Good morning, and welcome to the Primerica Second Quarter 2014 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Ms. Kathryn Kieser, Executive Vice President, Investor Relations. Please go ahead.

Thank you, Gary. Good morning, everyone. Thank you for joining us today as we discuss Primerica’s results for the second quarter of 2014. Yesterday afternoon, we issued our press release reporting financial results for the quarter ended June 30, 2013. A copy of the press release is available on the Investor Relations section of our website at investors.primerica.com. With us on the call this morning are Rick Williams, our Chairman and Co-CEO; John Addison, Chairman of Primerica Distribution and Co-CEO; and Alison Rand, our CFO. We referenced certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures are provided because management uses them in making financial, operating and planning decisions, and in evaluating the company’s performance. We believe these measures will assist you in assessing the company’s underlying performance for the periods being reported. These non-GAAP measures have limitations and reconciliations between non-GAAP and GAAP financial measures are attached to our press release. You can see our GAAP results on Page 3 of the presentation. On today’s call, we will make forward-looking statements in accordance with the Safe Harbor provision of the Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that may project, indicate or imply future results, events, performance or achievements and may contain words such as expect, intend, plan, anticipate, estimate and believe or similar words derived from those words. They are not guarantees and such statements involve risks and uncertainties that could cause actual results to differ materially from these statements. For a discussion of these risks, please see our risk factors contained in our Form 10-K for the year ended December 31, 2013. This morning’s call is being recorded and webcast live on the Internet. The webcast and corresponding slides will be available on the Investor Relations section of our website for at least 30 days after the presentation. After the prepared remarks, we will open the call to questions from our dial-in participants. Now, I will turn the call over to Rick.

Thank you, Kathryn and good morning everyone. As you can see on Page 4 during the second quarter of 2014, our operating revenues grew 10%, net operating income increased 18% and net operating income per diluted share was up 25% to $0.88 compared with the prior year period. These results were driven by strong investment and savings products performance and higher term life net premiums in the quarter. Net investment income continues to experience downward pressure from lower yield on invested assets in the low interest rate environment, although the second quarter was enhanced by favorable market value changes on our deposit asset in the Corporate and Other Distributed Products segment. Year-over-year, expenses declined largely reflecting our settlement of the Florida Retirement System matter earlier this year. Solid earnings in the second quarter drove net operating income return on adjusted stockholders’ equity to increase to 16.3% in the second quarter. Over the course of the next 12 to 18 months, ROE should remain in the 15% to 16% range as the recurring income accumulates and stockholder equity builds until capital is employed. During the quarter, we retired $22 million of Primerica’s common stock for a total of $35 million of stock repurchased year-to-date. In July, we completed a redundant reserve financing transaction with Hannover Re, which should enable the execution of our multi-year capital strategy. Alison will walk you through more details in a minute, but near term, we anticipate returning approximately $150 million of capital to shareholders annually through 2016. Now, turning to production results, in the second quarter term life insurance policies issued increased 3% from the year ago period and grew 21% from the seasonally lower first quarter. Average annualized issued premium per policy remains fairly constant with both the second quarter of last year and the…

Thanks Rick. Good morning everybody. We feel good about the positive distribution results in the quarter. As you can see on Slide 5, the size of life license insurance – life insurance license sales force grew 5% to 96,596 in the second quarter compared with the year ago period and was up 1% from the first quarter of 2014. Sales force growth partially reflected growth of new license representatives which increased 2% from the second quarter a year ago and grew 22% compared with the seasonally lower licensing in the first quarter. Recruiting in the second quarter remained consistent with the second quarter of a year ago and increased 4% from the first quarter of 2014. The ratio of new representatives obtaining a life insurance license remains consistent on a year-over-year basis, and increased sequentially from the first quarter with seasonally typical – with seasonality typical for the second quarter. The ratio of representatives not renewing their life insurance license was consistent with both the prior period – with the prior year and the prior quarter period. As we move into the third quarter last year’s post convention recruiting levels and associated new licenses generated by convention incentives will create challenging year-over-year comparisons. On a sequential quarter basis we anticipate the size of the life license sales force to increase slightly from the end of the second quarter 2014. I have mentioned before that we are continuously evaluating and adjusting messaging and incentive programs to produce positive results. At our contest trip to the La Costa Resort in California this month, our focus will be building on recent sales force momentum by creating a sense of urgency to help more families in the vastly underserved middle income market to become properly protected with term life insurance. We will also be launching technology initiatives at this meeting including new point of sale presentations. And we will be promoting our current incentive trip competition to take 1400 qualifying representatives to Puerto Rico in February. Now I will turn it over to Alison to walk through our financial results.

Thank you, John. Good morning everyone. My remarks today will begin with a discussion of segment operating results highlighting changes that we have made in our presentation of the term life segment followed by a review of company wide operating expenses and invested assets. I will conclude with a discussion of distributable capital from the recently approved redundant reserve financing transaction. Starting with term life on Slide 6, year-over-year operating revenues increased by 9% driven by 11% increase in net premiums compared with the second quarter a year ago. Allocated net investment income remained consistent with the prior year period as lower portfolio yield was offset by growth in the assets required to support this segment. These revenue trends combined with higher DAC amortization year-over-year from the shifts in our incentives towards more deferrable programs in recent years resulted in a 6% growth in term life operating income versus the year ago period. During the quarter benefits and claims grew in line with net premium. On a sequential quarter basis operating income before income taxes increased 17% primarily reflecting seasonally favorable persistency which reduced DAC amortization from levels experienced in the first quarter. The seasonally favorable second quarter persistency also enhanced the sequential quarter direct premium growth. Looking at the term life sub-segment, new term pretax operating income as a percentage of direct premiums improved versus the prior year period due to the continued leveraging of fixed cost partially offset by higher DAC amortization in the second quarter of 2014 from increased commission deferrals. In legacy, pre-tax operating income as a percentage of direct premiums declined to 6.1% reflecting downward pressure on allocated net investment income due to the low rate environment as well as higher benefits and claims than in the prior year period. Providing financial results for term…

Thanks, Alison. Primerica’s second quarter results reflect our focus on driving long-term organic growth. Our recurring life insurance revenues coupled with positive investment savings, products performance reflects the strong market position of our core businesses. Our ability to generate significant distributable earnings on an annual basis should drive expansion of operating earnings per share and return on equity longer term. Currently, we are working to build on the momentum generated in the first half of 2014 in order to generate organic growth that will positively impact future earnings and enhance shareholder value.

And now we’ll open it up for questions.

(Operator Instructions) And the first question comes from Steven Schwartz with Raymond James. Please go ahead.

Hey, good morning, everybody. Just a few. First, John, you were talking about third quarter licensed agents, the salesforce growing slightly vis-à-vis the second quarter and you cited the Georgia Dome thing a year ago. Are you implying here that you are going to get greater lapsation, is that the deal these people signed up a year end?

No. Coming out of the Dome, which we will be doing our last Dome event next year, because they are going to be tearing the Dome down after that and putting up the new one, but after a Dome event, we always that’s when we have everybody there and we put out great incentives and everybody hears them. And so, we always have significant increase in recruiting and production coming out of the Dome. What I was saying is we are going up, we are not – we don’t have that this year. We are going to – I am going to do some exciting things in La Costa, but it will be with 1,400 couples, not with 40,000. And so last year, we had – this quarter coming up, we had the Dome incentives and the Dome event, the post Dome kind of jump and we won’t have that this year. So, that’s what’s going to make the comparisons from that standpoint difficult this year.

Will there be any new products for the remainder of this year or does that wait again until next year’s convention?

No. There won’t be any significant new product changes this year. And at this point, when you are moving this Army and trying to marshal things, in truth right now, we are in the process of getting things lined up for the announcements at the Dome next year.

Okay.

Because that really is your opportunity to significantly move things and introduce new and improved things and get – and make sure that you get it in front of maximum number of people.

Okay, great. And then for Alison, Alison you were talking about the new presentation, which I get I understand. Hopefully, you will still split out at least direct premiums between the two so we can do the Citi reinsurance thing. That would be helpful. But what I am asking is you seem to imply that the direct benefit ratio would be consistent over time in the 58% to 59% range, shouldn’t that go up since – for the same reason that the YRT goes up?

Two things, first of all, if you look at our financial supplement, we do continue to show what we are now calling primary direct premium and Citi direct premium. Each quarter, we have given you that information historically. So that detail has not gone away. The ratio that I am describing actually nets, and this is something I mentioned in my prepared comments. Specifically for YRT, why GAAP presentation has you treat that as a contra revenue, we look at that as a direct offset to mortality costs. So from an analytic perspective, we actually apply or net out the ceded premiums from the benefit costs, in order to come up with that 58%, 59%.

No. I get that. In fact, I do that in my own model. But my understanding would be that the – I thought that that ratio, because it’s related to premiums and not to premiums and investment income that that ratio goes up slowly over time, is that not accurate?

It does not, it goes up in relation to direct premium, but based on how you would account for any reinsurance under GAAP accounting we basically lock in the cost, if you will and again because we do 90% of our YRT exposure, we pretty much have it as a fixed cost all along. So GAAP will have you levelize that out as a percentage of premium over time.

Okay. And then just on the financing transaction, as you have done the transaction, does that increase RBC since the money is still at the – the cash is still at the life insurance companies and then that comes down over time as it’s moved to the holding company?

That is correct. In the third quarter, you will see a jump in RBC because we had essentially created free capital, free surplus in excess of what we will be extracting. And there are quite a few nuances about what you can extract. So it doesn’t necessarily correlate dollar for dollar with what we would have otherwise said has been freed up. So you will see an increase in RBC in the third quarter as we take out the capital in the third and fourth quarter, it will come back down. And the important thing to note is by no means do we expect it to get anywhere near to 3.50 that we said as our targeted long-term range.

Okay, alright. That’s what I had. Thanks guys.

Thank you.

The next question comes from Mark Hughes with SunTrust. Please go ahead.

Thank you. Good morning.

Good morning.

With the collapsed presentation in the life business, is there any change in the expense allowance structure in the legacy block, is that going to continue essentially as it was?

That does continue. It is now just being applied to our total term segment but is the exact same expense allowance that we had in the past that’s contractual relationship with Citi.

Right and the 6.1% profit relative to direct premiums, how do you think that will trend going forward, is that going to come back up a little bit or stay about the same?

Are you referring to the legacy ratio?

Yes and I know it’s not going to be as relevant, but just for…?

It definitely and will fluctuate from period to period. It is pretty close to where we thought it would be. We had indicated in the last call it would be the low to mid-6s. What really drives this number more so than anything is the fact that we have not been able to increase our investment yields and so you keep having the downward pressure from as assets roll off, there is a lot of assets backing that segment, so that’s one component. This particular quarter, we did have some slightly negative mortality experience in the legacy block, but on the new term block it was actually more than offset. And as we – this is a good example although we start to go and think about how we want to be describing the business and how you should look at the business, what’s really important is our mortality experience on the portfolio, not necessarily how it broke out between the two buckets because both buckets reflect whatever co-insurance or YRT you have in place. So we feel it’s more appropriate for us to be talking about the aggregate trends, which is actually one of the drivers as to why we decided to go ahead and collapse the sub-segments. I will say Mark and again we are not going to continue to show legacy after this year, but as we said at all along we do expect that ratio to continue to climb. One, because we don’t see on the horizon any immediate rise in the interest rate and two, because we have got this end of term block that obviously when the business comes to the end of its level term period, the mortality gains that you would have been recognizing because the business had been price so long ago go away.

Right. In the new term business, the insurance expenses, you got it looked like very good leverage, did you say there was anything unusual or one-time in nature in that or is that just a – just leverage really kicking in?

It’s a combination of things. Our expenses in and of themselves in the term life segment, again, I will talk about in the aggregate were up a little bit but really because they were growth related type items, so from a leveraging perspective wouldn’t have caused the problem. The reason you actually had quite a bit of hiccup this quarter was more a function of the premium line in direct – in new term sale combination of the facts that one, the second quarter has always been a seasonally strong persistency quarter, so it helps your premium level. And two, the fact that we did have some growth in our issued business year-over-year and we’ve seen a little bit sequentially as well, which did help to bolster the premium levels. So it’s a combination of those two items, basically holding our expenses pretty consistent and growth in the denominator.

And then one final question. Your asset based revenue, the commissions and fees as a percentage of asset value, up a little bit sequentially this quarter, do you think it stabilized here at this level?

Yes. I think that if you look at the metrics that we show in the supplement, it’s really stayed in a pretty consistent range. Specifically what’s happened this quarter is we had very strong performance in our variable annuity block and that block tends to provide higher returns in that regard. So I think it is sustainable. As we said last quarter, we do see from period to period mix and what we are selling and while it will create noise on a quarter-to-quarter basis, the important thing is in the aggregate over the long-term, sale of one product versus sale of the other is equally valuable to us. So it creates some timing types of bumps, but economically we are happy with whatever production we have.

Okay. Thank you.

You’re welcome.

(Operator Instructions) Your next question comes from Dan Bergman with UBS. Please go ahead.

Hi, good morning.

Good morning.

Good morning.

You have indicated that the recent redundant reserve financing should support about $150 million of annual capital deployment through I think 2016, I just want to get a little more color on the potential for capital generation and deployment longer term. I guess, I mean should we think of that $150 million annual level as kind of an ongoing run rate, in other words, would you expect to have enough new term policies on the book to do an additional similarly sized reserve deal in another two to three years time?

Yes. So specifically this deal covers three years of issue and we do have the ability to add another year of issue if we would like to. So I do not see a need to do another transaction for quite some time. That said, this transaction we do believe will fully fund the life component of that $150 million through 2016 and to the extent we decide to add another issue year, even potentially beyond that. The reason we are sort of gauging 2016, I will say somewhere between 2016 and 2017 is the thought that PBR will come into play sometime near that point and at which time the level of redundant reserves that we will need to carry will go down significantly and the need to do additional financing type of transactions will go down as well. So, our theory here is that we have now put us in a position to get through what we stated as 2016, we have not made any decisions for 2017 although this transaction, especially with the ability to add in another year, that give us some ammunition, if you will into 2017. But really we want to wait and see what happens with PBR, with the hopes that it would do away with the need for these in the future.

Got it. That’s very helpful. Thanks. And I just wanted to switch gears a little bit to the sales force, where it looked like the growth on kind of a year-over-year basis has improved to about a 5% pace the past couple of quarters. I just wanted to see if you could give any perspective on what have been the main drivers of this improvement? How much is due to the favorable macro environment versus more company specific factors? And then do you think that this current sales force growth rate is something that’s sustainable going forward?

Rick, you go first and then I will jump in.

One of the dynamics that we have talked about on several of the past calls is the non-renewal rate on the sales force. And by that what I mean is the percentage of agents who don’t renew during the quarter as a beginning balance. If you go back to the second quarter of 2013, that number has ranged around 8.3%, 7.9%, 7.9%, 8% and 8.2% this quarter. At that lower non-renewal rate, that is generated – help generate positive momentum in growing the sales force. That coupled with the improvements that we have made in licensing percentages over the last couple of years have generated that growth. We have said really since coming out of the IPO that we would believe a mid single-digits growth rate for the size of the sales force makes sense and we are running at about that rate right now and still believe long-term that’s the right appropriate measure to be looking at. Again, it will vary from quarter-to-quarter due to seasonality in doing that, due to items like John mentioned relative to the promotions after the convention last year.

But as you mentioned, I mean 5% is mid single-digits and that is our goal to have that be the long-term growth in the sales force. And as Rick said very well, other than seasonality in a quarter where you are going against a convention in the previous year and not one this year and stuff like that, taking those kind of things out, that is our goal that we believe that is what we can achieve.

Great, thank you.

As there are no further questions, this concludes the question-and-answer session. This will also conclude today’s conference. Thank you for attending today’s presentation. You may now disconnect.