Primerica Inc (PRI) 2015 Q4 法說會逐字稿

Good morning and welcome to the Primerica Fourth Quarter Financial Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference call over to Kathryn Kieser, Executive Vice President of Investor Relations. Please go ahead.

Good morning everyone. Welcome to Primerica's fourth quarter earnings call. A copy of our earnings release, financial supplement, presentation and the webcast of today's call are available on our website at investors.primerica.com. Glenn Williams, our Chief Executive Officer and Alison Rand, our Chief Financial Officer will deliver prepared remarks. Then, we'll open it up for questions.

We reference certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures have limitations and reconciliations between non-GAAP and GAAP financial measures are attached to our press release.

We will also make forward-looking statements in accordance with the Safe Harbor provisions of the Securities Litigation Reform Act. The Company will not revise or update these statements to reflect new information, subsequent events or changes in strategy. Risks and uncertainties that could cause actual results to differ materially from these expressed or implied are discussed in the Company's 2014 Annual Report on Form 10-K, as updated quarterly by our reports on Form 10-Q.

Now, I'll turn it over to Glenn.

Thank you Kathryn and good morning everyone. In 2015, Primerica had its strongest year of distribution growth since becoming a public company in 2010. We delivered record ROAE and operating EPS by successfully executing our strategy to drive organic growth, while actively repurchasing shares of Primerica's common stock.

Beginning on slide 3, you can see operating revenues for the full year 2015 increased 5% to $1.41 billion, driven by a 11% growth in Term Life adjusted direct premiums, and a 14% increase in Term Life operating income before income taxes. Investment and Savings product sales and client asset values were slightly higher, while ISP operating income before income taxes remained consistent year-over-year.

Total net operating income grew 5% to $191.1 million, due to business growth with a modest 3% increase in insurance and other operating expenses in 2015. The weakening of the Canadian dollar during 2015 negatively impacted net operating income by approximately $7 million. And net investment income continued to experience downward pressure in 2015, primarily due to market conditions, lower yield on invested assets and continued share repurchases throughout the year.

Net operating earnings per diluted share increased 12% to $3.72 and ROAE increased 160 basis points to 16.9%, compared to 2014. In 2016, we expect ROAE to continue to increase to around 18% for the full year. During 2015, we increased share repurchases by $50 million to $200 million enabling the retirement of approximately 8% of common stock outstanding as of December 31, 2014.

We increased quarterly shareholder dividends by 33% from 2014. In aggregate, we returned over 100% of operating earnings to stockholders in 2015. We plan to deploy approximately $150 million in 2016 and between $125 million and $150 million in 2017 in addition to stockholder dividends.

In 2017, the level of capital deployment may be modestly lower due to several factors including the additional share repurchases in 2015, strong trends in life insurance policies issued requiring more capital on a statutory basis near-term, market volatility and the Canadian exchange rate.

Turning to the fourth quarter results. Net operating income increased 2% to $50.2 million, while ongoing stock repurchases helped drive a 12% increase in net operating income per diluted share year-over-year to $1.01. The drivers of operating results in the fourth quarter are consistent with the full-year results I just discussed.

In addition to strong financial performance, we also experienced very positive distribution results. We began the year with positive momentum generated by solid growth in the second half of 2014. Our underlying business fundamentals are very strong due to the improvements we made over the last several years, including changes to the licensing processes to accelerate licensing momentum simultaneously with recruiting growth.

Building on this solid foundation, we executed initiatives in 2015 to drive organic growth, including product enhancements, incentive programs, and sales force support. We introduced new innovative tech sales technology including cutting-edge sales tools and real-time recognition programs that appeal to a broader spectrum of representatives. Effective competitions like the six month contest for the Atlantis trip also help drive momentum in the second half of the year. The result was distribution growth across the board.

As you can see on page 4, our life licensed sales force grew more than 8% to 106,710 at year-end versus the end of 2014 and was up 2% from the end of the third quarter. Recruiting of new representatives increased 13% and new life insurance licenses increased 24%, indicative of strong recruiting trends and licensing focus in the second half of 2015. We expect that the size of the life insurance licensed sales force will continue to increase in the first quarter of 2016, due to the recent recruiting and licensing trends.

On a sequential quarter basis, recruiting and new life insurance licenses declined, reflecting seasonally lower activity levels in the fourth quarter. On a full year basis, the ratio of new life insurance licenses to recruits was 17.4%, and we expect this ratio to continue to be near this range for the full year 2016. We also expect the ratio of license non-renewals and terminations to sales force size to remain in the 8% per quarter range for the full year 2016.

The size of our mutual fund licensed sales force also continued to grow in 2015 up 5% from 2014, primarily due to ongoing growth in the size of the life insurance sales force and our continued focus on mutual fund licensing, as well as enhancing investment and savings product offerings. Our investment advisor sales force increased 13% to over 2,900 representatives at year-end 2015.

Now, let's briefly review production results in the fourth quarter. On page 5, you can see Term Life issued policies grew 22% in the fourth quarter, significantly outperforming the industry, which increased 3% year-over-year, according to the Medical Information Bureau Life Index. Our larger life insurance licensed sales force as well as productivity that was at the high-end of our historical range drove the strong growth in issued policies in the fourth quarter.

Productivity increased in the quarter to 0.22 policies issued per life licensed representative per month, from 0.19 in the fourth quarter a year ago and remain consistent with the third quarter of 2015. Over the past few years, we've enhanced our life insurance products, underwriting technology and point-of-sale applications to broaden our appeal to middle market clients.

These long-term efforts combined with effective short-term incentives led to 18% growth in life insurance policies issued in 2015 versus 2014. We continue to see significant opportunity for our life insurance business as the protection gap widens for middle-income families and millennials make up one in three American workers who are entering the peak age for starting a family and buying homes.

Turning to Investment and Savings products; net inflows for the fourth quarter were about $245 million while average client asset values declined 1% to $47.5 billion from both third quarter of 2015 and the prior-year period. ISP sales increased 3% to $1.41 billion from the third quarter and were down 3% from strong sales in the fourth quarter of 2014.

Year-over-year, the decline in the Canadian dollar value impacted sales and client asset values. Sales of Canadian retail mutual funds were modestly lower even on a Canadian dollar basis, however, Canadian segregated funds continue to experience strong sales growth, despite the currency headwind. The significant increase in fixed-indexed annuity sales from recent product introductions partially offset lower variable annuity and managed account sales that were impacted by slower market appreciation and volatility year-over-year.

As you know, the Department of Labor has submitted the fiduciary rule to the OMB for review. It's expected that OMB will approve the rule and the final regulation will be published in the coming months with implementation expected around year-end. We've been very focused on planning for this potential outcome and believe our basic non-proprietary product offerings will position us to adapt to the new rule.

Our team has been diligently working with our mutual fund and variable annuity product providers to develop a product set that will comply with the rule. We're also expanding our advisory platform and product offerings, as well as working to increase our number of investment advisors. After we see the final version of the rule, we will further refine our approach as necessary. We're confident we can make the business adjustments needed to ensure middle income families continue to have access to sound investment advice for retirement savings.

In 2016, we're working to build on our 2015 success. We began the year with a two-day senior sales force leadership event, to catch the vision for continued growth. This event culminated with Company-wide webcast to kick off the year followed in January by over 50 meetings across the US and Canada that were attended by more than 35,000 representatives.

We have focused the sales force on accelerating success by growing the number of licensed productive representatives on their teams in order to build a new generation of sales force leaders. Our business fundamentals are solid and we have significant competitive advantages, including extensive distribution in a vastly underserved target market. I feel good about where we are and our ability to leverage our core competencies to drive future growth.

Now let me turn the call over to Alison to discuss financial results in more detail.

Thank you, Glenn and good morning everyone. Let me share with you the key drivers behind our financial results for the quarter, as well as an insight into what we expect in the year ahead.

Starting on slide 6, our Term Life segment experienced strong growth compared with the fourth quarter a year ago. Operating revenues and adjusted directing premiums increased 11% reflecting the inherent growth trajectory in this segment as well as strong sales in recent periods. Operating income before income taxes grew 17% and Term Life operating margins increased to 17.7% from the prior-year period. On a sequential quarter basis, Term Life operating margin was down slightly, primarily due to seasonally worst persistency typically experienced in the fourth quarter.

The benefits and claims ratio was 58.3% for the quarter reflecting incurred claims which were in line with historical levels and seasonally lower persistency. The ratio was lower than the 59.7% ratio in the fourth quarter of 2014, as persistency was somewhat lower this quarter versus last year, and benefits in the prior-year period were elevated due to a revision to reserve assumptions on certain supplemental benefits.

In 2015, the full-year benefits and claims ratio was consistent with 2014 at 59.4%, and we expect this ratio to remain around this level for 2016. The lower persistency this quarter versus the fourth quarter of 2014 contributed to the DAC amortization and insurance commissions ratio increasing to 17% from 16% last year. On a full-year basis, the ratio was 15.2% versus 15.3% in 2014 and should remain around this level for full year 2016.

Insurance expense ratio at 7.6% was in line with expectations in the fourth quarter of 2015. On a full year basis at this ratio was 8.6% and we expect it to decline slightly in 2016 as the block of business continues to build. On a full year basis, Term Life operating margins increased to 17.3% from 16.9% last year.

We believe that the Term Life segment's operating income should generally grow at a rate consistent with the growth in adjusted direct premium with periodic fluctuations for unusual levels of incurred claims persistency and insurance expenses.

We expect adjusted direct premiums to show attractive growth rate in the low-double digits for 2016 with Term Life's operating margins continuing to be in the 17% to 18% range on an annualized basis.

Moving now to our Investment and Savings Products segment on slide 7, you'll see our ISP operating revenue declined 2%, while ISP operating income before income taxes was 1% lower than the fourth quarter a year ago, reflecting market volatility in the second half of 2015.

Segregated fund DAC amortization was unusually low this quarter, largely due to a downward revision to assumptions for future redemptions based on emerging experience. The lower Canadian dollar value relative to the prior-year period negatively impacted the year-over-year comparison of revenue and pretax operating income by approximately $5.5 million and $2 million respectively in the fourth quarter.

Revenue generating product sales and sales-based revenue declined 4% and 5% respectively from the strong results experienced in the fourth quarter a year ago. The sales-based net revenue ratio at 1.33% was lower than the prior-year period, primarily due to fluctuations in the mix of product sale. Asset-based revenues were flat year-over-year, in line with average client asset values declining 1% due to volatile market performance and the lower Canadian dollar value.

The asset-based net revenue ratio was 0.054%, up slightly from the prior-year period due to a $1.2 million deceleration of DAC amortization related to the lower Canadian dollar value, favorable segregated fund performance, and lower revised assumptions for future redemptions this quarter. Account-based revenues grew 10% year-over-year largely reflecting the addition of a mutual fund provider to a record keeping platform earlier in the year.

Slide 8 provides a chart comparing ISP revenues by product, as well as the chart we've shown in the past regarding potential DOL exposure areas updated for 2015 results. While the long-term economics are generally similar across ISP products, each product has different level of sales-based, asset-based and account-based net revenues as defined in our financial supplement. Changes in mix can drive period-to-period fluctuations in earnings pattern.

For example, variable and fixed indexed annuities typically generate higher sales-based net revenues than US retail mutual funds, but now account-based revenues like those [earn on] US platform mutual fund. Asset-based net revenues are relatively consistent among US retail mutual funds and variable annuities, while fixed indexed annuities generate lower asset-based net revenues.

Canadian segregated funds and US managed accounts generate low sales-based revenues but relatively higher asset-based net revenues in other products. Like US retail mutual fund, managed accounts generate account-based revenues, while Canadian segregated funds do not.

Moving to the Corporate and Other Distributed Products segment on slide 9, the key driver of this segment's result is allocated net investment income, which declined $5.6 million year-over-year, in large part, due to negative mark-to-market on the deposit asset backing a Citi reinsurance agreement.

Also contributing to the decline in net investment income was an unusually high level of income from called securities in the prior year period, a slight decline in portfolio yield and continued share repurchases throughout 2015. Our invested asset portfolio saw market pressures with net unrealized gains declining from $76.6 million at September 30 to $49.3 million at year-end.

The fixed income market saw significant spread widening and lower levels of liquidity at the end of the year. This was especially true in energy related issues. At December 31, approximately $143 million or 7% of our invested asset and cash was invested in corporate funds within the energy sector. The portfolio includes 90 issuers across the energy space, including refiners, larger integrated oil companies, and independent drillers; 88% of which are rated investment grade.

While the prolonged period of depressed oil prices will likely result in continued credit stress in the industry, we actively monitor our portfolio and believe our exposures to be manageable. We've mentioned in the past, while not immune to credit cycles and interest rates, we are unlike most life insurers in that our ratio of invested assets to cash to stockholders equity is low at 2 times and net investment income represents only 5% of our 2015 operating revenues.

Now, I'll move to a discussion of the Company's insurance and operating expenses. On slide 10, you can see our fourth quarter expenses at $72.3 million or $3.6 million higher than the prior-year quarter and were $1.6 million higher than the third quarter of 2015. The year-over-year change reflects slightly higher employee-related expenses as well as an increase of $2.2 million for premium and growth related expenses, partially offset by a write-off of developed software in the prior-year period.

Looking forward to 2016, we expect to see the typical increases in insurance and other operating expenses in the first quarter, with an approximate $8 million increase versus the fourth quarter, largely related to the annual grant of management equity awards to retirement eligible employees that are fully expensed when granted, as well as other annual employee-related expenses in the first quarter.

Given the elevated expense level anticipated in the first quarter, we expect ROAE to decline to the 15% to 16% range in the first quarter of 2016. ROAE should rebound to an 18% to 19% range as expenses return to a more normalized run rate in the second quarter, with an annualized projected ROAE of around 18% for 2015.

While we are looking at 2016, one headwind we see is the Canadian exchange rate. Over the last couple of years, the US dollar have strengthened considerably versus the Canadian dollar, resulting in a lower level of reported operating income as well as Term Life face amount in force and ISP sales volumes and client asset value.

To help you think about the potential exposure going forward, in 2015, the Canadian dollar value declined 14% on average throughout the year versus the US dollar, and negatively impacted our net operating income by approximately $7 million, and operating earnings per diluted share by $0.14 for the full year.

As I wrap up, let me say that we remain committed to maintaining a strong balance sheet, but also executing the capital strategy Glenn described earlier. We continue to demonstrate a strong capital position with Primerica Life Insurance Company's statutory risk-based capital ratio estimated to be around 450% and holding company liquidity of $86.5 million at the end of 2015. At the business [fails] and we continue to take out ordinary dividend, we expect RBC to remain in excess of 400% in 2016.

Now, I will turn it back over to Glenn.

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

Now let's open it up for questions.

(Operator Instructions) Suneet Kamath, UBS.

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

Yes. I'm assuming this is in the context of DOL changes and so forth and the impact of DOL on the variable annuity business. And as we talked about before, our first approach is to work with our product providers on a levelized or uniform compensation structure that eliminates conflict. And we include our variable annuity and are including our variable annuity providers in that and are getting a high level of interest in working toward a solution.

So you're right in that, that would be a significant change not only for the Primerica model, but I think for the industry overall. And we are looking at the possibility of a solution outside of the Best Interest Contract Exemption being a levelized or uniformed commission structure across all products to include mutual funds and variable annuities.

And again, our product providers had a positive response to those discussions and we are in those discussions right now. And of course, the solution will not only help Primerica, it would help other distribution channels as well. So it's not unique to a Primerica issue. So that's our first approach and we believe there is a good possibility that there is a solution in there.

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

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

I'd say indexed annuities might not fall into that, because -- and a lot depends on where they will land but we think that the current exemption for FIAs will still persist in the new world. So that is true for both mutual funds and variable annuities. Money markets do raise some questions as to how we would handle those but for the most part, mutual funds and variable annuity would fall into that.

And your manufacturing partners are working towards that solution, it just seems like such a significant change relative to what we've seen [in past]?

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

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

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

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

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

Ryan Krueger, KBW.

You guys have laid out a lot of helpful info on the ISP revenues and the way to think about how that could be impacted. I was hoping you could talk a little bit about the potential costs and what type of costs you might expect related to complying with the new DOL rules?

Yes, Ryan, let me take that one. Again, as we understand the rule today, not having seen the final version, we continue to have the view that we will operate outside the Best Interest Contract Exemption and that's for a number of reasons previously discussed, but also, as we study the rule, many of the additional expenses that would be created and borne by the company are created by compliance with that Best Interest Contract Exemption.

And so, by operating outside of it, we escape what we understand, many of those to be, it's not that the change will not cause us to incur any expenses, there will be some expenses, but they're very much in our sweet spot, they're preparing our sales force for the new way of doing business, the new conversation, understanding the difference between education and advice. So there is some upfront training we would anticipate. There is the cost of ongoing compliance, but we have a very robust compliance infrastructure already in place. There may be some additional costs there, but we don't perceive those to be significant. Many of the discussions that I've heard around increased costs or the cost of compliance with BICE that need to provide additional information prior to sale and ongoing information. And so, if we operate outside of BICE, then we don't expect to be impacted by those.

Should the Best Interest Contract Exemption be revised in a more positive way, we'll reconsider it when we see it and our understanding of the discussions is some of the revisions being discussed are exactly on this topic of the cost of implementing and living under that exemption. And so, if some of that should change we'll re-evaluate, but right now, we don't see that as a significant dynamic for us to deal with.

Thanks, that's helpful. Then I want to move on to the distribution force and productivity. So productivity was up quite a bit and kind of ran towards the higher end of your historical range last year, is that something you think is sustainable as we move forward?

Well, we got to this point after a tremendous amount of effort over a long period of time working on the fundamentals of our business. We really, for the last couple of years have tried to look at every area of our business that we believe there were some leverage and if there was a fundamental change or improvement either in our licensing process or our sales support system, our point-of-sale dynamics, our technology, we've been working on that for an extended period of time.

And as you saw from our results in 2015, beginning to see some very positive results from that. So I believe that means that it does give us some sustainability in both our ability to grow distribution as well as keep productivity in a healthy position, at the high end of the range. So we feel like we're getting results out of our efforts and we should continue to see some of those.

Steven Schwartz, Raymond James.

Hi, good morning. This is actually Carl Doirin for Steven Schwartz. My own question have already been answered, but I'll add one more. In Canada, I believe last quarter, Glenn you mentioned that, you just couldn't see the impact of the actual insurance licensing change, the exam change, getting the implementation on January 1. My question is, since the implementation, have you seen any issues regarding Canada recruits since the beginning of the year?

Well, you are correct. The change was implemented on January 1. That was the very beginning of the process. And of course, we are in an overlap period right now where we're still seeing some run-off from the people that were involved in the old system at the end of 2015 are coming through and their licenses are being issued.

Those that entered the new system as of January 1 have to go through the pre-licensing training process, the classroom process, then be certified by the classroom provider before they can go and take the new multi-stage exam, modular exam that now has four modules rather than one. Except in Quebec where it has fewer modules than it used to have.

And so, it's still very early in the process. Most of the people are still in that pipeline somewhere as we were just 45 days or so into the process and trying to get through the education piece, throughout the certification piece and onto the province to write the actual exam. So with that level of experience, we've had very good uptake in the number of people entering class and staying in class and also writing the certification exam that's the precursor to the actual exam.

Only a handful have made it to the province and have written the exam, We are seeing, because it is a modular exam, where you now pass it in four pieces, we're seeing the advantage of people passing part of the exam and then if they final part of it, they only have to go back and re-take the part they failed rather than the old system where they had to retake the whole exam. And so, we're seeing the positive side of that in that a re-take process is a little easier than it used to be.

But we are seeing, as we expected, some dislocation with the new process. Any exam process that's been in place for a number of years changes, it takes a while for the industry to adapt and that's the expected process we're going through right now. It's still so early, we don't have any past ratio trends or anything like that that we would be able to analyze to determine which point is going.

I'm encouraged by the fact that our sales force is recruiting strong, sending a large number of people through the training process, and we are having people engaged too early to tell you, at this point, what the results might be.

Sure, fair enough. And then I know you did hire a third-party to study whether the four modules rather than the one exam was actually harder, was there any conclusion to add?

Yes, we did that to some of our process, but then also, we asked the exam providers in Canada to hire an outside psychometrician, a third-party to evaluate this process. Now, again, it's too early. There is no enough data for that evaluation to have taken place. So that's still to come, is the regulators third-party review of that.

But we did our own and that was one of our concerns, was that the same exam given in four pieces, it is more difficult to pass than a single exam all given at the same time. It's simply because people might have to go to an exam site more frequently than before and schedules may not permit that.

So that was one of our concerns going in, addressing that concern, making those concerns known to the regulators resulted in some accommodations around that, a transition period on the front-end where the exam continues to be marked as we review the quality of questions and accuracy of questions on the front-end.

So, we are going through a transition period with the agreement of the regulators in Canada to monitor for that dynamic that you described, and we expect there to be some accommodation around it, if it's needed.

Jeff Schmidt, William Blair.

Good morning, everyone. The sales force showed nice growth at 8% obviously, but recruit growth was up quite a bit more than that. Given the economic slowdown that we're kind of going through, I guess, you'd think that would be down a bit. What do you think is driving that and is the consumer maybe a little better off than certain economic indicators might suggest?

It's always better when we're in a period of confidence than a period of uncertainty, but it's really difficult to tell what makes the middle market uncertain. I'm not sure they track the stock market, the indexes as frequently as the upper-income market does and are impacted emotionally by that.

It's the type of things you asked about which are real wallet issues for them and while there is uncertainty and a lot of discussion about that uncertainty in media, there are also some positives out there. I've seen a number of stats on how much is the average family saving as a result of the drop in gas prices and I've seen everything from $350 a year to $1,000 a year. That's real money in the pockets of the middle market and that will positively impact our ability to recruit people as well as make sales.

So, as always, there are offsetting dynamics going on, but in the middle market we're feeling good. There is a sufficient amount of confidence for us to continue to have strong recruiting numbers. The results that you described; the strong results or a combination of strong recruiting as well as strong licensing simultaneously and that's some of those fundamental support systems we've worked on over the years to create that.

And so, I think we have a good level of confidence in the middle market right now. I think it does give us the capability to continue to recruit strong numbers. Keep in mind that you're always going to have a lag time as recruits pull through to licenses of a quarter or so. And so, you won't always see recruits and licenses grow in exactly the same percent in any one quarter. But if you take that lag into consideration, you'll see a really strong recruiting quarter followed by really strong licensing quarter generally. And as we stated, we expect our pull-through rate to continue at its current level as we continue to grow recruiting and that's part of the results of the fundamental strength we see in the business.

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

The $200 million was a bit of a special case. We had originally planned to do a $150 million in 2015. Actually because of the pullback in the stock earlier in 2015, we actually got authority from our Board to increase that by $50 million. So we essentially hold forward some of what we had planned to do in the future into 2015. So, that's why the number was higher than anticipated.

And while we certainly will take advantage of what we can with regard to the timing of our share buyback, we do think it will still generally be in the ranges that Glenn discussed this year and for 2016, add about a $150 million. The timing may be moved a little bit by where the stock price is, but from the most part, it will stay in that range.

Sean Dargan, Macquarie.

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

Most people enter our business, Sean, virtually all through the life insurance door and start a life insurance business first. But over time, they migrate to their strengths, their personal strengths as well as the markets they happen to be in. And so, some of those high producers on the security side have a good size life book and others are more concentrated in the investment and savings business.

But I don't think that's the thing that you should look at to determine our continued attractiveness to that group. We don't see anything in the DOL rule either as we understand it today or the discussions of what it might be that put us at a competitive disadvantage such that people would leave our company to go to another company.

We, as we've talked about before continue to build out our platforms and expand our product lines and become more and more attractive, not only to our own people, but to people outside our company. And in this dislocation, there may be opportunities out there for us to be attractive to people that aren't here today.

But it's generally a case of, if they have the appropriate licenses, we've got the product set for them to sell and our product set is going to compete with any other company's product set. So we don't view these coming changes as something that presents an attraction of another model that would be a threat to us in the way that perhaps that concern might have arisen.

Okay, but if they did start out as life reps, presumably they're still collecting an override for business done on -- okay.

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

Mark Hughes, SunTrust.

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

I think the productivity increase, as most things at Primerica is a combination of things. First of all, I do believe it's based in the fundamental improvements that we've made over the last few years to the business, working on that specific item of what can we do to make our products more attractive, make our sales process easier and more technologically advanced, more attractive for the process itself. And then also, the wise use of incentives and advance on top of that.

I think what you see is, if we don't have strong fundamentals, then you don't get the sustainability, you get a temporary impact of an incentive, whether it'd be an event like our convention or a contest or a monthly incentive sales campaign. Where you really get benefit is when you have both strong fundamentals and effective incentives and that's how we describe where we are today.

Right. I'm sorry if I missed it, but did you give any sense of how recruiting trends have been recently here in Q1, whether this very good growth is being sustained?

We continue to see very positive trends in our business. As I stated, the events to kick off the year, we recognized we had a strong growth year last year and we're going to have to make sure we're at the top of our game to continue that growth on top of growth. And so we invested a tremendous amount of time and effort in January in making sure that we had an effective kick off to the year in meeting and communicating with both our senior leadership, at the senior leadership meeting and accompanying webcast as well as going out into the field.

Those 50 events that I mentioned were all attended by home office leaders to represent the company and present the company message, [cast] vision for continued growth. And so, we feel like we had a very positive impact with that and we're seeing some good results. So we're encouraged by that.

Ryan Krueger, KBW.

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

So that's a great question. The only years, I should say, that we will have that will not be -- by 2017 that will not already have been financed will be 2015 and 2016. So, there is conceivably before PBR goes in, the thought that we could do something for those two issue years, obviously those reserves take a little bit of time to build. So, it won't be all that substantial, but we certainly could look into doing it to just getting those two issue years on the same level as all the in-force would otherwise be.

At this point, it's a little bit too soon to tell. The one thing I can say is that with the new rules that have come out, whatever financing we did would most likely be to a level that's consistent with quote-unquote PBR reserve, rather than truly economic reserves that we were able to do prior to the rule changes. So most likely we'd like to wait to see what the actual PBR reserve rules come out at, because I think that would be the gating position as to what you could finance to.

Okay, thanks. Very helpful.

And we are showing no further questions at this time.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.