Primerica, Inc. (PRI) Q3 2026 Earnings Call Transcript

Operator: Greetings, and welcome to Primerica's Third Quarter 2026 Earnings webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nicole Russell, Senior Vice President of Investor Relations. You may begin.

Nicole Russell: Thank you, operator, and good morning, everyone. Welcome to Primerica's third quarter earnings call. A copy of our earnings press release was issued last night, along with other materials relevant to today's call and 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 Form 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 will provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in the earnings press release. I would now like to turn the call over to Glenn.

Glenn Williams: Thank you, Nicole, and thanks, everyone, for joining us this morning. In the third quarter, Primerica's financial performance demonstrated the resilience of our business fundamentals, driven by our unique operating model that is designed to help middle-income families achieve financial security through both protection and investing for the future. The power of our business model comes from its balance. We combine the stability of our Term Life business with the growth potential of our Investment and Savings business to drive results. You may have noticed a change to our earnings press release. This quarter, we adopted a more streamlined format designed to present key information in a concise and fact-based manner. Additional details on our third quarter results can be found in our investor update presentation beginning on Slide 7. Starting with our financial results. During the third quarter, we reported adjusted operating revenues of $902 million, up 8%, and adjusted net operating income of $209 million, up 2% compared to the prior year period. The more modest increase in adjusted net operating income reflects a smaller remeasurement gain this year compared to the prior year period. Strong performance in our Investments business continued to drive increases in both revenues and earnings. Diluted adjusted operating earnings per share of $6.77 is up 7% on a year-over-year basis. We generated healthy cash flows during the quarter, enabling us to deploy capital effectively while prioritizing attractive returns for our stockholders. During the third quarter, we repurchased $122 million of common stock and paid $37 million in regular dividends. Year-to-date, we've returned $511 million in capital to our stockholders through a combination of share repurchases and dividends. Turning to distribution. Our home office and field leadership teams are aligned around building recruiting momentum and encouraging new representatives to become field trained and licensed. Recruiting is the starting point for building distribution, and we believe that the value proposition of our entrepreneurial business opportunity is both compelling and attractive to individuals seeking a flexible and rewarding career path. As we look at quarterly recruiting trends year-to-date in 2026, comparisons have been affected by the timing of recruiting incentives. Following a weak first quarter, recruiting improved in the second quarter before declining 10% year-over-year in the third quarter, reflecting differing levels of incentives throughout the year. Despite the quarter-to-quarter volatility, recruiting activity has improved from the low levels seen at the beginning of the year, and the overall trend is moving in the right direction. Looking ahead, we anticipate negative trends to further moderate in the fourth quarter, as our recruiting initiatives and sales force growth efforts continue to gain traction. The number of individuals obtaining New Life licenses during the third quarter declined 14%. As a result of lower recruiting activity over the past several quarters, the total number of Life-licensed Representatives at quarter end was down 3% compared to September 30, 2025. We continue to focus on increasing the size of our sales force by building on the strategies that have previously proven effective. In addition to our ongoing focus on attracting, developing and licensing recruits, we've implemented new growth-focused incentives to further support recruiting activity. We recognize the opportunity ahead and remain focused on ensuring our sales force has the support, education and technology essential to distribution growth. Based on current trends, we expect our year-end 2026 sales force size to be down around 3% compared to December 31, 2025. Turning to production. We saw differing trends across our 2 operating segments, reflecting distinct dynamics within our 2 major product lines. Sales of our Investment products remained robust, while Term Life sales were affected by the continuation of economic pressures within our middle-income customer base and the limited growth in our sales force. Beginning with our Term Life Insurance business, issued Term Life face amount and total estimated annualized Term Life premium, both of which include new policies and add-ons to existing policies, declined 5% compared to the third quarter of 2025. The number of issued policies declined 7% compared to the prior year period. Productivity was 0.17 policies per Life-licensed Representatives, in line with the prior year period. The ongoing need for protection among middle-income families continues to support demand for our Term Life products. We remain committed to raising awareness about the steps our clients can take to build a stronger financial future, and our sales force is positioned to help clients manage competing financial priorities and identify ways to make Life Insurance protection fit within their budgets. Based on our current expectations, we anticipate continued moderation in the year-to-date negative trends and expect fourth quarter issued policies to be down low single digits, resulting in full year 2026 issued policies down between 8% and 10%. Turning to our Investments business. We delivered another record quarter and continue to benefit from the foundation laid over the last few years, high sales force engagement and favorable demographic trends. Total securities sales increased 19% year-over-year, supported by healthy demand across all of our major product offerings even as we compare against exceptional results in the prior year period. Drawing upon robust client demand for wealth accumulation, guaranteed income and downside asset protection through guaranteed benefit features, sales of variable annuities grew 29%, outpacing broader industry results. Sales of our managed account products increased 27% due to a growing interest in professional portfolio management, while mutual fund sales increased 8%. Assets under management ended the third quarter at $140 billion, representing a 10% increase compared to September 30, 2025, supported by continued positive client flows and market performance over the last 12 months. During the quarter, we generated $407 million in net client flows, reflecting favorable demand for our investment solutions and the ongoing strength of our distribution model. We remain optimistic about the long-term outlook for our Investment business with strong underlying fundamentals, including the broad appeal for retirement planning products as well as the need for personalized financial guidance. While market conditions will inevitably vary over time, demand for our investment solutions remains durable, supported by our clients' long-term objectives and the stickiness of our client assets. With that in mind and based on current projections, we expect fourth quarter investment sales to increase mid-single digits and full year 2026 investment sales to increase mid- to high teens compared to the prior year period. Finally, mortgage loan volumes in the United States remained steady in the third quarter even as interest rates reached multiyear highs, pressuring industry-wide mortgage origination. In Canada, mortgage referrals through our strategic lending partner increased, benefiting from a more consistent interest rate environment. Our Mortgage business remains an important way for our representatives to deepen client relationships and address another key financial need for middle-income families. As we look toward next year, we're focused on accelerating momentum, and our 50th anniversary provides a unique opportunity to reinforce that focus. Throughout the year, we will expand strategic growth-oriented messaging in our field communications, launch new incentives designed to increase momentum and include a growth component in key initiatives. We plan to recognize and celebrate the achievements of our sales force throughout the year, especially at our 2027 convention in July, which we expect will serve as an important catalyst for the second half of 2027. In closing, Primerica's competitive advantage is rooted in our unique ability to reach and serve middle-income families through financial education, term life protection and long-term investment solutions. Our entrepreneurial distribution model differentiates us from the traditional financial institutions and enables us to address the financial needs of a large and historically underserved market. The opportunity before us remains significant, supported by enduring need for protection and investment for the future. With our strong distribution network, we're well positioned to capture this opportunity, generate sustainable growth and create long-term value for our stockholders. With that, I'll turn it over to Tracy for the financial results.

Tracy Tan: Thank you, Glenn, and good morning, everyone. Our third quarter results reflected another quarter of strong growth in our Investment business, while Term Life continued to support consistent earnings and predictable cash flow. Combined, we delivered a return on adjusted equity of 33.9%. Starting with the Term Life segment. Revenues were largely consistent year-over-year at $462 million, while adjusted direct premiums increased 3%. Pretax income was $153 million compared to $173 million in the prior year period, a decline of 12%, primarily driven by a larger remeasurement gain in the prior year period. As required under LDTI accounting, we completed our annual review of actuarial assumptions during the third quarter and made certain changes to our long-term assumptions, which contributed to a $9 million remeasurement gain to the segment in the current year period. These assumption changes reflected overall higher lapses and ongoing favorable mortality. As a reminder, the prior year period included a remeasurement gain of $23 million, primarily driven by a change in mortality assumptions. Excluding the impact of remeasurement gains from both periods, pretax income declined by 4%. Looking at our key financial ratios for the third quarter of 2026. Excluding the impact of remeasurement gains, the benefit and claims ratio was relatively consistent at 58.7% compared to 58.3% in the third quarter of 2025. The DAC amortization and insurance commissions ratio was 12.5% compared to 12.2% in the prior year period, while the insurance expense ratio was 8.3% compared to 7.5%. The increase in insurance expense ratio was largely due to higher investments in technology. I'll share additional commentary on consolidated expense growth drivers later in my prepared remarks. Finally, the Term Life operating margin was 21.8% compared to 25.4% in the prior year period. The year-over-year decline was primarily attributable to smaller remeasurement gain from the annual assumption changes, which contributed 140 basis points this year compared to 340 basis points in the prior year period. The remainder of the decline was largely driven by higher insurance expenses. Given the size of our in-force block and the stable nature of our Term Life business, we continue to expect adjusted direct premiums to grow around 3.5% on a full year basis. After updating our mortality assumptions, we expect the fourth quarter benefits and claims ratio to be around 58%, the DAC amortization and commissions ratio to be around 12% to 13% and the operating margin to be approximately 21%. The operating margin outlook reflects an anticipated increase in technology investments to support future growth. I'll provide full year guidance for 2027 on our February earnings call. Turning to the Investment and Savings Products segment. The Investment business generated strong financial performance during the quarter, driven by record sales and record average client asset values. Resilient demand for our products, favorable demographic trends and continued equity market tailwinds contributed to revenue growth of 19% and an increased pretax income of 21% compared to the third quarter of 2025. Our Investment business accounted for approximately 42% of consolidated revenues compared to 38% in the prior year period. On a year-over-year basis, sales-based revenues increased 19%, largely in line with commissionable sales growth, led by strong demand for variable annuities. Asset-based revenues increased 21%, outpacing a 14% increase in average client values, as we continued to benefit from favorable product mix with strong demand for U.S. managed account advisory solutions, and Canada mutual funds sold under principal distributor model. Both products generate higher levels of recurring fee-based revenue and contributed to asset-based revenue growth that outpaced the growth in average client asset values. In the Corporate and Other Distributed Products segment, we recorded pretax adjusted operating income of $5.3 million for the quarter compared to $3.8 million in the prior year period. The improvement was primarily driven by higher net investment income. Finally, consolidated insurance and other operating expenses were $165 million in the quarter, up 9% year-over-year. The increase was primarily driven by a combination of higher variable growth-related costs in our Investment business and continued spend in technology solutions. We anticipate expenses to increase around 10% in the fourth quarter on a year-over-year basis, as we ramp up various growth initiatives, including front-end technology to support our sales force and client growth. Full year expense growth is expected to be around 7% to 8%, unchanged from the guidance provided throughout the year. The effective tax rate during the third quarter was 23.1% compared to 23.9% in the prior year period, primarily reflecting the benefit of the income tax credit transaction we discussed in the second quarter. We expect to recognize a similar tax benefit from this transaction in the fourth quarter, resulting in an effective tax rate around 22%. Our investment asset portfolio remained well diversified with an average credit rating of A. The average rate on new investment purchases was 5.6% for the quarter with an average credit rating of A. The net unrealized loss increased during the third quarter to $280 million compared to $140 million at the end of June as a result of sharp increase in interest rates during the period. We do not believe this reflects underlying credit concerns, and we have both the intent and ability to hold these investments to maturity. We continue to generate strong cash flows supported by superior growth of our fee-based investment business and the durable earnings contribution from our large in-force insurance block. Our distribution-focused business model and disciplined capital management allow us to operate with a relatively low capital requirements while consistently generating superior return on equity. Our holding company ended the quarter with $600 million in cash and available-for-sale securities. And Primerica Life's estimated RBC ratio was 445%, reflecting our financial strength. We are confident in our strong capital position, which provides flexibility to invest in growth initiatives, navigate economic uncertainty and generate superior returns for stockholders. With that, operator, please open the line for questions.

Operator: [Operator Instructions] Our first question comes from the line of Jack Matten with BMO Capital Markets.

Francis Matten: First was on recruiting trends and the outlook for your sales force growth in Term Life. I guess, what kind of gives you confidence you can see an uptick or reacceleration in those levels in the upcoming quarters? Do you think it's more a matter of timing until you have a larger convention next summer? Or do you think some of the incentives you're introducing now can help to reaccelerate growth before then?

Glenn Williams: Yes. And so Jack, we obviously are working on recruiting growth at all times, but we do have a business that has certain rhythms to it in the cyclical nature. We tend to grow our sales force in stair steps. So we'll get to a peak and we'll take a breath, the horses will take a rest, and then, we'll get them ready to run again. And during that time, we're trying to lay the foundation for the next spurt of growth. And so we've been doing that. We were hoping that we would see the trends that I mentioned in my prepared remarks that are moderating begin to moderate earlier this year. We're probably a couple of quarters later than I anticipated earlier in the year. But we are seeing some stability. We're finding our footing. The comparisons, as I mentioned, are getting better, and we expect them to be better next quarter. And then, I think that positions us for some growth in '27. We've got a lot of things in our favor in '27. We're coming off easier compares. So the math is in our favor. We recognize that. But the efforts we've been making in making sure that we improve our support systems, we communicate more clearly to our field about having balanced businesses and not letting a business skew one direction or another in our variety of things that field force leaders can focus on. And also, as we mentioned, putting some additional growth incentives. So we're trying to reward growth year-over-year and make that a key focus. So we've got a lot of those things coming together. The events of next year and our 50th anniversary year clearly will be in our favor that will generate excitement. And so you put all those together, and we're looking forward to taking another one of those steps up from the current plateau. So we're feeling like things are beginning to come together for us.

Francis Matten: That's helpful. Maybe my follow-up is on lapse rate or persistency trends in Term Life. I think that you mentioned higher lapse assumptions for part of the annual review. Just any color there on what drove that, whether it was certain cohorts or policy durations? And then, any thoughts on how current lapse experience is trending across your book?

Tracy Tan: Jack, congrats to your family, and welcome back from paternity. Lapse rates -- yes, lapse rate story is relatively consistent in terms of what we've been observing in the last 3 years. We know that during the pandemic period, we had extraordinarily good lapse rates for about 3 years. And then, we have been experiencing extraordinary strong persistency and very low lapse rates during the pandemic period for about 3 years. And then following that, we have much higher lapse rates and lower persistency, which we do believe is a runoff of the policies that were generated during the pandemic period. And then also, there are other factors that contributed to the higher lapses, such as the economic side of the pressure on the middle-income families, particularly on the younger generation compared to, let's say, the cohorts we have that are supporting a lot of the investment side of the growth. So the lapse rates is a combination of a lot of different factors, all of which is very difficult to decipher. However, that being said, it does not mean that we don't believe that the lapse rate is going to recover at some point. It's just that when we look at the annual assumption review in the third quarter, we are recognizing the recent 3 years of trend and incorporating that in our longer-term LDTI assumptions. And that, again, does not mean that we don't believe that the lapse rates could possibly decline and persistency improve in the future. It's just that it's very difficult to predict when that could be. And then the other factor is the -- when we look at the duration performance, some durations have much higher lapse rates than our previous assumptions, and some durations actually have better lapse rates than our assumptions. So when we incorporate both, for example, the nearer durations that are more recent policies, first 10 durations may have higher lapse rates than maybe later durations. So all incorporating in different duration performance, when we essentially recognize the trend, the remeasurement gain that we recognized is reflecting the most recent behavior. And when I consider the longer trend, it's very possible that we could see improvement. We just will not be trying to predict when that would be. In terms of persistency of different periods, I would also say that we have seen some improvement in recent couple of quarters in particularly certain durations that are more recent. We also believe that the runoff for the pandemic duration such as duration 6 continue to be higher than many other durations. So that part is going to be a piece that we observe very closely and see when that runoff might end. That being said, I think we have reflected what we believe currently as the appropriate assumptions for the foreseeable future. And I also don't believe that we would be expecting as big of a remeasurement gain from the persistency side for the near future. I hope that answers your question.

Francis Matten: Yes, it does.

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

Mark Hughes: Tracy, how should we think about the 2027 expenses? I know it's early and you usually don't give guidance, but we've got the convention coming up after -- because of the delay around the soccer. I think you're talking about this year, 7% to 8% expense growth. How should we think about the 2027 trajectory even if just kind of roughly?

Tracy Tan: Mark, that's a great question. I would certainly be more confident to give an appropriate guidance in the February time frame because we still have a fourth quarter with a lot of growth initiatives running up for technology, particularly the front-end technology that we're rolling out and investing in and also for growth initiatives, as Glenn has talked about, as we prepare for the 50-year anniversary for Primerica in February and heading into the convention. So my expectation for 2027 would be more certain in February, but I would say that we are committed to organic growth, investing in our sales force and client experience and continue to also support the more advanced technology that can give us better retention of clients and also more superior client experience for the longer future expectations.

Mark Hughes: Yes. Is -- when we think about expense growth, does that imply a little bit faster growth if you're continuing to invest in the underlying business, but you also have the convention? And maybe you can refresh me on what the incremental cost load of that has been in earlier years.

Tracy Tan: Yes, that's a good observation. But I would emphasize that our annual expense typically is pretty consistent in convention years versus non-convention years. When we don't have convention, we typically have 2 major sales trips and to really help build the sales force momentum and also motivate and engage and educate, also roll out new products and all the activities that happen in those events. So in convention year in an ordinary situation, it's quite similar to how much we would be spending on a non-convention year because we wouldn't have 2 trips, we would have 1 in that case. Now to your earlier point, next year is special because we have 50-year anniversary. So my expectation is that there will be a lot more focus, energy and momentum from the sales force and the engagement that we expect to also from a lot of our partners that help support product growth and also increase our technology penetration and solutions. So I do believe that next year, we have a lot of special activities centered around it, but I wouldn't necessarily conclude that convention year is significantly higher expenses than other years albeit that we will be celebrating 50 years next year.

Mark Hughes: Yes. Okay. I appreciate that perspective. And then, Glenn, you had given guidance for the ISP sales in the fourth quarter to be mid-single digits. I think we've been experiencing just this very strong equity market that seems to have boosted demand for ISP products or the annuity products. They have also been on a nice trajectory. Is this kind of the same conservatism perhaps that you've expressed in earlier quarters, it's hard to see that momentum sustain because it's been so strong? Or do you actually see some trends early in the fourth quarter that suggest a little more moderation in the ISP sales growth?

Glenn Williams: No, Mark, there's nothing significant that has changed. I mean, we've experienced 12 consecutive quarters of not just growth, but double-digit growth in our ISP sales. And so the compares are getting very large. I think the third quarter is our largest quarter ever. But -- and so some of it is the math of the comparison. Some of it is a bit of conservatism of how long can the run of the strength of the market or double-digit growth continue, and we don't want to get too far out over our skis. So it's taking all of those factors into consideration, but there's nothing that is a change of trend or a change of specific fundamentals in our business that would reflect that.

Mark Hughes: Yes. And then, Tracy, on the ISP business, the asset-based revenue, if you look at that relative to assets, it has continued to march up nicely. The -- I'm looking at kind of 15 basis points, if I'm doing the math properly, which is up from below 14 in this quarter last year. It's been kind of a steady progress. I think you've talked about the managed accounts contributing to that. Is that still the right way to think about this, as the managed accounts grow, the asset-based revenue should grow a little bit faster than asset values?

Tracy Tan: Yes, that's a great question, Mark. Our asset-based business has growing outpacing many other areas, partly because of the demand for advisory solutions on the managed account as well as the faster growth of our Canadian PD model. Now, those products are highly in demand, particularly on the advisory business. When we look at the history of that business, we really only significantly launched into that business with more product offering, technology platforms and particularly the training and education of our clients really from about 2015 onward. And the more tremendous growth is really in the most recent 3 to 5 years. So that business has a particular potential for continued stronger growth, not only from the fact that the market is doing well, but also because of our efforts in better platforms, much broader product offering. We rolled out more than 60 products within the last 2, 3 years, and most recent rollout were in June time frame, and we continue to expect expanded offering along that line. And in that manner, the -- from the demand side, we have clients who started with us from mutual fund and very small balances, and they've been with us due to our long relationships of the clients with our agents. Now, they've become much more larger account and more affluent clients, and that also drives the demand for advisory business. The flexibility of it, where they can build more custom portfolios, and all of that features is increasing the demand from the clients, coupled with the better services of product offering and our technology. So that will continue to help drive the faster growth of that side of the business that's outpacing other areas. And I do believe that it is a positive product mix that is also helping in terms of the outlook of the margin leverage that we're seeing on the investment business.

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

Daniel Bergman: Just following up on the ISP sales, while the third quarter growth was broad-based, it was particularly strong in variable annuities and managed accounts, which outpaced the mutual fund growth. So I wanted to see if there's any more detail you could give on those product-specific trends you're seeing and what's driving strength in those areas. And then, just looking forward, particularly as we move into a seemingly higher interest rate environment, just curious if there are any additional product types you're considering adding to the shelf or further emphasizing within ISP.

Glenn Williams: Yes, Dan, the -- as we see the product mix shift, it's fairly predictable and reasonable within our experience and our client base. It may be different for other providers that are in a more upscale market. But what we've seen driving the Managed Account business is the desire of our larger account holders with more investments looking for more variety and customization and portfolio management. When Tracy mentioned the product introductions on that platform, they're portfolios on a platform. So they don't take all of the effort of a brand-new product that nobody understands. It's different options on our Managed Account platform. Some are tax efficient. Some are -- have better interest rate exposure, as you point, as interest rates fluctuate or remain high. And so clients can customize more of their specific desires and their needs on that platform. We're seeing tremendous response to that. And then in the variable annuity line of business, it is the guarantees, both the income guarantees of annuities, but also the guarantees of account balances, floors that are created within the products that give an older client generally with more assets that are preserving those assets for retirement or entering retirement, very attractive to have those guarantees. So those products are larger ticket, I would say, generally more sophisticated and more focused products, and we're seeing a tremendous amount of interest in those. The mutual fund business is our bread and butter. It's where people enter the Investment business, broad application of growth and balanced mutual funds, and they tend to be a little more steady. They don't grow from the product mix shift quite the way the other 2 products, although they've been very strong sales for the last few quarters. They weren't quite up double digits this last quarter, but they've been up double digits in previous quarters. So it's not an unexpected mix shift as we see our client base age, as Tracy said, become larger asset holders and more sophisticated. That's one of the trends we're playing into on purpose. And then, we offer more options that have -- meet the specific needs on a client-by-client basis. So that's what's, I believe, driving that product mix. If there's more there you need me to expand on it, I'd be happy to.

Daniel Bergman: Got it. That's super helpful. And then maybe just pivoting over to Term Life. I believe you guided for a continued decline in policies issued in the fourth quarter, but at a slower pace than what you've seen in recent quarters. Just looking for any more color you can give on how confident you are in that positive inflection going forward and any kind of a time frame. And just stepping back with inflation and the higher energy prices back in the spotlight a little bit more of late, what are you seeing in terms of how that's impacting your sales and customer finances and thoughts on kind of what you can do to overcome that?

Glenn Williams: Sure. We developed that view because we are seeing a progression throughout the year of the negative trend moderating. We believe it will continue to do that. As I said earlier, we were hoping we would see that occurrence in earlier quarters. It's taking a little longer to develop. Some of that is because we're getting better at helping clients prioritize in this difficult environment. So we're developing sales skills to help clients be able to fit those products into their budget. Some of that is because we do believe the cost of living is stabilizing a little. I'm not going to say yet it's improving very much. But in our own household budget index, which when it achieves 100, it means that families -- middle-income families are at breakeven, their income is perfectly keeping up with their expense growth. 10 -- or 12 of the last 14 months have been above 100 or at 100. Not much. So I'm not going to declare victory, but we do think that the -- it's not getting much worse right now. And so we're seeing that stabilization in our business trends. We're seeing that in what we believe are cost of living trends in middle-income families. Families are adapting to the environment. We're adapting to the environment. So we believe we're getting close to that inflection point where the negative trend ends and we can start building from there with positive trends. But that's what's behind that assumption.

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

Wilma Jackson Burdis: I just want to add a little bit on the last question here. You touched on it, but are you seeing anything changing in terms of the health of the middle-income consumer? I think we've seen some other companies report this quarter with an uptick in disability claims, and they said maybe some potential economic weakness could be driving that. So are you seeing anything on the ground there?

Glenn Williams: No, we're not seeing much more negativity. Like I said, we're seeing this, generally the same amount of negativity or maybe a little improvement. But we do believe it's a foundation, it's firm footing we can build on is what we're hoping going into the future. So there's nothing new out there that we see that's new -- I mean, most of what we see is the gas price fluctuation. When gas skyrockets, it creates further pressure. Most of the other expenses are staying relatively within a reasonable range, and incomes are growing at pretty much the same rate as the expenses are growing. So Wilma, we're not seeing anything new or unusual on the negative front other than just the fluctuation in gas prices.

Wilma Jackson Burdis: Okay. And then, could you talk about retention rates within ISP? The sales were very strong. We noticed the flows were not as strong compared to the sales. So just curious if you're seeing more turnover in products with the interest rate environment shifting, or if there's anything that's changing there? And what the goals are for retention longer term?

Glenn Williams: Sure. Well, I mentioned in my comments specifically that our product providers view our business as sticky business, a business they like because it has lower redemption rates than average. The best we can tell from the information we can get our hands on, our redemption rates run about 2/3 of the industry average. And so we're significantly below the average -- industry average on redemption rates. However, we see both our redemptions and industry redemptions increasing as assets do on a percentage basis. Some of that could be driven by older clients hitting retirement and starting to take distributions and so forth. So it's not just -- it is the percentage of assets, but ours are significantly better, significantly lower than the industry average. So even as we grow, we're continuing to see the flows stay positive. That trend is very rarely do we have negative flows. So we are gaining ground. And that's one of the things that makes our distribution model attractive to our product providers is because it's better than the industry based on the information that we have access to.

Tracy Tan: If I could add to what Glenn just mentioned, 74% of our client accounts are qualified retirement accounts, and those accounts are particularly sticky in the eye of the industry is because people are really saving for retirement. They're not necessarily the very upper echelon of cohorts that may be playing the market and reacting to the market. And we also do a very good job, and our sales force does a tremendous amount of excellent work, to educate our clients not to monitor the stock market in the way of reacting to it. We try to educate our clients that time in the market is more important than timing the market. So I think that is also another aspect of it.

Glenn Williams: It's a good point. Was that helpful, Wilma?

Wilma Jackson Burdis: Very helpful.

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

Suneet Kamath: On the annuity front, I just wanted to ask something about the utilization of the product. Is your sense that most of the customers that are buying these annuity contracts are still focused on asset accumulation? Or are you actually seeing people use the product for sort of the income for life feature that the product has kind of been talked about in terms of the great opportunity to convert accumulated savings into protected income? Like where are we in sort of that transition period?

Glenn Williams: Yes. I can give you a feel for that. I don't have any stats in front of me, but we do see most of the sales are coming in and the assets are being held. They're not going straight into distribution mode or quickly going into distribution mode. So I do think it's -- and that's why I said it's not just the income guarantees that are attractive about the product, it's the floors. It's the guarantees on the account values and so forth because people are using the products to preserve the gains and the wealth they've accumulated. I do think as we age, we will see a shift over time toward more distributions, but we'll be selling newer clients at the same time. But right now, I would say we're -- it's significantly more about accumulation than it is about distribution at this point, Suneet.

Suneet Kamath: Okay. That's helpful. And then I guess for Tracy, if I think about your comments on holding company cash and RBC, the levels that you're running at relative to your business mix, which I would argue is pretty low risk, seem pretty elevated. Just wanted to get your thoughts on that. And is there a sort of a time frame for bringing one or both of those metrics down?

Tracy Tan: Suneet, I wanted to emphasize that the cash balance, especially the amount of cash that we have in our insurance entities, they do have a -- these balances do have a relationship to how fast we grow. As we know that when we grow in Term Life business, when we write a new policy, the cash flow upfront is negative. So the faster we grow, the more cash is going to consume. So one of the major reasons that we want a strong cash balance is to support our long-term growth. As Glenn had mentioned earlier, our recent lower growth rate is -- as we have observed in the last 50 years, there's a speed of growth that sometimes are faster and sometimes are slower. So the cash consumption in that business will be quite influenced by how fast that we issue new policies and all the other benefits that we put out there. That's one aspect of it. The other aspect of it is the need that we have to continue to invest in technology that support our client experience and the -- also our sales force productivity. If we think about the investment business, in the last 3 years, we have tremendously increased the size of the volume, the new product and also the client demand upon that business. So we're going to continue, for example, to invest in technology such as CRM and then the different various tools to support the growth of the business. In the same time, we're also heavily invested in modernizing our infrastructure as the business continue to scale. If you think about the sales force size as well as the client size, the ability to be able to offer the technology that can be secure in the ever-changing new environment with AI and with all the capabilities that is available to us. We are heavily invested in supporting the modernization of our technology and the offering that we can make to our sales force and our client experience. So that is primarily a top reason for having strong cash is to support organic growth. At the same time, we know that the world is an uncertain ever-changing place. So we want to have extraordinarily strong capital position to withhold any sort of downturn, whether it's equity market or whether it's any other factors that could impact our business. And that's our primary motivation to support the top line growth, the technology investment as well as any sort of market uncertainty.

Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. And this also concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.