more local events now. I guess do you still expect the cumulative impact of those on recruiting and engagement to be comparable to a typical larger event? And can you -- just any more color you could offer on the types of incentives and promotions that Primerica is planning to turn on this year?

Certainly. A reminder that our largest event, our convention that we do every other year was moved to 2027 to avoid the World Cup, a little challenge finding facilities during the World Cup year, plus it aligned beautifully with our 50th birthday as a company. So our major event still scheduled and unchanged for July 2027. What we originally had scheduled for this year was what we call regional events and large regions, 3 in the U.S. and in East and West in Canada, so a total of 5. But what we found out is that people were making decisions to either attend those or wait and attend the larger event in 2027 or just felt like that travel was a burden. And so we kind of call an audible at the line of scrimmage working with our sales force and say, let's move to a larger number of local events. And indeed, we do believe we're going to touch more people total with it's going to create a very busy travel schedule for all of us during the middle of the year, going to more events, but we'll be closer to the people and the total attendance, we believe will be larger. And those events are still large enough to be significant platforms for us to cast our vision and also promote our incentives and so forth. And we do believe a healthy sign is that we do get positive response to our incentives. In the month of April, we had a recruiting incentive that we had used previously. We had excellent response to that. And so that was a reduced licensing fee that we've used in the past. And so we do believe there is positive response happening when we use incentives. We saw evidence of that in the first month of the second quarter. And so we believe that combination is going to be effective. And that's why while the results were not what we had hoped for in the first quarter on recruiting and licensing, we do believe that turns as the year goes on and becomes more positive.

And our next question will come from Wilma Burdis with Raymond James.

In ISP, what percentage of earnings is driven by AUM versus fees? I think that used to be around 50%, but it seems to have shifted, which would improve the stickiness of ISP earnings. So can you talk about that and how it's trended over time?

Okay. Percentage of AUM earnings coming from AUM versus upfront sales, that might not be want to have a finger to it.

Yes, I'm sorry. Yes.

That's alright. I think our current is closer to 60-40, 60 AUM, 40 sales. And so you're right, it is shifting more toward the AUM-based fees as our assets grow, that would be expected. And also as our product mix shifts toward both the managed account product in the U.S. that Tracy mentioned as well as the principal distributor model in Canada, both of those are more AUM focused. So it's exactly what we would expect. It looks like we're at about 60-40 right now, Wilma.

And really, you guys have always been a distribution company. I guess, typically, it was historically more focused on term life, but certainly ISP is compelling distribution opportunity as well. And I know you're getting into mortgages and other things. Is that kind of how you view it? Just it's more about distribution and meeting that middle-income customer? And are there any additional products that you think would make sense to distribute?

You're right, Wilma. We do view our strength, our unique competitive advantages, our distribution capabilities. And that's the reason even our Life business has distribution characteristics principally, even though it's our own product. And that is very intentional. And the two products that we sell, our major product lines today create an amazing complementary nature as we see right now when one is weak in momentum, the other tends to be very strong. And occasionally, we can get them both strong at the same time. Very seldom are they both weak at the same time. And that's a true strength, we believe, of our business model. We do believe that the mortgage business is an interesting addition to our distribution capability. It's still a very small business, not necessarily material to our financial results at this time. But it also frees up money as we help clients get their debt load under control that can then be used to be deployed for both protecting and investing for the future. So it helps our two major product lines. And we find it's also a business that clients feel very good after we've helped them with their debt load and tend to refer us to everyone they know in a way that may not even happen with life or investments. And so we think the mortgage business has a real positive impact beyond just its own financial capabilities, even though we do expect it to continue to grow and be a financial contributor. Beyond that, we constantly review opportunities to distribute, but what we generally find is that other products don't have the margins that we're accustomed to. And then if they cannibalize the pocket books of middle-income families, we're simply trading a high-margin sale for a low-margin sale. So it's -- we're going to be very thoughtful before we add any additional products because we want to make sure that they're a net positive, first of all, for the consumer, of course, also for our sales force in Primerica. So there's nothing huge on the horizon right now that we're setting, but we always keep our ear to the ground.

And we'll go next to Mark Hughes with Truist Securities.

The Life sales, your guidance for the full year, flat to down 2%, that assumes a pretty nice stabilization as the year progresses. You've been running down kind of mid-teens the last 4 quarters and now you're lapping that. And so you've got easier comps or not mid-teens, but kind of double digits. What's your confidence or visibility that the Term Life can kind of get back on track, stabilize, maybe up a little bit?

You're right, Mark. It starts with the comps do get a little easier throughout the rest of the year. If you kind of study our momentum trends, momentum doesn't pay much attention to the calendar, but it continued out of our record 2024 through the first quarter of last year to a certain extent. And so we do see the comps getting easier. We also see that those green shoots I mentioned that middle-income families' financial conditions are stabilizing. And then we are taking specific actions to try to play into that. It's still early on that financial stabilization I mentioned, and many families don't even recognize it yet. And so what we're doing as a part of our effort to bring value to those families is actually have a focus on helping families identify the emerging positives that might be happening in their budgets early so that they can put those positives to work. I mean if people don't realize that their budget is getting a little breathing room in it, they tend to spend the extra money often without even realizing it. And so we're working hard on opening discussions with families. We've got an interesting prospecting/discussion promotion that we call where's the money, that we're actually asking new and past clients that question. And of course, the first response, they say, it what money? And that opens up a conversation of let's take a fresh look at your budget. Let's take a look and see if in spite of gas prices bouncing up on us, if you've got a larger tax refund, if your tax withholding is down, is the cost of auto insurance down, which is the case in many cases, people are changing their auto insurance and saving several hundred dollars a year. And then we can redeploy that toward their other financial needs. And often, when we are the first to identify that for them, they appreciate the value that we bring in that process. And so it's -- that we see a change in their condition. We are using that opening that, that change in their financial condition brings to bring more value to them. And then we're also continuing to work on the value of our Life products. We introduced the next-gen product series late in 2022, and we've recently released what we call [ next-gen 2.0 ], which is -- it's not a repricing or a new product line. It's simply continued improvements on that product set that we introduced in late 2022. It's a better client experience. It's improved and faster underwriting processes, greater accuracy in our underwriting, which allows us to offer better pricing, more precise pricing to clients. And so all of those things combined give us some confidence that we can make a difference, and we can start building on this opportunity to create momentum throughout the rest of this year. The other thing that we think is an advantage is the 12 months leading up to our convention has always been a period of time that we've been able to use positively to impact both building distribution, our Life business and our Investment business, and that begins in July. So we think we've got several unique dynamics happening between now and the end of the year that can give us some momentum in that product line and in distribution as well.

Yes. Very good. Tracy, your outlook for 21% margin, is that on the same basis, the 22.5% in Q1? And if that's the case, are there some drivers that are in play that could put pressure on that? Or is that -- I know you've kind of held out that 21% guidance is a good long-term result, but it's been better lately. And so is that just conservatism on your part?

Mark, again, I would say that the 21%, around 21%, there's certainly some timing of activities that's driving it. And each quarter, the margin may vary some. The first quarter on the performance for Term Life, we definitely benefited from the remeasurement gain, but a lot of that really underlying the continued favorability of our mortality trend. So -- with looking ahead, the other aspect of the favorable expenses due to timing, both of those, for example, we are not going to predict that the mortality is exactly going to show up in the remeasurement gain. That's one aspect. But if it continues to show up, and that could be a favorable activity based on the current claims experience sort of prediction. And then the other part is timing of expense, which is a negative aspect on the future quarters just because the favorability of projects that we ramp up, and we have a good amount of initiatives that continue to drive, as Glenn mentioned, the growth aspect of our business, because we are continuing to improve our product, improve our underwriting, but also modernize our technology to give the best experience to the clients. So we have several major projects that we continue to work on to get our clients' experience better, and those projects will ramp up starting second, third quarter, we really, really start to have a lot more activities and expenses. So overall, the 21% reflects some of the quarterly activity, timing differences, but also did not carry forward some of those remeasurement gains, which is the favorable period experience that we're not predicting them to be in the remeasurement gain. So hopefully, that helps.

And our next question will come from Suneet Kamath with Jefferies.

I wanted to start with the Term Life productivity metric. I mean it's been dropping off here in recent quarters, and I think 1Q is actually one of the lowest we've seen. Is that a metric that, a, you're focused on; and b, have a strategy to try to improve?

Yes. We definitely focus on it because it's a very simple calculation. It's simply the size of our sales force divided by the number of policies we issue. And so first of all, you need to recognize that it's a great tracking mechanism because it's easy to identify. At the same time, it's limited by simplicity. The dynamic that we experienced coming out of 2024 with very successful efforts to grow the size of our sales force. And then when sales momentum slows, simply dividing a record-sized sales force into slowed sales momentum makes the percentage go down. So I think we have to recognize what it's telling us and not overestimate its sophistication because it's not very sophisticated, it's very simple. But it's important because it's an easy-to-track dynamic over time. And we absolutely -- all of the efforts that I mentioned in response to Mark's question about improving sales, we want to improve the sales number, and that will take care of the fraction. We don't focus on the fraction necessarily, but we absolutely have efforts in place to make our sales force more productive as it is today. As we continue to work against that fraction by growing the sales force at the same time, that puts pressure -- downward pressure on that percentage. So -- but we're absolutely focused on productivity, a number of efforts. I mentioned a handful of them just now, and we do believe that will improve over time. But at the same time, we're going to continue to work on growing the sales force. We do believe that the drivers of our capability to grow the sales force are the need for financial guidance and solutions by middle-income families, which we believe is greater than ever and the attractiveness of our entrepreneurial business opportunity, which is more successful than ever. So we've got the two most important things that drive the size of our sales force are as dynamic as they've ever been, and that gives us some optimism that we can grow both the size of the sales force and productivity simultaneously.

Got it. That makes sense. And then I just had an observation about the Term business that I wanted to sort of bounce off you and see if I'm thinking about it right. Historically, as I thought about this business, it felt to me like there's sort of a natural hedge that exists in periods of economic uncertainty, where the target market may be facing some pressure, maybe reluctant to buy product, but higher levels of unemployment also creates opportunities on the recruiting side. So like I said, kind of a natural hedge. It feels like the current environment is different where we are seeing the cost of living pressure, but I think the latest job numbers would suggest that unemployment is still pretty good. So is this just sort of a unique kind of different period of time that you're going to have to deal with here in Term? Or am I not thinking about that right?

No, I think a lot of what you've said, Suneet, is the way we perceive it. I think I would consider that almost every dynamic in our environment has both a positive and a negative, that we're trying to maximize the positive and minimize the negative. I do think we're experiencing unique uncertainty or have experienced it over the last few years. To me, that's what's unique. It's a little hard to get a beat on the direction of things. And I think that tends to make most -- maybe people in every market, but certainly in the middle income market stop and wait and see what's happening. I don't think that strong employment numbers necessarily directly compete with our recruiting because remember, people come to Primerica looking for an alternative to a job, not a paycheck on Friday, but to build a business over time that can supplement or replace their income. And so large numbers of poor quality jobs probably help us. And I'm not saying that's exactly what's happening right now. But when that occurs, that probably helps recruiting because people become very frustrated with their employment. A better recruit is an employed recruit that's frustrated, not an unemployed recruit. But yet, there's an ebb and a flow of a positive and negative with almost every one of those economic dynamics. And what we try to do, again, is maximize the positive of the dynamic around us and minimize the negative. So I think you can look at it the way you described, but don't forget that there might be a counterbalancing positive to each negative and counterbalancing negative to each positive.

We'll hear next from Dan Bergman with TD Cowen.

If I got the number right, I think you said you're guiding to high single-digit ISP sales growth in 2026, which is very strong nominally, but would imply a somewhat lower sales run rate in the remainder of the year relative to the first quarter. So I was just hoping you could kind of unpack that a little bit more and what that's assuming. Like have you actually seen any slowdown of sales into the second quarter so far? Or is guidance more based on just some conservatism given the potential for market volatility and obviously, you're at record levels currently.

Yes. I think it's more of the second than the first. I mean we really haven't seen an emerging headwind in that momentum, but we are comparing to stronger and stronger comparisons as the year goes on. So a bit of that is the math of the comparison. And we also recognize that there is a potential risk of market volatility. We're experiencing market volatility, but it could become more negative. And so we just want to make sure that we take that into account in our projections. So it's the increasingly difficult comparisons over continue -- we're setting records over last year's records. As the year goes on, we had a very strong year last year, and it got stronger as the year went by. And so those comparisons will get tougher as we go forward. And it's just recognizing that there is that risk of volatility that could interrupt momentum. We don't know how, but we try to take that into consideration in that guidance. So it's the combination of those things, I would say, Dan.

Got it. That makes a lot of sense. And then I guess a related question, but while ISP sales are really strong across all products this past quarter, the sequential improvement was really largely driven by retail mutual funds, which I was a little surprised by given the market volatility and pressure we saw during the quarter. So as such, I was just hoping you could give a little more insight into what you're seeing at your clients, their behavior and kind of how they're viewing current markets and the recent movements.

It's interesting, Dan. We saw that as well, and we take that as a very healthy sign because we consider a retail mutual fund to be the most basic product we sell and the most appealing to the broadest market. I mentioned some of the trends that the industry has identified of younger investors being more prone to save maybe than the last generation or two earlier in their lives. And that is that mutual fund market, particularly within their Roth or traditional IRAs. And so we take that as a positive sign that there's a broader interest and acceptance of investing. We're still trying to validate all of that, but that's just our early reaction to it that -- when that happens, that means that generally preferred investment to a broad marketplace are being more highly accepted. That's a good sign. And then as time goes by, if they need those more sophisticated products due to changes, volatility in the market or changes in their own financial condition, we've got the answer to those as well. But we did see that. We took it as a positive sign for the future, and we'll continue to track it to see if we can validate that assumption.

[Operator Instructions] we'll go next to Joel Hurwitz with Dowling & Partners.

Another one on ISP sales. Glenn, just any color on annuity sales, right? You guys continue to significantly outpace the industry, right, up over 30% year-over-year in annuity sales. I think if I look at the LIMRA data that just came out, total annuity sales are actually down a little bit. Just what do you think is driving your ability to grow faster than the industry there?

Joel, I agree. We see the same dynamic that you've -- generally for the last few quarters, it's been the same direction as the industry. We've just been more accelerated. And we see that from the same combination we've talked about previously. We see our client base as they amass larger and larger assets based on the returns that have happened in the market over the last few years. The closer they get to retirement, the more important it is to preserve those assets and have guarantees underneath them. So future market volatility doesn't take away their gains. And so I think we've got the kind of dynamic of our growing and maturing client base. I think we've got excellent partners in that business that continue to present great products that are appropriately priced and have great benefits. They're not unnecessarily aggressive, but they are, I would say, as good as any in the industry. And so it's a combination of a number of fundamentals, I think, where we've executed well on that opportunity, maybe a little better than the industry as a whole. I think there are other peers that have done as well as we have, but I do think we've outstripped the industry through just some strong blocking and tackling in that area.

Got it. And then, Tracy, on the quarter's remeasurement gains, how much of that was from mortality versus lapses? And then on lapses, any color just how that's comparing to recent periods?

Joel, on the remeasurement gain, as I mentioned, that it is a combination of both mortality and persistency. In terms of a comparison on the remeasurement gain over the prior quarter of 2025, the bigger part of the contribution on the year-over-year size of remeasurement gain, actually, mortality drove a bigger improvement on the remeasurement gain quarter-over-quarter compared to prior year than persistency in terms of dollar amounts and the size of contribution. And mortality is one that we've mentioned since 2022 second half, we've seen very good performance. And we made some remeasurement assumption change in third quarter of 2025. But that being said, we only recognized a portion of those improvements, and we continue to experience the claims improvement. First quarter was typically in the industry, as we all know, with the flu season and probably higher prong COVID, first quarter would have been a little bit heavier claims period from the instance, and all of that perspective. But we saw pretty good experience variance on the mortality side, and we're happy to see that. On the lapse side, I would say that for the lapse performance, and we mentioned that during the COVID, we had extraordinarily high persistency. And then we followed with the drop of persistency with higher lapses because we do know that some of the policies brought on during the pandemic period may not be the most committed buyers. And in terms of looking at the trend, I would say that the earlier durations are more stable, the ones that we continue to see compared to our long-term expectation that is more pronouncedly further in terms of distance is actually the COVID cohorts continue to have some runoff. And I've mentioned in the recent past that we're still observing that pattern and observing when that runoff would be. So from a remeasurement perspective, we continue to observe the pattern and see what the underlying trend might be before we make any conclusions of the long-term trend being sustained.

We have a follow-up question from Jack Matten with BMO Capital Markets.

Just one on the RBC ratio. Is there anything notable kind of driving the sequential movement this quarter? Was that just subsidiary dividends? Just curious, looking at the first quarter of last year, the RBC ratio took a step up. So just wondering what was going on this quarter?

Jack, on the RBC ratio, I think we typically try to have a little conservatism on RBC to be 400% or above, and that's where we like to see. But we, at the same time, don't like to run up too high. When it gets to closer to 500%, we typically will take some actions to manage it. One of the reasons that we like RBC to be conservative but not overly high is for just capital use and efficiency on how we deploy the capital. From a management standpoint, I would say that we have the ability -- to the degree we can, provide strong liquidity for our growth on the term Life. As Glenn has mentioned that there's obviously an ebb and flow in the business, but we do believe that convention as being our largest event and the excitement towards our 50-year anniversary is going to drive some changing trend as we get closer to the next year of 50th year anniversary. So we are managing the RBC to be to our more ideal ratios as much as we can, at the same time, keeping enough strong capital at the holdco to support the growth of the Term Life business. But also the security, as I mentioned that in the recent past, we've doubled that business in the recent 2, 3 years, if you think about it. And we have tried very hard to keep pace with the growth of that business while building infrastructure, improving our ability in terms of even serving the clients better with how fast the business grows. So the capital strength is very, very important to support the strong growth of securities over current period and the long haul, but also have enough liquidity to sustain any sort of market downturn. And that is our philosophy, and that's what we're executing towards.

And we'll go next to Ryan Krueger with KBW.

Just a quick one. In the ISP business, your net revenue fee rate has been gradually ticking up the last couple of years. What's been driving that? Is that -- I don't know if it's the shift to managed accounts some or if there's something else going on. But can you give any color on why that's happening? And would you expect it to continue?

Ryan, the ISP business growth on the net revenue, I think some of that definitely has to do with the mix of the products. As Glen -- as we have mentioned and Glenn had mentioned earlier, we certainly see strong growth from mutual funds. But if you look at the percentages where the strongest growth has been in the last 2, 3 years, the #1 and #2 is percentages-wise, depending on what period is between managed account and variable annuity. Now the managed account growth has been a sustained strength and we introduced those managed account, more sophisticated advisory services not that long ago. It's probably no more than a couple of decades, if you think about it, and we really, really stepped up on improving our platforms a few years ago, and we added 57 or 56, close to 60 new products on that platform. And we also introduced on variable annuity RILA product, which is more than 60% of our offering. So that product, RILA, as an example, Glenn mentioned about the retirement needs to have some guarantee, but that product also allows the clients to take advantage of the equity market strong performance while having a bottom line guarantee security from that perspective. So that has captured a lot of interest for our clients to want to retire, but meanwhile, not lose out on the strong equity market potential that they can make a higher yield on. Those attracted certainly a lot of client demand and those products certainly are driving the revenue growth. And then the PD model from Canada, that has been a tremendous growth of our product and its growth can compete with the other two in recent years. And all these 3 products are great mix that is driving the positive revenue side of the growth and the makeup and the contribution that you are seeing.

And that is all our questions for today. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.