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Primerica Reports Second Quarter 2019 Results

August 07, 2019

Investment and Savings Products reach record levels in sales and ending client asset values

Term Life net premiums grow 9%; adjusted direct premiums grow 11%

Net earnings per diluted share (EPS) of $2.28, up 17%; return on stockholders’ equity (ROE) of 25.1%

Adjusted operating EPS of $2.21, up 14%; adjusted net operating income return on adjusted stockholders’ equity (ROAE) of 25.1%

Declared dividend of $0.34 per share, payable on September 13, 2019

DULUTH, Ga.--(BUSINESS WIRE)-- Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended June 30, 2019. Total revenues of $504.9 million increased 8% compared to the second quarter of 2018. Net income of $97.4 million increased 12%, while earnings per diluted share of $2.28 increased 17% compared to the same quarter last year. ROE increased to 25.1% during the current quarter from 24.5% during the second quarter of 2018.

Adjusted operating revenues were $501.4 million, increasing 7% compared to the second quarter of 2018. Adjusted net operating income of $94.8 million increased 10%, while adjusted operating earnings per diluted share of $2.21 increased 14% compared to the same quarter last year. ROAE increased to 25.1% during the current quarter from 24.5% during the second quarter of 2018.

Key factors contributing to the quarter’s financial results were 11% growth in Term Life adjusted direct premiums year-over-year and the financial benefit of record sales and client asset values in the Investment and Savings Products (ISP) segment. Insurance and other operating expenses grew by a modest 2%, while other expenses such as commissions, benefits and claims and DAC amortization grew in line with their related revenues. The company repurchased $57.1 million of common stock during the quarter and is on track to achieve its $225 million repurchase target for the year.

“Our quarterly financial results reflect the strength of our model with net income growth of 12% and earnings per share growth of 17%,” said Glenn Williams, Chief Executive Officer. “Our biennial convention in June was a great success. It energized our sales force, accelerated momentum and renewed our commitment to serve middle-income families as only Primerica can.”

Second Quarter Distribution & Segment Results

Distribution Results

 

 

Q2 2019

 

 

Q2 2018

 

 

% Change

 

 

Life Licensed Sales Force (1)

 

 

129,550

 

 

 

130,156

 

 

*

 

 

Recruits

 

 

86,173

 

 

 

76,520

 

 

 

13

%

 

New Life-Licensed Representatives

 

 

10,919

 

 

 

13,544

 

 

 

(19

)%

 

Life Insurance Policies Issued

 

 

78,664

 

 

 

83,754

 

 

 

(6

)%

 

Life Productivity (2)

 

 

0.20

 

 

 

0.22

 

 

*

 

 

ISP Product Sales ($ billions)

 

$

1.94

 

 

$

1.76

 

 

 

10

%

 

Average Client Asset Values ($ billions)

 

$

64.43

 

 

$

61.30

 

 

 

5

%

 

____________________

(1) End of period
(2) Life productivity equals policies issued divided by the average number of life insurance licensed representatives per month
* Not calculated or less than 1%

Segment Results

 

 

Q2 2019

 

 

Q2 2018

 

 

% Change

 

 

 

 

($ in thousands)

Adjusted Operating Revenues: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Life Insurance

 

$

296,868

 

 

$

272,978

 

 

 

9

%

 

Investment and Savings Products

 

 

173,086

 

 

 

162,841

 

 

 

6

%

 

Corporate and Other Distributed Products

 

 

31,434

 

 

 

31,058

 

 

 

1

%

 

Total adjusted operating revenues (1)

 

$

501,388

 

 

$

466,877

 

 

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Income (loss) before income taxes:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Life Insurance

 

$

83,997

 

 

$

75,828

 

 

 

11

%

 

Investment and Savings Products

 

 

47,343

 

 

 

43,227

 

 

 

10

%

 

Corporate and Other Distributed Products

 

 

(7,394

)

 

 

(6,228

)

 

 

19

%

 

Total adjusted operating income before income taxes (1)

 

$

123,946

 

 

$

112,827

 

 

 

10

%

 

____________________
(1) See the Non-GAAP Financial Measures section and the segment Operating Results Reconciliations at the end of this release for additional information.

Life Insurance Licensed Sales Force

During the second current quarter, 86,173 individuals were recruited to Primerica, a year-over-year increase of 13%. Much of this increase came during the second half of June, driven by excitement generated at the biennial convention and incentives announced to drive recruiting and productivity. Lower recruiting levels earlier in the year, and the resulting impact on new life-licensed representatives in the period, led to a life insurance licensed sales force at quarter-end of 129,550, largely unchanged from the prior year.

Term Life Insurance

Operating revenues of $296.9 million during the second quarter increased 9% compared to the second quarter of 2018 driven by 11% growth in adjusted direct premiums. Persistency during the quarter was consistent with the prior year and benefits and claims experience was in line with historical trends. Income before income taxes was $84.0 million, an increase of 11% year-over-year.

During the second quarter of 2019, new life insurance policies issued were 78,664, down 6% compared to the prior year period. Productivity for the quarter was 0.20 policies per life insurance licensed representative per month, which was within the Company’s historical range of 0.18 to 0.22, but below the prior year level of 0.22.

Investment and Savings Products

Operating revenues of $173.1 million during the second quarter increased 6% compared to the second quarter of 2018. The increase in revenues is due in part to a 10% increase in sales volume, reflecting strong demand for variable annuities and an increase in demand for mutual funds. Higher average client asset values also contributed to the increase in revenues as average assets increased 5% compared to the second quarter of 2019. Sales and asset-based commission expenses were generally consistent with the associated revenues. These strong drivers, combined with the Company’s efforts to reduce costs and realize operational efficiencies, led to a 10% increase in income before income taxes.

As of June 30, 2019, ending client asset values were $66 billion and sales for the quarter were $1.9 billion, both new highwater marks for the Company. Net new client inflows were $305 million for the quarter.

Net Investment Income

Net investment income during the quarter benefited by approximately $2.0 million from an increase in the size of the invested assets portfolio compared to the same quarter in 2018, as well as higher book earnings on the deposit asset underlying the 10% coinsurance agreement from extending the portfolio duration. These were partly offset by lower reinvestment yields on purchases made in the general portfolio.

Taxes

In the second quarter of 2019, the GAAP effective income tax rate was 23.5% compared to 23.8% during the second quarter of 2018.

Capital

During the second quarter of 2019, the Company repurchased 463,916 shares of common stock with a value of $57.1 million, bringing the year-to-date total to $110.7 million. The Board of Directors has approved a dividend of $0.34 per share, payable on September 13, 2019, to stockholders of record on August 21, 2019.

Primerica has a strong balance sheet and continues to be well-capitalized to meet future needs. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be approximately 440% as of June 30, 2019.

Non-GAAP Financial Measures

We report financial results in accordance with U.S. generally accepted accounting principles (GAAP). We also present adjusted direct premiums, other ceded premiums, adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income, adjusted stockholders’ equity and diluted adjusted operating earnings per share. Adjusted direct premiums and other ceded premiums are net of amounts ceded under coinsurance transactions that were executed concurrent with our initial public offering (IPO coinsurance transactions) for all periods presented. We exclude amounts ceded under the IPO coinsurance transactions in measuring adjusted direct premiums and other ceded premiums to present meaningful comparisons of the actual premiums economically maintained by the Company. Amounts ceded under the IPO coinsurance transactions will continue to decline over time as policies terminate within this block of business. Adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income, and diluted adjusted operating earnings per share exclude the impact of realized investment gains (losses) and fair value mark-to-market (MTM) investment adjustments, including other-than-temporary impairments (OTTI), for all periods presented. We exclude realized investment gains (losses) and MTM investment adjustments in measuring these non-GAAP financial measures to eliminate period-over-period fluctuations that may obscure comparisons of operating results due to items such as the timing of recognizing gains (losses) and market pricing variations prior to an invested asset's maturity or sale that are not directly associated with the Company's insurance operations. Adjusted stockholders' equity excludes the impact of net unrealized investment gains (losses) recorded in accumulated other comprehensive income (loss) for all periods presented. We exclude unrealized investment gains (losses) in measuring adjusted stockholders' equity as unrealized gains (losses) from the Company's available-for-sale securities are largely caused by market movements in interest rates and credit spreads that do not necessarily correlate with the cash flows we will ultimately realize when an available-for-sale security matures or is sold.

The definitions of these non-GAAP financial measures may differ from the definitions of similar measures used by other companies. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. Furthermore, management believes that these non-GAAP financial measures may provide users with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of the core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Reconciliations of GAAP to non-GAAP financial measures are attached to this release.

Earnings Webcast Information

Primerica will hold a webcast on Thursday, August 8, 2019 at 10:00 am EST, to discuss the quarter’s results. To access the webcast go to http://investors.primerica.com at least 15 minutes prior to the event to register, download and install any necessary software. A replay of the call will be available for approximately 30 days on Primerica’s website, http://investors.primerica.com. This release and a detailed financial supplement will be posted on Primerica’s website.

Forward-Looking Statements

Except for historical information contained in this press release, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from anticipated or projected results. Those risks and uncertainties include, among others, our failure to continue to attract and license new recruits, retain sales representatives or license or maintain the licensing of sales representatives; new laws or regulations that affect our distribution model; changes to the independent contractor status of sales representatives; our or sales representatives’ violation of or non-compliance with laws and regulations or the failure to protect the confidentiality of client information; differences between our actual experience and our expectations regarding mortality, persistency, expenses and interests rates as reflected in the pricing for our insurance policies; the occurrence of a catastrophic event; changes in federal, state and provincial legislation or regulation that affects our insurance and investment product businesses; our failure to meet regulatory capital ratios or other minimum capital and surplus requirements; a downgrade or potential downgrade in our insurance subsidiaries’ financial strength ratings or our senior debt ratings; inadequate or unaffordable reinsurance or the failure of our reinsurers to perform their obligations; the failure of our investment products to remain competitive with other investment options or the change to investment and savings products offered by key providers in a way that is not beneficial to our business; fluctuations in the performance of client assets under management; legal and regulatory investigations and actions concerning us or sales representatives; heightened standards of conduct or more stringent licensing requirements for sales representatives; inadequate policies and procedures regarding suitability review of client transactions; the failure of, or legal challenges to, the support tools we provide to sales force; the failure of our information technology systems, breach of our information security or failure of our business continuity plan; the effects of credit deterioration and interest rate fluctuations on our invested asset portfolio; incorrectly valuing our investments; the inability of our subsidiaries to pay dividends or make distributions; our inability to generate and maintain a sufficient amount of working capital; our non-compliance with the covenants of our senior unsecured debt; the loss of key personnel; and fluctuations in the market price of our common stock or Canadian currency exchange rates. These and other risks and uncertainties affecting us are more fully described in our filings with the Securities and Exchange Commission, which are available in the "Investor Relations" section of our website at http://investors.primerica.com. Primerica assumes no duty to update its forward-looking statements as of any future date.

About Primerica, Inc.

Primerica, Inc., headquartered in Duluth, GA, provides financial services to middle-income households in North America. Primerica licensed representatives educate their clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, mutual funds, annuities and other financial products. Primerica insured approximately 5 million lives and had over 2 million client investment accounts at December 31, 2018. Primerica, through its insurance company subsidiaries, was the #2 issuer of Term Life insurance coverage in North America in 2018. Primerica stock is included in the S&P MidCap 400 and the Russell 1000 stock indices and is traded on The New York Stock Exchange under the symbol “PRI”.

PRIMERICA, INC. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed-maturity securities available-for-sale, at fair value

 

$

2,216,260

 

 

$

2,069,635

 

Fixed-maturity security held-to-maturity, at amortized cost

 

 

1,087,790

 

 

 

970,390

 

Short-term investments available-for-sale, at fair value

 

 

-

 

 

 

8,171

 

Equity securities, at fair value

 

 

38,897

 

 

 

37,679

 

Trading securities, at fair value

 

 

23,375

 

 

 

13,610

 

Policy loans

 

 

33,527

 

 

 

31,501

 

Total investments

 

 

3,399,849

 

 

 

3,130,986

 

Cash and cash equivalents

 

 

244,975

 

 

 

262,138

 

Accrued investment income

 

 

17,434

 

 

 

17,057

 

Reinsurance recoverables

 

 

4,185,850

 

 

 

4,141,569

 

Deferred policy acquisition costs, net

 

 

2,238,315

 

 

 

2,133,920

 

Agent balances, due premiums and other receivables 1

 

 

238,367

 

 

 

215,139

 

Intangible assets, net

 

 

46,409

 

 

 

48,111

 

Income taxes

 

 

65,777

 

 

 

59,336

 

Operating lease right-of-use assets

 

 

49,381

 

 

 

-

 

Other assets 1

 

 

394,058

 

 

 

391,291

 

Separate account assets

 

 

2,437,291

 

 

 

2,195,501

 

Total assets

 

$

13,317,706

 

 

$

12,595,048

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Future policy benefits

 

$

6,314,403

 

 

$

6,168,157

 

Unearned and advance premiums

 

 

17,111

 

 

 

15,587

 

Policy claims and other benefits payable

 

 

322,417

 

 

 

313,862

 

Other policyholders' funds

 

 

377,737

 

 

 

370,644

 

Notes payable

 

 

373,848

 

 

 

373,661

 

Surplus note

 

 

1,087,117

 

 

 

969,685

 

Income taxes

 

 

206,301

 

 

 

187,104

 

Operating lease liabilities

 

 

55,662

 

 

 

-

 

Other liabilities

 

 

496,027

 

 

 

486,772

 

Payable under securities lending

 

 

43,867

 

 

 

52,562

 

Separate account liabilities

 

 

2,437,291

 

 

 

2,195,501

 

Total liabilities

 

 

11,731,781

 

 

 

11,133,535

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

420

 

 

 

427

 

Paid-in capital

 

 

-

 

 

 

-

 

Retained earnings

 

 

1,537,535

 

 

 

1,489,520

 

Accumulated other comprehensive income (loss), net of income tax

 

 

47,970

 

 

 

(28,434

)

Total stockholders' equity

 

 

1,585,925

 

 

 

1,461,513

 

Total liabilities and stockholders' equity

 

$

13,317,706

 

 

$

12,595,048

 

____________________
(1) Certain reclassifications have been made to the December 31, 2018 amounts to conform to current-period reporting classifications. These reclassifications had no impact on net income or total stockholders’ equity.

PRIMERICA, INC. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Income

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

 

2019

 

 

2018

 

 

 

(In thousands, except per-share amounts)

 

Revenues:

 

 

 

 

 

 

 

 

Direct premiums

 

$

687,262

 

 

$

667,191

 

Ceded premiums

 

 

(400,588

)

 

 

(403,449

)

Net premiums

 

 

286,674

 

 

 

263,742

 

Commissions and fees

 

 

178,468

 

 

 

167,940

 

Net investment income

 

 

24,868

 

 

 

20,030

 

Realized investment gains (losses), including OTTI

 

 

1,067

 

 

 

1,313

 

Other, net

 

 

13,825

 

 

 

14,790

 

Total revenues

 

 

504,902

 

 

 

467,815

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

Benefits and claims

 

 

115,068

 

 

 

105,069

 

Amortization of deferred policy acquisition costs

 

 

58,762

 

 

 

53,847

 

Sales commissions

 

 

90,099

 

 

 

82,954

 

Insurance expenses

 

 

44,570

 

 

 

43,451

 

Insurance commissions

 

 

5,829

 

 

 

6,417

 

Interest expense

 

 

7,201

 

 

 

7,229

 

Other operating expenses

 

 

55,913

 

 

 

55,083

 

Total benefits and expenses

 

 

377,442

 

 

 

354,050

 

Income before income taxes

 

 

127,460

 

 

 

113,765

 

Income taxes

 

 

30,014

 

 

 

27,065

 

Net income

 

$

97,446

 

 

$

86,700

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

2.28

 

 

$

1.96

 

Diluted earnings per share

 

$

2.28

 

 

$

1.95

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings per share:

 

 

 

 

 

 

 

 

Basic

 

 

42,483

 

 

 

44,066

 

Diluted

 

 

42,619

 

 

 

44,207

 

PRIMERICA, INC. AND SUBSIDIARIES

 

Consolidated Adjusted Operating Results Reconciliation

 

(Unaudited – in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

 

 

 

 

 

2019

 

 

2018

 

 

% Change

 

Total revenues

 

$

504,902

 

 

$

467,815

 

 

 

8

%

Less: Realized investment gains (losses), including OTTI

 

 

1,067

 

 

 

1,313

 

 

 

 

 

Less: 10% deposit asset MTM included in net investment income (NII)

 

 

2,447

 

 

 

(375

)

 

 

 

 

Adjusted operating revenues

 

$

501,388

 

 

$

466,877

 

 

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

127,460

 

 

$

113,765

 

 

 

12

%

Less: Realized investment gains (losses), including OTTI

 

 

1,067

 

 

 

1,313

 

 

 

 

 

Less: 10% deposit asset MTM included in NII

 

 

2,447

 

 

 

(375

)

 

 

 

 

Adjusted operating income before income taxes

 

$

123,946

 

 

$

112,827

 

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

97,446

 

 

$

86,700

 

 

 

12

%

Less: Realized investment gains (losses), including OTTI

 

 

1,067

 

 

 

1,313

 

 

 

 

 

Less: 10% deposit asset MTM included in NII

 

 

2,447

 

 

 

(375

)

 

 

 

 

Less: Tax impact of preceding items

 

 

(828

)

 

 

(223

)

 

 

 

 

Adjusted net operating income

 

 

94,759

 

 

 

85,985

 

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share (1)

 

$

2.28

 

 

$

1.95

 

 

 

17

%

Less: Net after-tax impact of operating adjustments

 

 

0.07

 

 

 

0.02

 

 

 

 

 

Diluted adjusted operating earnings per share (1)

 

$

2.21

 

 

$

1.93

 

 

 

14

%

____________________
(1) Percentage change in earnings per share is calculated prior to rounding per share amounts.

 

TERM LIFE INSURANCE SEGMENT

 

Adjusted Premiums Reconciliation

 

(Unaudited – in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

 

2019

 

 

2018

 

Direct premiums

 

$

681,004

 

 

$

660,505

 

Less: Premiums ceded to IPO coinsurers

 

 

272,596

 

 

 

290,956

 

Adjusted direct premiums

 

$

408,408

 

 

$

369,549

 

 

 

 

 

 

 

 

 

 

Ceded premiums

 

$

(398,927

)

 

$

(401,686

)

Less: Premiums ceded to IPO coinsurers

 

 

(272,596

)

 

 

(290,956

)

Other ceded premiums

 

$

(126,331

)

 

$

(110,730

)

 

 

 

 

 

 

 

 

 

Net premiums

 

$

282,077

 

 

$

258,819

 

 

 

 

 

 

 

 

 

 

CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT

 

Adjusted Operating Results Reconciliation

 

(Unaudited – in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

 

2019

 

 

2018

 

Total revenues

 

$

34,948

 

 

$

31,996

 

Less: Realized investment gains (losses), including OTTI

 

 

1,067

 

 

 

1,313

 

Less: 10% deposit asset MTM included in NII

 

 

2,447

 

 

 

(375

)

Adjusted operating revenues

 

$

31,434

 

 

$

31,058

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

$

(3,880

)

 

$

(5,290

)

Less: Realized investment gains (losses), including OTTI

 

 

1,067

 

 

 

1,313

 

Less: 10% deposit asset MTM included in NII

 

 

2,447

 

 

 

(375

)

Adjusted operating loss before income taxes

 

$

(7,394

)

 

$

(6,228

)

PRIMERICA, INC. AND SUBSIDIARIES

 

Adjusted Stockholders' Equity Reconciliation

 

(Unaudited – in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Stockholders' equity

 

$

1,585,925

 

 

$

1,461,513

 

Less: Unrealized net investment gains (losses) recorded in stockholders' equity, net of income tax

 

 

56,227

 

 

 

(7,370

)

Adjusted stockholders' equity

 

$

1,529,698

 

 

$

1,468,883

 

 

Investor Contact:
Nicole Russell
470-564-6663
Email: investorrelations@primerica.com

Media Contact:
Keith Hancock
470-564-6328
Email: Keith.Hancock@Primerica.com

Source: Primerica, Inc.

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