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Primerica (PRI) Solid Segmental Results Aid, Cost Woes Stay

·3 min read

Primerica, Inc. PRI is poised for growth, given a compelling portfolio, strong market presence and solid capital position. This leading life insurer has a decent track record of beating earnings estimates in two of the last four quarters while missing in the other two.

Primerica is the second-largest issuer of term-life insurance coverage in North America with $900 billion policies in force in 2022. Strong demand for protection products should drive sales growth and policy persistency. PRI’s strong business model makes it well poised to cater to the middle market's increased demand for financial security. This, in turn, should continue to boost operational performance.

PRI estimates Term Life Insurance policies in 2022 to increase slightly over 2021 while Investment and Savings Products (ISP) sales are expected to increase in the mid-single-digit range.

Licensed representatives play a major role in driving operational results for PRI. The insurer thus eyes about 2% growth in the number of life insurance licensed representatives in 2022 and a low-to-mid single-digit range over the long term.

With the U.S. mortgage distribution business gaining traction, Primerica remains focused on expanding distribution.

However, PRI projects insurance and other operating expenses to increase 16% year over year in 2022. Expenses in the Senior Health segment are estimated to rise 4% and 12% in the Term Life, ISP and Corporate & Other segments.

Though Senior Health results were impacted by a lower number of approved policies, policy churn and contract acquisition costs, PRI intends to continue offering Senior Health products to serve the growing middle-market senior population.

Primerica estimates the 2022 pre-tax operating margin to be in line with the 2021 figure.

The insurer has solid liquidity with invested assets in cash of $295 million at 2021 end. Primerica Life Insurance Company’s statutory risk-based capital ratio was about 440% as of Dec 31, 2021. It estimates the RBC ratio at around 420% in 2022.

Primerica has been strengthening its balance sheet by improving its leverage ratio. PRI scores strongly with credit rating agencies.

Sustained solid performance at Term Life and ISP businesses continues to drive strong levels of deployable capital aiding Primerica to put up an impressive dividend history with hiking dividends 11 times in the last 10 years. The board approved a $500 million increase in its already $275 million buyback authorization.

Some Key Industry Players

Some key stocks from the insurance industry include Chubb Limited CB Cincinnati Financial Corporation CINF, and Everest Re Group Ltd.RE.

Chubb delivered an average earnings surprise of 12.03%. CB is poised to benefit from its focus on capitalizing on the potential of middle-market businesses, and strategic initiatives, which pave the way for long-term growth.

Cincinnati Financial delivered an average earnings surprise of 38.48%. CINF should continue to grow given the disciplined expansion of Cincinnati Re, an agent-focused business model, and strong performance at the Commercial Lines segment.

Everest Re’s delivered an average earnings surprise of 24.72%. RE has a huge market share in the insurance and reinsurance market and is expected to benefit from capital adequacy, financial flexibility, traditional risk management capabilities, improved pricing and focus on building a portfolio with a mix toward product lines with better rate adequacy and higher long-term margins.




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