Primerica (PRI) Stock Declines 1.1% Despite Q2 Earnings Beat
Primerica, Inc. PRI shares have declined 1.1% since Aug 7, 2023, despite reporting strong second-quarter earnings. Investors are likely concerned about the company’s expectation of rising expenses, which will reduce margins in the coming days. It expects expenses to rise 9% year over year in the third quarter. Further, for 2023, it expects insurance and other operating costs to increase by almost 5%.
Nevertheless, in 2023, the company expects the Term Life Insurance unit’s adjusted direct premium to rise 6% year over year. It anticipates the benefits and claims ratio from the segment to be around 58% for the full year.
Q2 Earnings
Primerica reported a second-quarter 2023 adjusted earnings of $3.99 per share, beating the Zacks Consensus Estimate by 5.3%. The bottom line also jumped 18% from the prior-year quarter. Rising premiums, net investment income, lower costs and solid Term Life Insurance unit performance aided its strong second-quarter earnings. However, the positives were partially offset by weakness in Investment and Savings Products operations.
The top line increased 3% year over year to $689.6 million. The figure missed the consensus mark by 2.5%.
Primerica, Inc. Price, Consensus and EPS Surprise
Primerica, Inc. price-consensus-eps-surprise-chart | Primerica, Inc. Quote
Q2 Operational Update
Primerica reported net premiums of $403 million in the second quarter, up 3.4% from the year-ago level. Net investment income rose 52.2% year over year to $32.4 million. However, commissions and fees fell 3.1% from the year-ago period to $233.1 million.
Total benefits and expenses declined 13% in the second quarter to $499.5 million, thanks to lower sales commissions and contract acquisition costs, partially offset by higher insurance commissions and other operating expenses.
Adjusted net operating income jumped 11% year over year to $145.4 million in the second quarter. In June-end, PRI’s total independent life-licensed representatives were 137,806, which rose 4% from a year ago.
Segmental Update
Term Life Insurance: Adjusted operating revenues from the segment climbed 3% year over year to $411.9 million. Adjusted operating income before income taxes jumped 9% year over year to $140.1 million. The segment was supported by increased policies issued, partially offset by policy lapses due to inflation.
Investment and Savings Products: Adjusted operating revenues from the segment declined 4% year over year to $214.5 million. Adjusted operating income before income taxes fell 5% year over year to $59.6 million. The segment was affected by lower sales volumes, partially offset by lower expenses.
Senior Health: Adjusted operating revenues from the segment rose 26% year over year to $14.9 million. Adjusted operating loss before income taxes narrowed 53% year over year to $6 million. The company remains focused on pushing the business toward profitability.
Corporate and Other Distributed Products: Adjusted operating revenues from the unit rose 23% year over year to $48.3 million. Adjusted operating loss before income taxes narrowed 61% year over year to $3.6 million. The segment benefited from the high interest rate environment.
Financial Update (as of Jun 30, 2023)
Primerica exited the second quarter with cash and cash equivalents of $561.9 million, which rose from the 2022-end level of $489.2 million. Total assets of $14.8 billion marginally increased from the figure of $14.6 billion at 2022 end.
Surplus note was $1,433.1 million at the second-quarter end, down from $1,444.5 million at 2022-end.
Total shareholders’ equity of $2,015.5 million decreased from the 2022-end level of $2,031.3 million.
Operating cash flow in the first half of 2023 was recorded at $311.7 million, down from $384.5 million in the year-ago period.
Capital Deployment
PRI bought back shares worth $110.8 million in the second quarter. It plans to complete $375 million of share buyback in 2023.
It approved a dividend of 65 cents per share, which will be paid on Sep 11, to shareholders on record as of Aug 21.
Zacks Rank & Key Picks
Primerica currently has a Zacks Rank #3 (Hold). Investors interested in the broader finance space can consider better-ranked companies like Marsh & McLennan Companies, Inc. MMC, Employers Holdings, Inc. EIG and Ryan Specialty Holdings, Inc. RYAN, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
New York-based Marsh & McLennan is a globally leading insurance broker. The Zacks Consensus Estimate for MMC’s current-year earnings implies 12.6% year-over-year growth. MMC beat earnings estimates in all the last four quarters, with an average of 3.4%.
Based in Reno, NV, Employers Holdings has vast operations in the commercial property and casualty insurance industry. The Zacks Consensus Estimate for EIG’s current-year bottom line is pegged at $3.23 per share, indicating a 10.2% jump from a year ago. It beat earnings estimates in all the last four quarters, with an average of 34.1%.
Headquartered in Chicago, Ryan Specialty offers specialty products and solutions for different types of clients in the insurance industry. The Zacks Consensus Estimate for RYAN’s current year earnings indicates a 20.9% year-over-year increase. It beat earnings estimates in two of the past four quarters, met once and missed on the other occasion, with an average surprise of 2.4%.
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