Primerica Reports 2016 Q1 – Revenues Up 6% To $363.7 Million

 

Primerica, Inc. (NYSE: PRI) recently today financial results for the quarter ended March 31, 2016. Total revenues were $363.0 million and net income was $45.2 million or $0.92 per diluted share in the first quarter of 2016.

Glenn Williams, Chief Executive Officer said, “We have begun 2016 with strong distribution growth. The size of our life insurance licensed sales force grew 10% which drove 19% growth in life insurance policies issued versus the first quarter a year ago.

Solid core performance across business segments coupled with recent share repurchases resulted in a 17% increase in diluted operating EPS and a 170 basis points increase in return on adjusted equity (ROAE) year-over-year.”

In the first quarter, operating revenues increased 6% to $363.7 million and net operating income increased 7% to $45.7 million from the prior year period. Operating results in the quarter reflect strong performance in the Term Life segment including a 13% increase in net premiums and 28% growth in the Term Life segment’s operating income before income taxes versus the year ago period.

Lower Investment and Savings Products (ISP) sales and lower average client asset values, largely driven by market volatility in the quarter, led to a 10% decline in ISP operating income before income taxes compared with the first quarter of 2015.

The average Canadian dollar value remained a modest headwind on a year-over-year basis leading to lower operating revenues of approximately $6 million and lower net operating income of approximately $1 million in the first quarter of 2016.

Solid earnings as well as ongoing share repurchases drove a 17% increase in diluted net operating earnings per share to $0.93 and ROAE expanded to 16.3% on an operating basis versus 14.6% in the first quarter of 2015.

Life Insurance Licensed Sales Force. Strong recruiting trends in recent quarters drove 10% growth in the life insurance licensed sales force year-over-year. First quarter recruiting of new representatives increased 19% and new life insurance licenses grew 29% from the year ago period. On a sequential quarter basis, recruiting increased while new life insurance licenses declined following seasonally lower recruiting levels in the fourth quarter.

Term Life Insurance. In the first quarter of 2016, term life insurance policies issued increased 19% driven by the larger life insurance licensed sales force and productivity that continued to be at the higher-end of the historical range. Term Life operating revenues increased 13% to $206.3 million reflecting 13% growth in net premiums compared to the first quarter of 2015.

Operating income before income taxes grew 28% to $46.1 million versus the year ago period. Persistency and incurred claims in the first quarter of 2016 were in line with historical levels. Insurance and operating expenses declined 4% year-over-year as higher growth-related expenses were more than offset by lower employee compensation-related expenses in the segment.

The lower employee compensation largely relates to changes in the management structure that occurred in April 2015 which reduced total company expenses and reallocated a portion of expenses from Term Life to the Corporate and Other Distributed Products segment.

Investment and Savings Products. Market volatility in the first quarter, as well as the year-over-year decline in the Canadian dollar value, led to 4% lower average client asset values of $46.65 billion and a 9% decline in sales to $1.38 billion compared with the prior year period.

ISP operating revenues of $125.0 million were 3% lower year-over-year as lower sales and average client asset values were partially offset by higher account-based revenue. The 10% decline in ISP segment operating income before income taxes to $31.7 million versus the first quarter of 2015 also reflects a shift in product mix, a $0.7 million increase in segregated fund DAC amortization and the decline in the Canadian dollar value versus the year ago quarter.

Corporate and Other Distributed Products. Operating revenues were $32.4 million, and operating losses before income taxes were $6.8 million in the first quarter of 2016. Insurance and other operating expenses increased largely due to annual employee merit increases as well as the reallocation of expenses between segments as noted above.

The segment’s net investment income was relatively flat year-over-year as lower yield on the invested asset portfolio was offset by a positive mark-to-market on the deposit asset backing an IPO related reinsurance agreement. During the quarter, a reduction in the annual fees on this IPO related reinsurance agreement from 3% to 0.5% was effected, leading to a decline in interest expense of $1.5 million year-over-year.

The invested asset portfolio saw price improvements with net unrealized gains increasing from $49.3 million at December 31, 2015 to $74.9 million at quarter-end largely due to decreasing interest rates and slightly tighter credit spreads during the period.

The effective income tax rate for the first quarter of 2016 of 35.7% was higher than the prior year rate of 35.0% due to a smaller portion of pre-tax income being derived in Canada as well as increases made in 2015 to the estimated amount of current Canadian earnings that may be repatriated to the U.S.

In the first quarter of 2016, Primerica repurchased $49.9 million, or 1.2 million shares of its common stock. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be approximately 440% as of March 31, 2016.

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”.