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Primerica Reports Third Quarter 2020 Results

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Term Life policies issued increase 36% with productivity and policy persistency at record levels

Term Life net premiums grow 13%; adjusted direct premiums grow 14%

Investment and Savings Products ending client asset values reach a record $72.6 billion

Life-Licensed Sales Force increases to 136,306 aided by temporary COVID-related state licensing measures

Net earnings per diluted share (EPS) of $2.81, up 23%; return on stockholders’ equity (ROE) of 26.7%

Diluted adjusted operating EPS of $2.78, up 23%; adjusted net operating income return on adjusted stockholders’ equity (ROAE) of 28.0%

Declared dividend of $0.40 per share, payable on December 14, 2020

Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended September 30, 2020. Total revenues of $568.5 million increased 9% compared to the third quarter of 2019. Net income of $112.1 million increased 17%, while earnings per diluted share of $2.81 increased 23% compared to the same quarter last year. ROE increased to 26.7% during the quarter from 24.1% during the third quarter of 2019.

Compared to the third quarter of 2019, adjusted operating revenues of $566.7 million increased 9%, adjusted operating net income of $110.7 million increased 16% and diluted adjusted operating earnings per share of $2.78 increased 23%. ROAE increased to 28.0% during the quarter from 24.9% during the third quarter of 2019.

Third quarter results were positively impacted by strong demand for protection products, which has been on the rise since the onset of the COVID-19 pandemic. Record term life policy sales and persistency more than offset elevated claims experience during the quarter. Investment and Savings Products (ISP) sales remained under pressure, but market appreciation and lower levels of redemptions during the period drove an 8% increase in average client asset values year-over-year. The Company continued to invest in opportunities that will support and accelerate growth, including digital technologies and the recently launched mortgage distribution program. During the quarter, the Company repurchased $41.5 million of common stock for a year-to-date total of $218.1 million.

"Primerica continues to meet the strong demand for all of our financial solutions that has been aided by consumer sentiment during the COVID-19 pandemic. Protecting their families and pursuing our business opportunity have been a top priority for middle-income families, followed closely by investing for the future," said Glenn Williams, Chief Executive Officer. "The adaptability of our sales force and the flexibility of our business model have positioned us to meet the ongoing needs of our clients."

Third Quarter Distribution & Segment Results

Distribution Results

Q3 2020

Q3 2019

% Change

Life-Licensed Sales Force (1)

136,306

130,871

4

%

Recruits

101,861

72,345

41

%

New Life-Licensed Representatives

13,138

12,682

4

%

Life Insurance Policies Issued

100,199

73,434

36

%

Life Productivity (2)

0.25

0.19

*

ISP Product Sales ($ billions)

$

1.84

$

1.86

(1

)%

Average Client Asset Values ($ billions)

$

71.51

$

66.00

8

%

__________________________

(1)

End of period

(2)

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

*

Not calculated or less than 1%

Segment Results

Q3 2020

Q3 2019

% Change

($ in thousands)

Adjusted Operating Revenues:

Term Life Insurance

$

357,799

$

314,527

14

%

Investment and Savings Products

176,337

173,153

2

%

Corporate and Other Distributed Products (1)

32,518

32,154

1

%

Total adjusted operating revenues (1)

$

566,654

$

519,834

9

%

Adjusted Operating Income (Loss) before income taxes:

Term Life Insurance

$

105,315

$

83,761

26

%

Investment and Savings Products

51,372

48,794

5

%

Corporate and Other Distributed Products (1)

(12,011

)

(8,235

)

46

%

Total adjusted operating income before income taxes (1)

$

144,676

$

124,320

16

%

__________________________

(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 robust throughout the quarter, even as the business application fee discount ended on July 31. The Company saw favorable year-over-year comparisons in each of July through September, resulting in a total of 101,861 new recruits during the third quarter. The licensing process continues to be challenged due to various issues, including social distancing restrictions and processing backlogs; nonetheless, a total of 13,138 individuals received a new life license during the third quarter of 2020.

As of September 30, 2020, the Company had 136,306 independent life-licensed representatives, including 5,200 licenses that were issued on a temporary basis due to COVID-19. We expect approximately 40% of the COVID-19 temporarily licensed representatives to take the steps necessary to obtain a permanent license. The number of independent life-licensed representatives also includes 4,500 licenses where the state has extended the renewal date, 40% of which we estimate will ultimately be renewed.

Term Life Insurance

During the third quarter, the Company issued 100,199 new life insurance policies, a 36% increase year-over-year. Greater demand for protection products, along with a smooth transition to remote sales at the onset of COVID-19, led productivity during the quarter to 0.25 policies per life insurance licensed representative per month, well above our historical range of 0.18 to 0.22.

Revenues of $357.8 million increased 14% compared to the third quarter of 2019 and pre-tax income of $105.3 million increased 26% year-over-year. Continued strength in sales volume, along with a notable increase in persistency across all policy durations, led to a 14% increase in adjusted direct premiums. Strong policy persistency positively impacted DAC amortization by $22 million year-over-year and was partially offset by $8 million higher benefit reserve increases. Benefits and claims also included approximately $9 million of unfavorable claims experience during the third quarter of 2020, $8 million of which the Company estimates is related to COVID-19 deaths.

Investment and Savings Products

Total product sales during the quarter were $1.8 billion, or 1% lower than the third quarter of 2019 as investors began to see signs of market stabilization and resumed investing to meet long-term goals. Net client inflows were robust at $508 million during the quarter, a 173% increase year-over-year, driven by a 20% decline in gross redemptions. Average client asset values were $71.5 billion, increasing 8% year-over-year.

Revenues of $176.3 million during the quarter increased 2% compared to the same quarter in 2019 and pre-tax income of $51.4 million increased 5%. Sales-based revenues declined 5%, in line with revenue-generating product sales, as growth in sales of retail mutual funds were offset by continued weakness in annuity product sales. Asset-based revenues increased 7%, in line with the increase in average client asset values year-over-year. Sales and asset-based commission expenses generally moved in correlation with the associated revenues.

Net Investment Income and Invested Asset Portfolio

Consolidated net investment income of $23.0 million for the quarter was largely unchanged versus the prior year period as the $2.3 million impact of lower rates was offset by $1.7 million higher income due to the growth in the size of the invested asset portfolio. The invested asset portfolio ended the quarter with an unrealized gain of $135 million, up from $120 million as of June 30, 2020, and with an average credit rating of A.

Taxes

The third quarter effective income tax rate was 23.5% versus 23.1% in the prior year period.

Capital

During the third quarter, the Company repurchased 340,154 shares of common stock for $41.5 million, bringing the total through September 30 to $218.1 million. The Board of Directors has approved a dividend of $0.40 per share, payable on December 14, 2020, to stockholders of record on November 20, 2020.

Primerica has a strong balance sheet and continues to be well-capitalized to meet future needs. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be about 425% and holding company liquidity was $251.1 million as of September 30, 2020.

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, November 5, 2020 at 10:00 am EST, to discuss the quarter’s results. To access the webcast, go to http://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 on Primerica’s website, http://investors.primerica.com. 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, major public health pandemics, epidemics or outbreaks, specifically the novel COVID-19 pandemic; 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; the occurrence of a catastrophic event; 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 downgrade or potential downgrade in our insurance subsidiaries’ financial strength ratings or our senior debt ratings; inadequate or unaffordable reinsurance or the failure of our reinsurers to perform their obligations; the failure of our investment products to remain competitive with other investment options or the change to investment and savings products offered by key providers in a way that is not beneficial to our business or a significant change in the competitive environment in which we operate; fluctuations in the performance of client assets under management; 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; the failure of, or legal challenges to, the support tools we provide to the sales force; 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; incorrectly valuing our investments; changes in accounting standards may impact how we record and report our financial condition and results of operations; economic down cycles that impact our business, financial condition and results of operations; the inability of our subsidiaries to pay dividends or make distributions; our inability to generate and maintain a sufficient amount of working capital; our non-compliance with the covenants of our senior unsecured debt; the loss of key personnel or sales force leaders; 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 over 5 million lives and had approximately 2.5 million client investment accounts at December 31, 2019. Primerica, through its insurance company subsidiaries, was the #2 issuer of Term Life insurance coverage in North America in 2019. 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)

September 30, 2020

December 31, 2019

(In thousands)

Assets

Investments:

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

$

2,453,076

$

2,356,996

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

1,323,740

1,184,370

Equity securities, at fair value

33,856

40,684

Trading securities, at fair value

13,470

43,233

Policy loans

30,605

32,927

Total investments

3,854,747

3,658,210

Cash and cash equivalents

330,877

256,876

Accrued investment income

18,448

17,361

Reinsurance recoverables

4,229,088

4,169,823

Deferred policy acquisition costs, net

2,532,409

2,325,750

Agent balances, due premiums and other receivables

280,915

227,100

Intangible assets, net

45,275

45,275

Income taxes

72,707

70,492

Operating lease right-of-use assets

47,685

47,265

Other assets

420,051

384,634

Separate account assets

2,468,328

2,485,745

Total assets

$

14,300,530

$

13,688,531

Liabilities and Stockholders' Equity

Liabilities:

Future policy benefits

$

6,664,061

$

6,446,569

Unearned and advance premiums

18,308

15,470

Policy claims and other benefits payable

467,609

339,954

Other policyholders' funds

425,537

388,663

Notes payable

374,320

374,037

Surplus note

1,323,146

1,183,728

Income taxes

216,640

209,221

Operating lease liabilities

53,889

53,487

Other liabilities

519,363

510,443

Payable under securities lending

48,883

28,723

Separate account liabilities

2,468,328

2,485,745

Total liabilities

12,580,084

12,036,040

Stockholders' equity:

Common stock

394

412

Paid-in capital

-

-

Retained earnings

1,629,114

1,593,281

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

90,938

58,798

Total stockholders' equity

1,720,446

1,652,491

Total liabilities and stockholders' equity

$

14,300,530

$

13,688,531

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

Three months ended September 30,

2020

2019

(In thousands, except per-share amounts)

Revenues:

Direct premiums

$

736,606

$

692,258

Ceded premiums

(393,716

)

(388,982

)

Net premiums

342,890

303,276

Commissions and fees

185,302

179,719

Net investment income

22,953

22,675

Realized investment gains (losses)

642

285

Other, net

16,674

14,698

Total revenues

568,461

520,653

Benefits and expenses:

Benefits and claims

160,166

128,684

Amortization of deferred policy acquisition costs

47,491

63,883

Sales commissions

91,950

89,061

Insurance expenses

46,109

44,854

Insurance commissions

9,694

6,980

Interest expense

7,221

7,209

Other operating expenses

59,347

54,843

Total benefits and expenses

421,978

395,514

Income before income taxes

146,483

125,139

Income taxes

34,382

28,916

Net income

$

112,101

$

96,223

Earnings per share:

Basic earnings per share

$

2.82

$

2.28

Diluted earnings per share

$

2.81

$

2.28

Weighted-average shares used in computing earnings per share:

Basic

39,588

41,964

Diluted

39,710

42,100

PRIMERICA, INC. AND SUBSIDIARIES

Consolidated Adjusted Operating Results Reconciliation

(Unaudited – in thousands, except per share amounts)

Three months ended September 30,

2020

2019

% Change

Total revenues

$

568,461

$

520,653

9

%

Less: Realized investment gains (losses)

642

285

Less: 10% deposit asset MTM included in NII

1,165

534

Adjusted operating revenues

$

566,654

$

519,834

9

%

Income before income taxes

$

146,483

$

125,139

17

%

Less: Realized investment gains (losses)

642

285

Less: 10% deposit asset MTM included in NII

1,165

534

Adjusted operating income before income taxes

$

144,676

$

124,320

16

%

Net income

$

112,101

$

96,223

17

%

Less: Realized investment gains (losses)

642

285

Less: 10% deposit asset MTM included in NII

1,165

534

Less: Tax impact of preceding items

(424

)

(189

)

Adjusted net operating income

$

110,718

$

95,593

16

%

Diluted earnings per share (1)

$

2.81

$

2.28

23

%

Less: Net after-tax impact of operating adjustments

0.03

0.02

Diluted adjusted operating earnings per share (1)

$

2.78

$

2.26

23

%

__________________________

(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 September 30,

2020

2019

% Change

Direct premiums

$

730,273

$

685,539

7

%

Less: Premiums ceded to IPO coinsurers

254,938

267,856

Adjusted direct premiums

$

475,335

$

417,683

14

%

Ceded premiums

$

(392,004

)

$

(387,120

)

Less: Premiums ceded to IPO coinsurers

(254,938

)

(267,856

)

Other ceded premiums

$

(137,066

)

$

(119,264

)

Net premiums

$

338,269

$

298,419

13

%

CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT

Adjusted Operating Results Reconciliation

(Unaudited – in thousands)

Three months ended September 30,

2020

2019

% Change

Total revenues

$

34,325

$

32,973

4

%

Less: Realized investment gains (losses)

642

285

Less: 10% deposit asset MTM included in NII

1,165

534

Adjusted operating revenues

$

32,518

$

32,154

1

%

Loss before income taxes

$

(10,204

)

$

(7,416

)

38

%

Less: Realized investment gains (losses)

642

285

Less: 10% deposit asset MTM included in NII

1,165

534

Adjusted operating loss before income taxes

$

(12,011

)

$

(8,235

)

46

%

__________________________

PRIMERICA, INC. AND SUBSIDIARIES

Adjusted Stockholders' Equity Reconciliation

(Unaudited – in thousands)

September 30, 2020

December 31, 2019

% Change

Stockholders' equity

$

1,720,446

$

1,652,491

4

%

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

105,758

64,563

Adjusted stockholders' equity

$

1,614,688

$

1,587,928

2

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005458/en/

Contacts

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

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