About 35,000 people waved towels and banged inflatable noisemakers as Primerica Inc.’s co-Chief Executive Officer John Addison walked across the stage of the Georgia Dome in front of exploding fireworks.
“What we need, Primerica needs, is you, you, you in your seat right now, at your best to commit to go to a level you’ve never been,” Addison shouted, pacing and pointing at the salesmen and saleswomen who traveled to Atlanta at their own expense for the insurer’s four-day conference last week. “We are the answer. You are the answer. It’s our time.”
After a choir in red Primerica robes sang R. Kelly’s “I Believe I Can Fly,” people lingered past midnight, talking, hugging and dancing under confetti. A 25-year-old store clerk with a full-sleeve tattoo who’d come from Modesto, California, said in an interview that Primerica saved her life.
While other companies have cut back on hiring insurance salespeople and stockbrokers to save money during the economic slump, Primerica spreads its brand of financial evangelism with about 90,000 mostly part-time representatives who pay $99 each to sign up. Experienced brokers train new ones for free because they earn commissions on their underlings’ sales in a multilevel marketing system similar to Avon Products Inc. or Herbalife Ltd.
That’s paying off for investors. Primerica’s operating profit margin last year was 25 percent, better than any of the 22 companies in the Standard & Poor’s 500 Insurance Index, according to data compiled by Bloomberg. Its stock has more than doubled since Citigroup Inc. started selling its stake to the public in 2010.
While dwarfed in sales by more diversified insurers such as MetLife Inc. and Prudential Financial Inc., Primerica is the biggest provider of term life insurance in the U.S. based on premiums collected, according to its annual report. The Duluth, Georgia-based company issued 222,558 policies last year.
“Their business model is attractive,” Jeffrey Schuman, an analyst at Stifel Financial Corp.’s KBW unit, said in a phone interview. “It’s both lower risk and potentially higher return than many other life insurance companies.”
With fewer people in the U.S. buying life insurance, Primerica needs to expand its army of salespeople to keep its stock climbing, Schuman said. That’s a challenge when more than 80 percent of the 200,000 people the company recruits a year drop out without passing state licensing tests, according to a February regulatory filing. For those who do, the odds of success are still low, 12 former salespeople said in interviews.
“They want you to make it, but they know you’re not going to,” said Phillip Bowers, 53, who left Primerica this year after working for it on and off since 1989 near Nashville, Tennessee. “People would get into the business, bring their friends and then after a while, the person who brought those friends would quit.”
Bowers, who’s now a salesman for Principal Financial Group Inc., said he never made more than about $50,000 a year, even when he had dozens of people under him.
Primerica doesn’t pay salaries to its agents. They’re paid when they make sales, or when those they sign up do, and on the work of people their recruits hire, according to Mark Supic, a company spokesman. When a new representative sells a $1,000-a-year policy, she makes $250, the person who hired her typically makes at least that much, and the people above them get paid as well. Primerica paid agents an average of $5,513 last year, according to the company’s website.
The company’s executives said they don’t like to be described as a multilevel marketing organization. Primerica isn’t like those “juice or soap companies,” because it doesn’t pressure workers to buy its products, said Bill Kelly, head of the firm’s investment business.
When Primerica handed out diamond-studded championship rings at the Georgia Dome to people who made more than $100,000 over 12 months for the first time, about 25 couples who had hit the mark since December lined up on stage.
A senior who plays high school football has a better chance of making the National Football League than a Primerica recruit has of getting a ring, according to data compiled by the players’ union.
Addison, 55, who joined the company 31 years ago, said in an interview that Primerica doesn’t make money from recruiting and that those determined to succeed have a fair chance.
“We work hard not to overhype,” Addison said. “We don’t tell people they’re going to get rich. We tell people there’s a shot for you to do something great.”
The company that’s now Primerica was founded in 1977 by Arthur Williams, a former high school football coach. He built it into the top issuer of life insurance in the U.S. by telling consumers to trade their whole-life policies for less expensive term insurance and invest the savings, according to his autobiography. Term life insurance pays out if the buyer dies within a certain period of time and expires worthless otherwise. It’s cheaper than policies that also have investment components.
Sanford “Sandy” Weill, who built what would become Citigroup, bought Primerica in 1988 and forced out Williams in 1990, when a U.S. attorney investigated whether Williams had retaliated against a former agent, according to the autobiography. Williams denied any wrongdoing, and the matter was dropped.
The plan Williams developed still works well for some Primerica salespeople, who told their rags-to-riches stories in speeches and videos at the convention. Mario Arrizon, 27, said in an interview as he signed autographs for other agents that he makes $50,000 a month.
“You can do this,” a voice said over the public-address system after Addison’s speech. “People far less talented than you actually have.”
The Georgia Dome, where football’s Atlanta Falcons play, was full of believers on June 15 -- old and young, black, white, Hispanic and Asian. Many wore matching neon T-shirts and hats with slogans such as “Empire Builders,” “Path to Glory,” and “Team Unstoppable.”
“We want to go to the top,” said Davena Jones, a part-timer who took a 13-hour bus ride with her husband to Atlanta from Gladstone, Missouri. “I’ve seen other people do it.”
Top salespeople cried on stage as their portraits were unveiled. Others held their babies aloft. One proposed to his girlfriend after the announcer said she had been promoted to regional vice president.
“I’m going to be a RVP by December,” said Dan King, 18, as sweat dripped down his forehead from the exertion of running back and forth waving a flag for a group of salespeople who call themselves the “Maniacs.”
Current and former salespeople said in interviews that they generally set up meetings with potential clients and recruits by telling them they have a lucrative opportunity, rather than pitching insurance. Paul Thorpe, 49, said he asks people he meets if they’re interested in owning their own business.
“It’s an inborn need of man,” Thorpe said as he took a lunch break with two salesmen from what he called the “Team of Eagles.” One had dropped out of a doctoral program, and the other used to manage a McDonald’s Corp. restaurant.
Part of the pitch to potential salespeople is that they’re helping others. The Primerica “movement” is shown alongside the U.S. push to put a man on the moon, ending the Cold War and the civil rights movement in a video on the company’s website.
Kelly, the head of investments, said Primerica doesn’t push credit cards or sell structured products, real estate investment trusts or individual stocks. Representatives, who also sell annuities and mutual funds run by companies such as Franklin Resources Inc. and Invesco Ltd., said in interviews that they give simple advice: Pay off your debts, buy life insurance and start saving for retirement.
The company’s coverage generally isn’t the least expensive, said Bob Barney, president of data provider CompuLife Software Inc., which tracks life insurance costs. Primerica would charge a 40-year-old woman $475 a year for a 20-year policy with a face value of $500,000 that’s available for 30 percent less from another insurer, Barney said.
Ron Rogers, a part-time salesman who left Primerica last year to join CCF Investments Inc., said he canceled his own policy three years after he was recruited at church when he discovered other firms offered less expensive coverage.
“Primerica offers one life insurance company -- their own,” Rogers said in a phone interview. He said he earned about $25,000 over five years at Primerica and at one point had six people under him.
Primerica’s policies are competitively priced, and agents have to be compensated to educate the company’s middle-income clientele, Addison said.
The company works with customers who have less money than those targeted by other firms. Clients have household incomes of between $30,000 and $100,000, according to the February filing. Bank of America Corp.’s Merrill Lynch brokers are discouraged from opening accounts smaller than $250,000.
“We sit down with families where if the primary breadwinner died, buddy, they’re hosed,” Addison said.
During the convention, thousands of brokers toured the company’s new headquarters in Duluth, about 22 miles (35 kilometers) northeast of Atlanta. After visitors watched a video of salespeople talking about how they once couldn’t afford to buy enough food, they walked through an exhibit of company history decorated with larger-than-life photos of top brokers.
“It’s all about trying to expand your mind so you can imagine yourself being the MVP of Primerica,” Kelly said as a visitor posed for photos with a trophy on a replica of the convention stage. One top representative earns about $5 million a year, he said.
On their way out, visitors can stop at the gift shop and buy a Primerica toddler T-shirt for $8.
At the Georgia Dome, salespeople expressed little doubt in interviews that they would be among the successful, even as they acknowledged that most people don’t make it. Trevor Williams, 20, and Errol Stephenson, 21, said they were trying to support themselves after moving to Richmond, Virginia, from the Bronx, where they grew up poor.
“The most exciting part of it is that people are so excited,” said Williams, who also performs spoken-word poetry and hip-hop. “Everyone has hopes and aspirations.”