Primerica Reports First Quarter 2019 Results

Life insurance licensed representatives increase 2% to 129,821

Term Life net premiums grow 10%; adjusted direct premiums grow 11%

Investment and Savings Products ending client asset values grow 5%

Net earnings per diluted share (EPS) of $1.83, up 26%; return on
stockholders’ equity (ROE) of 21.2%

Adjusted operating EPS of $1.74, up 19%; adjusted net operating
income return on adjusted stockholders’ equity (ROAE) of 20.3%

Declared dividend of $0.34 per share, payable on June 14, 2019

DULUTH, Ga.–(BUSINESS WIRE)–Primerica, Inc. (NYSE: PRI) today announced financial results for the
quarter ended March 31, 2019. Total revenues of $495.0 million increased
8% compared to the first quarter of 2018. Net income of $79.2 million
increased 20%, while earnings per diluted share of $1.83 increased 26%
compared to the same quarter last year. ROE increased from 18.5% during
the first quarter of 2018 to 21.2% during the current quarter.

Adjusted operating revenues were $490.0 million, increasing 6% compared
to the first quarter of 2018. Adjusted net operating income of $75.3
million increased 14%, while adjusted operating earnings per diluted
share of $1.74 increased 19% compared to the same quarter last year.
ROAE increased from 19.0% during the first quarter of 2018 to 20.3%
during the current quarter.

Results for the quarter reflect the financial stability of the Company’s
Term Life segment, including an 11% increase in adjusted direct
premiums. Persistency during the first quarter of 2019 was generally
consistent with the prior year’s first quarter and claims experience was
in line with historical trends. Market volatility early in the year
resulted in a slower start in the Investment and Savings Products (ISP)
segment, however, client asset values rebounded in late January and
average client asset values declined less than half a percent compared
to the first quarter of 2018. Demand for investment products, most
notably variable annuities, was robust through the last two months of
the quarter and total product sales of $1.8 billion were only 1% below a
very strong first quarter in 2018. Insurance and other operating
expenses increased 5% due to business growth and incremental
investments. The pace of investments is expected to increase as 2019
unfolds. The Company repurchased nearly $54 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 and durability of
our model with revenue growth of 8% and earnings per share growth of
26%, despite weaker sales than in the prior year period,” said Glenn
Williams, Chief Executive Officer. “The need for financial security in
middle-income families has never been greater and few companies possess
the distribution breadth to assist this population demographic the way
we do here at Primerica.”

First Quarter Distribution & Segment Results

 
Distribution Results
  Q1 2019     Q1 2018     % Change
Life Licensed Sales Force (1) 129,821 127,182   2 %
Recruits 63,223 76,230 (17 )%
New Life-Licensed Representatives 10,065 11,730 (14 )%
Life Insurance Policies Issued 64,242 70,821 (9 )%
Life Productivity (2) 0.16 0.19 *
ISP Product Sales ($ billions) $ 1.76 $ 1.78 (1 )%
Average Client Asset Values ($ billions) $ 61.45 $ 61.70 *

_______________

(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
  Q1 2019   Q1 2018   % Change
($ in thousands)
Adjusted Operating Revenues: (1)  
Term Life Insurance $ 296,843 $ 270,309 10 %
Investment and Savings Products 162,671 162,041 *
Corporate and Other Distributed Products   30,479   30,517 *
Total adjusted operating revenues (1) $ 489,993 $ 462,867 6 %
 
Adjusted Operating Income (loss) before

income taxes:(1)

Term Life Insurance $ 70,339 $ 59,621 18 %
Investment and Savings Products 42,683 39,984 7 %
Corporate and Other Distributed Products   (15,648 )   (13,698 ) 14 %

Total adjusted operating income before income taxes (1)

$ 97,374 $ 85,907 13 %

_______________

(1)

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

*

Less than 1%

 

Life Insurance Licensed Sales Force and Distribution Trends

As of March 31, 2019, the life insurance licensed sales force totaled
129,821 and was down slightly from December 31, 2018. The decrease in
the size of the sales force reflected the impact of fewer individuals
recruited over the last few quarters, which in turn resulted in a lower
number of new life insurance licenses. After several years of
exceptional growth, momentum in recruiting, licensing and term life
sales began to slow in 2018 and this trend has continued into the first
quarter. During the first quarter of 2019, approximately 64,000 term
life insurance policies were issued, which represented a decline of 9%
compared to the first quarter of 2018. Productivity for the quarter was
0.16 policies per life insurance licensed representative per month,
below the Company’s historical range of 0.18 to 0.22. Management has
confidence in its ability to rebuild momentum and the biennial
convention in June provides an excellent opportunity for the leadership
team to reenergize the sales force.

The ISP segment posted solid quarterly results with net new client
inflows of $227 million, led by a 31% increase in sales of variable
annuities year-over-year and strong demand for managed accounts, which
ended the quarter up 19% to $3.3 billion in client account asset values.

Segment Results

Term Life Insurance

Operating revenues of $296.8 million during the first quarter increased
10% compared to the first quarter of 2018 due to an 11% growth in
adjusted direct premiums. Persistency was generally in line with the
first quarter of 2018, while claims, which are typically higher in the
first quarter, improved by approximately $2 million due to unfavorable
claims experience in the prior year’s first quarter. Income before
income taxes was $70.3 million, an increase of 18% year-over-year.

Investment and Savings Products

Operating revenues of $162.7 million were relatively unchanged compared
to the same quarter in 2018, while income before income taxes of $42.7
million increased 7% year-over-year. ISP product sales and average
client asset values were both negatively impacted by market volatility
early in the quarter, although trends improved as the quarter
progressed. The continued mix-shift toward annuity sales, which
generally have higher sales-based fees, led to a 4% growth in
sales-based revenues. Ending client asset values increased 5% compared
to the first quarter of 2018, however, average client asset values
declined slightly, resulting in a decrease in asset-based revenues.
Account-based revenues declined due to the closure of Freedom portfolio
accounts, which we stopped selling at the end of 2017, and the loss of
associated recordkeeping and custodial fees. Sales and asset-based
commission expenses were generally consistent with the associated
revenues. Canadian segregated fund DAC amortization was $3 million lower
than the prior year, primarily reflecting positive market performance in
the first quarter of 2019.

Net Investment Income

An increase in the size of the invested assets portfolio compared to the
same quarter in 2018 contributed approximately $1.6 million to
investment income. The effective book yield of assets that matured
during the current quarter was largely consistent with the yield on new
purchases, however, for the remainder of 2019, the Company expects the
book yield of maturities to be higher than current interest rates.

Taxes

In the first quarter of 2019, the GAAP effective income tax rate was
22.7% compared to 20.8% during the first quarter of 2018. The prior
period tax rate included a benefit of $1.8 million associated with the
Tax Cuts and Jobs Act of 2017, which reduced the tax effective rate by
2.1%.

Capital

During the first quarter of 2019, the Company repurchased 473,138 shares
of common stock with a value of $53.6 million. The Board of Directors
has approved a dividend of $0.34 per share, payable on June 14, 2019, to
stockholders of record on May 22, 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 460% as of March 31, 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. In 2018, we excluded from adjusted net operating
income and diluted adjusted operating earnings per share the one-time
transition impact of adjustments made to finalize the provisional
amounts recognized from the enactment of the Tax Cuts and Jobs Act of
2017 (tax reform) in order to present meaningful and useful
period-over-period comparisons that could be distorted by the
historically infrequent tax law change. 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 Wednesday, May 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 2017. 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)    
March 31, 2019 December 31, 2018
(In thousands)
Assets
Investments:
Fixed-maturity securities available-for-sale, at fair value $ 2,088,702 $ 2,069,635
Fixed-maturity security held-to-maturity, at amortized cost 1,036,110 970,390
Short-term investments available-for-sale, at fair value 8,230 8,171
Equity securities, at fair value 37,848 37,679
Trading securities, at fair value 26,556 13,610
Policy loans   30,783   31,501
Total investments 3,228,229 3,130,986
Cash and cash equivalents 279,626 262,138
Accrued investment income 18,450 17,057
Reinsurance recoverables 4,202,903 4,141,569
Deferred policy acquisition costs, net 2,181,741 2,133,920
Agent balances, due premiums and other receivables 1 226,061 215,139
Intangible assets, net 47,260 48,111
Income taxes 62,252 59,336
Operating lease right-of-use assets 50,506
Other assets 1 410,841 391,291
Separate account assets   2,368,760   2,195,501
Total assets $ 13,076,629 $ 12,595,048
 
Liabilities and Stockholders’ Equity
Liabilities:
Future policy benefits $ 6,240,864 $ 6,168,157
Unearned and advance premiums 17,341 15,587
Policy claims and other benefits payable 308,422 313,862
Other policyholders’ funds 377,360 370,644
Notes payable 373,755 373,661
Surplus note 1,035,421 969,685
Income taxes 206,180 187,104
Operating lease liabilities 56,712
Other liabilities 505,514 486,772
Payable under securities lending 64,914 52,562
Separate account liabilities   2,368,760   2,195,501
Total liabilities   11,555,243   11,133,535
 
Stockholders’ equity:
Common stock 424 427
Paid-in capital
Retained earnings 1,506,943 1,489,520

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

  14,019   (28,434 )
Total stockholders’ equity   1,521,386   1,461,513
Total liabilities and stockholders’ equity $ 13,076,629 $ 12,595,048
 
(1) Certain reclassifications have been made to the December 31, 2018
amounts to conform to current-period reporting classifications.
These reclassifications had no impact on net income or total
stockholders’ equity.
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
   
Three months ended March 31,
2019 2018
(In thousands, except per-share amounts)
Revenues:
Direct premiums $ 677,286 $ 656,087
Ceded premiums   (389,795 )   (394,249 )
Net premiums 287,491 261,838
Commissions and fees 167,315 166,827
Net investment income 24,111 19,017
Realized investment gains (losses), including OTTI 2,847 (1,656 )
Other, net   13,223   13,897
Total revenues   494,987   459,923
 
Benefits and expenses:
Benefits and claims 122,284 116,890
Amortization of deferred policy acquisition costs 64,628 60,165
Sales commissions 83,799 82,519
Insurance expenses 43,402 41,109
Insurance commissions 5,619 5,877
Interest expense 7,180 7,173
Other operating expenses   65,707   63,227
Total benefits and expenses   392,619   376,960
Income before income taxes 102,368 82,963
Income taxes   23,203   17,248
Net income $ 79,165 $ 65,715
 
Earnings per share:
Basic earnings per share $ 1.84 $ 1.46
Diluted earnings per share $ 1.83 $ 1.46
 

Weighted-average shares used in computing earnings per share:

 

Basic   42,824   44,740
Diluted   42,942   44,855
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Adjusted Operating Results Reconciliation
(Unaudited – in thousands, except per share amounts)
       
Three months ended March 31,
2019 2018 % Change
Total revenues $ 494,987 $ 459,923 8 %
Less: Realized investment gains (losses), including OTTI 2,847 (1,656 )

Less: 10% deposit asset MTM included in net investment income (NII)

  2,147   (1,288 )
Adjusted operating revenues $ 489,993 $ 462,867 6 %
 
Income before income taxes $ 102,368 $ 82,963 23 %
Less: Realized investment gains (losses), including OTTI 2,847 (1,656 )
Less: 10% deposit asset MTM included in NII   2,147   (1,288 )
Adjusted operating income before income taxes $ 97,374 $ 85,907 13 %
 
Net income $ 79,165 $ 65,715 20 %
Less: Realized investment gains (losses), including OTTI 2,847 (1,656 )
Less: 10% deposit asset MTM included in NII 2,147 (1,288 )
Less: Tax impact of preceding items (1,132 ) 675
Less: Transition impact of tax reform     1,768
Adjusted net operating income $ 75,303 $ 66,216 14 %
 
Diluted earnings per share (1) $ 1.83 $ 1.46 26 %
Less: Net after-tax impact of operating adjustments   0.09   (0.01 )
Diluted adjusted operating earnings per share (1) $ 1.74 $ 1.47 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,
2019 2018
Direct premiums $ 670,755 $ 649,366
Less: Premiums ceded to IPO coinsurers   276,150   294,301
Adjusted direct premiums $ 394,605 $ 355,065
 
Ceded premiums $ (388,100 ) $ (392,561 )
Less: Premiums ceded to IPO coinsurers   (276,150 )   (294,301 )
Other ceded premiums $ (111,950 ) $ (98,260 )
 
Net premiums $ 282,655 $ 256,805
 
 
CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT
Adjusted Operating Results Reconciliation
(Unaudited – in thousands)
 
Three months ended March 31,
2019 2018
Total revenues $ 35,473 $ 27,573
Less: Realized investment gains (losses), including OTTI 2,847 (1,656 )
Less: 10% deposit asset MTM included in NII   2,147   (1,288 )
Adjusted operating revenues $ 30,479 $ 30,517
 
Loss before income taxes $ (10,654 ) $ (16,642 )
Less: Realized investment gains (losses), including OTTI 2,847 (1,656 )
Less: 10% deposit asset MTM included in NII   2,147   (1,288 )
Adjusted operating loss before income taxes $ (15,648 ) $ (13,698 )
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders’ Equity Reconciliation
(Unaudited – in thousands)
 
March 31, 2019 December 31, 2018
Stockholders’ equity $ 1,521,387 $ 1,461,513

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

  28,916   (7,370 )
Adjusted stockholders’ equity $ 1,492,471 $ 1,468,883

Contacts

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

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

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