DULUTH, Ga.--(BUSINESS WIRE)--Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended June 30, 2019. Total revenues of $504.9 million increased 8% compared to the second quarter of 2018. Net income of $97.4 million increased 12%, while earnings per diluted share of $2.28 increased 17% compared to the same quarter last year. ROE increased to 25.1% during the current quarter from 24.5% during the second quarter of 2018.
Adjusted operating revenues were $501.4 million, increasing 7% compared to the second quarter of 2018. Adjusted net operating income of $94.8 million increased 10%, while adjusted operating earnings per diluted share of $2.21 increased 14% compared to the same quarter last year. ROAE increased to 25.1% during the current quarter from 24.5% during the second quarter of 2018.
Key factors contributing to the quarter’s financial results were 11% growth in Term Life adjusted direct premiums year-over-year and the financial benefit of record sales and client asset values in the Investment and Savings Products (ISP) segment. Insurance and other operating expenses grew by a modest 2%, while other expenses such as commissions, benefits and claims and DAC amortization grew in line with their related revenues. The company repurchased $57.1 million of common stock during the quarter and is on track to achieve its $225 million repurchase target for the year.
“Our quarterly financial results reflect the strength of our model with net income growth of 12% and earnings per share growth of 17%,” said Glenn Williams, Chief Executive Officer. “Our biennial convention in June was a great success. It energized our sales force, accelerated momentum and renewed our commitment to serve middle-income families as only Primerica can.”
Second Quarter Distribution & Segment Results
Distribution Results |
|||||||||||||
|
|
Q2 2019 |
|
|
Q2 2018 |
|
|
% Change |
|
|
|||
Life Licensed Sales Force (1) |
|
|
129,550 |
|
|
|
130,156 |
|
|
* |
|
|
|
Recruits |
|
|
86,173 |
|
|
|
76,520 |
|
|
|
13 |
% |
|
New Life-Licensed Representatives |
|
|
10,919 |
|
|
|
13,544 |
|
|
|
(19 |
)% |
|
Life Insurance Policies Issued |
|
|
78,664 |
|
|
|
83,754 |
|
|
|
(6 |
)% |
|
Life Productivity (2) |
|
|
0.20 |
|
|
|
0.22 |
|
|
* |
|
|
|
ISP Product Sales ($ billions) |
|
$ |
1.94 |
|
|
$ |
1.76 |
|
|
|
10 |
% |
|
Average Client Asset Values ($ billions) |
|
$ |
64.43 |
|
|
$ |
61.30 |
|
|
|
5 |
% |
|
____________________
(1) End of period
|
|||||||||||||
Segment Results |
|||||||||||||
|
|
Q2 2019 |
|
|
Q2 2018 |
|
|
% Change |
|
|
|||
|
|
($ in thousands) |
|||||||||||
Adjusted Operating Revenues: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Life Insurance |
|
$ |
296,868 |
|
|
$ |
272,978 |
|
|
|
9 |
% |
|
Investment and Savings Products |
|
|
173,086 |
|
|
|
162,841 |
|
|
|
6 |
% |
|
Corporate and Other Distributed Products |
|
|
31,434 |
|
|
|
31,058 |
|
|
|
1 |
% |
|
Total adjusted operating revenues (1) |
|
$ |
501,388 |
|
|
$ |
466,877 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (loss) before income taxes:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Life Insurance |
|
$ |
83,997 |
|
|
$ |
75,828 |
|
|
|
11 |
% |
|
Investment and Savings Products |
|
|
47,343 |
|
|
|
43,227 |
|
|
|
10 |
% |
|
Corporate and Other Distributed Products |
|
|
(7,394 |
) |
|
|
(6,228 |
) |
|
|
19 |
% |
|
Total adjusted operating income before income taxes (1) |
|
$ |
123,946 |
|
|
$ |
112,827 |
|
|
|
10 |
% |
|
____________________
|
|||||||||||||
Life Insurance Licensed Sales Force
During the second current quarter, 86,173 individuals were recruited to Primerica, a year-over-year increase of 13%. Much of this increase came during the second half of June, driven by excitement generated at the biennial convention and incentives announced to drive recruiting and productivity. Lower recruiting levels earlier in the year, and the resulting impact on new life-licensed representatives in the period, led to a life insurance licensed sales force at quarter-end of 129,550, largely unchanged from the prior year.
Term Life Insurance
Operating revenues of $296.9 million during the second quarter increased 9% compared to the second quarter of 2018 driven by 11% growth in adjusted direct premiums. Persistency during the quarter was consistent with the prior year and benefits and claims experience was in line with historical trends. Income before income taxes was $84.0 million, an increase of 11% year-over-year.
During the second quarter of 2019, new life insurance policies issued were 78,664, down 6% compared to the prior year period. Productivity for the quarter was 0.20 policies per life insurance licensed representative per month, which was within the Company’s historical range of 0.18 to 0.22, but below the prior year level of 0.22.
Investment and Savings Products
Operating revenues of $173.1 million during the second quarter increased 6% compared to the second quarter of 2018. The increase in revenues is due in part to a 10% increase in sales volume, reflecting strong demand for variable annuities and an increase in demand for mutual funds. Higher average client asset values also contributed to the increase in revenues as average assets increased 5% compared to the second quarter of 2019. Sales and asset-based commission expenses were generally consistent with the associated revenues. These strong drivers, combined with the Company’s efforts to reduce costs and realize operational efficiencies, led to a 10% increase in income before income taxes.
As of June 30, 2019, ending client asset values were $66 billion and sales for the quarter were $1.9 billion, both new highwater marks for the Company. Net new client inflows were $305 million for the quarter.
Net Investment Income
Net investment income during the quarter benefited by approximately $2.0 million from an increase in the size of the invested assets portfolio compared to the same quarter in 2018, as well as higher book earnings on the deposit asset underlying the 10% coinsurance agreement from extending the portfolio duration. These were partly offset by lower reinvestment yields on purchases made in the general portfolio.
Taxes
In the second quarter of 2019, the GAAP effective income tax rate was 23.5% compared to 23.8% during the second quarter of 2018.
Capital
During the second quarter of 2019, the Company repurchased 463,916 shares of common stock with a value of $57.1 million, bringing the year-to-date total to $110.7 million. The Board of Directors has approved a dividend of $0.34 per share, payable on September 13, 2019, to stockholders of record on August 21, 2019.
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 approximately 440% as of June 30, 2019.
Non-GAAP Financial Measures
We report financial results in accordance with U.S. generally accepted accounting principles (GAAP). We also present 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 (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 other-than-temporary impairments (OTTI), for all periods presented. We exclude realized investment gains (losses) 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.
The 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, August 8, 2019 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, 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 affect our distribution model; changes to the independent contractor status of sales representatives; our or sales representatives’ violation of or non-compliance with laws and regulations or the failure to protect the confidentiality of client information; differences between our actual experience and our expectations regarding mortality, persistency, expenses and interests rates 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 and investment product 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; fluctuations in the performance of client assets under management; legal 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 sales force; the failure of our information technology systems, breach of our information security or failure of our business continuity plan; the effects of credit deterioration and interest rate fluctuations on our invested asset portfolio; incorrectly valuing our investments; 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; 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, provides financial services to middle-income households in North America. Primerica licensed representatives educate their clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, mutual funds, annuities and other financial products. Primerica insured approximately 5 million lives and had over 2 million client investment accounts at December 31, 2018. Primerica, through its insurance company subsidiaries, was the #2 issuer of Term Life insurance coverage in North America in 2018. 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) |
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
|
|
(In thousands) |
|
|||||
Assets |
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
Fixed-maturity securities available-for-sale, at fair value |
|
$ |
2,216,260 |
|
|
$ |
2,069,635 |
|
Fixed-maturity security held-to-maturity, at amortized cost |
|
|
1,087,790 |
|
|
|
970,390 |
|
Short-term investments available-for-sale, at fair value |
|
|
- |
|
|
|
8,171 |
|
Equity securities, at fair value |
|
|
38,897 |
|
|
|
37,679 |
|
Trading securities, at fair value |
|
|
23,375 |
|
|
|
13,610 |
|
Policy loans |
|
|
33,527 |
|
|
|
31,501 |
|
Total investments |
|
|
3,399,849 |
|
|
|
3,130,986 |
|
Cash and cash equivalents |
|
|
244,975 |
|
|
|
262,138 |
|
Accrued investment income |
|
|
17,434 |
|
|
|
17,057 |
|
Reinsurance recoverables |
|
|
4,185,850 |
|
|
|
4,141,569 |
|
Deferred policy acquisition costs, net |
|
|
2,238,315 |
|
|
|
2,133,920 |
|
Agent balances, due premiums and other receivables 1 |
|
|
238,367 |
|
|
|
215,139 |
|
Intangible assets, net |
|
|
46,409 |
|
|
|
48,111 |
|
Income taxes |
|
|
65,777 |
|
|
|
59,336 |
|
Operating lease right-of-use assets |
|
|
49,381 |
|
|
|
- |
|
Other assets 1 |
|
|
394,058 |
|
|
|
391,291 |
|
Separate account assets |
|
|
2,437,291 |
|
|
|
2,195,501 |
|
Total assets |
|
$ |
13,317,706 |
|
|
$ |
12,595,048 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Future policy benefits |
|
$ |
6,314,403 |
|
|
$ |
6,168,157 |
|
Unearned and advance premiums |
|
|
17,111 |
|
|
|
15,587 |
|
Policy claims and other benefits payable |
|
|
322,417 |
|
|
|
313,862 |
|
Other policyholders' funds |
|
|
377,737 |
|
|
|
370,644 |
|
Notes payable |
|
|
373,848 |
|
|
|
373,661 |
|
Surplus note |
|
|
1,087,117 |
|
|
|
969,685 |
|
Income taxes |
|
|
206,301 |
|
|
|
187,104 |
|
Operating lease liabilities |
|
|
55,662 |
|
|
|
- |
|
Other liabilities |
|
|
496,027 |
|
|
|
486,772 |
|
Payable under securities lending |
|
|
43,867 |
|
|
|
52,562 |
|
Separate account liabilities |
|
|
2,437,291 |
|
|
|
2,195,501 |
|
Total liabilities |
|
|
11,731,781 |
|
|
|
11,133,535 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock |
|
|
420 |
|
|
|
427 |
|
Paid-in capital |
|
|
- |
|
|
|
- |
|
Retained earnings |
|
|
1,537,535 |
|
|
|
1,489,520 |
|
Accumulated other comprehensive income (loss), net of income tax |
|
|
47,970 |
|
|
|
(28,434 |
) |
Total stockholders' equity |
|
|
1,585,925 |
|
|
|
1,461,513 |
|
Total liabilities and stockholders' equity |
|
$ |
13,317,706 |
|
|
$ |
12,595,048 |
|
____________________
|
||||||||
PRIMERICA, INC. AND SUBSIDIARIES |
|
|||||||
Condensed Consolidated Statements of Income |
|
|||||||
(Unaudited) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
|
(In thousands, except per-share amounts) |
|
|||||
Revenues: |
|
|
|
|
|
|
|
|
Direct premiums |
|
$ |
687,262 |
|
|
$ |
667,191 |
|
Ceded premiums |
|
|
(400,588 |
) |
|
|
(403,449 |
) |
Net premiums |
|
|
286,674 |
|
|
|
263,742 |
|
Commissions and fees |
|
|
178,468 |
|
|
|
167,940 |
|
Net investment income |
|
|
24,868 |
|
|
|
20,030 |
|
Realized investment gains (losses), including OTTI |
|
|
1,067 |
|
|
|
1,313 |
|
Other, net |
|
|
13,825 |
|
|
|
14,790 |
|
Total revenues |
|
|
504,902 |
|
|
|
467,815 |
|
|
|
|
|
|
|
|
|
|
Benefits and expenses: |
|
|
|
|
|
|
|
|
Benefits and claims |
|
|
115,068 |
|
|
|
105,069 |
|
Amortization of deferred policy acquisition costs |
|
|
58,762 |
|
|
|
53,847 |
|
Sales commissions |
|
|
90,099 |
|
|
|
82,954 |
|
Insurance expenses |
|
|
44,570 |
|
|
|
43,451 |
|
Insurance commissions |
|
|
5,829 |
|
|
|
6,417 |
|
Interest expense |
|
|
7,201 |
|
|
|
7,229 |
|
Other operating expenses |
|
|
55,913 |
|
|
|
55,083 |
|
Total benefits and expenses |
|
|
377,442 |
|
|
|
354,050 |
|
Income before income taxes |
|
|
127,460 |
|
|
|
113,765 |
|
Income taxes |
|
|
30,014 |
|
|
|
27,065 |
|
Net income |
|
$ |
97,446 |
|
|
$ |
86,700 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
2.28 |
|
|
$ |
1.96 |
|
Diluted earnings per share |
|
$ |
2.28 |
|
|
$ |
1.95 |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
42,483 |
|
|
|
44,066 |
|
Diluted |
|
|
42,619 |
|
|
|
44,207 |
|
PRIMERICA, INC. AND SUBSIDIARIES |
|
|||||||||||
Consolidated Adjusted Operating Results Reconciliation |
|
|||||||||||
(Unaudited – in thousands, except per share amounts) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|
|
|
|
|||||
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
|||
Total revenues |
|
$ |
504,902 |
|
|
$ |
467,815 |
|
|
|
8 |
% |
Less: Realized investment gains (losses), including OTTI |
|
|
1,067 |
|
|
|
1,313 |
|
|
|
|
|
Less: 10% deposit asset MTM included in net investment income (NII) |
|
|
2,447 |
|
|
|
(375 |
) |
|
|
|
|
Adjusted operating revenues |
|
$ |
501,388 |
|
|
$ |
466,877 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
127,460 |
|
|
$ |
113,765 |
|
|
|
12 |
% |
Less: Realized investment gains (losses), including OTTI |
|
|
1,067 |
|
|
|
1,313 |
|
|
|
|
|
Less: 10% deposit asset MTM included in NII |
|
|
2,447 |
|
|
|
(375 |
) |
|
|
|
|
Adjusted operating income before income taxes |
|
$ |
123,946 |
|
|
$ |
112,827 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
97,446 |
|
|
$ |
86,700 |
|
|
|
12 |
% |
Less: Realized investment gains (losses), including OTTI |
|
|
1,067 |
|
|
|
1,313 |
|
|
|
|
|
Less: 10% deposit asset MTM included in NII |
|
|
2,447 |
|
|
|
(375 |
) |
|
|
|
|
Less: Tax impact of preceding items |
|
|
(828 |
) |
|
|
(223 |
) |
|
|
|
|
Adjusted net operating income |
|
|
94,759 |
|
|
|
85,985 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share (1) |
|
$ |
2.28 |
|
|
$ |
1.95 |
|
|
|
17 |
% |
Less: Net after-tax impact of operating adjustments |
|
|
0.07 |
|
|
|
0.02 |
|
|
|
|
|
Diluted adjusted operating earnings per share (1) |
|
$ |
2.21 |
|
|
$ |
1.93 |
|
|
|
14 |
% |
____________________
|
||||||||||||
TERM LIFE INSURANCE SEGMENT |
|
|||||||
Adjusted Premiums Reconciliation |
|
|||||||
(Unaudited – in thousands) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Direct premiums |
|
$ |
681,004 |
|
|
$ |
660,505 |
|
Less: Premiums ceded to IPO coinsurers |
|
|
272,596 |
|
|
|
290,956 |
|
Adjusted direct premiums |
|
$ |
408,408 |
|
|
$ |
369,549 |
|
|
|
|
|
|
|
|
|
|
Ceded premiums |
|
$ |
(398,927 |
) |
|
$ |
(401,686 |
) |
Less: Premiums ceded to IPO coinsurers |
|
|
(272,596 |
) |
|
|
(290,956 |
) |
Other ceded premiums |
|
$ |
(126,331 |
) |
|
$ |
(110,730 |
) |
|
|
|
|
|
|
|
|
|
Net premiums |
|
$ |
282,077 |
|
|
$ |
258,819 |
|
|
|
|
|
|
|
|
|
|
CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT |
|
|||||||
Adjusted Operating Results Reconciliation |
|
|||||||
(Unaudited – in thousands) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Total revenues |
|
$ |
34,948 |
|
|
$ |
31,996 |
|
Less: Realized investment gains (losses), including OTTI |
|
|
1,067 |
|
|
|
1,313 |
|
Less: 10% deposit asset MTM included in NII |
|
|
2,447 |
|
|
|
(375 |
) |
Adjusted operating revenues |
|
$ |
31,434 |
|
|
$ |
31,058 |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(3,880 |
) |
|
$ |
(5,290 |
) |
Less: Realized investment gains (losses), including OTTI |
|
|
1,067 |
|
|
|
1,313 |
|
Less: 10% deposit asset MTM included in NII |
|
|
2,447 |
|
|
|
(375 |
) |
Adjusted operating loss before income taxes |
|
$ |
(7,394 |
) |
|
$ |
(6,228 |
) |
PRIMERICA, INC. AND SUBSIDIARIES |
|
|||||||
Adjusted Stockholders' Equity Reconciliation |
|
|||||||
(Unaudited – in thousands) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Stockholders' equity |
|
$ |
1,585,925 |
|
|
$ |
1,461,513 |
|
Less: Unrealized net investment gains (losses) recorded in stockholders' equity, net of income tax |
|
|
56,227 |
|
|
|
(7,370 |
) |
Adjusted stockholders' equity |
|
$ |
1,529,698 |
|
|
$ |
1,468,883 |
|
