UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(ZIP Code) |
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(Registrant’s telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
As of April 30, 2024, the registrant had
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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(Unaudited) |
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March 31, 2024 |
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December 31, 2023 |
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(In thousands, except per-share amounts) |
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Assets: |
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Investments: |
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Fixed-maturity securities available-for-sale, at fair value (amortized cost: $ |
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$ |
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$ |
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Fixed-maturity security held-to-maturity, at amortized cost (fair value: $ |
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Short-term investments available-for-sale, at fair value (amortized cost: $ |
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Equity securities, at fair value (historical cost: $ |
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Trading securities, at fair value (cost: $ |
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Policy loans and other invested assets |
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Total investments |
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Cash and cash equivalents |
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Accrued investment income |
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Reinsurance recoverables |
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Deferred policy acquisition costs, net |
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Renewal commissions receivable |
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Agent balances, due premiums and other receivables |
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Goodwill |
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Intangible assets, net (accumulated amortization: $ |
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Income taxes |
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Operating lease right-of-use assets |
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Other assets |
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Separate account assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity: |
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Liabilities: |
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Future policy benefits |
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$ |
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$ |
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Unearned and advance premiums |
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Policy claims and other benefits payable |
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Other policyholders’ funds |
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Note payable |
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Surplus note |
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Income taxes |
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Operating lease liabilities |
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Other liabilities |
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Payable under securities lending |
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Separate account liabilities |
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and contingent liabilities (see Commitments and Contingent Liabilities note) |
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Total liabilities |
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Stockholders’ equity: |
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Common stock ($ |
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Paid-in capital |
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- |
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- |
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Retained earnings |
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Accumulated other comprehensive income (loss), net of income tax: |
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Effect of change in discount rate assumptions on the liability for future policy benefits |
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( |
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Unrealized foreign currency translation gains (losses) |
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Net unrealized investment gains (losses) on available-for-sale securities |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
2
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income – Unaudited
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Three months ended March 31, |
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2024 |
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2023 |
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(In thousands, except per-share amounts) |
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Revenues: |
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Direct premiums |
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$ |
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$ |
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Ceded premiums |
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Net premiums |
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Commissions and fees |
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Investment income net of investment expenses |
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Interest expense on surplus note |
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Net investment income |
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Realized investment gains (losses) |
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Other investment gains (losses) |
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Investment gains (losses) |
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Other, net |
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Total revenues |
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Benefits and expenses: |
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Benefits and claims |
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Future policy benefits remeasurement (gain) loss |
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Amortization of deferred policy acquisition costs |
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Sales commissions |
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Insurance expenses |
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Insurance commissions |
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Contract acquisition costs |
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Interest expense |
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Other operating expenses |
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Total benefits and expenses |
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Income before income taxes |
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Income taxes |
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Net income |
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$ |
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$ |
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Earnings per share: |
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Basic earnings per share |
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$ |
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$ |
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Diluted earnings per share |
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$ |
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$ |
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Weighted-average shares used in computing earnings |
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Basic |
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Diluted |
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See accompanying notes to condensed consolidated financial statements.
3
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited
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Three months ended March 31, |
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2024 |
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2023 |
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(In thousands) |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss) before income taxes: |
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Unrealized investment gains (losses) on available-for-sale securities: |
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Change in unrealized holding gains (losses) on available-for-sale securities |
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Reclassification adjustment for investment (gains) losses included in net income |
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Effect of change in discount rate assumptions on the liability for future policy benefits |
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Foreign currency translation adjustments: |
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Change in unrealized foreign currency translation gains (losses) |
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Total other comprehensive income (loss) before income taxes |
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Income tax expense (benefit) related to items of other comprehensive income (loss) |
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Other comprehensive income (loss), net of income taxes |
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Total comprehensive income (loss) |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
4
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity – Unaudited
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Three months ended March 31, |
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2024 |
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2023 |
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(In thousands, except per-share amounts) |
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Equity |
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Common stock: |
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Balance, beginning of period |
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$ |
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$ |
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Repurchases of common stock |
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Net issuance of common stock |
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Balance, end of period |
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Paid-in capital: |
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Balance, beginning of period |
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- |
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- |
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Share-based compensation |
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Net issuance of common stock |
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Repurchases of common stock |
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Balance, end of period |
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- |
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- |
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Retained earnings: |
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Balance, beginning of period |
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Net income |
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Dividends |
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Repurchases of common stock |
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( |
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Balance, end of period |
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Accumulated other comprehensive income (loss), net of income tax: |
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Balance, beginning of period |
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( |
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Effect of change in discount rate assumptions on the liability for future policy benefits |
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( |
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Change in foreign currency translation adjustment |
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( |
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Change in net unrealized investment gains (losses) during the period |
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Balance, end of period |
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( |
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Total stockholders’ equity |
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$ |
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$ |
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Dividends declared per share |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
5
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows – Unaudited
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Three months ended March 31, |
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2024 |
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2023 |
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(In thousands) |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to cash provided by (used in) operating activities: |
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Change in future policy benefits and other policy liabilities |
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Deferral of policy acquisition costs |
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Amortization of deferred policy acquisition costs |
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Change in income taxes |
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Investment (gains) losses |
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Accretion and amortization of investments |
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Depreciation and amortization |
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Change in reinsurance recoverables |
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Change in agent balances, due premiums and other receivables |
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Change in renewal commissions receivable |
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Trading securities sold, matured, or called (acquired), net |
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Share-based compensation |
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Change in other operating assets and liabilities, net |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Available-for-sale investments sold, matured or called: |
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Fixed-maturity securities — sold |
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- |
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Fixed-maturity securities — matured or called |
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Equity securities — sold |
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- |
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Equity securities — matured or called |
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- |
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Available-for-sale investments acquired: |
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Fixed-maturity securities |
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( |
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Equity securities — acquired |
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- |
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( |
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Purchases of property and equipment and other investing activities, net |
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( |
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Cash collateral received (returned) on loaned securities, net |
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( |
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Sales (purchases) of short-term investments using securities lending collateral, net |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Dividends paid |
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( |
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Common stock repurchased |
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( |
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( |
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Tax withholdings on share-based compensation |
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( |
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( |
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Finance leases |
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( |
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( |
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Net cash provided by (used in) financing activities |
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( |
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( |
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Effect of foreign exchange rate changes on cash |
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( |
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Change in cash and cash equivalents |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
6
PRIMERICA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements — Unaudited
(1) Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies
Description of Business. Primerica, Inc. (the “Parent Company”), together with its subsidiaries (collectively, “we”, “us” or the “Company”), is a leading provider of financial products and services to middle-income households in the United States and Canada through a network of independent contractor sales representatives (“independent sales representatives” or “independent sales force”). We assist our clients in meeting their needs for term life insurance, which we underwrite, and mutual funds, annuities, managed investments and other financial products, which we distribute primarily on behalf of third parties. Our primary subsidiaries include the following entities: Primerica Financial Services, LLC, a general agency and marketing company; Primerica Life Insurance Company (“Primerica Life”), our principal life insurance company; Primerica Financial Services (Canada) Ltd., a holding company for our Canadian operations, which includes Primerica Life Insurance Company of Canada (“Primerica Life Canada”) and PFSL Investments Canada Ltd.; PFS Investments Inc., an investment products company and broker-dealer; and Primerica Health, Inc, a holding company for our senior health operations, which includes e-TeleQuote Insurance, Inc. and subsidiaries (collectively, “e-TeleQuote”), which markets Medicare-related insurance products underwritten by third-party health insurance carriers to eligible Medicare beneficiaries through its licensed health insurance agents. Primerica Life, domiciled in Tennessee, owns National Benefit Life Insurance Company, a New York insurance company. Vidalia Re, Inc. (“Vidalia Re”) is a special purpose financial captive insurance company and wholly owned subsidiary of Primerica Life. Vidalia Re has entered into a separate coinsurance agreement with Primerica Life whereby Primerica Life has ceded certain level-premium term life insurance policies to Vidalia Re (the “Vidalia Re Coinsurance Agreement”).
Basis of Presentation. We prepare our financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles are established primarily by the Financial Accounting Standards Board (“FASB”).
The accompanying unaudited condensed consolidated financial statements contain all adjustments, generally consisting of normal recurring accruals, which are necessary to fairly present the balance sheets as of March 31, 2024 and December 31, 2023, the statements of income, comprehensive income, and stockholders’ equity for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. Results of operations for interim periods are not necessarily indicative of results for the entire year or of the results to be expected in future periods.
These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are sufficient to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report”).
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect financial statement balances, revenues and expenses and cash flows, as well as the disclosure of contingent assets and liabilities. Management considers available facts and knowledge of existing circumstances when establishing the estimates included in our financial statements. The most significant items that involve a greater degree of accounting estimates and actuarial determinations subject to change in the future are the valuation of investments, deferred policy acquisition costs (“DAC”), liability for future policy benefits (“LFPB”) and corresponding amounts recoverable from reinsurers, renewal commissions receivable, income taxes, and valuation of intangible assets and goodwill. Estimates for these and other items are subject to change and are reassessed by management in accordance with U.S. GAAP. Actual results could differ from those estimates.
Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and those entities required to be consolidated under U.S. GAAP. All material intercompany profits, transactions, and balances among the consolidated entities have been eliminated.
Changes to Accounting Policies. All significant accounting policies remain unchanged from the 2023 Annual Report unless otherwise described.
Reclassifications. Certain reclassifications have been made to prior period amounts to conform to current period reporting classifications. These reclassifications had no impact on net income or total stockholders’ equity.
Correction of Immaterial Errors on Previously Issued Financial Statements. As previously disclosed in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, the Company identified immaterial errors in amounts presented in the unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (“Previously-reported Financial Statements”) related to the measurement of reinsurance recoverables and DAC in conjunction with the
7
consolidated statement of income for the three months ended March 31, 2023 was an overstatement of benefits and claims, an understatement of future policy benefits remeasurement loss and an understatement of DAC amortization along with the related income tax impact that netted to cause an understatement of net income.
In accordance with FASB ASC 250, Accounting Changes and Error Corrections, the Company evaluated the materiality of these errors quantitatively and qualitatively and concluded that these prior period errors were immaterial to the Previously-reported Financial Statements. As such, the Company revised the prior period financial information included in the accompanying unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, initially presented in the Previously-reported Financial Statements, to correct these errors. The revisions resulted in an increase to net income of $
These errors were specifically related to the Company’s accounting estimates under LDTI and no financial statements prior to the adoption of LDTI were affected. Management detected and corrected these errors during the second quarter of 2023 as previously disclosed, and the errors do not affect financial information subsequent to the date of the Previously-reported Financial Statements.
New Accounting Standards Not Yet Adopted.
Accounting standard |
Adoption date |
Description |
Effects on the financial statements |
Segment Reporting (Topic 280)— Improvements to Reportable Segment Disclosures ASU 2023-07 |
Annual periods beginning after December 15, 2023 and interim periods thereafter. Early adoption is permitted. Retrospective transition for all periods presented. |
In November 2023, the FASB issued the ASU to enhance segment disclosures. The amendments (1) require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (2) require disclosure of “other segment items” by reportable segment, which is the difference between segment revenue and significant segment expenses; (3) require annual segment disclosures to be included in interim financial statements; (4) clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures; and (5) require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.
|
We do not believe the adoption of the standard will have a material impact on our consolidated financial statements. We will revise disclosures in accordance with the new standard in our annual 2024 financial statements and for interim periods thereafter. |
Income Taxes (Topic 740)—Improvements to Income Tax Disclosures ASU 2023-09 |
Annual periods beginning after December 15, 2024. Early adoption is permitted. Prospective transition, although retrospective transition is permitted. |
In December 2023, the FASB issued the ASU to increase income tax transparency through improvements primarily related to the existing rate reconciliation and income taxes paid disclosures. The amendments require (1) consistent categories and greater disaggregation of information in the rate reconciliation; and (2) income taxes paid disaggregated by jurisdiction.
The ASU also removes certain disclosure requirements, such as reasonably possible significant changes in the total amount of unrecognized tax benefits within 12 months of the reporting date.
|
We do not believe the adoption of the standard will have a material impact on our consolidated financial statements. We will revise disclosures in accordance with the new standard in our annual 2025 financial statements. |
8
In addition, in March 2024, the SEC issued final rules that include updates to Regulation S-X for climate-related disclosures (the “Climate-Related Disclosures rule”). The Climate-Related Disclosures rule is currently stayed pending the completion of judicial review. The Climate-Related Disclosures rule requires a registrant to disclose in the notes to the financial statements (1) expenditures and losses, and capitalized costs and charges in each case excluding recoveries, incurred or recognized during a fiscal year as a result of severe weather events and other natural conditions; and (2) where material to a company's plan to achieve disclosed climate-related targets or goals, information regarding carbon offsets and renewable energy credits. The adoption of the Climate-Related Disclosures rule will impact our disclosures and may require changes to certain of our processes, systems, and controls. We are currently evaluating existing processes and data to determine what changes may be necessary. If the stay is lifted, the updates to Regulation S-X included in the Climate-Related Disclosures rule would be effective for the Company’s Form 10-K for the fiscal year ending December 31, 2025.
Recently issued accounting guidance not discussed above is not applicable, is immaterial to our consolidated financial statements, or did not or is not expected to have a material impact on our business.
(2) Segment and Geographical Information
Segments. We have
Notable information included in profit or loss by segment was as follows:
|
|
Three months ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
|
|
(In thousands) |
|||||||
Revenues: |
|
|
|
|
|
|
|
||
Term life insurance segment |
|
$ |
|
|
$ |
|
|
||
Investment and savings products segment |
|
|
|
|
|
|
|
||
Senior health segment |
|
|
|
|
|
|
|
||
Corporate and other distributed products segment |
|
|
|
|
|
|
|
||
Total revenues |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Net investment income: |
|
|
|
|
|
|
|
||
Term life insurance segment |
|
$ |
- |
|
|
$ |
- |
|
|
Investment and savings products segment |
|
|
- |
|
|
|
- |
|
|
Senior health segment |
|
|
- |
|
|
|
- |
|
|
Corporate and other distributed products segment |
|
|
|
|
|
|
|
||
Total net investment income |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Amortization of DAC: |
|
|
|
|
|
|
|
||
Term life insurance segment |
|
$ |
|
|
$ |
|
|
||
Investment and savings products segment |
|
|
|
|
|
|
|
||
Senior health segment |
|
|
- |
|
|
|
- |
|
|
Corporate and other distributed products segment |
|
|
|
|
|
|
|
||
Total amortization of DAC |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Non-cash share-based compensation expense: |
|
|
|
|
|
|
|
||
Term life insurance segment |
|
$ |
|
|
$ |
|
|
||
Investment and savings products segment |
|
|
|
|
|
|
|
||
Senior health segment |
|
|
|
|
|
|
|
||
Corporate and other distributed products segment |
|
|
|
|
|
|
|
||
Total non-cash share-based compensation expense |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Income (loss) before income taxes: |
|
|
|
|
|
|
|
||
Term life insurance segment |
|
$ |
|
|
$ |
|
|
||
Investment and savings products segment |
|
|
|
|
|
|
|
||
Senior health segment |
|
|
( |
) |
|
|
( |
) |
|
Corporate and other distributed products segment |
|
|
( |
) |
|
|
( |
) |
|
Total income (loss) before income taxes |
|
$ |
|
|
$ |
|
|
||
9
Total assets by segment were as follows:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
|
|
(In thousands) |
|
|||||
Assets: |
|
|
|
|
|
|
||
Term life insurance segment |
|
$ |
|
|
$ |
|
||
Investment and savings products segment (1) |
|
|
|
|
|
|
||
Senior health segment |
|
|
|
|
|
|
||
Corporate and other distributed products segment |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Geographical Information. Results of operations by country and long-lived assets – primarily tangible assets reported in other assets in our unaudited condensed consolidated balance sheets – were as follows:
|
|
Three months ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
|
|
(In thousands) |
|||||||
Revenues by country: |
|
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
|
||
Canada |
|
|
|
|
|
|
|
||
Total revenues |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
|
|
(In thousands) |
|
|||||
Long-lived assets by country: |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Canada |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
(3) Investments
Available-for-sale Securities.
|
|
March 31, 2024 |
|
|||||||||||||
|
|
Amortized cost |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Securities available-for-sale, carried at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agencies |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Foreign government |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
States and political subdivisions |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporates |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total fixed-maturity securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term investments |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total fixed-maturity and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
10
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Amortized cost |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Securities available-for-sale, carried at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agencies |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Foreign government |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
States and political subdivisions |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporates |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
||||