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Driving Growth: People or Brands?
Company Spotlight: Primerica
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Young Company Focus: B's Purses
Thailand: A Rising Power
Company Spotlight: Primerica
by Barbara Seale
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| Co-CEOs Rick Williams and John Addison with Primerica employees. |
For almost 30 years, Primerica has taken the road less traveled in the financial services industry. Through its network of more than 100,000 licensed independent representatives, the company has built its business by helping average Americans make the most of their money while providing security for their families' futures.
The largest financial services marketing organization in North America, Primerica provides financial products and services, including term life insurance, mutual funds, variable annuities, loans, long-term care insurance and legal services, to some 6 million clients, primarily in the United States and Canada. The company also operates in Spain, the United Kingdom, Puerto Rico and Guam.
Primerica proposes that its clients "buy term and invest the difference," a phrase that is so important at the company that it has its own abbreviation: BTID. Since term life insurance is less expensive than the "whole life" policies that many insurers advocate, the savings allow families to buy higher face-value policies for a lower monthly rate. With their savings, clients can systematically save and invest in separate investment vehicles such as mutual funds or IRAs-also offered through Primerica.
Against the Tide
The basic company concept came from Art Williams, the founder of A.L. Williams & Associates, from which Primerica grew. "He had gotten interested in the concept of buying term and investing the difference," explains Primerica Co-CEO John Addison. "He had a vision that term versus whole life insurance was the right thing for middle-income families, but it was the antithesis of what the life insurance industry sold in the 1960s and 70s. After starting part time, he joined with 85 other people to found the company. They took the concept of providing financial services to middle-income families and married it with the direct sales approach. You could sell products, do what's right for the consumer, and also build your own business. It was the right place, the right time, the right concept and the right execution."
A.L. Williams became the largest writer of individual life insurance policies in the United States from 1977 to 1984, when he sold the company to Primerica. Williams stayed with the company until 1990.
"Art was the heart and soul of that business," Addison says. "And the company went through some difficult years between 1990 and 1995." Addison and his Co-CEO Richard "Rick" Williams, who say they grew up in A.L. Williams, were Primerica executives then. To stabilize the company, they helped launch new initiatives, including the Financial Needs Analysis (FNA), the foundational sales-and-education tool that Primerica representatives still use to analyze a family's financial situation and suggest a personalized program to help them achieve their financial goals. Primerica regained its financial footing, and in 1999 Addison and Williams were named Co-CEOs.
A License to Sell
Primerica continues the basic A.L. Williams tradition of selling to middle-income families who are friends or referrals of their representatives-their warm market. But before Primerica's representatives can sit down with a prospective client and go through the FNA, they must earn a state license to sell insurance. On average, that requires 20 to 40 hours of pre-licensing education. Then they must pass the state licensing test. If representatives also want to sell mutual funds to help their clients "invest the difference," additional education and licensing are required. Primerica supports the agents' efforts through its powerful Primerica Online Web system, an intranet that delivers not just company information, but an international field-production leader board that is updated daily. It is also rich in the subjects that help Primerica representatives serve their clients.
"If you're a representative and you haven't gotten your life insurance license yet, you can go to Primerica Online and take a sample test," Williams says. "If you want to understand more about selling IRAs, there's a three-hour course on the basics of IRAs. We have a wide array of material."
Primerica by the Numbers |
| 2005 Revenue |
$2.2 billion |
| 2005 Net Income |
$550 million |
| Life Insurance in Force |
$581.3 billion |
| Term Life Insurance Issued |
$87.1 billion |
| Mutual Fund Sales |
$3.4 billion |
| Loan Volume |
$4.4 billion |
| Variable Annuities Net Written Premiums and Deposits |
$1.2 billion |
| Client Investment Assets Under Management |
$30.1 billion |
| Independent Representatives |
107,000 |
| Securities Representatives |
28,800 |
| Monthly Insurance Applications |
32,000 |
| 2006 Projected Comissions |
Over $650 million |
Middle-Income Focus
Once a representative obtains the appropriate credentials, the next stop is the client's "kitchen table," a term that Williams explains is widely used in the industry. But, Williams and Addison agree that most financial services companies have "abandoned the middle-income market. In the 80s, as much as 70 percent of the insurance business was in whole-life policies. Today it's less than 20 percent," Addison says. "The life insurance industry isn't out there selling any more, because the traditional financial services company is focused on the 'mass affluent.' They're targeting people with $200,000 of investable assets. That's not the average person out there!"
Double Vision
In some corporate environments, having two CEOs would be a recipe for disaster, but at Primerica it works naturally. The yen/yang team of John Addison and Rick Williams have shared the job since 1999. They're successful, they say, because they each play to their strengths.
"There's no way I could do John's job," Williams says.
"I don't have the personality to be an on-stage motivator." Then he jests, "And John doesn't have the attention span to do mine!"
Picking up on the joke, Addison laughs, "I think a healthy dose of ADD can be a good thing for a leader if they're surrounded by the right people."
The exchange shows the ease with which the two seeming opposites share power and responsibility. Addison taps his marketing background to focus on field management and promotions, while Williams devotes most of his attention to finance and administration. They've developed trust and a mutual respect by working closely together since 1989.
"John and I have a similar vision for the company," Williams says. "We're trying to get to the same place. The shared roles work great when you have two people who view the future the same way."
"It lets us focus our energy and efforts in areas where we're strong and doesn't require us to spend a lot of time doing stuff we're no good at. In this situation, one and one equals three," Addison explains. "Rick has the unique ability to juggle numerous complex challenges and give great attention to each, and to manage tremendous operational challenges. He can do it all and drive it to completion."
"John motivates the field in a way no one else can," Williams says. "He knows what types of contests to design, what's the message at the kitchen table. He understands people and their motivations in a way that no one else approaches."
The two have side-by-side offices and spend hours together, talking informally about ways to grow the Primerica business. When they disagree, they work it out in one of their offices.
"One of the biggest reasons this works is that we're not running for office," Addison says. "This is what we want to do-run this company. If Citigroup wanted us to do something else, we wouldn't do it. This is what we do." |
Why? Because traditional financial services companies pay not only commissions to their salesforces, but also pay for their overhead-offices, computers, benefits and other routine business expenses-month after month, no matter how much or how little an agent sells at any given time. So their individual sales target must be a high-value, affluent client who purchases a high-premium life insurance product or a costly investment vehicle. Conversely, Primerica representatives often work part time, running their businesses from their own homes and earning commissions on the sale of term insurance policies that provide more coverage but have lower monthly premiums. And Primerica sells more term policies than any other company in the industry.
"The nature of direct selling, where a full-time person can override 10 part-time people, means that the full-time person doesn't need a big premium for each individual sale." Williams says. "A full-time person overriding part-time people can sell smaller. Primerica is based on high-volume and low ticket size for that middle-income marketplace. And we have an efficient back-office process as well as great sales tools to help the salesforce sit down with the client." The company processes 32,000 new term life insurance applications a month, with an average face amount of $282,500-about twice the industry average. At the end of last year, Primerica had more than $581 billion in term life insurance policies in force. The company paid $600 million in compensation to its salesforce and some $800 million in death claims to clients. This year, the company is on target to sell $90 billion in term life insurance policies.
Keeping It Simple
"Our entire approach is education," Williams says. "Our representatives talk about fundamental financial concepts and make it easy for the average consumer to understand their financial situation. Then we have the tools to help them allocate their dollars among the financial products that are right for them."
"The fundamental issue for middle-income Americans is that they have too much month at the end of the money," Addison says. "Too many credit cards and too much debt. They're renting a lifestyle instead of owning their own life. They insure their car, their house, their boat. But if the primary breadwinner dies, the family is devastated. They don't have enough life insurance or meaningful savings to provide for the family's education and their retirement."
Primerica has two prescriptions to repair those problems: its products and its business opportunity. No matter which solution a consumer chooses-or both-Primerica works hard to keep things simple for representatives and consumers. It builds simple term insurance contracts that are easy for representatives to explain and consumers to understand. And it equips its agents with technology that makes the sale quick and easy. A new innovation allows a PalmPilot to capture information from the client's Financial Needs Analysis, merge it onto the insurance application and electronically transfer it all to the company's robust information management system. Some 30 percent of Primerica's life insurance applications are now processed using the new technology. With all the complexity in the background, both consumers and agents benefit. Clients are often so impressed that they join the growing ranks of Primerica representatives.
The Professional Payoff
"People are attracted to us by what we do," Addison says. "We're a professional business delivering products that families need. Because we're in the financial-services business, we require licensing, which most direct selling companies don't need. And while we're not collecting hundreds of thousands of dollars from families, we're collecting enough that compensation is strong. Our agents can deliver the right products without recruiting 50,000 people, and they can make a significant income. It isn't complicated, either. A cellphone contract is more complicated than a term life insurance contract."
Williams adds, "Our salesforce looks like America. We're all races, ages and educational levels. Our demographics are within a percentage of the demographics of the country."
He notes that those demographics allow Primerica representatives to stay in touch with their clients' needs and desires. In turn, Primerica's executives tap the representatives' insights on a regular basis. For example, as the Hispanic population grew in the United States, it also grew in the Primerica salesforce. Recognizing that trend, Primerica collaborated with its Hispanic sales leaders to identify and provide the tools they need to sell and recruit, including seminars, Spanish-language sales aids and a Web site dedicated to its Hispanic agents. The company has taken similar steps to support other segments of its salesforce, including African-Americans and women. And as the company has seen its agents get younger, they have developed a Web site and programs dedicated to agents under 30.
The effort pays off for the company and its representatives. When Addison and Williams took Primerica's helm at the end of 1999, the company paid $431 million in commissions to its 79,000-member salesforce. This year, compensation will exceed $650 million to slightly more than 100,000 representatives. The company has created 56 millionaires-almost half of them since 2000. Last year, it issued 384,000 term policies with a value of more than $87 billion. In 1999, mutual fund sales were $2.9 billion. This year they'll exceed $4 billion. And debt consolidation loans have essentially doubled since 1999.
Addison and Williams won't rest on their past successes, though.
Giving Back
In Gwinnett County, Ga., Primerica is a philanthropic force to be reckoned with. As the county's 5th largest employer, Primerica contributes millions to Atlanta-area charities through the Citigroup Foundation. In recognition, Gwinnett Magazine named Primerica the county's top corporate philanthropist.
A key charitable activity for the company's corporate employees and representatives around the country is the American Cancer Society's Relay for Life. Raising a record $120,000 in Gwinnett County alone, Primerica tied for the top fund-raising spot. ACS named Primerica a top national corporate fund-raiser.
Citigroup, Primerica's parent company, supports volunteer efforts by offering matching grants to organizations where its employees volunteer their time. It also offers a volunteer incentive program that allows employees to volunteer during work hours. |
Focus on North America
"Our primary focus is to double the size of our North American business-salesforce, sales, everything," Williams says. "One of the things that's different for us than for other direct sellers is that for us to expand into an international market, it must have a very vibrant middle-income market. Emerging markets are difficult for us. So we'll continue to focus on the mid-market family that's bringing in around $60,000."
Addison adds, "Right now we have a vibrant and growing business in Spain. In the U.K., we've had ups and downs, starts and stops, but we're focused on making that market vibrant, growing and successful, too. Then we'll look at what the future holds outside those countries. We have a lot of technical initiatives in the United States, along with product initiatives in Canada and the United States. We're also working on a strategic initiative to change licensing requirements in North America."
They note that the licensing issue is a hot one in the insurance business. Unlike Primerica, the industry is contracting. The number of life insurance agents has declined by 50 percent since 1987, and the decline is expected to continue. In addition, the industry's agent-retention rate after four years is about half that of Primerica. Contrary to the industry norm, many Primerica representatives work part time, earning a commission when they sell a policy.
Unlike many direct sellers, Primerica does not pay commissions for recruiting. When an agent recruits a new representative, he or she has a vested interest in getting the new agent trained and licensed, since no one makes money until they make a sale. The process gives agents incentive to make sure the people they recruit become licensed and begin working their warm market, make sales and produce override compensation. But Primerica's term policies, powerful sales tools and low initial-investment thresholds simplify the process. Most clients begin investing systematically through monthly bank drafts. They can begin with as little as $25, but the average initial monthly draft is $71. Those numbers create success for Primerica but, Addison notes, most brokerage houses would have no interest in them.
Addison points out that those modest investments and term life insurance policies work for middle-income American families, too. "What we do is more relevant for families today than it was in 1980," he says. "We show them financial concepts, how to save, how to get out of debt. That changes lives. After Sept. 11, we paid death claims for every tower and airplane that went down."
Williams adds, "When our agents deliver a death check to a family, they get to see that their work really makes a difference in someone's life." |
