Primerica, Inc. (NYSE: PRI) recently announced today financial results for the quarter ended December 31, 2015. Total revenues were $354.1 million in the fourth quarter of 2015 and net income was $47.9 million, or $0.97 per diluted share. For the full year 2015, total revenues were $1.41 billion and net income was $189.9 million, or $3.70 per diluted share.
Glenn Williams, Chief Executive Officer said, “We achieved record results in 2015 with a 12% increase in diluted operating EPS and a 160 basis points increase in ROAE to 16.9% compared with 2014. We also made great strides in expanding distribution in 2015 achieving an 8% increase in the size of our life insurance licensed salesforce which played a critical role in the 18% year-over-year growth in life insurance policies issued. In addition, Investment and Savings Products sales grew despite market volatility. Our strong across-the-board performance is evidence of our company-wide momentum and outstanding sales force leadership.”
In the fourth quarter, operating revenues increased 3% to $357.5 million and net operating income increased 2% to $50.2 million from the prior year period. Ongoing share repurchases helped drive a 12% increase in diluted net operating income per share to $1.01 while ROAE expanded to 18.2% on an operating basis versus 16.4% in the fourth quarter of 2014.
Solid operating results in the quarter reflect 17% growth in the Term Life segment’s operating income before income taxes, primarily achieved with an 11% increase in net premiums versus the year ago period. Slightly lower Investment and Savings Products (ISP) sales and average client asset values in the quarter led to a 1% decline in ISP operating income before income taxes compared with the fourth quarter of 2014. Year-over-year, net investment income fell due to market conditions and continued share repurchases. The declining Canadian dollar value reduced operating revenues by approximately $10 million and net operating income by approximately $2 million versus the prior year period.
For the full year 2015, operating revenues and net operating income grew 5% to $1.41 billion and $191.1 million, respectively, versus 2014 while diluted net operating income per share rose 12% to $3.72. 2015 results reflect a 10% increase in Term Life net premiums and a 14% increase in Term Life operating income before income taxes.
ISP sales and client asset values were modestly higher with ISP operating income before income taxes remaining flat year-over-year. Insurance and other operating expenses grew 3% compared to the prior year, while net investment income declined 12% due to the market conditions, lower portfolio yields and continued share repurchases during the year. Downward pressure from the weakening Canadian dollar value impacted net operating income by approximately $7 million year-over-year. During the year, we increased share repurchases by $50 million to $200 million enabling the retirement of approximately 8% of common stock outstanding as of December 31, 2014.
Life Insurance Licensed Sales Force. The life insurance licensed sales force grew 8% year-over-year driven by a 13% increase in recruiting of new representatives and a 24% increase in new life insurance licenses indicative of strong recruiting trends and licensing focus in the second half of 2015. On a sequential quarter basis, recruiting and new life insurance licenses declined reflecting strong distribution results in the third quarter as well as seasonally lower activity levels in the fourth quarter.
Term Life Insurance. In the fourth quarter of 2015, the 22% increase in term life insurance policies issued was driven by the larger life insurance licensed sales force and productivity that continued to be at the high-end of the historical range. Term Life operating revenues increased 11% to $200.2 million driven by 11% growth in net premiums versus the year ago period and operating income before income taxes grew 17% to $45.9 million. Seasonally lower persistency during the current quarter was slightly below prior year levels and contributed to DAC amortization outpacing premium growth. While incurred claims were in line with historical levels in both the current and prior years, the lower persistency combined with a prior year revision to reserve assumptions on certain supplemental benefits led to benefits and claims increasing at a slower pace than premiums. Insurance expenses increased 9% versus the prior year period largely due to growth in premiums, and the run-off of Citi reinsurance expense allowances.
Investment and Savings Products. Investment and Savings Products net inflows were approximately $245 million while average client asset values declined 1% year-over-year to $47.5 billion primarily reflecting the year-over-year decline in the Canadian dollar value. ISP sales of $1.41 billion were up 3% from the third quarter of 2015 and down 3% from the strong sales in the prior year period. These items led to a 2% decline in ISP segment operating revenues to $129.4 million and a 1% decline in operating income before income taxes to $38.5 million compared with the fourth quarter of 2014. Account-based revenue increased 10% year-over-year due to the addition of a mutual fund provider on the record keeping platform earlier this year. DAC amortization was lower than generally seen in the fourth quarter primarily due to revised assumptions for future redemptions based on emerging experience.
Corporate and Other Distributed Products. Operating revenues were $27.9 million, and operating losses before income taxes increased to $8.7 million in the fourth quarter of 2015. The increased loss was driven by a $5.6 million decline in the segment’s net investment income year-over-year primarily due to a negative mark-to-market on the deposit asset backing a Citi reinsurance agreement. Our general account investment portfolio saw similar market pressures with net unrealized gains declining from $76.6 million at September 30, 2015 to $49.3 million at year-end largely due to higher interest rates and credit spread widening during the quarter. Also contributing to the decline in net investment income was an unusually high level of income from called securities in the prior year period, a slight decline in portfolio yield and continued share repurchases throughout 2015.
The effective income tax rate for the fourth quarter of 2015 was 33.8%, down slightly from 34.2% in the prior year period. The decline is largely due to lower state income taxes and lower non-deductible expense items that more than offset the impact of higher residual U.S. taxes on current year Canadian earnings.
In the fourth quarter of 2015, Primerica repurchased $19.0 million, or 405,765 shares, of its common stock bringing full year 2015 aggregate purchases to $200.0 million, or 4.3 million shares. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be approximately 450% as of December 31, 2015, well positioned to support existing operations and fund future growth.
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, 2015. 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”.