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Primerica Reports First Quarter 2024 Results
--Term Life net premiums grew 5%; adjusted direct premiums grew 6%
--Investment and Savings Products sales of $2.8 billion, up 20%
--Investment and Savings Products client asset values up 18%, ending the quarter at $103 billion
--Earnings per diluted share (EPS) of $3.93 increased 14%; return on stockholders' equity (ROE) was 25.9%
--Diluted adjusted operating EPS of $3.91 increased 10%; adjusted net operating income return on adjusted stockholders' equity (ROAE) was 24.1%
--Declared dividend of $0.75 per share, payable on June 12, 2024, and repurchased $109 million of common stock during the quarter
Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended March 31, 2024. Total revenues of $742.8 million increased 8% compared to the first quarter of 2023. Net income of $137.9 million increased 8%, while earnings per diluted share of $3.93 increased 14% compared to the prior year period.
Adjusted operating revenues of $741.7 million increased 7% compared to the first quarter of 2023. Adjusted net operating income of $137.0 million increased 4%, while adjusted operating earnings per diluted share of $3.91 increased 10% compared to the prior year period.
Financial results during the first quarter of 2024 reflected the stability of the Company's large in-force block of term life insurance, higher investment products sales, appreciation of client asset values, and the impact of higher interest rates on net investment income. Results were partly offset by weakness in the Senior Health business, which reported a loss of $14 million. Distribution results demonstrated sustained momentum in recruiting and the Company's continued success in licensing new representatives.
"Our financial results reflect the fundamental strength in our core Term Life and ISP segments and the predictability of our model, particularly during uncertain times," said Glenn Williams, Chief Executive Officer of Primerica, inc. "We started 2024 with solid momentum and we are well-positioned to grow the size of our sales force for the third consecutive year."
First Quarter Distribution & Segment Results
Distribution Results
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q1 2024 Q1 2023 % Change
--------------------------- -------------------- --------------------------- -------------------- ------------------------
142,855 136,430 5 %
Life-Licensed Sales Force
110,710 93,540 18 %
Recruits
12,949 11,118 16 %
New Life-Licensed Representatives
86,587 84,561 2 %
Life Insurance Policies Issued
0.20 0.21 *
Life Productivity (1)
$ 28.7 $ 28.1 2 %
Issued Term Life Face Amount ($ billions) (2)
$ 2.8 $ 2.3 20 %
ISP Product Sales ($ billions)
$ 99.5 $ 86.6 15 %
Average Client Asset Values ($ billions)
16,068 19,826 (19 )%
Senior Health Submitted Policies (3)
15,023 18,413 (18 )%
Senior Health Approved Policies (4)
_______________________
(1)
Life productivity equals policies issued divided by the average number of life insurance licensed representatives per month.
(2)
Includes face amount on issued term life policies, additional riders added to existing policies, and face increases under increasing benefit riders.
(3)
Represents the number of completed applications that, with respect to each such application, the applicant has authorized us to submit to the health insurance carrier.
(4)
Represents an estimate of submitted policies approved by health insurance carriers during the indicated period. Not all approved policies will go in force.
Segment Results
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q1 2024 Q1 2023 % Change
------------------------------ ------------------------------ ------------------------------
($ in thousands)
Adjusted Operating Revenues:
$ 440,412 $ 421,069 5 %
Term Life Insurance
243,716 210,202 16 %
Investment and Savings Products
6,880 18,710 (63 )%
Senior Health (1)
50,654 44,990 13 %
Corporate and Other Distributed Products (2)
-------------------- ---------- -------------------- ----------
$ 741,662 $ 694,971 7 %
Total adjusted operating revenues (2)
==================== ========== ==================== ==========
Adjusted Operating Income (Loss) before
income taxes:
$ 138,367 $ 130,541 6 %
Term Life Insurance
65,562 56,106 17 %
Investment and Savings Products
(14,153 ) (3,762 ) 276 %
Senior Health (1)
(11,708 ) (11,008 ) (6 )%
Corporate and Other Distributed Products (2)
-------------------- ---------- -------------------- ----------
_______________________
(1)
First quarter 2024 included a $7.8 million negative tail revenue adjustment reflecting an increase in plan switching.
Life Insurance Licensed Sales Force
The attractiveness of Primerica's business opportunity continues to generate a high degree of interest, creating momentum in both recruiting and licensing and fueling growth in the size of the sales force. During the first quarter, recruiting increased 18% compared to the same period in 2023 while new life licenses increased 16%. As of March 31, 2024, the Company had a total of 142,855 independent life-licensed representatives, a 5% increase year-over-year.
Term Life Insurance
Life insurance policies issued during the first quarter of 2024 increased 2% to 86,587, helping to drive $28.7 billion in term life face amount issued during the three months ended March 31, 2024. Productivity, as measured by the number of policies issued per life-licensed representative per month, was 0.20 policies compared to 0.21 policies in the first quarter of 2023.
Compared to the prior year period, first quarter revenues increased 5% to $440.4 million due principally to a 6% increase in adjusted direct premium. Pre-tax operating income of $138.4 million increased 6%. The benefits and claims ratio at 58.0% and the DAC amortization ratio at 12.2% were both stable year-over-year. The Term Life operating margin was 22.0%, in line with the prior year period
Investment and Savings Products
Total product sales of $2.8 billion during the first quarter increased 20% compared to the prior year period, driven by continued strong sales of mutual funds in both the U.S. and Canada as well as solid demand for variable annuities and managed accounts. On March 31, 2024, client asset values were $103 billion, up 18% year-over-year primarily due to strong equity market appreciation as well continued net client inflows of $274 million during the quarter.
First quarter revenues of $243.7 million increased 16% compared to the prior year period, while pre-tax operating income of $65.6 million increased 17% driven by a combination of strong sales and an increase in average client asset values. Sales-based commissions and fees revenues increased 23%, in line with a 24% increase in revenue generating product sales, while sales-based commission expenses increased 20%. Asset-based revenues increased 15%, in line with the growth in average client asset values. The change in asset-based commission expenses was consistent with asset-based revenues, excluding revenues on Canadian segregated funds. Expenses related to Canadian segregated funds are reflected in insurance commissions and amortization of DAC.
Senior Health
During the first quarter of 2024, a total of 15,023 policies were approved by carriers, representing 18% fewer policies than in the prior year period due to fewer tenured agents and the negative impact of an industry-wide service disruption in a third-party service provider that affected the ability of our agents to verify plan eligibility. The lifetime value of commissions per approved policy ("LTV") was $926, while contract acquisition costs per approved policy ("CAC") were $901 for a LTV/CAC ratio of 1.0.
First quarter revenues of $6.9 million included a $7.8 million negative tail revenue adjustment. The tail adjustment was largely driven by an increase in plan switching. Total contract acquisition costs declined 10% year-over-year, reflecting lower sales volume, while operating expenses remained unchanged. The operating loss was $14.2 million compared to a loss of $3.8 million in the prior year period. The Company did not contribute cash to the segment during the first quarter of 2024, nor does it expect to do so for the remainder of the year.
Corporate and Other Distributed Products
During the first quarter of 2024, the segment recorded an adjusted operating loss of $11.7 million compared to an adjusted operating loss of $11.0 million in the prior year period. Adjusted net investment income increased $6.6 million from the continued benefit of higher interest rates and growth in the size of the invested asset portfolio. Insurance and other operating expenses increased $7.4 million due to higher growth-related technology costs and employee-related compensation increase.
Capital
The Company repurchased 465,938 shares of common stock for $109 million during the first quarter of 2024 and the Board of Directors has approved a dividend of $0.75 per share, payable on June 12, 2024 to stockholders of record on May 21, 2024.
Primerica has a strong balance sheet, including invested assets and cash at the holding company of $281 million. Primerica Life Insurance Company's statutory risk-based capital (RBC) ratio was estimated to be approximately 430% as of March 31, 2024.
Subsequent Event
In April 2024, the Company executed agreements providing for the payment of certain claims filed by the Company under a Representation and Warranty insurance policy negotiated and purchased in connection with the acquisition of e-TeleQuote Insurance. The claims made by the Company involved breaches of certain representations and warranties relating to the pre-acquisition financial statements made by the sellers of e-TeleQuote in connection with the acquisition. The Company will recognize a gain in earnings during the three months ended June 30, 2024 of $50 million, which is equal to the aggregate proceeds to be received from the third-party insurers under the policy, reflecting the full coverage under the policy. The proceeds of this claim will be excluded from second quarter adjusted operating results to provide comparability to the prior year results.
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 investment gains (losses), including credit impairments, and fair value mark-to-market ("MTM") investment adjustments for all periods presented. We exclude 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. Adjusted stockholders' equity also excludes the difference in future policy benefits calculated using the current discount rate and future policy benefits calculated using the locked-in discount rate at contract issuance recognized in accumulated other comprehensive income. We exclude the impact from the difference in the discount rate in measuring adjusted stockholders' equity as such difference is caused by market movements in interest rates that are not permanent and may not align with the cash flows we will ultimately incur when policy benefits are settled.
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 Tuesday, May 7, 2024, at 10:00 a.m. Eastern, to discuss the quarter's results. To access the webcast, go to https://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. 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 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; litigation and regulatory investigations and actions concerning us or sales representatives; differences between our actual experience and our expectations regarding mortality, persistency, disability or insurance as reflected in the pricing for our insurance policies; 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 significant downgrade by a ratings organization; the failure of our reinsurers or reserve financing counterparties to perform their obligations; the failure of our investment products to remain competitive with other investment options or the loss of our relationship with one or more of the companies whose investment products we provide; heightened standards of conduct or more stringent licensing requirements for sales representatives; inadequate policies and procedures regarding suitability review of client transactions; revocation of our subsidiary's status as a non-bank custodian; we may not be able to execute an effective senior health insurance business strategy; a failure by e-TeleQuote to comply with the requirements of the United States government's Centers for Medicare and Medicaid Services and those of its carrier partners; legislative or regulatory changes to Medicare Advantage or changes to the implementing guidance by the Centers for Medicare and Medicaid Services; e-TeleQuote's inability to acquire or generate leads on commercially viable terms, convert leads to sales or if customer policy retention is lower than assumed; e-TeleQuote's inability to enroll individuals during the Medicare annual election period; the loss of a key carrier, or the modification of commission rates or underwriting practices with a key carrier partner could adversely affect e-TeleQuote's business; a significant change to or disruption in the mortgage lenders' mortgage businesses or an inability of the mortgage lenders to satisfy their contractual obligations to us; economic downcycles that impact our business, financial condition and results of operations; major public health pandemics, epidemics or outbreaks or other catastrophic events; the failure of our or a third-party partner's information technology systems, breach of our information security, failure of our business continuity plan or the loss of the Internet; any failure to protect the confidentiality of client information; the current legislative and regulatory climate with regard to privacy and cybersecurity; cyber-attack(s), security breaches or if e-TeleQuote is otherwise unable to safeguard the security and privacy of confidential data, including personal health information; the effects of credit deterioration and interest rate fluctuations on our invested asset portfolio and other assets; incorrectly valuing our investments; changes in accounting standards may impact how we record and report our financial condition and results of operations; the inability of our subsidiaries to pay dividends or make distributions; litigation and regulatory investigations and actions; a significant change in the competitive environment in which we operate; the loss of key personnel or sales force leaders; the efficiency and success of business initiatives to enhance our technology, products and services; any acquisition or investment in businesses that do not perform as we expect or are difficult to integrate; 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 https://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 products and 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 approximately 5.7 million lives and had approximately 2.9 million client investment accounts on December 31, 2023. Primerica, through its insurance company subsidiaries, was the #2 issuer of Term Life insurance coverage in the United States and Canada in 2023. 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)
March 31, 2024 December 31, 2023
------------------------------ ------------------------------
(In thousands)
Assets
Investments:
$ 2,782,140 $ 2,719,467
Fixed-maturity securities available-for-sale, at fair value
1,376,400 1,386,980
Fixed-maturity security held-to-maturity, at amortized cost
271 276
Short-term investments available-for-sale, at fair value
26,647 29,680
Equity securities, at fair value
3,253 18,383
Trading securities, at fair value
50,835 51,175
Policy loans and other invested assets
-------------------- ---------- -------------------- ----------
4,239,546 4,205,961
Total investments
593,399 613,148
Cash and cash equivalents
24,991 23,958
Accrued investment income
2,920,417 3,015,777
Reinsurance recoverables
3,503,940 3,447,234
Deferred policy acquisition costs, net
176,298 190,258
Renewal commissions receivable
287,459 273,066
Agent balances, due premiums and other receivables
127,707 127,707
Goodwill
172,400 175,025
Intangible assets, net
120,126 123,514
Income taxes
52,135 53,693
Operating lease right-of-use assets
356,025 382,549
Other assets
2,334,911 2,395,842
Separate account assets
-------------------- ---------- -------------------- ----------
$ 14,909,354 $ 15,027,732
Total assets
==================== ========== ==================== ==========
Liabilities and Stockholders' Equity
Liabilities:
$ 6,548,050 $ 6,742,025
Future policy benefits
15,855 14,876
Unearned and advance premiums
517,468 513,803
Policy claims and other benefits payable
421,027 435,094
Other policyholders' funds
593,909 593,709
Note payable
1,376,028 1,386,592
Surplus note
197,714 135,247
Income taxes
60,494 61,358
Operating lease liabilities
581,342 583,434
Other liabilities
76,648 99,785
Payable under securities lending
2,334,911 2,395,842
Separate account liabilities
-------------------- ---------- -------------------- ----------
12,723,446 12,961,765
Total liabilities
-------------------- ---------- -------------------- ----------
Stockholders' equity
346 350
Common stock
- -
Paid-in capital
2,285,937 2,276,946
Retained earnings
Accumulated other comprehensive income (loss), net of income tax:
92,853 (39,086 )
Effect of change in discount rate assumptions on the liability for future policy benefits
(11,691 ) (2,235 )
Unrealized foreign currency translation gains (losses)
(181,537 ) (170,008 )
Net unrealized investment gains (losses) on available-for-sale securities
-------------------- ---------- -------------------- ----------
2,185,908 2,065,967
Total stockholders' equity
-------------------- ---------- -------------------- ----------
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------------------------------
2024 2023
------------------------------ ------------------------------
(In thousands, except per-share amounts)
Revenues:
$ 841,047 $ 817,872
Direct premiums
(409,764 ) (405,347 )
Ceded premiums
-------------------- ---------- -------------------- ----------
431,283 412,525
Net premiums
255,021 231,547
Commissions and fees
37,806 31,065
Net investment income
1,305 (4,608 )
Investment gains (losses)
17,415 19,507
Other, net
-------------------- ---------- -------------------- ----------
742,830 690,036
Total revenues
-------------------- ---------- -------------------- ----------
Benefits and expenses:
166,321 163,265
Benefits and claims
55 559
Future policy benefits remeasurement (gain) loss
72,049 67,923
Amortization of deferred policy acquisition costs
131,138 110,874
Sales commissions
63,149 61,125
Insurance expenses
9,634 8,138
Insurance commissions
13,533 14,984
Contract acquisition costs
6,771 6,690
Interest expense
100,944 89,536
Other operating expenses
-------------------- ---------- -------------------- ----------
563,594 523,094
Total benefits and expenses
-------------------- ---------- -------------------- ----------
179,236 166,942
Income before income taxes
41,332 38,843
Income taxes
-------------------- ---------- -------------------- ----------
$ 137,904 $ 128,099
Net income
==================== ========== ==================== ==========
Earnings per share:
$ 3.94 $ 3.47
Basic earnings per share
==================== ========== ==================== ==========
$ 3.93 $ 3.46
Diluted earnings per share
==================== ========== ==================== ==========
Weighted-average shares used in computing
earnings per share:
34,883 36,710
Basic
==================== ========== ==================== ==========
PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Adjusted Operating Results Reconciliation
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------------------------------
2024 2023 % Change
------------------------------ ------------------------------ ----------------------
(In thousands, except per-share amounts)
Total revenues $ 742,830 $ 690,036 8 %
Less: Investment gains (losses) 1,305 (4,608 )
Less: 10% deposit asset MTM included in NII (137 ) (327 )
-------------------- ---------- -------------------- ----------
$ 741,662 $ 694,971 7 %
Adjusted operating revenues
==================== ========== ==================== ==========
Income before income taxes $ 179,236 $ 166,942 7 %
Less: Investment gains (losses) 1,305 (4,608 )
Less: 10% deposit asset MTM included in NII (137 ) (327 )
-------------------- ---------- -------------------- ----------
$ 178,068 $ 171,877 4 %
Adjusted operating income before income taxes
==================== ========== ==================== ==========
Net income $ 137,904 $ 128,099 8 %
Less: Investment gains (losses) 1,305 (4,608 )
Less: 10% deposit asset MTM included in NII (137 ) (327 )
Less: Tax impact of preceding items (269 ) 1,151
-------------------- ---------- -------------------- ----------
$ 137,005 $ 131,883 4 %
Adjusted net operating income
==================== ========== ==================== ==========
Diluted earnings per share (1) $ 3.93 $ 3.46 14 %
Less: Net after-tax impact of operating adjustments 0.02 (0.11 )
-------------------- ---------- -------------------- ----------
_______________________
TERM LIFE INSURANCE SEGMENT
Adjusted Premiums Reconciliation
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------------------------------
2024 2023 % Change
------------------------------ ------------------------------ ---------------------
(In thousands)
Direct premiums $ 836,321 $ 812,880 3 %
Less: Premiums ceded to IPO coinsurers 206,502 220,240
-------------------- ---------- -------------------- ----------
629,819 592,640 6 %
Adjusted direct premiums
-------------------- ---------- -------------------- ----------
Ceded premiums (408,558 ) (404,044 )
Less: Premiums ceded to IPO coinsurers (206,502 ) (220,240 )
-------------------- ---------- -------------------- ----------
(202,056 ) (183,804 )
Other ceded premiums
-------------------- ---------- -------------------- ----------
$ 427,763 $ 408,836 5 %
Net premiums
==================== ========== ==================== ==========
CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT
Adjusted Operating Results Reconciliation
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------------------------------
2024 2023 % Change
------------------------------ ------------------------------ ----------------------
(In thousands)
Total revenues $ 51,822 $ 40,055 29 %
Less: Investment gains (losses) 1,305 (4,608 )
Less: 10% deposit asset MTM included in NII (137 ) (327 )
-------------------- ---------- -------------------- ----------
$ 50,654 $ 44,990 13 %
Adjusted operating revenues
==================== ========== ==================== ==========
Loss before income taxes $ (10,540 ) $ (15,943 ) 34 %
Less: Investment gains (losses) 1,305 (4,608 )
Less: 10% deposit asset MTM included in NII (137 ) (327 )
-------------------- ---------- -------------------- ----------
PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders' Equity Reconciliation
(Unaudited)
March 31, 2024 December 31, 2023 % Change
------------------------------ -------------------- ------------------------------ ---------------------
(In thousands)
Stockholders' equity $ 2,185,908 $ 2,065,967 6 %
Less: Net unrealized gains (losses) (181,537 ) (170,008 )
Less: Effect of change in discount rate assumptions 92,853 (39,086 )
on the liability for future policy benefits
-------------------- ---------- -------------------- ----------
View source version on businesswire.com: https://www.businesswire.com/news/home/20240506458863/en/
SOURCE: Primerica, Inc.
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Investor Contact: Nicole Russell 470-564-6663 Email: Nicole.Russell@primerica.com Media Contact: Susan Chana 404-229-8302 Email: Susan.Chana@Primerica.com
COMTEX_451975296/1006/2024-05-06T16:15:07