Primerica Inc

NYSE:PRI

Earnings Call Transcript 2018-Q2

[Operator]

Good morning and welcome to the Primerica's Second Quarter 2018 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. Please note, today's event is being recorded.

At this time, I would like to welcome everyone to the Primerica Incorporated Q2 2018 Earnings Results Conference Call. [Operator Instructions] Thank you.

I would now turn the call over to Kathryn Kieser, Executive Vice President of Investor Relations. You may begin your conference.

[Kathryn Kieser, Executive Vice President of Investor Relations]

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

We reference certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures have limitations, and reconciliations between GAAP and non-GAAP financial measures are attached to our press release. We will make forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. The Company will not revise or update these statements to reflect new information, subsequent events or changes in strategy. Risks and uncertainties that could cause actual events to differ materially from those expressed or implied are discussed in the Company's 2017 annual report on Form 10-K as updated by our quarterly reports on Form 10-Q.

Now, I will turn the call over to Glenn.

[Glenn Williams, Chief Executive Officer]

Thanks, Kathryn. Good morning, everyone. Today, I will share performance highlights and accomplishments that position us for continued growth, and Alison will cover our financial results.

We are constantly striving to drive long-term value for all of our stakeholders by executing our strategy and valuating used of free cash flow. We have had great success driving organic growth over the past few years, and we continue to assess opportunities to provide more solutions for our clients and support for our sales force.

Our strategy continues to be maximizing sales force growth and productivity, broadening protection product offerings, expanding client investment options and developing digital capabilities to deepen client relationships.

We are pleased to report strong returns and continue distribution growth in the second quarter. We achieved 42% growth in adjusted operating earnings per diluted share year-over-year and 24.5% ROAE in the second quarter, reflecting solid performance, ongoing share repurchases and the benefits of Tax Reform.

Our sales force leadership continue to perform well with the size of our life insurance life of sales force, exceeding 130,000 representatives at the end of the second quarter.

As you will note on Slide three, we continued delivering solid earnings growth across the business and returning significant capital to stockholders. Our adjusted operating revenues increased 13% to $466.9 million and adjusted operating income before income taxes increased 17% to $112.8 million year-over-year driven by increases of 23% for term - and 9% for the investment in savings product segments.

Net adjusted operating income increased 36% to $86 million from the period year period reflecting the benefit of Tax Reform. We had experienced strong operating EPs and ROAE expansion year-to-date and expect annualize ROAE to increase to approximately 22% for the full-year of 2018.

Our strong and diverse cash flows have allowed us to return a significant amount of operating earnings to our stockholders. In the second quarter we continue to optimize capital by repurchasing approximately $87 million or 891,000 shares of Primerica's common stock for a total of 134 million or about 1.4 million shares during the first six months of 2018.

We plan to repurchase a total of about 200 million in shares during 2018 in addition to paying stock holder dividends and we plan to deploy capital at or above this level in the future.

Moving to distribution results. On Page 4, you can see our life licensed sales force grew 7% primarily driven by a 5% in new life insurance licenses compared with the prior year period. Recruiting the new representatives declined slightly from the second quarter a year-ago, which have benefited from strong recruiting in connection with our 2017 by annual convention.

In the third quarter, we anticipate that recruitment of new representatives will decline year-over-year due to the 17,000 recruits in the third quarter of 2017 who had their independent business application fees waived in hurricane affected areas. The size of the life license sales force is expected to continue growing on both the year-over-year and the sequential quarter basis in the third quarter of 2018.

Turning to Page 5. You can see Term Life issued policies were consistent with the strong results in the year-ago period. Productivity remained at the high end of historical levels at 0.22 policies per life insurance licensed representative per month in the quarter versus 0.23 in the second quarter a year-ago.

As the growth in Term Life issued policies in prior year is compounded the aggregate level of policies issued makes it challenging to sustain the issued policy growth for the rest of the year. We currently expect issued policies for the full-year of 2018 to be consistent with the 2017 level.

Continued issued policy growth of these record levels requires ongoing focus and effective use of incentives as we continue to work to maximize productivity. In the second quarter, we achieved strong investment in savings product sales of $1.8 billion of 12% year-over-year led by the significant growth in managed account sales.

In addition, our variable annuity sales were up 22% compared with the second quarter a year-ago, reflecting a more favorable market environment. Our annuity providers have also enhanced product features over the past year, which has made these products more attractive to our clients and representatives.

Net flows were positive $261 million in average planned asset values increased 10% year-over-year to $61.3 billion. Our new state-of-the-art advisory platform has expanded our opportunity to serve clients with significant assets.

Managed accounts were our fastest-growing client asset value product class increasing 41% from the second quarter of 2017. While managed accounts do not generate sales-based revenue, they produce higher levels of recurring asset-based revenues than other U.S. products and this will benefit the business longer term.

Our business model is balanced by two major complementary business segments with proven track record of delivering positive results. The flexibility in our model enables us to deliver solid returns and long-term value during product mix shifts and rebalancing and momentum.

As we get into the second half of the year we remain focused on building on our solid foundation and executing initiatives to drive organic growth. We continuously strive to enhance the business for our clients representatives and stockholders and we are well-positioned to deliver meaningful long-term value to all of our stakeholders.

Alison will now walk you through our financial results.

[Alison Rand]

Thank you, Glenn, and good morning, everyone. My comments today will cover the earnings results for our core business segments and then we will conclude with a Company-wide review of insurance and other operating expenses and income taxes.

Starting on Slide 6, with Term Life. In the second quarter revenues increased 14% with 15% growth in adjusted direct premiums. Revenue growth outpaced the growth in benefits and expenses yielding a 23% year-over-year increase in pretax income and a 20.5% pretax margin for the quarter.

Growth adjusted direct premiums was driven by strong sales levels in the past few years and the runoff of business subject to the IPO coinsurance. We are seeing about a 6% annual decline in premiums ceded to IPO reinsurers now that policies that continue beyond the end of the initial level premium period, are no longer ceded to them.

When combining these factors with our sales projections for the remainder of 2018 and the weakening of the Canadian dollar since the beginning of the year, we expect adjusted direct premiums to grow around 13.5% in the second half of the year and between 14% and 14.5% on a full-year basis.

In the second quarter, the DAC amortization ratio was 14.6% consistent with the prior year period. With this in seismic quarter was generally in line for 2017 levels and we expect persistency to remain at this levels adjusted for typical seasonality for the remainder of 2018.

The DAC amortization ration also reflects a small increase related to insurance commissions from a change made to our 2018 sales force equity programs that modestly shifted expense from the differ to non-differed expenses.

While this shift changes the timing of expense recognition, it does not impact the overall economics of the program. We expect the DAC amortization to be around 16% on a 2018 full-year basis consistent for 2017.

Moving to benefits and claims. Normal claims volatility positively impacted benefits and claims by approximately $4 million in the second quarter, which resulted in a benefits and claims ratio of 57.5% versus 59.4% in the second quarter of last year.

Year-over-year claims were $6 million favorable as the prior year period had $2 million of negative experience. On a full-year basis we expect the 2018 benefit and claims ratio to be around 58.5%.

The net insurers expense ratio increase 50 basis points year-over-year at 8.2% primarily due to 3.6 million of investments in key constituent initiatives even savings from Tax Reform, as well as digital development initiatives in the quarter.

For the full-year, we expect the Term Life net insurance expense ratio to be slightly higher than 2017 reflecting these incremental investments in the business. Even with these increased investments we expect the full-year 2018 Term Life margins to remain between 18.5 and 19%.

Let's move to our investment savings product segment, where we again saw a solid growth. On Slide 7, you will see ISP revenues and income before income taxes grew 13% and 9% respectively over the prior year period.

Revenues grew faster than income, primarily due to revisions made for our record keeping platform contracts in December. These changes resulted in account base revenues and operating expenses both increasing year-over-year and a positive impact on pretax income of about $1 million in the second quarter.

Sales based revenues in net of commissions increased 6% year-over-year outpacing growth in revenue generating up-sells largely due to the 22% in variable annuity sales.

Total product sales grew 12% over the prior year period, primarily driven by strong growth in managed account sales from the rollout of our Lifetime Investment Platform at the end of the second quarter last year.

The momentum in this program combined with positive net inflows and year-over-year market performance led to a 10% increase in asset based revenues net of commissions in the second quarter.

Given the successful life time investment platform rollout, an enthusiastic adoption by our clients and representatives, I would like to spend a few moments highlighting the contribution that life time can make to our future earnings.

Since the launch of this program in mid-2017, we have seen tremendous growth in our managed accounts business with quarterly sales increasing from about $60 million in 2016 to over $200 million in the second quarter of 2018. While managed account sales do not generate sales based revenues, they do provide recurring asset based earnings above what we receive for other U.S. product.

The chart on Slide 8 reflect how earnings can emerge due to the accumulation of assets from new lifetime sales overtime. In the illustration, we take two 2017 lifetime sales at the current projection of 2018 sales of about 700 million and layer on three more years at the 2018 sales level.

While we believe managed account sales will continue to grow to simplify these illustrations, we are not assuming that future sales increase from 2018 levels. We have identified hypothetical assumptions of a 5% market return and a 7% redemption rate to the assets.

Using these assumptions the accumulation of life time sales will generate net asset based revenues defined as revenues less commissions and platform administration and advisory fees but the four internal operating expenses of over 17 million in 2021 up from 4 million in 2018. This is a meaningful contribution to our ISP segment results.

Now, I will move to a discussion of the Company's insurance and other operating expenses. On Slide 9, you can see our second quarter expenses of $98.5 million or $16.3 million higher than the second quarter of last year.

The changes to our ISP record keeping contract increased expense by $6.3 million that as I mentioned earlier this was more than offset by incremental revenue. We also had about $4 million of additional expenses to support growth in the business.

As Glenn described in previous earnings calls, we are committed to investing a portion of the financial benefit from Tax Reform in our key constituents including our communities, our people and our clients.

Year-to-date we have recognized around $5 million of expense in support of these initiatives most of which was incurred in the second quarter. We anticipate spending around $10 million on a full-year basis and expect these expenditures to remain part of our expense base going forward.

On recent calls, Glenn also described our commitment to digital development to enhance the effectiveness of our representative and deepened client relationships. In 2018, we are laying the ground work for a multiyear initiative to modernize end-to-end systems data gathering and processes to enable continuous deliver in innovation.

These efforts began to ramp up in the second quarter of 2018 with planning efforts well underway and exceptional talent to drive many of the initiatives on boarding.

During the second quarter, we incurred around $2 million towards these efforts and believe we are on-track to spend around $8 million more in the second half of the year. As we get closer year-end we will asses our progress and provide guidance on plans for 2019.

Looking ahead to the third quarter of 2018, we expect expenses to be around the $100 million including about $6 million spread equally for digital development and key constituent initiatives from Tax Reform saving.

Moving to income taxes. In the second quarter of 2018, the effective income tax rate was 23.8% about 70 basis points below our guidance for the quarter. This benefit was primarily a result of a higher proportion of pretax earnings coming from the U.S. with a lower statutory tax rate and a lower proportion from Canada with a higher statutory tax rate and was originally estimated. We still expect our full-year effective tax rate to be about 23.5%.

Let me reiterate our commitments to maintain a strong balance sheet and capital position, the closing company cash and investments of $86 million as of June 2018. As you are likely aware the NAIC has proposed changes to the statutory risk based capital ratio which we believe will reduce Primerica life of RBC by about 45% exploring to around 430%.

The impact was lower than the 70 to 80 percentage points previously indicated given that other calculation refinement have been proposed in addition to adjusting for the new federal tax rate. We considered this level of RBC to be more than sufficient to support our business needs going forward.

In closing, we are very excited to report that Moody's recently upgraded Primerica Inc. senior debt rating to BAA1 and Primerica Life Insurance Company and show its financial strength rated A1 citing our strong profitability and financial flexibility and drivers of the upgrade.

Now, let's open it up to questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Ryan Kruger [KBW]. Please go ahead.

[Ryan Kruger, Keefe, Bruyette, & Woods, Inc]

Hi thanks. Good morning. Glenn, I was hoping you could talk a little bit more about the productivity trends in term life, certainly you are still at the higher end of your historical range, but as you mentioned has come down some from last year. Could you just provide a little bit more color on what you are seeing there?

[Glenn Williams, Chief Executive Officer]

Sure Ryan. You are exactly right, we continue to be at the upper end of what we have seen historically, but slightly down from the kind of breakout levels we were at a year and maybe two years ago. And for us that is just part of the cyclical nature of the business, we are always striving to improve productivity over whatever it was previously.

We have people working on that 24\7, but we recognize there is a little bit of a cyclical nature, there is a lot of cyclical nature to all areas of our business, but even in within the Term Life you see a periods of strength, periods where a breadth is taken and then you run at it again.

And we just feel like that is what we are seeing right now, we are very pleased that we are still at the upper end, but we are working hard to focus our incentives, refresh them and make sure that our leadership is focused on continuing to grow and push that up as high as we can get it. So our commitment has not lessened.

[Ryan Kruger, Keefe, Bruyette, & Woods, Inc]

Thanks. On expenses, so it sounds like the constituent initiatives will kind of continue going forward beyond this year, on that digital side I know you are going to give more color as we get towards the end of the year, but is there probably some aspect of accelerated expense there that could decline going forward?

[Alison Rand]

There is definitely, I think just to reiterate what you said, we do feel like the expenses that we was added associated with the benefits of Tax Reform will be part of our ongoing expense base. With regard to the digital initiatives, as we have described in the past.

A lot of what we are doing this year is really focused on - we keep our franchise, repaving the road if you will, but really moving our system, there our big capabilities into a more of a modern technology age. And so there is a lot of work to be done there and we are progressing pretty well along those lines.

And as we move into the future, I mean look at what we want to spend, it will be a more correlated towards what we think the financial or the business type benefits are associated with those expenditures.

And so at this point, I can't say exactly what we think the expenses will be, but I can say that as we move through 2019 and beyond, we do expect there to be obviously real economic benefit to the business for the things that we planned to do.

So we will continue to update you on how we move forward with that, as well as the thing that we are focusing on to drive the business results.

[Ryan Kruger, Keefe, Bruyette, & Woods, Inc]

Thanks and then just last question from. Thanks for the illustration on the managed account platform. One follow-up would be, how should we think about corporate overhead in expenses that - like in the example that you gave, would there I guess be positive operating leverage when we think about expenses that will be allocated there?

[Alison Rand]

So the short answer is yes, I mean you have to just look at overhead and like general operating expenses and recognize that a lot of that is in fact fixed in nature. We do expect as the volumes continue to grow, obviously our staffing needs will go up just in order to make sure the business process profitably that we are keeping compliant and the like.

But with that being said, certainly it’s not one-for-one, there is sort of set variable nature to that. So we do expect the operating expenses associated with this business to grow, but we would agree with what your original point was, is that the leverage associated with those expenses should improve.

[Ryan Kruger, Keefe, Bruyette, & Woods, Inc]

Okay, great. Thanks a lot.

[Alison Rand]

You are welcome.

[Operator]

Your next question comes from the line of Jeff Smith [Cowen Inc.]. Please go ahead.

[Glenn Williams, Chief Executive Officer]

Good morning Jeff.

[Jeffery Smith, Cowen Inc.]

[Technical Difficulty] sales which have been good in the double-digit. Are you seeing growth in the number of agents that are licensed to sale securities? Or how does that pipeline look?

[Glenn Williams, Chief Executive Officer]

Jeff you broke up on the very first part of that question. Do you mind asking that again just to make sure we have it right.

[Jeffery Smith, Cowen Inc.]

Yes, sure. I was just wondering about the growth of agents that can sell securities. How is that number looking? And what is the pipeline looking like?

[Glenn Williams, Chief Executive Officer]

Yes, as we have discussed in the past, the new licenses and the total size of that sales force is continuing to grow, generally its lagged the growth rate of the life insurance sales force by a few percentage points. But at the same time over the longer period those two growth closer together.

We generally try to focus on one thing at a time is our primary focus and then have a secondary focus. So yes, we have seen, we are continuing to grow in new licenses and in the total size of the sales force, the rate of growth that we normally talk about at year-end is slightly less than the life sales force.

[Jeffery Smith, Cowen Inc.]

Okay, thank you. And then on new recruits I mean it sounds like you think that number is going to be pretty flat or even down this year. Do you view this sort of 300,000 levels kind of the high watermark or a total saturation level or are there thing that you can do next year to taken above that?

[Glenn Williams, Chief Executive Officer]

Well, I definitely wouldn’t use the word saturation, the need for what we are doing in the middle market is growing much faster than we are. It's more function of our growth rates sustainable as they compound the difficulty level gets harder as the numbers get higher. But the dynamic that we talked about in the prepared remarks was simply a function of what we did last year.

We had the series of Hurricanes it impacted Puerto Rico, Texas and Florida and as we often do in the counties, it's a county-by-county focus generally that have declared disaster areas by [FIMA] (Ph) then often what we do to encourage people in that area and keep them focused as we wave the IBA fee, Infinite Business Application fee for joining the company and that is what we did last year.

Well Texas and Florida are two of our biggest states and it covered a much a larger in both of states and so we had a significant number of those coming without IBA fee 17,000. We are not expecting to do that again this year. And so you have got a different dynamic in the comparison. So the comparison of the numbers from 2017 or 2018 is driven around that dynamic.

As we look forward, we believe there is room to continue to grow our business, continue to grow recruiting, the response to our message as a business opportunity is very strong and so we believe there is upside there and that we can continue to go to sales force as well. So, we believe there is more upside out there.

[Jeffery Smith, Cowen Inc.]

Got it. Okay. Thank you.

[Operator]

Your next question comes from the line of Mark Huges [SunTrust Robinson Humphrey]. Please go ahead.

[Glenn Williams, Chief Executive Officer]

Good morning Mark.

[Mark Hughes, SunTrust Robinson Humphrey]

Good morning. A question on the mutual fund sales and managed account sales. How should we think about that dynamic, you know your mutual fund sales were up 1% this quarter, managed account continues to be quite strong, presumably there is some mix shift that is going on, it's influencing your near-term and sales based revenue, but as you show in the example that will be replaced overtime with more asset base revenue. How much are we going to see that mutual funds sales declined in managed accounts that take or place, how should we think about the relative growth in those categories?

[Glenn Williams, Chief Executive Officer]

Right. I would probably described it more as focused shift than mixed shift. We have had a very successful launch of the managed accounts platform, and it's going well. I think the platform itself is something to be proud of and I think the way that our team has rolled it out in way that our sales force has respond to it.

It's all been excellent, and so we are getting a lot of focused on that, and lot of upside. And I do think that overtime, that becomes a more normal part of our business and it's not the shiny - that attract so much attention and you will see a normalizing of our business shift.

The other thing that we mentioned in the call is the rebound and variable annuity sales and I think our rebound is very much in-line with the industry as there is more certainty in the marketplace, and as a result of that product providers are taking advantage of that natural momentum to improve their products and attract even more attention to them.

So you know all of that I think is something has attracted focus for mutual funds. I would expect overtime, you would see things rebalance. It’s all in the pendulum that swings one way and then the other and then really overtime normalizes. So I wouldn’t look at this as something that overtime you would see mutual fund sales suffer long-term as a result of what we are doing. It would just rebalance itself.

[Mark Hughes, SunTrust Robinson Humphrey]

Understood. And then the expenses associated with the managed accounts. Are the commissions similar to the what you have had in the sales base category more like 70% 75%?

[Glenn Williams, Chief Executive Officer]

Yes, that is correct. I agree that everything we do is product agnostic to make sure that we are not creating a conflict where it's possible. So I agree to the same for all products. So we push the amount of compensation created by the product out through the same degree as there in that 80% top in range, 75% to 80% kind of average range.

[Mark Hughes, SunTrust Robinson Humphrey]

And Alison on the decline in premium fee to the IPO coinsure, any thoughts about how that will progress overtime? I think there is maybe some discussion about the depending on how blocks were issued in the past that might influence the way that number progress. The ratio has been declining looks like a pretty steadily 60, 70 basis points per quarter for the last several quarters. Is there any reason why that wouldn't continue to be the case?

[Alison Rand]

No, not in the near-term. We do expect it to run off by around 6% a year and I would say that will continue for exactly I mean, at least for the next several years. I think the pace will slow down a little bit, at that point, again we have a lot to do with the size of these blocks. And I know it’s just a nature of the book of business and what the duration is of the policies that are subject to that reinsurance trading.

So that being said, I expect it to run off less than 6% sort of after a few years. I think the important thing to remember is that business is going to remain on the book for a long time. So I think it gets 6% in your head do math and say oh that is going to be gone after a few years.

It’s going to be around for a very, very long time. So I just think that is what is really important to remember when you think about this, but for the next couple of years I think the 6% run rate is a good one.

[Mark Hughes, SunTrust Robinson Humphrey]

Glenn you talked about the cyclical nature of the business that sometimes you stop to take a breath, your outlook here for I think policies issued to be relatively stable year-over-year. My simple question is, this time around as you look at the business what is the influence on that kind of newer outlook for stable rather than up?

[Glenn Williams, Chief Executive Officer]

Yes, we are always monitoring the momentum that we have in each of our lines of business and I think of our business really in three big chunks a building and distribution and then obviously our life insurance business and our investment savings business. And at all times, we are looking for the natural momentum in those three areas that we can throw fuel on the fire on and then we are looking at the obstacles to those three.

And in a certain sense, they are incredibly complementary, one of the things I’m proud is to have about our business model is that we can shift between those lines and manage the natural fluctuations in the business and still have strong results even as momentum and product mix shifts.

But the three did compete with each other to a certain extent and so as we have seen a burst of momentum in our investment and savings business that attracts a little attention much in the same vein as I just describe about the managed account business within the ISP segment.

And so the good news is we are seeing gaining momentum in that business as we are seeing momentum stabilize in the life business and overall both for our Company and for our sales force it continues to provide an opportunity that is moving forward.

So a certain amount of it is just that we have been - we have had four incredible years of extraordinary growth on the life side of our business we are taking a little bit of a breadth and then and we are refocusing on that, but at the same time we are seeing a huge burst to momentum on that ISP business as we reported today.

So I think it's just part of the national shift to the business and one of our jobs is to manage that so that we don't let to anything get too extreme, so were very focused on getting stronger momentum on the lifestyle, we wanted to share today, as we saw things as of today, but that doesn’t lessen our commitment to continue to work on it for the future.

[Mark Hughes, SunTrust Robinson Humphrey]

And then just final point or question. Is it fair to say that in the back half you have had some tough comps in terms of the sales force and recruiting growth relative to last year. And so that will make it harder to make as much forward progress on the overall headcount and then productivity is relatively stable then policy issue there is also relatively stable is that a fair way to look at it?

[Glenn Williams, Chief Executive Officer]

As we said for the next quarter, in the current quarter and that is underway right now, we do expect to see continued growth in the size of the sales force. As you have noted, it slowed down slightly for the last couple of quarters and so it's still growing at a slightly less pace, a slower pace, but I think we expect not to be impacted as directly as the life momentum has been.

[Mark Hughes, SunTrust Robinson Humphrey]

Thank you.

[Glenn Williams, Chief Executive Officer]

Certainly.

[Operator]

[Operator Instructions] Your next question comes from line of Dan Bergman [Citigroup]. Please go ahead.

[Glenn Williams, Chief Executive Officer]

Good morning Dan.

[Daniel Bergman, Citigroup]

Good morning. To start up just within and investment in savings with another strong quarter of variable annuity sales. I was just hoping you could elaborate a little bit more on the year-to-date growth in the [VA] (Ph) sales and generally just what you are seeing there, the DLL rule and regulatory uncertainty receiving a big driver of that are more due to product changes that are making the guarantees more attractive. I guess any thoughts on that would be appreciated.

[Glenn Williams, Chief Executive Officer]

Sure Dan. We believe it’s a combination of the two. I mean our growth rate is similar to industry as a whole and I think that reflects both dynamics that you mentioned, a little more certainty in the future for the product has clearly made the entire industry feel like it's safe to go back in the water and so I think people are taking advantage of that.

And then I would commend the annuity providers as they recognize that natural momentum that has created from that dynamic, at the same time they are introducing product improvements that makes the product more attractive to clients.

As is all from the case, I believe in our industry and probably all others is when a product is threatened for any reason and then you realize that there is a future you use that opportunity to go back and improve the product at the client level make more attractive to the products to the client.

And I think that is exactly what the industry is doing and so I think the large numbers of growth percentages that you are seeing both that Primerica and at other distributors is a result of both of those dynamics.

[Daniel Bergman, Citigroup]

Got it. Thanks. And then I just wanted to see if there is any update or updated thoughts you could provide just on the regulatory front in general, in terms of where things stand with the SEC, best interest proposal or any potential new suitability or best interest rules coming out of the NAIC or New York State et cetera?

[Glenn Williams, Chief Executive Officer]

Sure both of those were very familiar with and very involved in that as we have stated before, we appreciate the fact that the SEC is acting under their authority and they are taking a very thoughtful approach and a thoughtful process. They have requested a lot of inputs from industry and of course, we continue to provide that as we have with previous processes. And we are not only that we participate actively, but we also are monitoring the entire rule making process.

So, we believe that is on the track it should be on, where it comes out, too early to tell. We continue to be involved in that and give our view and provide our input as its asked for and so we will continue to be involved and keep you posted as more certainty arrives on that front.

On New York, it’s a very similar process. They have finalized a regulation that applies the best interest standard to the sale of annuities and insurance products. The NAIC and even other states might do similar things in the future. And so once again we are at the table involved providing comment and starting to - trying to what type of adjustments might be needed in our business.

On the New York front, we are particularly pleased that the New York DFS recognized the term insurance should be treated differently for more complicated products. And so it is to simple product and therefore figuring out what that the best interest is should be a little easier and less disruptive. And that appears to be the direction things are going right now.

Again, we are continuing to work on to find details and plan our adjustments, but we are involved in it and feel like we have a handle on it and we can make the adjustments that would be required assuming things progress as they appear to be directed now.

[Daniel Bergman, Citigroup]

Got it. That is a very helpful color. Thank you for taking the question.

[Glenn Williams, Chief Executive Officer]

Certainly.

[Operator]

And we have no further questions in the telephone queue at this time. I would like to thank everyone for attending today's conference call. This will conclude our call and you may now disconnect.