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Primerica Reports First Quarter 2021 Results

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Investment and Savings Products sales increase 27% to a record $2.9 billion

Issued Term Life policies grow 16%

Strong momentum in recruiting continues; new recruits up 12%

Net earnings per diluted share (EPS) of $2.46, up 41%; return on stockholders’ equity (ROE) of 21.1%

Diluted adjusted operating EPS of $2.44, up 19%; adjusted net operating income return on adjusted stockholders’ equity (ROAE) of 22.2%

Declared dividend of $0.47 per share, payable on June 14, 2021

Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended March 31, 2021. Total revenues of $637.7 million increased 21% compared to the first quarter of 2020. Net income of $97.9 million increased 35%, while earnings per diluted share of $2.46 increased 41% compared to the same quarter last year. As previously disclosed, last year’s first quarter included pre-tax realized losses on the invested asset portfolio of $10.0 million and mark-to-market adjustments on the reinsurance deposit asset of $6.4 million, driven by a sharp market downturn at the onset of the COVID pandemic. ROE was 21.1% for the current quarter compared to 18.2% in the first quarter of 2020.

Adjusted operating revenues, adjusted net operating income and diluted adjusted operating earnings per share, which are non-GAAP financial measures, exclude the impact of realized gains/losses and the mark-to-market adjustment on the reinsurance deposit asset. A reconciliation of non-GAAP to GAAP financial measures is included at the end of this release.

Adjusted operating revenues were $636.7 million, increasing 18% compared to the first quarter of 2020. Adjusted net operating income of $97.1 million increased 14%, while diluted adjusted operating earnings per share of $2.44 increased 19% compared to the same quarter last year. ROAE was 22.2% during the first quarter of 2021 and 21.8% during the first quarter of 2020.

First quarter results reflect strong performance in the Investment and Savings Products (ISP) segment and the continued benefit of increased sales and heightened persistency in the Term Life segment. ISP sales were particularly robust at $2.9 billion, increasing 27% year-over-year due to increased demand for mutual funds and managed accounts. Demand for variable annuities also improved, increasing 7% compared to a robust first quarter in 2020. The Term Life segment continues to see strong demand for protection products, which directly impacts sales and persistency as well as higher claims as a result of the pandemic. During the quarter, the Company incurred approximately $21 million in COVID-related death claims, net of reinsurance. The onset of COVID in March 2020 had no significant impact on last year’s first quarter financial results.

"Our exceptional first quarter results reflect the strength of our business and the continuing momentum created by our ability to meet the financial needs of middle-market families," said Glenn Williams, Chief Executive Officer. "The impact of COVID has heightened consumer awareness concerning their finances, helping to drive record production results for Primerica, including in recruiting, issued life policies and investment sales."

First Quarter Distribution & Segment Results

Distribution Results

Q1 2021

Q1 2020

%
Change

Life-Licensed Sales Force (1)

132,030

130,095

1

%

Recruits

94,633

84,762

12

%

New Life-Licensed Representatives

10,833

10,599

2

%

Life Insurance Policies Issued

82,667

71,318

16

%

Life Productivity (2)

0.21

0.18

*

ISP Product Sales ($ billions)

$

2.85

$

2.25

27

%

Average Client Asset Values ($ billions)

$

83.13

$

66.59

25

%

Closed U.S. Mortgage Volume ($ million brokered)

$

262.3

$

12.9

*

_________________________

(1)

End of period

(2)

Life productivity equals policies issued divided by the average number of life insurance licensed representatives per month

*

Not calculated

Segment Results

Q1 2021

Q1 2020

%
Change

($ in thousands)

Adjusted Operating Revenues:

Term Life Insurance

$

382,027

$

327,746

17

%

Investment and Savings Products

223,422

185,032

21

%

Corporate and Other Distributed Products (1)

31,289

28,567

10

%

Total adjusted operating revenues (1)

$

636,738

$

541,345

18

%

Adjusted Operating Income (Loss) before income taxes:

Term Life Insurance

$

88,236

$

82,892

6

%

Investment and Savings Products

63,363

47,700

33

%

Corporate and Other Distributed Products (1)

(24,263

)

(19,637

)

24

%

Total adjusted operating income before income taxes (1)

$

127,336

$

110,955

15

%

_________________________

(1)

See the Non-GAAP Financial Measures section and the Adjusted Operating Results reconciliation tables at the end of this release for additional information.

Life Insurance Licensed Sales Force
Recruiting activity remained strong during the first quarter, with a total of more than 94 thousand individuals recruited, an increase of 12% year-over-year. The licensing process remained challenged as social-distancing measures limited pre-licensing class access and states continued to work through COVID-related backlogs. As a result, the Company saw only a 2% increase in licensing.

At March 31, 2021, the Company had a total of 132,030 independent life-licensed representatives, including an estimated 2,400 individuals who we expect will not pursue the steps necessary to convert a COVID-related temporary license to a permanent license or renew a license with a COVID-related extended renewal date. Excluding these individuals from the quarter-end count, the total number of life-licensed representatives was largely unchanged year-over-year.

Term Life Insurance
Clients continue to prioritize protection for their families, which amplifies demand for our products. During the quarter, the Company issued nearly 83 thousand life insurance policies, an increase of 16% compared to the first quarter of 2020. This increased demand led productivity during the quarter to 0.21 policies per life-licensed representative per month compared to 0.18 in the prior year’s first quarter.

Revenues of $382.0 million increased 17% compared to the prior year’s first quarter, driven largely by a 16% increase in adjusted direct premiums. Pre-tax income of $88.2 million increased 6% year-over-year. Higher sales, along with favorable persistency trends, continued to positively impact adjusted direct premiums, adding an estimated $9 million to pre-tax operating income during the first quarter of 2021. Strong persistency also led to $12 million less DAC amortization, partly offset by $7 million higher benefit reserve increases. The Company also incurred an estimated $21 million in COVID-related death claims, net of reinsurance, in line with expectations.

Investment and Savings Products
Total product sales during the quarter were $2.9 billion, a 27% increase year-over-year. The primary sales drivers were mutual funds and managed accounts, which increased 40% and 34%, respectively, while annuities were up slightly compared to last year’s strong first quarter results. Net client inflows doubled from $543 million in the prior year period to $1.1 billion in the first quarter of 2021. Client asset values ended the quarter at $85.9 billion, an increase of 45% year-over-year, reflecting the sharp market downturn in March 2020 and strong subsequent market performance combined with nearly $3 billion of net client inflows over the last 12 months.

Revenues of $223.4 million during the first quarter increased 21% compared to the same quarter in 2020, while pre-tax income of $63.4 million increased 33%. Sales-based revenues increased 21%, slightly less than the 26% increase in revenue generating sales as the mix of products sold continues to shift toward mutual funds which have a lower sales-based commission rate. Asset-based revenues increased 24% year-over-year, in line with the increase in average client asset values. Sales-based commission expenses were largely correlated with sales-based revenues, as were asset-based commission expenses when factoring in Canadian segregated fund commissions that are reflected in insurance commissions and DAC amortization. Canadian segregated fund DAC amortization was lower year-over-year largely due to negative market performance during the first quarter of 2020.

Corporate and Other Distributed Products
During the first quarter of 2021, the segment recorded an operating loss before taxes of $24.3 million compared to $19.6 million in the prior year’s first quarter. Segment revenues increased $2.7 million year-over-year. Higher commissions and fees, including a $4.7 million increase from mortgage sales were offset by a $3.0 million reduction in net investment income due to lower portfolio yields and a higher allocation to the Term Life segment to support the growing block of business. Sales commissions and other operating expenses increased $9.0 million due in part to $3.5 million in mortgage commissions and support costs as well as growth in technology costs and employee-related expenses. Benefits and claims were lower year-over-year due to a $1.6 million loss associated with a reinsurance allowance on a discontinued line of business recognized in the prior year period.

Taxes
The effective tax rate remains relatively unchanged at 23.7% in the first quarter of 2021 compared to 23.4% in the first quarter of 2020.

Capital
As announced on April 19, the Company temporarily suspended its stock repurchase program to fund the planned acquisition of e-TeleQuote. Consequently, there were no shares repurchased during the first quarter of 2021 and the Company does not plan any repurchase activity during the remainder of 2021. Given the Company’s strong capital generation, repurchases are expected to resume in 2022. The Board of Directors approved a dividend of $0.47 per share, payable on June 14, 2021, to stockholders of record on May 21, 2021.

Primerica has a strong balance sheet and continues to be well-capitalized to meet the future funding needs of both Primerica and e-TeleQuote’s businesses. As of March 31, 2021, invested assets and cash at the holding company was $369.4 million, reflecting the liquidity build-up to fund the acquisition of e-TeleQuote. The $100 million distribution from the Company’s Canadian subsidiary is expected to occur just prior to the closing of the e-TeleQuote transaction. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be approximately 400% at March 31, 2021.

Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company presents certain non-GAAP financial measures. Specifically, the Company presents adjusted direct premiums, other ceded premiums, adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income, adjusted stockholders’ equity and diluted adjusted operating earnings per share. Adjusted direct premiums and other ceded premiums are net of amounts ceded under coinsurance transactions that were executed concurrent with our initial public offering (the "IPO coinsurance transactions") for all periods presented. We exclude amounts ceded under the IPO coinsurance transactions in measuring adjusted direct premiums and other ceded premiums to present meaningful comparisons of the actual premiums economically maintained by the Company. Amounts ceded under the IPO coinsurance transactions will continue to decline over time as policies terminate within this block of business. Adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income and diluted adjusted operating earnings per share exclude the impact of realized investment gains (losses) and fair value mark-to-market ("MTM") investment adjustments, including credit impairments, for all periods presented. We exclude realized investment gains (losses), including credit impairments, and MTM investment adjustments in measuring these non-GAAP financial measures to eliminate period-over-period fluctuations that may obscure comparisons of operating results due to items such as the timing of recognizing gains (losses) and market pricing variations prior to an invested asset’s maturity or sale that are not directly associated with the Company’s insurance operations. Adjusted stockholders’ equity excludes the impact of net unrealized investment gains (losses) recorded in accumulated other comprehensive income (loss) for all periods presented. We exclude unrealized investment gains (losses) in measuring adjusted stockholders’ equity as unrealized gains (losses) from the Company’s available-for-sale securities are largely caused by market movements in interest rates and credit spreads that do not necessarily correlate with the cash flows we will ultimately realize when an available-for-sale security matures or is sold.

Our definitions of these non-GAAP financial measures may differ from the definitions of similar measures used by other companies. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. Furthermore, management believes that these non-GAAP financial measures may provide users with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of the core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Reconciliations of GAAP to non-GAAP financial measures are attached to this release.

Earnings Webcast Information
Primerica will hold a webcast on Thursday, May 6, 2021 at 10:00 a.m. Eastern, to discuss the quarter’s results. To access the webcast, go to https://investors.primerica.com at least 15 minutes prior to the event to register, download and install any necessary software. A replay of the call will be available for approximately 30 days. This release and a detailed financial supplement will be posted on Primerica’s website.

Forward-Looking Statements
Except for historical information contained in this press release, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from anticipated or projected results. Those risks and uncertainties include, among others, our failure to continue to attract and license new recruits, retain sales representatives or license or maintain the licensing of sales representatives; new laws or regulations that could apply to our distribution model, which could require us to modify our distribution structure; changes to the independent contractor status of sales representatives; our or sales representatives’ violation of or non-compliance with laws and regulations; any failure to protect the confidentiality of client information; differences between our actual experience and our expectations regarding mortality or persistency as reflected in the pricing for our insurance policies; changes in federal, state and provincial legislation or regulation that affects our insurance, investment product, and mortgage businesses; our failure to meet regulatory capital ratios or other minimum capital and surplus requirements; a significant downgrade by a ratings organization; the failure of our reinsurers or reserve financing counterparties to perform their obligations; the failure of our investment products to remain competitive with other investment options or the loss of our relationship with one or more of the companies whose investment products we provide; litigation and regulatory investigations and actions concerning us or sales representatives; heightened standards of conduct or more stringent licensing requirements for sales representatives; inadequate policies and procedures regarding suitability review of client transactions; revocation of our subsidiary’s status as a non-bank custodian; economic down cycles that impact our business, financial condition and results of operations; major public health pandemics, epidemics or outbreaks or other catastrophic events; the failure of our information technology systems, breach of our information security, failure of our business continuity plan or the loss of the Internet; the effects of credit deterioration and interest rate fluctuations on our invested asset portfolio and other assets; incorrectly valuing our investments; changes in accounting standards may impact how we record and report our financial condition and results of operations; the inability of our subsidiaries to pay dividends or make distributions; litigation and regulatory investigations and actions; a significant change in the competitive environment in which we operate; the loss of key personnel or sales force leaders; any acquisition or investment in businesses that do not perform as we expect or are difficult to integrate; and fluctuations in the market price of our common stock or Canadian currency exchange rates. These and other risks and uncertainties affecting us are more fully described in our filings with the Securities and Exchange Commission, which are available in the "Investor Relations" section of our website at http://investors.primerica.com. Primerica assumes no duty to update its forward-looking statements as of any future date.

About Primerica, Inc.
Primerica, Inc., headquartered in Duluth, GA, is a leading provider of financial services to middle-income households in North America. Independent licensed representatives educate Primerica clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. We insured approximately 5.5 million lives and had over 2.6 million client investment accounts at December 31, 2020. Primerica, through its insurance company subsidiaries, was the #2 issuer of Term Life insurance coverage in North America in 2020. Primerica stock is included in the S&P MidCap 400 and the Russell 1000 stock indices and is traded on The New York Stock Exchange under the symbol "PRI."

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

March 31, 2021

December 31, 2020

(In thousands)

Assets

Investments:

Fixed-maturity securities available-for-sale, at fair value

$

2,538,197

$

2,464,611

Fixed-maturity security held-to-maturity, at amortized cost

1,362,210

1,346,350

Short-term investments available-for-sale, at fair value

50,758

-

Equity securities, at fair value

39,638

38,023

Trading securities, at fair value

35,046

16,300

Policy loans

30,278

30,199

Total investments

4,056,127

3,895,483

Cash and cash equivalents

439,944

547,569

Accrued investment income

19,964

17,618

Reinsurance recoverables

4,345,483

4,273,904

Deferred policy acquisition costs, net

2,712,169

2,629,644

Agent balances, due premiums and other receivables

268,660

259,448

Intangible assets

45,275

45,275

Income taxes

74,683

73,290

Operating lease right-of-use assets

45,318

46,567

Other assets

467,336

456,967

Separate account assets

2,638,901

2,659,520

Total assets

$

15,113,860

$

14,905,285

Liabilities and Stockholders' Equity

Liabilities:

Future policy benefits

$

6,885,115

$

6,790,557

Unearned and advance premiums

18,184

17,136

Policy claims and other benefits payable

526,654

519,711

Other policyholders' funds

475,511

447,765

Notes payable

374,511

374,415

Surplus note

1,361,648

1,345,772

Income taxes

235,234

223,496

Operating lease liabilities

51,521

52,806

Other liabilities

582,198

566,068

Payable under securities lending

87,190

72,154

Separate account liabilities

2,638,901

2,659,520

Total liabilities

13,236,667

13,069,400

Stockholders' equity:

Common stock

394

393

Paid-in capital

8,138

-

Retained earnings

1,785,038

1,705,786

Accumulated other comprehensive income (loss), net of income tax

83,623

129,706

Total stockholders' equity

1,877,193

1,835,885

Total liabilities and stockholders' equity

$

15,113,860

$

14,905,285

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

Three months ended March 31,

2021

2020

(In thousands, except per-share amounts)

Revenues:

Direct premiums

$

762,227

$

702,637

Ceded premiums

(395,973

)

(386,825

)

Net premiums

366,254

315,812

Commissions and fees

234,044

190,069

Net investment income

20,052

15,420

Realized investment gains (losses)

1,766

(10,030

)

Other, net

15,595

13,665

Total revenues

637,711

524,936

Benefits and expenses:

Benefits and claims

183,789

134,813

Amortization of deferred policy acquisition costs

66,105

70,311

Sales commissions

121,894

96,607

Insurance expenses

48,766

48,709

Insurance commissions

8,740

6,844

Interest expense

7,145

7,192

Other operating expenses

72,963

65,914

Total benefits and expenses

509,402

430,390

Income before income taxes

128,309

94,546

Income taxes

30,437

22,077

Net income

$

97,872

$

72,469

Earnings per share:

Basic earnings per share

$

2.47

$

1.75

Diluted earnings per share

$

2.46

$

1.75

Weighted-average shares used in computing earnings per share:

Basic

39,456

41,131

Diluted

39,581

41,238

PRIMERICA, INC. AND SUBSIDIARIES

Consolidated Adjusted Operating Results Reconciliation

(Unaudited – in thousands, except per share amounts)

Three months ended March 31,

2021

2020

% Change

Total revenues

$

637,711

$

524,936

21

%

Less: Realized investment gains (losses)

1,766

(10,030

)

Less: 10% deposit asset MTM included in NII

(793

)

(6,379

)

Adjusted operating revenues

$

636,738

$

541,345

18

%

Income before income taxes

$

128,309

$

94,546

36

%

Less: Realized investment gains (losses)

1,766

(10,030

)

Less: 10% deposit asset MTM included in NII

(793

)

(6,379

)

Adjusted operating income before income taxes

$

127,336

$

110,955

15

%

Net income

$

97,872

$

72,469

35

%

Less: Realized investment gains (losses)

1,766

(10,030

)

Less: 10% deposit asset MTM included in NII

(793

)

(6,379

)

Less: Tax impact of preceding items

(231

)

3,832

Adjusted net operating income

$

97,130

$

85,046

14

%

Diluted earnings per share (1)

$

2.46

$

1.75

41

%

Less: Net after-tax impact of operating adjustments

0.02

(0.30

)

Diluted adjusted operating earnings per share (1)

$

2.44

$

2.05

19

%

(1) Percentage change in earnings per share is calculated prior to rounding per share amounts.

TERM LIFE INSURANCE SEGMENT

Adjusted Premiums Reconciliation

(Unaudited – in thousands)

Three months ended March 31,

2021

2020

% Change

Direct premiums

$

756,514

$

696,564

9

%

Less: Premiums ceded to IPO coinsurers

249,944

260,076

Adjusted direct premiums

$

506,570

$

436,488

16

%

Ceded premiums

$

(394,550

)

$

(385,232

)

Less: Premiums ceded to IPO coinsurers

(249,944

)

(260,076

)

Other ceded premiums

$

(144,606

)

$

(125,156

)

Net premiums

$

361,964

$

311,332

16

%

CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT

Adjusted Operating Results Reconciliation

(Unaudited – in thousands)

Three months ended March 31,

2021

2020

% Change

Total revenues

$

32,262

$

12,158

165

%

Less: Realized investment gains (losses)

1,766

(10,030

)

Less: 10% deposit asset MTM included in NII

(793

)

(6,379

)

Adjusted operating revenues

$

31,289

$

28,567

10

%

Loss before income taxes

$

(23,290

)

$

(36,046

)

(35

)%

Less: Realized investment gains (losses)

1,766

(10,030

)

Less: 10% deposit asset MTM included in NII

(793

)

(6,379

)

Adjusted operating loss before income taxes

$

(24,263

)

$

(19,637

)

24

%

PRIMERICA, INC. AND SUBSIDIARIES

Adjusted Stockholders' Equity Reconciliation

(Unaudited – in thousands)

March 31, 2021

December 31, 2020

% Change

Stockholders' equity

$

1,877,193

$

1,835,885

2

%

Less: Unrealized net investment gains (losses) recorded in stockholders' equity, net of income tax

77,053

128,128

Adjusted stockholders' equity

$

1,800,140

$

1,707,757

5

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005881/en/

Contacts

Investor Contact:
Nicole Russell
470-564-6663
Email: Nicole.Russell@primerica.com

Media Contact:
Keith Hancock
470-564-6328
Email: Keith.Hancock@Primerica.com