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Primerica (PRI) Rallies 17% YTD: Can the Bull Run Continue?

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Primerica (PRI) Rallies 17% YTD: Can the Bull Run Continue?

Shares of Primerica (PRI) gain 17% year to date, backed by solid fundamentals and growth-driving initiatives.

That Primerica, Inc. PRI stock is favored by investors is further corroborated by its share price movement. Shares of the company have rallied 17.5% year to date against its industry's decrease of 12.4%. However, the stock’s growth lagged the Zacks S&P 500 Composite’s gain of 19.9%. With a market capitalization of $5.1 billion, average volume of shares traded in the past three months was 0.2 million.

Price Performance

What’s Behind the Upside?

The company delivered a positive earnings surprise of 7.2% in second-quarter 2018. Moreover, the bottom line improved nearly 38% during the first half of 2018.

The company continues to benefit from maximizing sales force growth and productivity, expanding protection product offerings, increasing client investment options and developing digital capabilities.

Direct premiums grew 4.6% in the first half of 2018, driven by higher number of new policies issued in recent periods. The company expects adjusted direct premiums to grow around 13.5% in the second half of the year and between 14% and 14.5% in 2018 at Term Life Insurance. Total Revenues improved 13% year over year, driven by incremental premiums on term life insurance policies.

While new recruits increased 2.3%, new life-licensed sales representatives rose nearly 6%. The company estimates life licensed sales forces to consistently grow going forward.

Revenues in Term Life Insurance increased 15% in the first half of 2018. The metric also improved 14% in Investment and Savings Products.

Additionally, the company remains focused on investing in digital development to improve the effectiveness of its representatives and extend client relationships. It intends to spend about $8 million toward this initiative during the second half of 2018.

Return on equity (ROE), a measure of profitability, has been improving over the past many quarters. ROE of 21.1% in the second quarter expanded 260 bps and betters the industry average of 13.2%. This reflects the company’s efficiency in utilizing its shareholders’ funds. The company estimates annualized return on adjusted equity to improve 22% in 2018.

Cash from operations surged 36.8% on increase in cash receipts from collective premium revenues in excess of benefits and claims paid in Term Life Insurance segment.

Banking on its operational efficiency and diverse cash flows, this Zacks Rank #1 (Strong Buy) life insurer has returned $134 million through the first half of 2018. The company intends to repurchase about $200 million shares in 2018.

The Zacks Consensus Estimate for 2018 bottom line reflects 30.1% year-over-year increase on 12.6% higher top line.

Other Stocks to Consider

Investors interested in life insurance industry can also check out some other top-ranked stocks like Athene Holding Ltd. ATH, FGL Holdings FG and Torchmark Corporation TMK. You can see the complete list of today’s Zacks #1 Rank stocks here.

Athene Holding, a retirement services company, issues, reinsures and acquires retirement savings products in the United States, the District of Columbia and Germany. The company delivered a 16.54% positive surprise in the earlier reported quarter and sports a Zacks Rank of 1.

FGL Holdings sells individual life insurance products and annuities in the United States. Last reported quarter, it pulled off a 3.85% earnings surprise. The stock is a Zacks #1 Ranked player.

Torchmark provides various life and health insurance products and annuities in the United States, Canada and New Zealand. It came up with a 1.34% beat in the previously reported quarter. It carries a Zacks Rank #2 (Buy).

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