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Primerica (PRI) Shares Rise 50% YTD: Room for More Growth?

Primerica PRI shares have rallied 49.5% year to date, outperforming the industry’s increase of 19%, the Finance sector’s rise of 8% and the Zacks S&P 500 composite’s rally of 19.7% in the same period. With a market capitalization of $7.4 billion, the average volume of shares traded in the last three months was 0.1 million.

A compelling portfolio, strong market presence and solid capital position continue to drive this Zacks Rank #2 (Buy) company. Earnings of this second-largest issuer of term-life insurance coverage in North America have risen 14.4% over the last five years, outperforming the industry average of 2.1%.

A steady contribution from large in-force book of term life insurance, solid term life sales, growth in client asset values and an improving rate environment benefiting investment portfolio should continue to drive earnings.

Return on equity (ROE), a profitability measure to identify how efficiently a company is utilizing its shareholders’ funds, has been improving over the last several years. PRI’s trailing 12-month ROE of 28% is better than the industry average of 14.8%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Can the Stock Retain the Momentum?

The Zacks Consensus Estimate for Primerica’s 2023 earnings is pegged at $16.00 per share, indicating an increase of 39.9% on 3.2% higher revenues of $2.8 billion. The consensus estimate for 2024 earnings is pegged at $17.54, indicating an increase of 9.6% on 4.9% higher revenues of $3 billion.  

Primerica stands to benefit from solid demand for protection products that drive sales growth and policy persistency. A strong business model makes it well-poised to cater to the middle market's increased demand for financial security.

PRI noted that 48% of middle-income Americans will not be ready for retirement based on their investment and savings habits. This opens a sea of opportunities. Here comes the role of its diversified life-licensed sales representatives who are positioned to cater to the unique needs of its customers. The insurer stays focused on increasing the size of its life license sales force through continued recruiting and licensing. PRI estimates a 3% rise in sales force size in 2023. Licensed representatives play a pivotal role in driving the company’s operational results.

PRI estimates adjusted direct premiums in the Term Life segment to increase 6% in the fourth quarter of 2023. In Investment and Savings Products, the insurer projects fourth-quarter 2023 sales to grow 5% year over year.

Life insurers are direct beneficiaries of an improving interest rate environment. The Fed raised interest rates 11 times since March 2022. Thus, an improving interest rate environment should aid net investment income.

While the insurer has solid liquidity, Primerica has been strengthening its balance sheet by improving its leverage ratio. PRI scores strongly with credit rating agencies.

Management believes that its solid Term-life insurance business ensures consistent free cash flow. Banking on this strength, the board recently approved a $425 million buyback program through next year. It also hiked its dividend 10 times in the last nine years.

Thus, Primerica also envisions being a successful senior health business while continuing to enhance its shareholders’ value.

The Zacks Consensus Estimate for 2023 and 2024 earnings has moved 1.9% and 0.8% north, respectively, in the past 30 days, reflecting analyst optimism.

Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are F&G Annuities & Life, Inc. FG, American Equity Investment Life Holding AEL and Reinsurance Group of America RGA.

The Zacks Consensus Estimate for F&G Annuities’ 2023 and 2024 earnings has moved 0.6% and 4.8% higher in the past 30 days. FG sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FG’s 2023 and 2024 earnings per share indicates year-over-year increases of 6.3% and 44.2%, respectively. Year to date, FG shares have gained 110.5%.

American Equity delivered a four-quarter average earnings surprise of 13.53%. AEL carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for AEL’s 2023 and 2024 earnings per share indicates year-over-year increases of 9% and 1.4%, respectively. Year to date, AEL shares have risen 20.2%.

Reinsurance Group delivered a four-quarter average earnings surprise of 13.53%. RGA carries a Zacks Rank #2.

The Zacks Consensus Estimate for RGA’s 2023 and 2024 earnings per share has moved 1.8% and 0.7% north, respectively, in the past seven days.  Year to date, RGA shares have gained 14.2%.

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Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report

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F&G Annuities & Life, Inc. (FG) : Free Stock Analysis Report

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