Greetings, and welcome to Primerica's Second Quarter 2025 Earnings webcast. Please be aware that this conference is being recorded. I will now hand it over to your host, Nicole Russell, Head of Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Welcome to Primerica's Second 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 Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Tracy Tan. Our comments this morning will contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. We assume no obligations 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 that are expressed or implied. We also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliation of non-GAAP results 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. Primerica delivered another strong quarter with results that reflect the consistent performance of our business. Despite continued economic and government policy uncertainty, our investment clients remain committed to their long-term savings goals. Our life insurance clients recognized the importance of protecting their income, and our business opportunity is attracting a significant number of recruits. Our sales force plays a critical role in delivering protection and investment solutions to middle-income families when they need it most. As we sometimes see, our two main product lines respond differently to changes in the business environment, creating a good balance in our business model and financial results. Starting with our financial results, adjusted net operating income was $180 million during the second quarter of 2025, up 6% year-over-year, while diluted adjusted operating EPS increased 10% to $5.46. These results reflect the continued strength within our investment savings products business and a steady contribution from our Term Life business. We continue to generate solid earnings growth and maintain our commitment to returning capital to stockholders. During the quarter, we returned a total of $163 million to stockholders through a combination of $129 million in share repurchases and $34 million in regular dividends. Looking at distribution, we recruited over 80,000 individuals during the second quarter and licensed nearly 13,000 new representatives, down 10% from the second quarter record set last year. This level of activity continues to fuel growth in our sales force. We ended the quarter with 152,592 Life-licensed representatives, up 5% compared to June 2024. Recruiting in the third quarter also started strong. Using a recruiting incentive, which has been effective in the past, we added over 50,000 new recruits in July. We remain committed to growing our sales force and expect to grow between 2% and 3% in the full year of 2025. Turning to our sales results, we issued 89,850 new term life insurance policies during the second quarter and put in place over $30 billion in new term life protection for our clients, bringing our total face amount in force to a record $968 billion. On a year-over-year basis, the number of new life insurance policies and face amount issued declined 11% and 9%, respectively. We believe the decline reflects a combination of continued cost of living pressures and ongoing uncertainty compounded by comparison to exceptionally strong results in the prior year period. Productivity at 0.2 policies per life insurance license representative per month was within our historical range of 0.20 to 0.24. Considering these stronger-than-expected headwinds, we're now projecting the total number of new life policies issued to decline around 5% in 2025 compared to the full year 2024. Turning next to the ISP segment, results were once again stronger than anticipated with total sales during the quarter up 15% to $3.5 billion. We continue to see strong demand for variable annuities and managed accounts, while U.S. and Canadian mutual funds grew at a more modest pace. Net inflows for the quarter were $487 million versus $227 million in the prior year period, and client asset values ended the quarter at $120 billion, up 14% year-over-year. We see more clients focusing on saving for retirement, driving higher transaction volume and increased average sales size. This trend has the potential to continue based on the large number of individuals in the Baby Boomer and Gen X populations who are approaching retirement age. Given our momentum in the first half of 2025 and strong sales in July, we expect full year ISP sales growth to be more than 10%. During the quarter, we discovered a need to correct our methodology for calculating outflows and market value for Canadian mutual fund assets included in our consolidated client asset roll-forward statistical data. We updated the roll-forward table in our financial supplement to provide investors with restated historical statistics. This correction had no impact on our financial statements, ISP product sales nor the average or ending client asset values during the relevant periods. Net flows were impacted, but remained positive. Our mortgage business showed solid year-over-year growth in both the U.S. and Canada during the second quarter of 2025. In the U.S., we had $133 million of closed loan volume, up 33% year-over-year. We are licensed to do business in 35 states through a total of nearly 3,400 licensed mortgage loan originators. Our referral program in Canada had USD 45 million of closed loan volume, up 30% from a year ago. While mortgages currently represent a relatively small portion of our business, they provide our clients with a valuable financial tool while also creating a diversified income stream for our mortgage license sales force. The unique characteristics of each of our product lines can cause them to respond differently to changing business conditions. This quarter highlighted their complementary nature, with record ISP sales helping to offset the headwinds in Life sales. Despite the pressure on new life sales, the size and stability of our Life business continues to provide consistent earnings even in an uncertain environment. We remain well positioned to deliver long-term value for our clients, our field and our stockholders. With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning, everyone. The company's financial performance across all segments was very strong. Starting with Term Life, second quarter revenues of $442 million rose 3% year-over-year, driven by 5% growth in adjusted direct premiums. The segment delivered solid performance with pretax income of $155 million, up 5% compared to the prior year period. Our key financial ratios remain consistent with expectations and largely in line with the prior period. These included the benefits and claims ratio at 57.5%. The DAC amortization and insurance commissions ratio at 12%, the insurance expense ratio at 7.6% and the operating margin at 23%. Overall, lapse rates for the quarter remained elevated and were stable compared to the prior year period in aggregate. We continue to believe higher lapse rates are primarily driven by cost of living pressures and their impact on middle-income families. We believe that our clients are resilient over the long term and value our services and products. Based on historical trends, we expect persistency to normalize as clients adapt to the evolving economic environment. Therefore, we do not expect any significant changes to our LDTI lapse assumptions. We started to experience favorable mortality in the second half of 2022 and continued to see favorable mortality trends relative to our expectations. Given the stable nature of our Term Life business, our full-year guidance remains unchanged. To reiterate, we expect ADP to grow around 5% with the benefits and claims ratio at around 58%, the DAC amortization and insurance commissions ratio at around 12%, and the operating margin at around 22%. As a reminder, we will conduct our annual assumption setting review in the third quarter, which may impact our future guidance for key ratios. Continued sales momentum and growth in our client asset values drove record revenues in our Investment and Savings Product segment. Second quarter operating revenues of $298 million increased 14% from the prior year period, while pretax income rose 6% to $79 million. Sales-based revenues increased 15%, slightly outpacing the 11% increase in relevant sales, primarily driven by strong demand for variable annuities. Asset-based revenues increased 17% year-over-year compared to an 11% increase in average client asset values as we continued to benefit from strong client demand for products on which we earn higher asset-based commissions, namely U.S. managed accounts and Canadian mutual funds sold under the principal distributor model. The Corporate and Other Distributed Products segment recorded pretax adjusted operating income of $3 million during the quarter compared to $1 million in the prior year period. The year-over-year change was driven by an increase in net investment income, primarily due to the growth in the size of the portfolio. Finally, consolidated insurance and other operating expenses were $154 million, up 8% year-over-year. The growth in expenses was primarily driven by higher variable growth-related costs in our ISP and Term Life segments and higher technology and infrastructure investments to support our sales force and business growth. We reiterate our full-year outlook for expenses to increase in 2025 by around $40 million or 6% to 8%. Our invested asset portfolio remains well diversified with a duration of 5.3 years and an average quality of A. The average rate on new investment purchases in our Life companies was 5.65% for the quarter with an average rating of A. The net unrealized loss in our portfolio continues to improve, ending the June quarter with a net unrealized loss of $158 million. We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intended ability to hold these investments until maturity. We continue to generate significant deployable capital, underscoring the strength and reliability of our capital-light distribution model. The steady cash flow from our Term Life business is driven by the sizable in-force block of insurance policies and our use of reinsurance, which limits our exposure to mortality risk. The fee-based nature of our ISP business supports strong cash flow generation and a higher rate of earnings conversion. This model allows us to consistently return value to stockholders while also investing in long-term growth opportunities. Our holding company ended the quarter with $371 million in cash and invested assets. Primerica Life's estimated RBC ratio was 490%. We remain confident in our ability to maintain a strong capital position while supporting ongoing growth initiatives and continuing to return capital to stockholders. In both good and bad economic times, Primerica has been able to deliver strong earnings, solid cash conversion, and superior return on equity. With that, operator, please open the line for questions.

And our first question comes from John Barnidge with Piper Sandler.

Can you talk about the decline in Term Life sales and the revised guidance? I know it's a point of sale than a monthly contributor like ISP. There's been concerns about cost of living, as you've noted in your prepared remarks. Did that accelerate post Liberation Day?

I believe it's a mix of rising living costs and some uncertainty that's caused many middle-income families to budget on a month-to-month basis and adopt a wait-and-see approach. They're cautious about how prices will change and what will happen with interest rates and other unclear issues. For several years, we've faced cost of living pressures, but we managed to overcome them last year and achieve positive growth. However, this wait-and-see mindset is evident among middle-income families with tight budgets, which affects our Term Life sales and monthly investments in the ISP side of our business. Larger investments, such as retirement account transfers and generational estates, are less influenced by monthly living costs. We primarily notice this trend in our Term Life business. We believe, as Tracy mentioned, that this situation is temporary. Middle-income families will adapt over time as uncertainty turns into certainty, even if the challenges differ from last year’s. Eventually, they will adjust and move forward, and right now, we're in a wait-and-see period that we first see impacting Term Life sales.

My follow-up question. You talked about a lot of wait-and-see mode on how the cost of living pressures will turn up at the pushback. When you're talking about adding over 50,000 recruits in July, are these pushbacks actually an opportunity to recruit new agents?

I'm sorry, I didn't hear you. Is what an opportunity to recruit new agents?

These cost of living pushbacks indicate that costs are rising and people are uncertain about making commitments. We may need to consider the possibility of becoming an agent or exploring part-time work.

Absolutely. There are generally both a push and a pull for most economic dynamics on a lot of what we do. But the positive side of financial stress in recruiting is people looking for additional income. And so the attraction of our part-time opportunity absolutely plays into that. As we've said in the past, kind of rampant unemployment does not help us because that creates the need for someone to get a paycheck on Friday, not to build a business over a long period of time. So when things get extreme, it may work a little bit differently. But yes, while cost of living pressures and to a certain extent, employment uncertainty are reasonable, they actually give us a little bit of a tailwind for recruiting, while they might provide a headwind for that month's life insurance sales. So yes, absolutely, you've defined that correctly.

And your next question comes from Joel Hurwitz with Dowling & Partners.

Tracy, you had mentioned in your prepared remarks that mortality continues to be favorable in the quarter. Can you just unpack the level of favorability versus expectation? And then in terms of the Q3 assumption review, I know you mentioned no change to the lapse rate, but any potential for changes to the mortality assumption as part of the review?

So mortality has been a trend we've been observing very closely. And in the second half of 2022, we started to experience favorable mortality and for over more than 10 quarters at this point. We had initially been waiting to see if this was just a pull-forward impact from COVID, which means that there could be an earlier accelerated death rates and then somehow it's going to stabilize over what the trend could turn out to be. But so far, we continue to see that the mortality has been favorable, especially last 4 quarters and 12 months, and we've seen that trend stabilizing downward. At this point, I think there's a potential likelihood that this is a trend to stay. And clearly, in terms of magnitude, we're quite a few percentages lower than our long-term pre-pandemic baseline actuarial assumptions. So in the third quarter, the annual reviews we will certainly take a very close look and make a decision if we change our long-term assumption to recognize this trend.

Got it. That's very helpful, Tracy. And then moving to ISP, really good sales in the quarter. I guess just a question. I look at the sales-based margin, it was 123 basis points in the quarter. That's a bit below where you've been running the past several quarters. Any color on the driver there?

In terms of ISP margin, I think part of the expenses is the impact because of the variable growth-related expenses that we have. And we also have commissions that is slightly higher than what you've seen in terms of dollars. We do try to true up as much as we can by midyear point, where we see that the total year trend is running favorable. So we do a true-up in the middle of the year, which may make the second quarter slightly higher than the first quarter. But it's in terms of the magnitude based on the running rate of our growth and where the commission is headed. And the other part to consider also is, as we see the growth trend of ISP, last year was growing more than 20%, 25%. And this year, we're continuing on a pretty strong double-digit top line growth, and our infrastructure has been a little bit stressed in terms of catching up with the volume. So we'll continue to invest in technology and infrastructure to support our ISP sales. So some of those are part of what we had announced earlier in the year in terms of expense investments that would be supporting our growth. So that's what you're seeing coming through for ISP. And that segment really deserves that buildup on technology and infrastructure.

Your next question comes from Ryan Krueger with KBW.

I have a question about ISP sales. You mentioned they remained strong in July, and I was hoping you could provide more details on that. The reason I ask is that you indicated you expect them to grow by over 10% this year, but they increased by more than 20% in the first half. So, while I understand the emphasis on the 10%, I wanted to know if you anticipate any slowdown, or if we can expect the same momentum in the second half.

Yes, Ryan, we are continuously evaluating how long the double-digit growth can last, especially as we begin to compare against last year's strong second half results. We have indicated that these comparisons will become tougher, leading to a decrease in percentage growth. However, we have observed stronger-than-expected month-over-month growth. As a result, we have now updated our expectations to above 10% growth, whereas last quarter we had anticipated something less than that. While we are experiencing ongoing strength, we do expect some moderation in growth rates as we compare to the second half of last year, when this momentum began.

Got it. Makes sense. And then just one quick follow-up on lapses in Term Life. Are they still running basically similar to what they were in the first quarter? Or have you seen any change?

Yes. In terms of lapse, we continue to see, in aggregate, the elevated lapse compared to our long-term LDTI assumptions, which is pre-pandemic. But in terms of comparative to prior year, the overall trend is pretty steady. And we started to see the lapse rates stabilizing a few quarters earlier, meaning that they're not elevating because during the pandemic, we have extraordinarily low lapse rates. And then after the pandemic, we see them run up because of the people who weren't committed and bought it during the pandemic period. And that is part of the reason that, for example, duration 5 may be the duration that we continue to see mostly fall off in terms of lapse and ability to persist. But we're obviously still waiting for that to run off. And to us, that is an egg going through the snake at some point that falls off. But in aggregate, I think we're seeing a stable trend. And we do believe that our consumers over the long term, if you look at the history of our 40 years, they learn to adapt as the economic conditions evolve. So they're going to continue to value the policies, and we do believe that it's going to stabilize over time. And by the way, our ADP assumption of growth that we give the guidance on of 5% already considered this elevated lapse rate.

Your next question comes from Jack Matten with BMO Capital Markets.

Just a follow-up on the recruiting outlook in Term Life. I think you referenced over 50,000 recruits in July. Can you talk about the incentives that drove that strong level? And then in the second quarter, was pressure on recruiting more prevalent early in the quarter in April and then improved? Or was there like a different trend, I guess?

Some of the differences, Jack, stem from the fact that we had incentives in place under a slightly different calendar last year, which created a favorable situation. Last year's convention allowed us to share these incentives with a large segment of the sales force simultaneously, rather than through our usual communication methods. This typically leads to a greater response during a convention year. Therefore, we decided to replicate the approach we took at the last convention. If someone wants to join Primerica and already has an insurance license, there is no cost to become a member. For those without a license, we have a process to help them obtain one at a low cost, which we further reduced in July. This discount prompted our recruiters and team to communicate that opportunity effectively. Despite the negative economic challenges we've discussed, we were encouraged by the strong response we received. Our entrepreneurial opportunity seems to be more appealing than ever, and there was considerable enthusiasm around sharing this information. So, while we are comparing ourselves to last year's convention year and factoring in the different calendar timing, we were extremely pleased with the responses in July, which gave us a solid start to the third quarter.

That's helpful. And then maybe just one on capital. The RBC ratio moved up again nicely to 490% this quarter. I'm curious like when or if you might get some of that excess up to the holding company? I think of Primerica as having a relatively low-risk asset liability profile. So just curious why you're kind of running at what looks to be a pretty conservative RBC ratio at the moment?

Jack, when evaluating our RBC ratio, there are a couple of factors to consider. Firstly, the RBC ratio is influenced by statutory regulatory restrictions, which are determined by the state where we are based. This means we can only withdraw a certain amount based on our previous year’s statutory income. We are currently taking out the maximum allowed under these regulations and estimating what that may be. Secondly, we aim to maintain a strong RBC ratio because, in the life insurance sector, stronger growth requires additional capital to support that growth, including reserves for claims. This is another important consideration. Over time, we value having a robust rating as it instills confidence in our clients and salesforce when they utilize our protection products. All of these factors are crucial. That said, we are exploring various options and strategies for long-term capital deployment, including supporting the holding company for buybacks, dividends, and growth. We will evaluate all possible alternatives to ensure that our ratio remains at a reasonable level, balancing growth support with the ability to make distributions when feasible for our shareholders.

Your next question comes from Dan Bergman with TD Securities.

Just digging into your ISP sales a little more this quarter. There's really strong continued growth in variable annuities and managed accounts, but a little closer to flattish in U.S. mutual funds. There's still a really strong nominal level of sales there. But I was just hoping you could talk a little more about the dynamics in these different product areas? And do you view the mix shift this quarter as a one-off given the high equity market volatility in the U.S. or part of an ongoing trend given the shift towards more retirement savings?

I think it's some of both, Dan. I think we do have a longer-term kind of demographic tailwind, as I mentioned in my script, from just kind of our aging society, people moving toward retirement, which would be positive for retirement products like variable annuities. I do think the uncertainty that we talked about that probably impacts everyone to a certain extent. Our view is for investors, they look for guarantees in uncertain times or volatile times. And while I think there's confidence in the overall direction of the market, if you look at the history this year, it's been tremendously volatile. And so that's where the variable annuity guarantees, the guaranteed income options, or the upside market protection of the index-linked variable annuities have real appeal to consumers. And I do think that the product providers have played into that and have continued to improve their products and make them appropriately more attractive to that marketplace. So my guess is, and again, I'm seeing into a crystal ball, so it's just entirely opinion, is that as people move toward retirement and want security, there's likely the potential for a long-term trend here. Our other products continue to grow and continue to serve a fantastic purpose. Our Managed account business that you mentioned is a newer business, and you would expect it to be faster growing, coming off a smaller base, and it is. And it's something that our sales force, more people are getting licensed and getting more experienced with that. And so we would expect that to grow faster than an established business. But our mutual fund business is the largest of all those businesses, and it still performs an important, important function, particularly as we see those middle-income families moving through their periods of life. Many times, they start in mutual funds because the minimums are smaller, they're simpler products that they can understand. They're appropriate because they're simpler. And then later, they move into more sophisticated products. So our product set works together very, very well. We do see the mix shift according to economic conditions, but it's very much what we would expect from this product sale.

Got it. That's very helpful. And then I think the mortgage volume showed nice growth this quarter. I think it was the highest it's been in a while. Just any more color on the trends here and the outlook for growth? And just maybe big picture thoughts on how much room is there for continued incremental growth if interest and mortgage rates remain elevated.

Yes. We're very excited about the potential for our mortgage business. Canada has had some rate reductions, and that gave some early momentum to the referral program there. I think we're still waiting on rate reductions in the U.S. But back in times when rates were lower as this program came off the ground, it got a very fast start in the 2019 to 2021 period. And then we kind of stalled out and retreated a little bit, but now we're regaining that momentum. I think there's tremendous potential if we do get some rate reductions. A lot of our advice around mortgages is about reducing debt and reducing your weighted average interest rate as a family. As interest rates come down, there are opportunities for refinancing, folding in high interest rate credit card debt. All of that comes on the table with falling interest rates. So we're optimistic about the potential for the program and can be a real player in the future for our company. Already, as we stated in the prepared remarks, it's important for clients and families and for our sales force, but there's upside for Primerica as well in the future.

And your next question comes from Wilma Burdis with Raymond James.

Could you talk about a little bit more specifically what drove the good expense results in 2Q? I realize that you guys reiterated the full-year guide, but is there any sustainable element to the lower expenses in the quarter? Or is it more of a timing related to the ISP tech investments?

The expenses in the second quarter was certainly an aspect of timing, and some of it also has to do with our investment in technology. So the combination of those, the projects, obviously, are long-term projects, many of those. So the timing of the start and when they get ramped up could be more likely towards the third and fourth quarter at this point. And we obviously also are experiencing variable growth-related expenses that are associated with how the top line is going. And as ISP, for example, continues to be strong, and you see some of the expenses coming through that segment a little bit stronger. Now in terms of full-year guidance, I think we remain in the 6% to 8% range. And it just depends on how accelerated some of those technology and investments can be so that there could be some timing variable depends on those as well.

And then can you talk a little bit more about your efforts to grow the ISP sales force and also to increase the diversity of sales by selling both Term Life and ISP across the sales force?

We find it very important to expand the size of our sales force. While this is not as directly linked to production as it is on the Term Life side, there is typically a strong connection between the size of our Life licensed sales force and Life production. On the security side, however, there are many additional factors at play, such as market confidence and product appeal, which we have discussed previously. Despite this, we believe that having a growing sales force is essential. It is becoming increasingly challenging to obtain licenses for securities, whether for limited licenses or full stock and bond licenses like Series 7. We primarily use Series 6 and 63, and this process has become more difficult over time, creating a hurdle to our growth rate. Nonetheless, we are starting to see some progress. We experienced positive results this year in expanding our security sales force and the mortgage sales force we mentioned earlier. Other licenses are beginning to come through, and we will continue to support this improvement. Our team is actively collaborating with field leaders to ensure we provide all necessary resources to help navigate the challenges of the licensing process. Although we typically discuss the sales force only once a year, we are encouraged by the growth we are seeing this year and the initial results from our efforts, even though its growth tends to be slower than that of our Life sales force.

Your next question comes from Mark Hughes with Truist Securities.

Is the momentum with ISPs continuing in July? Are you noticing an increase in mutual fund activity now that the market has rebounded? I recall you mentioned that April was quite poor and sentiment was soft during your last call. Is that starting to improve?

The mix shift, Mark, it usually is not quite that real-time responsive. I mean if we have a month or 2 or a quarter of positive returns, it's not like suddenly people go, "Oh, I don't need those guarantees anymore. Let's move back over here into the lower guarantee or no guarantee business." It happens over longer-term trends and longer-term sentiment. So I don't have the data in front of me on the mix exactly for the month of July. But my gut tells me that it's similar to what we've seen in the past. And if it does change, it will change slightly over time rather than take a hard turn. So I don't think you've got much difference in mix shift probably just for the single month.

When considering Term Life sales, how do you believe you compare to the industry? Some industry data suggests it hasn't been great, but it appears to be a bit more stable than your results. Do you think this does not reflect your specific market? I'm curious about your experiences in relation to the industry.

Yes, that's a great question, Mark. I was looking earlier this morning at numbers that were released this morning on application activity in the industry. And what we're seeing is a lot of the industry positive is at the upper end of the age spectrum, 60 and above, even 70 and above, an extraordinarily large face amount. The growth in the under 30 year-to-date was just barely 0.3% under 30 and 1.2% between ages 30 and 50, which that pretty much covers the vast majority of all the sales that we do since our philosophy is that Term insurance is a temporary need while you're in income-earning mode. So we're not that far off the industry. I think the whole industry is struggling with the exception of those selling to older ages and larger face amounts for estate planning purposes. We may be a little behind the industry this year just slightly, but I think we were way ahead of the industry last year. So it goes back to those difficult comparisons. But I think we're experiencing a lot of the same things that our peers are. And, as Tracy pointed out, we do believe the resiliency of the middle-income market always amazes me. They do adapt over time. And what's uncertain today, the same conditions will be considered certain after you've lived through them for a few months. And so we think it's a temporary issue that will correct itself over time, perhaps even turn into a positive cost of living discussion at some point in the future, but certainly not for the immediate future. So I think we're traveling pretty much in the pack for our age group, Mark, maybe a little behind this year because we're ahead last year, and we believe it's something that will correct itself over time.

And your next question comes from Jeff Schmitt with William Blair.

Just curious how you're thinking about productivity here with it at the low end of the historical range. Do you think it could move below that? And what do we need to see for that to really turn around?

I think productivity is just the math on the headwinds we talked about. You've got a couple of dynamics. It's a pretty simple calculation actually. So as we grow the sales force, the denominator becomes larger, it makes it more difficult to stay in the range just by the sheer number. But you've also got new people entering the sales force and entering today at a time when those headwinds we've discussed are probably a little more significant than they were a year ago or maybe even 2 years ago. So you've got a couple of mathematical dynamics working there. It is possible we could peak out the bottom of the range for a period of time, due to that math; it wouldn't surprise me or concern me just based on those things. But we do know that over time, we tend to move back to the middle. And so as we address issues of confidence in this kind of environment for salespeople, maybe we get a little, if not relief from cost of living, at least we accommodate the cost of living in the middle market, we tend to move back to the middle of the range over time. So I think you're going to continue to see pressure on that ratio for the rest of this year. But over the long haul, we'd expect it to get back more towards the middle.

Okay. And does that suggest, I guess, that the surge in the sales force last year, you may have brought on some sort of less committed or just lower productivity sales agents and maybe that kind of corrects itself over the next year or 2?

That's possible, Jeff, but I got to tell you that our sales force is so large, and we've been doing this for so long, and we go for excellent quality individuals. I'm so proud of our sales force and the quality of what they do. I think it's the more difficult sales environment, not the commitment or ability of the salespeople that we're seeing today. And so I think that's possible, but I don't think that's probable. I think it's the environment. We've got people entering the business in a tougher sales environment now than we did in the past. And I think that environment will change over time. And their skill set will grow, just like the middle market will adapt to living in a high cost of living environment, salespeople adapt to selling in a high-cost environment and get better at it. So I don't think it's quality or commitment.

And your next question comes from Suneet Kamath with Jefferies.

I have a question about annuity sales. Historically, they have accounted for about a quarter of ISP sales, but over the past few quarters, we've seen that increase to around a third. If we maintain this proportion, will it have any impact on the P&L? Should we anticipate any changes compared to what we have seen in the past? I am curious if this is something we need to pay attention to.

We believe that the profitability of products is quite similar, with the timing of compensation being the main difference. Variable annuities typically offer more upfront compensation at the time of sale and somewhat less based on assets, but their profitability is comparable to most other products. As we've observed this quarter, when the mix leans towards variable annuities, sales-based commissions tend to surpass the overall totals. Conversely, if the product mix shifts back, it balances itself out. We have never focused on managing the product mix based on profitability concerns, since the profitability over time is quite similar. The current shift is a response to changing conditions and the strong performance of our product providers who are offering features that meet consumer needs, making these products more appealing. That gives a perspective from the front end. Tracy, do you think the P&L is affected by the shift toward variable annuities in any way that might assist Suneet with his question?

Yes, I agree with Glenn. I think it's more of a timing and most of the products in the long run it kind of evens itself out.

Got it. Okay. That makes sense. And then I guess, sticking with variable annuities. Glenn, as a distributor, I think you have a good sense of product design. And we're starting to hear a little bit from some of the carriers about some aggressive features, particularly in the RILA market. Just wondering what you're seeing, if you're seeing any of that? And when you think about your product providers, do you tend to stick with the same sort of handful of carriers? Or do you sort of swap in and out kind of over time?

Let me address those questions in reverse order because your second question helps clarify the first. We definitely maintain a limited selection of very high-quality product providers with whom we have long-term relationships. This is crucial not just for our business interactions but also because it ensures they understand our philosophy regarding these products. Throughout my more than 40 years here, the annuity business has sometimes experienced excesses, so we are always vigilant in monitoring companies that might be straying into risky offerings and shifting too much risk onto clients. We have been cautious entering the variable annuity market and have also taken care with indexed annuities, especially because, in the past, this market was rife with excesses. However, those excesses tend to stabilize over time, leading to better product offerings. Fortunately, our high-quality partners do not follow that risky trend. They adopt a long-term perspective and aim for enduring relationships with clients, just as we do. Consequently, they usually avoid crossing into the risky territory characteristic of some other product providers we don’t work with. Additionally, we have a committee that evaluates products to ensure their suitability for our clients before adding them to our offerings, even among our top-quality providers. So yes, Suneet, there is a tendency for some companies to venture into that territory. We remain vigilant against such practices, and I don’t anticipate us taking on any risks associated with inappropriate products that some others might offer.

And that was our last question for today. So with that, we will conclude today's call. All parties may now disconnect, and have a great day.