Earnings Call Transcript - PRI Q2 2020

Operator, Operator

Hello. I would like to welcome everyone to the Primerica Second Quarter Earnings Results Conference Call and Webcast. As a reminder today's event is being recorded. I would now like to turn the conference over to Nicole Russell, Head of Investor Relations. Ms. Russell, you may begin your conference.

Nicole Russell, Head of Investor Relations

Thank you, operator, and good morning, everyone. Welcome to Primerica's second quarter earnings call. A copy of our earnings press release, along with materials relevant to today's call, are posted on the Investor Relations section of our website, investors.primerica.com. Joining our call today are our Chief Executive Officer, Glenn Williams; and our Chief Financial Officer, Alison Rand. Glenn and Alison will deliver prepared remarks, and then we will open the call up for questions. During our call, some of our comments may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. The company does not assume any duties to update or revise these statements to reflect new information. We refer you to our most recent Form 10-K filing as modified by subsequent Form 10-Q filings for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We will also be referencing certain non-GAAP measures, which we believe provide additional insight into the company's operations. Reconciliations of these non-GAAP measures to their respective GAAP numbers are included at the end of the earnings release and are also available on our Investor Relations website. I would now like to turn the call over to Glenn.

Glenn Williams, CEO

Thank you, Nicole, and thanks, everyone, for joining us today. Alison and I will provide a recap of our quarterly results and share with you how the COVID-19 pandemic is impacting our business. Second quarter results continue to reflect the strength and resilience of our business model, including the following financial highlights shown on slide three. Adjusted operating revenues during the quarter were $522 million, up 4% year-over-year, while adjusted net operating income was also up 4%. Diluted adjusted operating income per share was $2.44, which represents a 10% increase year-over-year and ROAE was 25.6% compared to 25.1% in last year's second quarter. Before going into the details of the quarter, I'd like to provide an update on the market dynamics impacting our business, which you can see on slide four. First, the positives. We believe that our unique business model is demonstrating its strength during the COVID-19 disruption. The flexibility of our entrepreneurial business opportunity, combined with complementary business lines of life insurance, investments in our emerging mortgage distribution business have positioned us to meet the needs of the middle market. Our efforts to make fundamental improvements and build momentum early in 2020 are also paying off in this unique environment. We have seen extraordinarily high interest in our financial solutions among Main Street consumers. During this period of limited mobility, many families are taking action to improve their financial game plans which was reflected in the strong life insurance sales results we saw in the quarter. Our field and corporate leadership have responded to the environment with a high level of focus and specific action plans to drive business. For example, adding the efficiency and reach of web conferencing to our traditional face-to-face model has not only allowed us to continue to meet clients' needs, it has also allowed us to extend our reach across the U.S. and Canada through the use of non-resident licenses. While we're excited about these positive trends, we're also closely monitoring some potential headwinds and recognize the uncertainty that lies ahead. We know that change, both positive and negative, creates disruption that must be managed. In addition, distinguishing between the temporary and long-term impact of client sentiment, market forces and the effectiveness of our incentive programs is more difficult to assess. Last quarter, we discussed two key challenges that we were anticipating for the second quarter and beyond. First was the disruption in our ability to obtain paramedical exams and other underwriting requirements for traditionally underwritten life products. I'm happy to report that our providers responded quickly and our underwriting capabilities in the U.S. are back at full capacity, while in Canada, they are about 75% of normal. The second challenge we discussed, the testing, processing and issuance of permanent life insurance licenses remains impaired in most states and provinces. I will discuss how licensing administrators are responding to this disruption in just a moment. We are confident that we will meet the challenges of the current delays, and we will leverage some of the necessary changes as long-term positives. However, in the near term, these adjustments are creating noise in our numbers for comparative purposes. We are positioning our incentives aggressively during this period of disruption to focus on activities within our control such as recruiting and field training. As the licensing process begins to normalize, we will rebalance our incentives to add focus on permanent licensing. Now let's look at our business by segment, beginning with distribution on slide five. The excitement created in our field by the $49 licensing fee during the last two weeks of March led us to continue the incentive into April. We then extended this incentive program into May and June as licensing delays became apparent. Aided by this incentive program, total recruits during the quarter were 133,123, up 54% over the second quarter of 2019. In addition to creating energy in the field, increased recruiting also brings access to warm markets where field training occurs, which added a tailwind to life sales. And to ensure that recruits remain engaged, we enhanced our field training program and increased the profile of our ancillary products that can be sold without a license. As I mentioned earlier, the licensing process remains compromised. To date, 26 states have responded to processing delays in the normal permanent licensing process by issuing temporary licenses. We are preparing to convert as many as possible of those temporary licenses to permanent licenses once the licensing infrastructure reopens. But at this time, it's too early for us to project our rate of success in converting licenses. In addition, 23 states have also extended the renewal dates of existing licenses due to the COVID-19 crisis. These extensions prevented a number of our reps' licenses from expiring during the quarter. The total number of new licenses issued during the quarter was 12,250, up 12% year-over-year. Our sales force ended the quarter at 134,157, up 4% year-over-year and included both 3,400 COVID-temporary licenses and 4,400 licenses with extended renewal dates. It's too early for us to accurately project the normalized size of our sales force as doing so would require us to know the number of COVID-temporary licenses that will convert to permanent licenses as well as how many licenses will renew when states resume normal operations. The length of time before the licensing infrastructure returns to normal will also impact these outcomes. We believe that certain challenges today could become long-term positives. The growing acceptance of remote license testing is one such example. Historically, testing has been done at exam centers, most of which are currently operating at limited capacity. Today, remote testing is alleviating some of the pressure caused by the COVID-19 pandemic and is currently available in all states and provinces for securities licensing and in 14 states for life licensing. We anticipate the rollout of remote life license testing to continue with five states and seven Canadian provinces coming soon. This is an exciting development for the future because remote testing adds flexibility to the licensing process. Another challenge that could turn into a long-term positive for our business is the added efficiency with which our reps can interact with clients. Our rapid adjustment to remote client interactions has had a positive impact on recruiting and sales. Transactions completed using web conferencing technology are identical, whether the client is next door or hundreds of miles away. So many of our representatives are now able to extend their geographical reach. Sales force members do require a non-resident life license to sell life insurance outside their home states, which can be readily obtained in order to make out-of-state sales. During the quarter, our representatives received more than 8,000 non-resident licenses, up 400% from the same period last year. This new trend positively impacted non-resident sales and recruiting. Our Term Life business on Slide 6 reflected the middle market's heightened interest in protecting their families with life insurance. Our ability to assess their needs and complete life insurance transactions remotely led to a 20% increase in issued policies during the second quarter. Our business model, product set, transaction technology and educational approach positioned us well for these unique times. Our sales force leadership also reacted quickly by increasing their level of engagement. Together, these dynamics resulted in a productivity rate of 0.24 policies for life insurance licensed representatives per month. And while the second quarter is usually seasonally strong, the second quarter of 2020 was exceptional by comparison. Slide 7 summarizes the results from our Investment and Savings Products segment. Sales of $1.7 billion declined 13% compared to the second quarter of 2019, which was in line with our expectations. While market volatility kept many investors on the sidelines, and we saw fewer larger investment trades, investors with automatic monthly investments largely continued dollar cost averaging throughout the quarter. Net client inflows of $600 million were more than double last year's second quarter as clients remained invested during the market's volatility and continued their long-term investment plans. Redemptions were noticeably lower than expected at $1.1 billion. Client asset values ended the quarter at $68 billion, up $9 billion compared to the March quarter-end, as the market rebounded from the first quarter correction, while average client asset values, which more closely correlate to revenues, were flat year-over-year at $64.6 billion. With the second quarter behind us, I'd like to take a few moments to discuss what we're seeing so far in the third quarter and then talk about our expectations for the second half of 2020. Due to continued disruptions with the licensing process, we extended our $49 licensing fee discount through the end of July. While there are still delays in the process, we returned to the $99 licensing fee in August, as we begin to balance our messaging to include greater emphasis on licensing. Projecting how long states will continue to issue temporary licenses and extend renewal dates is very difficult. It's also too early to anticipate how much disruption the delays in the process will create in our permanent licensing pull-through rate. We believe these anomalies may persist through the remainder of 2020. July showed continued momentum in recruiting and life sales. Investment sales also showed signs of improvement, but year-over-year ISP sales comparisons will be difficult due to the strength of last year's second half. Based on current trends, we would expect new issued policies to increase between 12% and 18% in the second half of the year, which would result in a full year 2020 over 2019 growth of around 15%. For our ISP business, we would expect sales to decline by approximately 10% to 15% compared to the second half of 2019, resulting in a full-year sales decline in the low- to mid-single digits compared to the previous year. Beyond our insurance and investment business, our recently launched mortgage distribution business is beginning to show early signs of success, and we've gained valuable insight and experience. Our focus is on refinancing mortgages and consumer debt in an effort to assist families with consolidating and accelerating payments on their debt loads. Today, we are active in four states and plan to continue expanding our program in the future. With that, I'll now turn it over to Alison.

Alison Rand, CFO

Thank you, Glenn, and good morning, everyone. I will start by discussing the quarter's key earnings drivers by segment, followed by a review of company-wide insurance and other operating expenses. As I cover each area, I will point out the impacts of COVID-19 on our financial results. I will conclude my prepared remarks with a look at our invested asset portfolio and our capital and liquidity position. Beginning with the Term Life segment, operating revenues grew 11% year-over-year to $328 million, while operating income before income taxes increased 13% to $95 million. The Term Life margin rose to 20.9% for the quarter as higher claims were offset by strong persistency and lower insurance expenses. COVID-19 significantly influenced the second quarter Term Life results, presenting four main themes. The first was the anticipated rise in death claims. During the quarter, we recognized $10 million in COVID-related net claims from an estimated 935 cases, which translates to around 190 extra deaths per million lives in our insured population of approximately five million. In comparison, the U.S. and Canada reported 135,000 COVID-19 deaths, resulting in a death rate of 368 per million, nearly twice that of Primerica. Our experience reflects a younger average age and fewer comorbidities in our insured population compared to the general population. The COVID-19 claims originated from policies that had been active for an average of 20 years, with the average attained age being 63. As mentioned last quarter, at the end of 2019, only 1% of face amounts had an attained age of 70 or higher, and 12% were 60 or older. The second COVID-19 theme pertains to persistency, which has shown steady improvement over several quarters. As we entered the second quarter, typically our strongest in terms of persistency, there were concerns about potential lapses due to economic uncertainty and rising unemployment rates. However, increased recognition of the value of protection products helped maintain persistency across all policy durations at robust levels for the quarter. During this period, we extended some premium grace periods per state regulations, but nearly all of these extensions have now expired and did not adversely affect our quarter's persistency results. On reviewing the financial supplement, the terminated face amount during the quarter actually decreased compared to the previous year, whereas an increase was expected as the in-force block ages and grows. From an earnings perspective, the strong persistency lowered the DAC amortization ratio to 12.3%, but led to higher benefit reserve increases, which, combined with the additional $10 million in COVID-19 claims, resulted in a benefits and claims ratio of 61.5% for the quarter. Overall, we believe this strong persistency's effect on reserves and DAC contributed around $4 million to second quarter pre-tax earnings. The third theme related to the strong sales levels that Glenn mentioned earlier, which combined with strong persistency, resulted in an 11% increase in adjusted direct premiums year-over-year. We estimate that the Adjusted Direct Premium growth exceeding the anticipated 9% for the period added approximately $3 million to pre-tax earnings for the quarter. Finally, the fourth theme concerns insurance expenses, which were lower than expected for the quarter by around $5 million due to business travel restrictions, event cancellations, and other factors. We anticipate many of these savings to reverse in the second half. I will address the company-wide expenses for the second quarter as well as the full-year forecast later in the call. Looking to the remainder of the year, we expect adjusted direct premium growth for the full year to be in the range of 10% to 11%, considering the strong first half and the anticipated sales growth Glenn mentioned earlier. While we cannot foresee the pandemic's depth or duration, we project recognizing about $7 million in COVID-19 net claims in the third quarter based on estimates of 75,000 to 80,000 additional deaths in the U.S. and Canada. With Congress currently negotiating an extension of stimulus support, future stimulus remains uncertain. We could face high unemployment that pressures disposable income in the middle-income market and may potentially reverse some of the strong persistency we saw in the second quarter. Nonetheless, we believe the heightened awareness of mortality and the importance of Term Life insurance will persist. Moving to the ISP segment, operating revenues of $164 million declined 5%, while pre-tax income remained largely unchanged from the previous year. Sales-based revenues fell 12% due to a high volume of smaller trades that did not meet breakpoints, while asset-based revenues and average client asset values were relatively stable. Expenses from sales- and asset-based commissions aligned with their respective revenues, and we saw a favorable amortization of Canadian segregated fund DAC by approximately $2 million thanks to market recovery. We ended the second quarter with $68 billion in client asset values, bolstered by strong equity markets in July, which should benefit third-quarter asset-based revenue. As a reminder, assuming today’s mix remains constant, every $1 billion increase in average client asset values results in an additional $500,000 in asset-based net revenues per quarter. We anticipate third quarter ISP sales to be lower than the prior year by about 10% to 15%, translating to a year-over-year decline in sales-based net revenues of $2 million to $3 million in the third quarter. For consolidated insurance and other operating expenses, we reported $100 million, remaining flat year-over-year. COVID-19 has significantly influenced both the timing and overall level of expenditures across our organization. The stay-at-home orders reduced business travel and other operating costs, while travel restrictions led to the cancellation or modification of field-incentive meetings and other in-person events. Looking forward, we are committed to making strategic investments that reinforce Primerica's competitive position, including in our technology infrastructure, digital platform, and the expansion of our mortgage distribution program into more states. Certain operating expenses, such as travel and headcount additions, are expected to remain lower than originally projected due to COVID-19. We currently estimate that full-year insurance and other operating expenses will be around $430 million, with projections of $105 million to $107 million in the third quarter and $107 million to $109 million in the fourth quarter. We also expect that second-half insurance commissions, reflected in the Term Life DAC amortization ratio, will be $3 million to $5 million higher than usual as we ramp up licensing initiatives and incur other non-deferrable commissions using funds from canceled sales force meetings and events. Collectively, we anticipate expenses to increase by about $18 million to $20 million year-over-year, compared to our original guidance of $25 million to $30 million. Moving on to investment income and our invested asset portfolio, our adjusted net investment income on a consolidated basis was $2 million lower year-over-year as lower yields on the portfolio were partly offset by portfolio growth. At the segment level, more investment income is allocated to the Term Life segment to support the growth of that business, which would be counterbalanced in our corporate and other segments. Our invested asset portfolio remains well diversified across industries and issuers. Despite significant actions by rating agencies recently, we have maintained an average credit rating of A, with our below investment-grade mix staying manageable at about 4%. Credit spreads have narrowed since the first quarter, moving the portfolio from an unrealized loss of about $1.2 million at March 31 to an unrealized gain of nearly $120 million at June 30. We continue to monitor our portfolio for credit issues, especially in sectors facing more pressure, such as energy and air travel. We also reviewed our commercial mortgage-backed security portfolio and believe we have a high level of credit protection in the names we hold, supported by an AA+ average rating on those holdings. In the second quarter, we experienced only modest investment impairment of about $500,000. Regarding liquidity at the holding company, it remains strong with invested assets and cash totaling $256 million at the end of June. Primerica Life's estimated statutory risk-based capital ratio stood at 400% at quarter-end. The primary reason for the decline in the RBC ratio since last quarter was due to the increased use of capital for funding new business, which was anticipated when determining the second quarter dividend from Primerica Life. Although increased sales provide long-term benefits, they initially create strain, especially when funding commissions and underwriting costs incurred. We expect the RBC ratio to return to the 420% range by year-end and believe our capital levels are more than sufficient to meet our operational needs. We are committed to our dividend, which at the current rate requires about $16 million per quarter, contributing to our planned annual share repurchase goal of $250 million, of which approximately $200 million has been completed as of July 31. With that, operator, I will now open the line for questions.

Operator, Operator

And the first question comes from Andrew Kligerman with Credit Suisse.

Andrew Kligerman, Analyst

Good morning, Glenn. It's pretty impressive sales that you saw in the quarter, now you're anticipating newly issued term policies in the 12% to 18% range. And you gave some really good comprehensive outlook information. So I want to take it out to next year. You cited this incredible productivity of 0.237 policies issued per month, and that's above the high end of your range at 0.22. So what I'm wondering is, as we get to next year, and hopefully, the COVID issues kind of dissipate, will the producers still have that growth going? Or is this some kind of an environment where maybe people aren't generating enough income and they're more inclined to sell more Primerica policies. How do you think about next year? I mean maybe there's a real positive here from a sales standpoint, given COVID-19 this year.

Glenn Williams, CEO

Well, there's a lot of conjecture in trying to respond to that, Andrew, but it is something we're talking about constantly trying to evaluate and anticipate how permanent the changes in human behavior might be, both of our clients and of our sales force. I think that certainly, from a client perspective, this has been a wake-up call for middle-income families to realize they need to protect their families. They need to invest for the future. They need to get out of debt. They need to be thinking about an alternative to their careers, which may have been shaken or put in jeopardy as a result of the economic disruption. So all of that plays into actions that are coming from human behaviors that help our business. The question is, how permanent will that be after life goes back to normal? But it's a great question to be asked. I don't think it's going to be any worse than it was. I think it can only be better. The question is, how much better. Is it significant? Is it something we can carry forward? The same set of dynamics we ask about the activity of our sales force. Our opportunity is more attractive than it's ever been as a result of the dynamics we just described. Our sales force is achieving more success, and human behavior being what it is, success breeds success. So the more successful you are, the more excited people get and the more successful they become, in general, until there's another disruption that changes that. So the first comment I would say is coming out of this, and we can't lose sight of the fact that this is a terrible pandemic that is costing people lives and jobs. And so I certainly don't want our success to make anyone think that we're not conscious of that because we are. At the same time, we're trying to appropriately change our business so that we can serve these clients, serve these recruits in a way that's appropriate, and help them succeed in the future and avoid this kind of disaster, at least the financial part of that. So we do believe that there are many, many positives long term that will come out of this. We mentioned some in our prepared remarks as far as the way we do our business. The web conferencing dynamic, the use of nonresident licenses in conjunction with that to expand our reach geographically within the U.S. and Canada. And those won't go away. There are new ways of doing business that we've learned. But the motivation of humans is the part that I think is really at the heart of your question; it's very, very difficult to predict. But we do think it's a lot of upside. And so we are analyzing right now how we might capitalize on that appropriately.

Andrew Kligerman, Analyst

And as you look at this massive increase in recruits at 133,000 in the quarter, up more than 50%, what can you say about the quality of the people that you've brought on board? Is there an issue with having brought them in at $49 as opposed to $99? How are you feeling about these folks that are coming in now in the second quarter?

Glenn Williams, CEO

Well, we feel great about them, Andrew. I don't believe that a $50 discount impacts quality. There are thousands and thousands of quality people out there looking for an opportunity, and a temporary discount of $50 is a motivating factor to a certain extent, but I don't believe it changes the net quality of the results. Now what it may change is the commitment level of the results. There may be someone that makes a decision that says, 'Hey, I risked $49 that might not have risked $99.' And so the question is how committed again, when life comes back to normal or these delays in the licensing process to extend the pathway to success that we're always working on the compressed time frame. So that's a negative of the current dynamics is the extension of time frames, all that impacts, which makes it impossible other than just a guess for us to try to calculate a pull-through rate. We've got many, many models on it right now and what it could be, but there's not one that starts to stand out as one that we could rely on at this point. But I think we've got excellent quality recruits. The question is, what is their commitment level? And of course, the more success we can show as an organization and the more success they have in their experience, I think, the longer they stay and the more committed they become. So that's a positive working in that dynamic. But just there's just a lot of unanswered questions because we're in uncharted waters, we've never seen anything quite like this.

Andrew Kligerman, Analyst

And maybe if I could just get one last question in. With regard to the investment and savings product sales, guided at down 5% to 15%. Is it just in life demand has just gotten so much stronger in the COVID-19 environment? And is there any chance that maybe you might even see an uptick in ISP sales?

Glenn Williams, CEO

Yes, there's always a chance. Of course, we're always working to improve and grow no matter what the conditions around us. But as we just look realistically around us, there's so much uncertainty, and our experience has been that when there's uncertainty, the larger investors tend to step to the sidelines for a while waiting on some clarity. And so what we described, both Alison and I described in our prepared remarks, is that we see great activity levels. But generally, it's with smaller investors and moving into the products that don't have uncertainty around their futures. And so we're still seeing movements toward our mutual fund line of business and away from our variable annuity line to a certain extent, as I think, by the way, the entire industry is. It's not unique to us. But I do think that we've got some people waiting on all the uncertainties of the future to kind of get some clarity, and so that's why we're anticipating the headwinds. If we can figure out a way to slide through that, that's appropriate and our advice for clients and their unique needs, then certainly, we would work for upside, but that's just how we see things right now.

Operator, Operator

And the next question comes from Dan Bergman with Citi.

Dan Bergman, Analyst

Thank you. For the temporary licenses that were issued and the licenses that were extended due to COVID, can you provide any more color on how long those temporary licenses and the extensions last? And any additional color on how much those two items might have influenced the sales force growth in the quarter? Can we just apply an overall normalized licensing rate to the temporary licenses and maybe a normalized withdrawal rate to the extensions to get a sense of what might have happened to those two things not occurred? Or are there other things we should be thinking about there?

Glenn Williams, CEO

There's a lot of complexity involved in that process. To start, there's a lack of consistency, as several states issued temporary COVID licenses with varying rules and timeframes. For instance, 26 states issued these licenses, and the conditions can change as emergency orders evolve. We're uncertain about when this will end, which makes it difficult to base projections on historical data. Additionally, we need to consider how many of those extended licenses would have been renewed without the extensions and how the length of these extensions impacts decisions to renew. There are many factors at play, and we're modeling various scenarios, but the differences among states and their licensing processes add to the uncertainty. It typically takes months to go through the traditional licensing process, and individuals with temporary licenses may be more or less inclined to pursue permanent ones after several months. This is what we're currently analyzing, and, as mentioned, we expect some discrepancies in comparisons until the end of the year. On a positive note, our productivity is increasing without significantly expanding our sales force, which usually lowers productivity metrics. We believe the additional licenses and renewals are contributing to this productivity. Increased productivity also aids in retention, as the team experiences success, particularly in field training. There are both positive and negative aspects to consider, and we're still unclear about the overall outcome.

Dan Bergman, Analyst

And maybe if I can just one more, a little bit more of a high-level question. Is there a material difference? And as you look at your business and your market share and penetration in the South and West, regions compared to the Mid-Atlantic and Northeast, just given how the different geographic areas are being hit hardest by the pandemic at different times. Should we expect different impacts in terms of your mortality or maybe persistency and just overall level of business activity in the third quarter relative to what we saw in the second quarter? Just any kind of overall thoughts on that would be helpful.

Glenn Williams, CEO

Yes, early in the pandemic, particularly when the Northeast was first locked down, we clearly noticed an impact on sales. You would also see the claims trends reflecting that. Canada has enforced very strict restrictions, resulting in a different effect on our business there compared to the overall situation in the U.S. There is some regional variation in what we're experiencing, but that seems to be diminishing now. The Northeast is starting to return to a degree of normalcy, and Canada is progressing with its reopening plan, which could position it more favorably after having longer restrictions than elsewhere. While we did witness significant impacts early on, we are now observing a shift towards normalization across North America. We're hopeful that by the end of the fourth quarter, we will be in a position to better project our business and anticipate developments as we move into 2021.

Alison Rand, CFO

Yes. And as you would expect, our business sort of matches up to the population. So California is, obviously, a very big state for us as is Florida and Texas as are Florida and Texas. So I don't think there's any anomalies about how we're geographically based. So if you look at the U.S. population, you could look to see where we're largely also concentrated.

Operator, Operator

And the next question comes from Mark Hughes with Truist Securities.

Mark Hughes, Analyst

Glenn, did you give any specific guidance on the recruiting outlook? I know you talked about a number of parameters. But I think in times past, you've talked specifically about the ranges. Did you do that on this call?

Glenn Williams, CEO

No, we didn't this time, Mark, because we are changing from the extreme recruiting focus. And again, that was out of necessity because we have control over recruiting and to a great extent, field training, much less control over the licensing process. And so we said, 'Okay, we're going to aim our incentives at the things we can control.' And now we're starting to move to a more balanced approach of trying to incent both. We're going to continue to incent recruiting just in a different way than the $49. And we're also going to balance that up with a strong permanent licensing pull-through impact, all that discussion we've been having during the Q&A period. So we did not attempt to project recruiting. We moved back just a few days ago to the $99. We don't anticipate that to be extremely disruptive, but if the $49 was positive; $99, you'd expect it to be a little less positive. But so that's not really clear. So we've not provided a recruiting projection or any kind of guidance or direction on that through year-end at this point, Mark.

Mark Hughes, Analyst

And similar, Alison, the Term Life segment margin. I think you've thought about that in the past. Did you do that this time?

Alison Rand, CFO

Nothing. Very good. No, we did not do that either. At this point, the truth is, we put out some numbers for mortality. It's hard to predict, quite frankly, where the deaths are going to go. I think if you had asked a few months ago, people would have thought we were on the downward trajectory, and we're not quite there at this point. So we have not gone ahead and done that. I would say, we did look back at what we had projected early on when we did our fourth quarter call. And as far as I can tell, if trends continue and even if persistency pulls back some and we hit these levels of claims, we should be relatively close to where we had originally thought. But I didn't really want to give an exact number just because it's just too hard to say specifically with mortality what is going to happen. So that's why we decided we would just give you the facts as we knew them for the upcoming quarter and our best estimate of what the claims might be.

Mark Hughes, Analyst

How about the mortgage product? You've mentioned that a couple of times. Can you talk about whatever rollout you're looking at and the extent to which or some timing where that might be material?

Glenn Williams, CEO

We are very excited about the program. As I mentioned, we've been doing business for a while now in four states: Florida, Colorado, Texas, and California. We're just really starting to get Texas stood up. We picked four states for a variety of real estate markets, a variety of business styles of our own and leadership styles and a variety of regulatory regimes in place because really, we're trying to understand the dynamics of the mortgage business today versus when we were in it a decade ago or more. And so we're very pleased with what we're learning. Our partner, Quicken Loans, is an excellent partner and is we're working together extremely well as a partnership. We do have a plan to add a fifth state in the next week or two. And so we that will give us yet another perspective on different strengths and weaknesses of our business in the marketplace and so forth. But we're seeing really good traction early, and we're learning the adjustments we need to make to really maximize it. And so we think in the next year or two, right now, I would say that this is a product line that should have a great impact on our business. And both financially, but also don't forget the complementary nature of this business. When we go into a home, as I said in my prepared remarks, we're focused on refinancing current debt at a lower-weighted average interest rate and then accelerating payments on debts. And so the middle-income consumers focused on their debt load has probably been replaced by the current crisis just a little bit. But historically, people lie awake at night worrying about being in debt, not being able to get it paid off in their lifetimes. So it's a very attractive discussion to have with clients. And when they do take action, it generally frees up money for them in their monthly budget, which then enables them to do other things they need to do, including protect their family and invest for the future. So it has a positive dynamic. And then clients are very happy after having done that. So they're great at referring us to other business. They love to say, 'I'd like to be in business with you and help my friends and family do what I've just done.' So it has a tremendous halo effect on the rest of our business as well. So we're excited about the potential for it as a business in and of itself, but also the impact it can have on the rest of our company dynamics. And so we're going to continue to study it. As we see the opportunities, we're going to continue to accelerate. As Alison said, our investment in it, make it grow quickly as much as possible. And then we'll report back once it starts to have a real measurable impact on the business.

Mark Hughes, Analyst

And then finally, still thinking about the Medicare Advantage, I think was also a potential product.

Glenn Williams, CEO

Yes. We're still looking at that marketplace. Still a very interesting marketplace for us. Demand seems to continue to be growing, and there are certainly success stories in that space. And we just keep asking ourselves, how can our distribution strength be matched up with the successes that are occurring in that space to benefit clients and us and a potential partner if we could identify one that would be interested in doing business with us as well. So we are continuing to actively study that. No action to report, but clearly, still of interest to us.

Operator, Operator

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