Greetings, and welcome to the Primerica Third Quarter 2025 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nicole Russell, Senior Vice President, Investor Relations. Please go ahead.

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

Thank you, Nicole, and good morning, everyone. Primerica delivered solid earnings growth and generated strong cash flows during the third quarter of 2025, underscoring the resilience of our business model and consistent execution as our clients gradually adapt to economic headwinds. Our complementary product lines have proven to be a key advantage and powerful differentiator, while our sales force's commitment to serving middle-income families continues to set us apart. Starting with a snapshot of third quarter financial results. Adjusted net operating income was $206 million, up 7% year-over-year, while diluted adjusted operating EPS increased 11% to $6.33. We remain disciplined in our capital deployment strategy and returned a total of $163 million to stockholders through a combination of $129 million in share repurchases and $34 million in regular dividends during the quarter for a total of $479 million returned year-to-date. Looking more closely at our distribution results, both recruiting and licensing were down compared to the prior year period, which benefited from elevated post-convention activity. However, current levels remain healthy relative to historical trends in non-convention years. During the quarter, more than 101,000 recruits became part of Primerica and nearly 12,500 people obtained a new life license, positioning us to end the year at around 153,000 life license representatives. This projection is slightly above last year's record level. Looking at our life sales results. During the quarter, we issued 79,379 new Term Life policies, down 15% year-over-year compared to record performance in the prior year period. Those policies contributed $27 billion in new protection for our clients for a total of $967 billion of in-force coverage. Productivity at 0.17 policies per rep per month was below our historical range, driven by a combination of lower life sales and continued growth of our life sales force over the last 12 months. As we close out the year, we project the total number of policies issued in 2025 to decline around 10% compared to 2024's record-setting pace. Lower life sales are largely driven by cost of living pressures in the middle market. However, our conviction in the future potential for our life business remains unchanged. Primerica is well positioned to reach and serve middle-income families, one of the largest and most underserved market segments. We're working toward improving productivity on several fronts. First, we continue to improve the accessibility and appeal of our Term Life products. Our next generation of products recently received approval for sale in the state of New York. For all U.S. states and Canada, we continue to work toward more convenient and faster underwriting and issue processes to make sales simpler for our reps and clients. In addition, we've introduced improved life product training for newer representatives with the goal of positively impacting their productivity. In the coming months, we will evaluate the effectiveness on productivity of this training alongside increased focus by field leadership with expectations of a positive impact. Moving to our ISP segment, where results continue to outpace our guidance. Sales grew 28% year-over-year to a record $3.7 billion during the third quarter of 2025. We continue to see strong demand for all product categories, including managed accounts, variable annuities and U.S. and Canadian mutual funds. Net inflows for the quarter were $363 million, comparing favorably to $255 million in the prior year period, while client asset values ended the quarter at $127 billion, up 14% year-over-year. Over the last few years, we've made meaningful improvements to our platform and fund offering, including the addition of over 50 new investment portfolios. In Canada, the principal distributor model continues to be well received and is driving strong sales. We believe demand for investment solutions will continue to benefit from inflows as the baby boomer and Gen X populations prepare for retirement. Given the strength in the equity markets and continued momentum, we expect full year ISP sales to grow around 20% in 2025. Through our mortgage business, supported by more than 3,450 licensed representatives, we remain well positioned to help middle-income families obtain a new mortgage or refinance to consolidate consumer debt. We're now licensed to do business in 37 states with the recent addition of South Carolina. Year-to-date, we've closed nearly $370 million in U.S. mortgage volume, up 34% compared to the first 9 months of 2024. We also have a mortgage referral program in Canada, bringing refinancing and new mortgages to our clients there. As 2026 approaches, we're laying the foundation for strong momentum by launching a series of major regional field events in the spring. Our goal is to build excitement and field engagement as we move toward our 50th anniversary convention in 2027, a milestone we're proud to share with our sales force. We remain focused as we close 2025 and look forward to the exciting opportunities ahead. With that, I'll hand it over to Tracy for the financial results.

Thank you, Glenn, and good morning, everyone. Our third quarter financial results were strong across all segments, giving us confidence that we're well positioned to end 2025 with solid year-over-year growth in both revenues and earnings. Starting with the Term Life segment, third quarter revenues of $463 million rose 3% year-over-year, driven by a 5% increase in adjusted direct premiums. Pretax income was $173 million compared to $178 million in the prior year period, down 3% year-over-year. Results during the quarter included a $23 million remeasurement gain compared to a $28 million gain in the prior year period. Excluding the impact of these remeasurement gains, pretax income remains largely unchanged. As required under LDTI accounting, we completed our annual review of actuarial assumptions and made certain changes to our long-term assumptions, which resulted in a $23 million remeasurement gain in the current period. The largest portion of the gain was from mortality assumption change, reflecting favorable trends observed since the pandemic in addition to a positive experience variance from the quarter. As a reminder, the prior year period included a remeasurement gain of $28 million, primarily driven by an adjustment to our best estimate assumptions for the disability incident rate under our waiver of premium rider. Persistency remained stable on a year-over-year basis in aggregate, although lapses remained above our long-term LDTI assumptions. 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. As a result, we did not make a change to our long-term lapse assumptions during the recent review cycle. Turning next to our key financial ratios. Excluding the impact of the remeasurement gain, the Term Life margin at 22% and the benefits and claims ratio at 58.3% remains consistent with our guidance. Our other key financial ratios also remained stable with the DAC amortization and insurance commissions ratio at 12.2% and the insurance expense ratio at 7.5%. Given the size of our in-force block and the stable nature of our Term Life business, we maintain our full-year guidance for ADP growth at around 5%. After revising our updated mortality assumptions, we expect the benefits and claims ratio to remain stable at around 58% in the fourth quarter. Guidance for the DAC amortization and insurance commissions ratio remains unchanged at around 12% and the operating margin at around 21% for the quarter with an expectation for some accelerated technology investments to support growth. This will result in a full-year operating margin above 22%. I will provide full-year guidance for 2026 in February. Turning next to the results of our Investment and Savings Products segment, which continued to perform well on the strength of robust sales momentum and increasing client asset values. Third quarter operating revenues of $319 million increased 20% from the prior year period, while pretax income rose 18% to $94 million. Sales-based revenues increased 23%, slightly outpacing the 20% increase in commissionable sales, primarily driven by strong demand for variable annuities. Asset-based revenues increased 21% year-over-year compared to a 14% increase in average client asset values as we continue to benefit from a mix shift due to customer 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. Sales commissions for both sales and asset-based products increased relatively in line with revenues. In the Corporate and Other Distributed Products segment, we recorded a pretax adjusted operating income of $3.8 million during the quarter compared to a pretax loss of $5.7 million in the prior year period. The year-over-year change is due to higher net investment income, primarily from growth in the size of the portfolio and a $5.2 million remeasurement loss on the closed block of business in the prior year period. Finally, consolidated insurance and other operating expenses were $151 million during the quarter, up 4% year-over-year. The growth in expenses was driven by a combination of higher variable growth-related costs in the ISP segment and, to a lesser degree, in the Term Life segment, as well as higher employee-related costs. We continue to see year-over-year growth in technology investments and anticipate some acceleration as we move towards the fourth quarter. We expect fourth-quarter expenses to grow around 6% to 8%, resulting in full-year growth towards the lower end of our original guidance of 6% to 8% as we have realized expense savings that offset some of the investments we made this year. Our invested asset portfolio remains well diversified with a duration of 5.4 years and an average quality of A. The average rate on new investment purchases in our life companies was 5.25% for the quarter with an average rating of A plus. The net unrealized loss in our portfolio continued to improve, ending the September quarter with a net unrealized loss of $116 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 intent and ability to hold these investments until maturity. We continue to generate strong cash driven by the superior growth of our fee-based ISP business and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $370 million in cash and invested assets. Primerica Life's estimated RBC ratio was 515%. We have plans to increase capital release from our insurance companies in the fourth quarter and to continue our effective capital conversion for the long run. We are confident in our strong capital position to fund growth initiatives, absorb economic volatility, and to provide superior return on equity to our stockholders.

Our first question comes from the line of Joel Hurwitz with Dowling & Partners.

Tracy, I just wanted to start with your last comments there on the planned capital drawdown from the insurance entity. Just can you elaborate on what you're expecting in the fourth quarter and then maybe going forward?

Yes. Good morning, Joel. Our capital position remains very strong, particularly because of the excellent cash generation from our in-force block. And in the third quarter, we also had a really nice improvement in profitability from our statutory entities, and that's part of the reason why the RBC got higher. And from a cash generation standpoint, the continued strength of our profitability in Term Life being consistent and resilient is a big part of why the RBC ratio continued to be very strong. And as you know, our ability to take cash out of the life business is really based on the regulatory conditions as a limitation of how much you can take out as a percentage of or limited by the prior fiscal year income. So we are taking the maximum amount out as we speak. However, in the fourth quarter, we do have plans to increase that conversion from our insurance entities. The specific plan clearly will help us reduce that RBC ratio while keeping a strong enough ratio above 400% to help support growth. And as we continue to anticipate growth for the long run for the life insurance business, we know that when the growth pace starts to pick up, it's going to consume more cash because of how the cash flow is more front-loaded for policy issuance. So that is part of our long-term plan. But for the fourth quarter, we have actions in place that could possibly include, in the long run, looking at how dividends can be converted out, not excluding special dividends, but also including some other actions that we are putting in place to certainly increase that conversion rate. I hope that helps answer your question.

Yes. No, that's helpful. I look forward to seeing what you do in Q4. Maybe shifting for my second one, shifting to the term sales. Can you just help unpack, I guess, sort of what you're seeing and what you think the drivers of the weaker sales relative to your prior expectations? Is this all cost of living? Or are you starting to see other headwinds emerge that are impacting sales?

Joel, we think it's primarily cost of living and other general uncertainties. It seems like every day, there's something new about the future that's unknown that you thought would be clear by now. As far as we can tell, it's all external. As I said in my prepared remarks. Obviously, we don't want to just be victims of the environment. We want to push back as hard as we can. So as we look at making our processes easier and faster, I had some conversations with some of our reps yesterday about the difficulties in the marketplace. And they're saying the conversations are taking longer. Clients are having to dig deeper into their budgets to reprioritize because their budgets are tighter. And so the discussions take longer. The decisions are harder for clients, and we want to be able to work through that with them. We're not going to just say, okay, thanks, we'll check with you when things get better. So that's part of the training process we were talking about earlier is to help our reps have those conversations with clients that can get them deeper into their budgets for prioritization, understanding the importance of protection in their family of putting in force and keeping in force. But there's still that uncertainty out there that has people in a wait-and-see mode in general. I conducted an informal poll of a number of our reps that were in yesterday for a training session and asked how many feel like it's harder to make a life insurance sale this year than last year because of the economic and social circumstances, and they all raised their hand. They said life has gotten harder, while investments for those clients that have money have gotten easier. I think what we're seeing is the result of the path of least resistance. We've seen that before in our business when one line of business goes up and another one struggles a little bit, and then it turns around in future years.

Our next question comes from the line of Jack Matten with BMO Capital Markets.

First one on the ISP business. Just wondering if you could talk about the sustainability of these kinds of strong sales growth levels. Certainly, the VA or RILA market has been a tailwind. But I also think of you all as having some structural advantages given your kind of built-in customer base. I know you've been adding new products and funds. So just curious, bringing it all together, whether there's kind of an underlying growth rate we should think about over time?

Yes. As we look forward, Jack, we are pleased that we see growth across the product lines. We've seen strong growth of mutual funds, variable annuities, managed accounts, and Canadian business, and that breadth gives us added confidence that this trend probably has some legs. That said, a sudden turn in the market, a lot of discussion out there about whether the market is higher than it should be and whether a correction is on the horizon. Those are the types of things that can really turn this momentum around again, far beyond our ability to control them. But the fundamentals of the breadth, along with the demographics, which I mentioned in my prepared remarks, give us true growth opportunities here. It might be a little choppier than it's been in 2025 if the market starts to reverse direction significantly or for an extended period. So I think we just have to keep that in mind, but the fundamentals are sound in that business.

Got it. Makes sense. And just a follow-up on the cash flow outlook. I guess, are you suggesting that there is the potential to have maybe a structural improvement in your cash flow conversion ratio over time? Or were your comments more related just to this year where you've had better experience and so maybe more cash flow coming out and then it normalizes heading into next year?

Jack, regarding cash performance, what I would comment on is that the question in terms of cash conversion was more specific about cash conversion out of the life insurance business to the holding company, where the RBC ratio is. I think we have plans in the fourth quarter to improve that conversion, even though that conversion is largely limited by the statutory requirements. We do have plans that could help improve that conversion. Now in terms of long-term cash flow generation, I think we're very confident in our ability to generate very positive cash flow. First and foremost, our fee business has been really outperforming in terms of the ability to generate cash, and that conversion continues to be very strong. We have very good momentum on fee business growth beyond just the market normal growth rate. When we look at our growth rate in these businesses, we've been outperforming the market in the comparisons. So that generation has been very strong, and that gives us a very good long-term potential from the fee business cash generation. When I look at the longer term, over 4 or 5 years, our Term Life is an extraordinarily important business that produces very consistent strong cash flow because of how big the in-force block is and how consistent that business performs. If you look at the margins, they don't really vary all that much more than 200 basis points. Combined, our total business profitability is very sound at over 20% when you look at overall profitability. So the consistency, resilience, and our ability to convert cash from subsidiaries into the holding company, along with our ability to return cash to stockholders has been impressive, performing at around 79% to 80%. That's also superior to the health and life performance. We're confident about our ability to generate cash and our ability to return a good amount of cash back to the stockholders in various ways.

Our next question comes from the line of Ryan Krueger with KBW.

I had a question on the 21% margin in the fourth quarter in Term Life. You had mentioned some higher investments. Can you elaborate on what you're doing there to start?

Yes, Ryan. Our Term Life performance has been relatively consistent. When we look at the ratios, they don't vary more than 50 basis points much at all. Some quarters, there is a little bit of a pattern, maybe higher than the other quarters due to just the spending patterns. In terms of looking at the fourth quarter, we do have some activities of accelerated technology investments that will continuously support our growth potential from the front end. If you look at the overall ratio on the Term Life business, it's pretty steady. If I look at the benefit, the DAC ratio, and the expense ratio, they're very consistent overall on a total year basis to our guidance. The margin for the year is going to be well over 22% as well for the total year. Now in terms of the fourth quarter, we believe that some of this acceleration is specifically targeted to addressing our front-end productivity side for improvement purposes that makes the rep journey easier. That will continue to be a focus of ours to support technology and digital marketing and improve the reps and clients' experience. I hope that answers your question, Ryan.

Yes, it does. And then the follow-up was in the ISP business. Your net fee rate has been kind of gradually trending up for the last several quarters. Is there any specific thing that's driving that? I know you are growing the managed account platform more, which I wonder if maybe that has slightly higher revenue rates. But can you give any color on what's driving that and if this trend may continue going forward?

Yes, Ryan, this is a great observation. On the ISP side, we do have a mix shift because of the client demand. This is particularly driven by where the highest growth rates are. If you look at our growth rate on managed accounts, it significantly outpaces most of the other categories, and variable annuities, as an example, also outpace the other categories. All of those, on a relative basis compared to mutual funds, have higher margins. The variable side of the story also has a higher ending trend that pushes some of the improvement you see on the ISP business. While we discussed earlier, when Jack talked about the variable annuities being a tailwind, some of this certainly has the impact of where interest rates are pushing people to capitalize on higher rates. More importantly, the demographic shift of people preparing for retirement, as well as the need to avoid volatility from the equity market standpoint, all of these help push our good performance on the ISP rates and margins.

Our next question comes from the line of Wilma Burdis with Raymond James.

Do you guys expect any forward impact from the assumption review? And maybe you can just walk me through this a little bit, but how is the assumption review so outsized given the 90% mortality reinsurance?

Wilma, our assumption review in the third quarter generated a $23 million remeasurement gain. In relative terms, it is still a small percent when we consider reinsurance. On comparative speaking terms of size, if we didn't have reinsurance, this would have been several times larger of an adjustment number. Looking at our overall mortality performance, we've been experiencing very good mortality for several years since the middle of 2022. We took a portion of that profit improvement and adjusted our long-term best assumptions. To your point, what the size would have been, without the reinsurance treaties and the size of that 90% YRT that we reinsure, this would have been several times larger. The $23 million total remeasurement gain in the third quarter is a very small percent in terms of what the size could have been. Hopefully, that helps answer your question.

Yes. I realize you guys have given quite a bit of color on the Term Life sales. But I'm just wondering what might change the trajectory of those sales. I've been looking at your recent surveys on households, and I'm not seeing that the trends appear sharply worse than they have in some of the recent results. So I'm just wondering if there's anything else that might contribute to the pressure that could potentially run off nearer term?

Yes, Wilma, you're right. Fortunately, we have seen a flattening of the increases in cost of living. As we talk to our reps and our clients and survey them, we find that the cumulative effect is still causing some struggles. While it's not getting worse as fast, it's not getting better very quickly either. But we do believe that clients are adapting. Over time, people become accustomed to where they are. I'm not going to say they like it, but they become accustomed to it and learn to deal with it. That's where we've often seen these types of pressures start to ease some over time. But clearly, it's better if we can have household incomes really start to gain some ground. The prices aren't going to come down significantly, I don't think, but it's household income catching up that will help us get out of this. We have seen some of that begin to happen. I think it just takes time to get some traction. We've seen this dynamic in the past. Our almost 16-year-old public company has had a number of years where we see this exact dynamic that recruiting and life insurance is down, and investments are up. We've seen other years where recruiting and life insurance are up, and investments are down—and many years where everything is up at the same time. It's not unprecedented. It's probably a little more severe than what we've seen in about 15 years and is taking a little longer to get out of it. Also, we have what we've termed government policy uncertainties that can affect everything, including the government shutdown. Federal employees on furlough right now might be saying, 'Let's wait until this is over before we make a buying decision.' That's just another level of uncertainty in addition to the financial pressure. But again, we think it's temporary, we believe we can take some actions to help clients work through it, and we think we can turn the tide along the way.

Can I squeeze one more?

Go ahead.

Okay. Is there anything that you think is going to change near term for your customer base? So I know that there's some different tax impacts that are coming in next year. Is there anything like that, that you see on the horizon that could provide some relief?

Wilma, not anything that we have enough confidence in to count on. I mean, we always keep our ear to the ground on the types of decisions that might be made at government policy or taxation levels that will be helpful for the middle market. You're right; there are some discussions that may provide some relief that could help. But we want to build a plan about what we can control. If we get some breaks beyond our control, that will just be icing on the cake. We're not counting on those to turn the direction. But we do know there are discussions going on because we recognize the pressure that middle-income families are under. There's universal agreement among all the divisions in our two countries that middle-income families are under significant pressure. So hopefully, there would be some relief that would give us a tailwind.

Our next question comes from the line of John Barnidge with Piper Sandler.

Cost of living headwinds, I think the competition is clearly with space in your core customers' wallet. It's been talked about that rates are going lower. It's also been discussed that rates are going lower for a seemingly longer time as well. But with the refinancing of a mortgage, when that does occur, how much on average do you save the consumer versus the average life policy premium?

I can give you some directional answers, John. I don't have the averages at my fingertips, but you're exactly right. Another area of uncertainty is the direction of interest rates. The entire mortgage industry has been struggling with that for a while. We assumed for a long time they would come down, and then they did, but actually went in the other direction. That's common in this business. When we assist a family with refinancing, we are also exploring their consumer debt, which generally has a much higher interest rate than their mortgage, to maximize savings. When we're able to do that, we also adjust the term as needed to make things affordable or possibly accelerate their payments. Generally, when we help a family on the mortgage side, it frees up more than the cost of a life insurance policy. It can also help fund a systematic investment plan. That's one reason we value that business. We get approached often by product providers wanting us to load additional products into our distribution system, but we're very resistant to that. The refinancing of a mortgage is a product that doesn't cannibalize existing products. We can lower the average interest rate, consolidate those high-interest consumer debts, and get clients on better financial ground. It's a very regulated business, and we've got to put representatives through a complex licensing process to enter the business, so growth will be slower than adding Term Life Insurance representatives. But that's why we believe in this area.

My follow-up question, do you track the amount of sales maybe on Term Life in any given year to government employees? I'm just trying to get a size of how much your total addressable market is directly impacted by the shutdown in Q4 as the revised Term Life guidance for the year suggests an acceleration in the decline of Term Life policies issued?

Yes, John, I wouldn't attribute the government shutdown specifically to any changes or magnifying changes in the fourth quarter. I mention it merely as another level of uncertainty that we're dealing with. We don't specifically target government employees, but cover a slice of the middle market that includes everyone out there. Government employees are part of that. So while it's not the difference-maker, it's just another issue that adds to the list of uncertainties. I don't have the percentage of our clients that are government employees available. But I wouldn't attribute everything that happened in the fourth quarter to that. It's just continuing uncertainty.

Our next question comes from the line of Dan Bergman with TD Cowen.

To start, I guess, it sounds like with the 50th year anniversary coming up, the next convention was pushed out to 2027 instead of the typical biannual pattern. In the prepared remarks, I believe you mentioned a number of field events next year instead. Given that the convention typically drives outsized sales force and new business momentum, can you provide more color on your plans for next year and whether the events are expected to offset the lack of a convention? Will the timing of these events drive any change in your typical seasonal pattern of sales and recruiting as we look into next year?

Sure. You've read that correctly. We have moved the convention out for two reasons. First, it coincides with our 50th anniversary being in '27. The other reason is that due to the World Cup in 2026, you can't rent a stadium in the U.S. or Canada. So it was convenient to push it out and have it sync with our 50th anniversary. We recognize the importance of those events for generating momentum, excitement, and casting a vision for our business. We certainly didn't want to spend another year in '26 without any significant events, but we also didn't want to compete with the '27 convention. After consultation with our field leaders, we're running a play we used over a decade ago: regional events across 5 locations—3 in the U.S. and 2 in Canada. Starting in late April, we have one every week or bi-weekly through the first week in June. These happen in the second quarter—earlier in the year is strategic to get benefits while avoiding bad weather for travel. They will not be as big as our convention, but if added together, they should yield similar attendance. We will keep them shorter: a Friday afternoon/evening and Saturday, rather than a 4-day event, to make attendance easier and cheaper. We've consolidated some other events to offset the expense of holding these, making it expense-neutral. We're excited about these events, and while they won't be as long as a convention, we'll still announce incentives, as those typically drive business too. We think this combination allows us to regain some momentum in our distribution and life businesses while maximizing ISP growth as we approach '26.

Got it. Very, very helpful. And then maybe just following up on the earlier questions concerning the rise in your RBC ratio so far this year. Is there any way to break down the drivers further? Specifically, how much of the improved capital generation has been due to strong in-force earnings versus less capital strains from the lower level of life sales? If life sales do remain somewhat subdued for a period, could this allow for an ongoing outsized level of dividends for the holding company and ultimately, share repurchases to help offset slower sales trends for a period? Any sizing or thoughts would be great.

Dan, in terms of the RBC ratio being higher, one reason is the improved profitability and cash generation from the statutory side. The cash impact on the statutory side is part of what makes the RBC ratio higher, but the primary reason is the overall ability to convert cash out based on the regulatory restrictions of how much can be taken out compared to the prior fiscal year's income. Our increased profitability allows for more cash to be taken out in the future than we would be able to otherwise. As our income continues to improve on the statutory side, we have plans in the fourth quarter to help convert more cash out. We understand that the faster growth of the Term Life business will consume more cash than when it is at a slower pace. We always aim to keep a cushion as we approach our 50th anniversary so we can capture growth potential when it ramps up. Currently, we're on a lower growth trajectory compared to the prior year, which had a record pace. However, long-term, our growth is consistent and respectable. So that factors into our decision of how much we keep in these entities and how much we withdraw. We anticipate maintaining high historical levels of cash conversion moving forward.

Our next question comes from the line of Mark Hughes with Truist Securities.

Excellent. The asset-based revenue, you pointed out that it has been growing faster than the underlying categories. Should that trend continue?

I think, as Tracy said, it's driven by product mix within our managed account business and also the principal distributor model in Canada, which operates with similar dynamics. Both are among our fastest-growing product lines. They're smaller, and so, on a percentage basis, they tend to grow faster as they catch up in total mix. We should expect, barring unforeseen disturbances, that this trend should have some legs and continue. You're correct in your observation.

Yes. And then, Tracy, the YRT ceded premiums—you look at those relative to adjusted direct premiums, and those have been moving up. This ratio has been increasing. What is the update on how that should trend over the next year or so? Will we see continued upward drift?

Mark, the YRT ceded premium, as compared to adjusted direct premium, is increasing because as the insured age, the ceded premiums rise to cover for higher mortality risks. So you actually don't want to look at it in isolation; you want to consider it alongside the benefit cost. When combined as percentages of ADPs, they're relatively steady. That's how you should approach it.

Our next question comes from the line of Suneet Kamath with Jefferies.

First question, just on the assumption update. Tracy, you had mentioned that you took a portion of the mortality or favorable mortality that you're seeing and put it through your assumptions. I don't expect a specific answer, but can you give a rough sense of the proportion of the favorable mortality you accounted for? Was it half? Was it 20%? Just a rough estimate would be helpful.

Suneet, our mortality performance since 2024, particularly since the middle of that year, has been consistently favorable. We initially thought that it was a pull forward from increased unfavorable mortality from the pandemic and that it would end at some point, but we've continued to see stable favorable trends. We've taken a portion of that improvement and adjusted our long-term best assumptions. In terms of the proportion, I would say this is our best estimate on what the long-term trend would be for mortality experience—and we built that into our assumption review. We're watching for any favorable variance claims, and should that pattern become a long-term trend, we will recognize it.

Got it. And I guess my second question is just on the annuity sales. So we've seen sales volumes increase for both you and the industry. Some of that could be driven by just higher markets as essentially, 401(k) rollover balances are higher, leading to higher rollovers. Another way to think about growth would be the number of contracts you write. I'm wondering if you have any data on that. Additionally, Glenn, do you think you're increasing the total addressable market for the annuity business? Or are you effectively selling products to the existing customer base, seeing a lot of exchange activity?

Sure. I don't have specific stats, but I can offer some directional answers. The annuity business is appealing. Some of it is due to demographic changes, with aging populations accumulating money and looking for preservation during uncertain times. The guarantees within variable annuities, such as floors and guaranteed income, drive their attractiveness. Our product providers have done commendably at making products both attractive and actuarially sound. Changes in interest rates may influence guarantees, but our salespeople are using those advantages effectively to both serve existing clients and attract new clients. We are seeing not just larger transactions, but increased volume overall. This growth arises not just from existing clients transitioning assets to Primerica, but through referrals from satisfied clients as well as new acquisitions. We are experiencing sales from both existing clients and entirely new clients.

Thank you. Ladies and gentlemen, this concludes our Q&A session and will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.