8% increase in life insurance licensed
representatives to 124,436
4% growth in life insurance policies
issued
7% increase in Investment and Savings
Products (ISP) sales
19% growth in both net earnings per diluted
share (EPS) and adjusted operating EPS to $1.46
20.9% net income return on stockholders’
equity (ROE) and 21.7% adjusted net operating income return on
adjusted stockholders’ equity (ROAE)
Primerica, Inc. (NYSE: PRI) today announced financial results
for the quarter ended September 30, 2017. In the third quarter,
both total revenues and adjusted operating revenues increased 11%
year-over-year to $427.3 million. Net income and adjusted net
operating income both grew 15% to $66.6 million compared with the
prior year period. During the quarter, earnings growth and ongoing
share repurchases drove both EPS and adjusted operating EPS to
$1.46, increasing 19% compared to the third quarter a year ago. ROE
expanded to 20.9% and adjusted operating ROAE expanded to 21.7% in
the period.
Glenn Williams, Chief Executive Officer, said, “In the third
quarter we continued to build on our strong foundation and overall
business momentum to deliver solid results. The outstanding
performance of our sales force leadership produced an 8% increase
in the size of our life insurance sales force along with 4% growth
in life insurance policies issued and 7% increase in Investment and
Savings (ISP) product sales. Income before income taxes grew 13%
with Term Life and ISP segments’ income before income taxes
increasing 14% and 9%, respectively, year-over-year. Solid earnings
and ongoing share repurchases contributed to a 19% increase in EPS
year-over-year and 20.9% ROE in the third quarter. We are pleased
with these results and continue to be well positioned to deliver
meaningful value to our stakeholders in the future.”
Third Quarter Distribution &
Segment Results
Distribution Results
Q3 2017
Q3 2016 % Change Q2 2017
% Change Life Licensed Sales Force (1) 124,436 115,345 8 %
121,471 2 % Recruits 90,210 73,706 22 % 78,273 15 % New
Life-Licensed Representatives 12,783 11,739 9 % 12,947 (1 )% Life
Insurance Policies Issued 78,056 75,374 4 % 84,033 (7 )%
Life Productivity (2)
0.21 0.22 * 0.23 *
ISP Product Sales ($ billions)
$
1.43
$ 1.34 7 % $ 1.57 (9 )%
Average Client Asset Values ($
billions)
$
57.66
$ 50.68 14 % $ 55.78 3 %
(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 Q3 2017 Q3 2016 %
Change Q2 2017 % Change ($ in thousands)
Adjusted Operating Revenues: (1) Term Life Insurance
$ 256,240 $ 222,598 15 % $ 238,901 7 % Investment and Savings
Products 140,058 130,080 8 % 143,774 (3 )% Corporate and Other
Distributed Products 30,980 30,983 *
30,917 * Total adjusted operating revenues
(1) $
427,278 $ 383,661 11 % $ 413,592 3 %
Adjusted Operating Income (loss) before
income taxes:(1)
Term Life Insurance $ 66,543 $ 58,137 14 % $ 61,854 8 % Investment
and Savings Products 39,050 35,760 9 % 39,684 (2 )% Corporate and
Other Distributed Products (5,415 ) (5,425 ) *
(5,253 ) 3 %
Total adjusted operating income before
income taxes (1)
$ 100,178 $ 88,472 13 % $ 96,285 4 %
* Less than 1%.
(1) See the Non-GAAP Financial Measures
section and the segment Adjusted Operating Results Reconciliations
at the end of this release for additional information.
Life Insurance Licensed Sales Force. Strong recruiting
and licensing trends in recent quarters resulted in 8%
year-over-year growth in the life insurance licensed sales force to
124,436 representatives at the end of the third quarter. New
recruits increased 22% versus the prior year quarter, including
approximately 17,000 recruits from hurricane-affected areas whose
Independent Business Application fees were waived during September.
A portion of these recruits would have likely entered the business
without the waived fee. It is possible the licensing rate of those
who joined through this program may be slightly lower than overall
company levels. Strong recruiting levels following our June
biennial convention drove 9% growth in new life insurance licenses
year-over-year. On a sequential quarter basis, the size of the life
insurance sales force increased 2% versus the second quarter.
Term Life Insurance. In the third quarter of 2017, Term
Life insurance policies issued increased 4% year-over-year driven
by growth in the life insurance licensed sales force. Results were
somewhat impacted by lower production in hurricane-affected areas.
Term Life productivity in the third quarter was 0.21 versus 0.22
policies per life insurance licensed representative per month in
the prior year period.
Term Life revenues increased to $256.2 million driven by a 15%
increase in net premiums compared with the third quarter a year
ago. Income before income taxes in the segment increased 14% to
$66.5 million year-over-year. During the quarter, normal claims
volatility positively impacted benefits and claims by approximately
$2 million. Persistency performance continued to improve relative
to earlier in the year, although it was slightly lower than the
third quarter a year ago. Insurance expenses increased $5.0 million
from the prior year period primarily reflecting about $3.0 million
of higher growth and employee-related costs and $1.5 million of
incremental technology spending. Costs to enhance the sales force’s
mobile technology capabilities were largely offset by growth in
other net revenues of $1.1 million.
Investment and Savings Products. In the third quarter,
ISP revenues increased 8% to $140.1 million and income before
income taxes grew 9% to $39.1 million compared with the year ago
period. Product sales grew 7% year-over-year driven by a 10%
increase in retail mutual fund sales as well as a 132% increase in
managed account sales following the launch of the new Lifetime
Investments Platform in June 2017. Managed accounts generate
asset-based revenues and will provide for earnings in future
periods. Annuities sales continued to be pressured in the quarter,
declining 13% versus the year ago period. Net flows were positive
$174 million and average client asset values increased 14% to $57.7
billion at the end of the third quarter. Account-based revenue grew
16% year-over-year largely related to a change made in the
account-based fee structure in the fourth quarter of 2016 as well
as a higher number of accounts subject to the fee. Canadian
segregated funds DAC amortization was $1.1 million higher than a
year ago, mostly reflecting the deceleration of DAC amortization in
the third quarter of 2016.
Corporate and Other Distributed Products
(C&O). C&O results were consistent
year-over-year with adjusted operating revenues of $31.0 million
and adjusted operating losses before income taxes of $5.4 million
in the third quarter of 2017.
TaxesThe effective income tax rate for the third quarter
of 2017 was 33.5%, down from 34.4% in the prior year period,
primarily reflecting excess tax benefits of approximately $0.9
million for the difference between the stock price of sales force
equity awards at the time of grant and when the sales restrictions
lapse. Prior to the adoption of Accounting Standard Update 2016-09
effective January 1, 2017, any tax benefits or deficiencies were
recorded in additional paid-in-capital.
CapitalPrimerica repurchased $57.7 million or 741,087
shares of its common stock in the third quarter of 2017 and has
repurchased $150.0 million or 1.9 million shares year-to-date
through October. Primerica Life Insurance Company’s (PLIC)
statutory risk-based capital (RBC) ratio was estimated to be
approximately 440% as of September 30, 2017.
Non-GAAP Financial MeasuresWe 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, net adjusted 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) 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,
net adjusted operating income, and diluted adjusted operating
earnings per share exclude the impact of realized investment gains
and losses, including other-than-temporary impairments (OTTI), for
all periods presented. We exclude realized investment gains and
losses in measuring adjusted operating revenues to eliminate
period-over-period fluctuations that may obscure comparisons of
operating results due to items such as the timing of recognizing
gains and losses and other factors prior to an invested asset’s
maturity that are not directly associated with the Company’s
insurance operations. Adjusted stockholders’ equity excludes the
impact of net unrealized investment gains and losses recorded in
other comprehensive income (loss) for all periods presented. We
exclude unrealized investment gains and losses in measuring
adjusted stockholders’ equity as unrealized gains and losses from
the Company’s invested assets 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 invested asset 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
financial 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
results as reported under GAAP. Reconciliations of GAAP to non-GAAP
financial measures are attached to this release.
Earnings Webcast InformationPrimerica will hold a webcast
Wednesday, November 8, 2017 at 10:00 am EDT, to discuss third
quarter results. This release and a detailed financial supplement
will be posted on Primerica’s website. Investors are encouraged to
review these materials. 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.
Forward-Looking StatementsExcept 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 our sales
representatives; changes to the independent contractor status of
our sales representatives; our or our 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 that causes a large number of premature
deaths of our insureds; changes in federal and state legislation,
including other legislation or regulation that affects our
insurance and investment product businesses, such as the DOL’s rule
defining who is a “fiduciary” of a qualified retirement plan as a
result of giving investment advice; our failure to meet RBC
standards or other minimum capital and surplus requirements; a
downgrade or potential downgrade in our insurance subsidiaries’
financial strength ratings or our senior debt ratings; the effects
of credit deterioration and interest rate fluctuations on our
invested asset portfolio; incorrectly valuing our investments;
inadequate or unaffordable reinsurance or the failure of our
reinsurers to perform their obligations; the failure of, or legal
challenges to, the support tools we provide to our sales force;
heightened standards of conduct or more stringent licensing
requirements for our sales representatives; inadequate policies and
procedures regarding suitability review of client transactions; 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; 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; legal and regulatory
investigations and actions concerning us or our sales
representatives; the loss of key personnel; the failure of our
information technology systems, breach of our information security
or failure of our business continuity plan; and fluctuations in
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 distributor of financial products to
middle income households in North America. Primerica
representatives educate their Main Street 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. In addition,
Primerica provides an entrepreneurial full or part-time business
opportunity for individuals seeking to earn income by distributing
the company’s financial products. We insured approximately 5
million lives and have over 2 million client investment accounts at
December 31, 2016. Primerica stock is included in the S&P
MidCap 400 and the Russell 2000 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, 2017 December 31, 2016 (In thousands)
Assets Investments: Fixed-maturity securities
available-for-sale, at fair value $ 1,888,506 $ 1,792,438
Fixed-maturity securities-held-to-maturity, at amortized cost
688,840 503,230 Equity securities available-for-sale, at fair value
45,171 44,894 Trading securities, at fair value 11,513 7,383 Policy
loans 34,905 30,916 Total investments 2,668,935
2,378,861 Cash and cash equivalents 177,418 211,976 Accrued
investment income 17,847 16,520 Due from reinsurers 4,238,978
4,193,562 Deferred policy acquisition costs, net 1,900,122
1,713,065 Agent balances, due premiums and other receivables
240,731 210,448 Intangible assets, net 52,364 54,915 Income taxes
43,601 37,369 Other assets 379,883 334,274 Separate account assets
2,486,960 2,287,953 Total assets $ 12,206,839 $
11,438,943
Liabilities and Stockholders' Equity
Liabilities: Future policy benefits $ 5,894,882 $ 5,673,890
Unearned premiums 476 527 Policy claims and other benefits payable
284,451 268,136 Other policyholders' funds 371,508 363,038 Notes
payable 373,196 372,919 Surplus note 688,055 502,491 Income taxes
255,877 225,006 Other liabilities 463,926 449,963 Payable under
securities lending 106,978 73,646 Separate account liabilities
2,486,960 2,287,953 Total liabilities 10,926,309
10,217,569 Stockholders' equity: Common stock 444 457
Paid-in capital - 52,468 Retained earnings 1,228,546 1,138,851
Accumulated other comprehensive income, net of income tax
51,540 29,598 Total stockholders' equity 1,280,530
1,221,374 Total liabilities and stockholders' equity $
12,206,839 $ 11,438,943
PRIMERICA, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Income (Unaudited)
Three months ended September 30, 2017
2016 (In thousands, except per-share amounts)
Revenues: Direct premiums $ 646,079 $ 616,587 Ceded premiums
(397,641 ) (399,676 ) Net premiums 248,438 216,911
Commissions and fees 144,627 134,282 Net investment income 19,922
19,399 Realized investment gains (losses), including OTTI 22 (35 )
Other, net 14,291 13,069 Total revenues
427,300 383,626
Benefits and
expenses: Benefits and claims 105,864 93,022 Amortization of
deferred policy acquisition costs 53,384 45,428 Sales commissions
72,022 66,700 Insurance expenses 37,637 32,837 Insurance
commissions 5,593 4,709 Interest expense 7,073 7,184 Other
operating expenses 45,527 45,309 Total
benefits and expenses 327,100 295,189
Income before income taxes 100,200 88,437 Income taxes
33,565 30,400 Net income $ 66,635 $
58,037
Earnings per share: Basic earnings per
share $ 1.46 $ 1.22 Diluted earnings per share $ 1.46
$ 1.22
Shares used in computing earnings
per share: Basic 45,318 47,008
Diluted 45,408 47,051
PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Adjusted Operating Results Reconciliation
(Unaudited – $ in thousands, except per
share amounts)
Three months ended September
30, 2017 2016 % Change Total revenues $
427,300 $ 383,626 11 % Less: Realized investment gains (losses),
including OTTI 22 (35 ) Adjusted operating
revenues $ 427,278 $ 383,661 11 % Income
before income taxes $ 100,200 $ 88,437 13 % Less: Realized
investment gains (losses), including OTTI 22
(35 ) Adjusted operating income before income taxes $ 100,178
$ 88,472 13 % Net income $ 66,635 $ 58,037 15
% Less: Realized investment gains (losses), including OTTI 22 (35 )
Less: Tax impact of reconciling items (8 ) 12
Net adjusted operating income $ 66,621 $ 58,060 15 %
Diluted earnings per share (1) $ 1.46 $ 1.22 19 % Less: Net
after-tax impact of operating adjustments
-
-
Diluted adjusted operating earnings per share (1) $ 1.46
$ 1.22 19 %
(1) Percentage change in earnings per
share is calculated prior to rounding per share amounts.
TERM LIFE INSURANCE
SEGMENTAdjusted Premiums Reconciliation(Unaudited –
in thousands)
Three months ended September 30,
2017 2016 Direct premiums $ 638,830 $
608,396 Less: Premiums ceded to IPO coinsurers 304,580
319,517 Adjusted direct premiums $ 334,250
$ 288,879 Ceded premiums $ (395,772 ) $
(397,214 ) Less: Premiums ceded to IPO coinsurers (304,580 )
(319,517 ) Other ceded premiums $ (91,192 ) $ (77,697 )
Net premiums $ 243,058 $ 211,182
CORPORATE AND OTHER DISTRIBUTED
PRODUCTS SEGMENTAdjusted Operating Results
Reconciliation(Unaudited – in thousands)
Three months ended September 30, 2017
2016 Total revenues $ 31,002 $ 30,948 Less: Realized
investment gains (losses), including OTTI 22
(35 ) Adjusted operating revenues $ 30,980 $ 30,983
Loss before income taxes $ (5,393 ) $ (5,460 ) Less:
Realized investment gains (losses), including OTTI 22
(35 ) Adjusted operating loss before income taxes $ (5,415 )
$ (5,425 )
PRIMERICA, INC. AND
SUBSIDIARIESAdjusted Stockholders' Equity
Reconciliation(Unaudited – in thousands)
September 30, 2017 December 31, 2016
Stockholders' equity $ 1,280,530 $ 1,221,374
Less: Unrealized net investment gains
recorded in stockholders' equity, net of income tax
47,048 42,791 Adjusted stockholders'
equity $ 1,233,482 $ 1,178,583
View source
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Primerica, Inc.Investor Contact:Kathryn Kieser,
470-564-7757investorrelations@primerica.comorMedia
Contact:Keith Hancock, 470-564-6328Keith.Hancock@Primerica.com
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