Primerica, Inc. PRI is well-poised for growth, riding on compelling product portfolio, strong market presence and solid capital position.
The Zacks Consensus Estimate for 2020 earnings has moved up 2 cents in the past 60 days, reflecting analysts’ optimism. Return on equity of 23.1% in the first quarter of 2020 was better than the industry average of 11.8%, reflecting the company’s efficiency in utilizing shareholders’ fund. The stock carries an impressive VGM Score of A. VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum.
According to a research report by Swiss Re Institute, protection gap (the amount of life insurance needed, but not in force) in the United States could be as large as $25 trillion, half of which is estimated to be in the middle market. Thus, being the second largest issuer of term life insurance coverage in North America, the company is well poised to serve this market. The company estimates insurance sales to increase 5% year over year in the second quarter of 2020.
However, given the impact of the pandemic, the company estimates second-quarter sales in its Investment and Savings Products business to be 15% lower than the year-ago quarter.
Given the stay-at-home orders, the company is leveraging technology to serve clients better and in turn ensure profitability.
The company’s earnings per share has increased at a five-year CAGR (2015-2019) of 24%. The Zacks Consensus Estimate for 2020 and 2021 indicates 5.6% and 13.5% year-over-year increase. The stock carries an impressive Growth Score of A. This Style Score analyzes the growth prospects for a company.
Though the company’s debt-to-capital ratio has been deteriorating over the years, its times interest earned, identifying how efficiently the company can service debt has been improving. Times interest earned of 17.3% is higher than the industry average of 14.6%. The company exited the first quarter with $2 million holding company liquidity, access to $200 million revolving credit facility and a Primerica Life Insurance Company’s (PLIC) RBC ratio around 430.
Given operational excellence and strong capital position, this Zacks Rank #3 (Hold) life insurer has increased its dividend nine times in eight years at a CAGR of 17.5%. Also, given solid capital and liquidity position, the company expects to buy back $250 million worth of shares in 2020.
The company has a stellar history of delivering positive earnings surprise in the last eight reported quarters.
Shares of Primerica have lost 14.4% year to date compared with the industry's decrease of 21.7%.
Stocks to Consider
Some better-ranked companies in the insurance industry are Brighthouse Financial, Inc. BHF, BRP Group, Inc. BRP and The Allstate Corporation ALL, each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brighthouse Financial provides annuity and life insurance products in the United States. The company surpassed estimates by 32.65% in the last reported quarter.
BRP Group operates as an insurance distribution company in the United States and internationally. The company surpassed estimates by 171.43% in the last reported quarter.
Allstate provides property and casualty, and other insurance products in the United States and Canada. The company surpassed estimates by 13.46% in the last reported quarter.
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