Primerica Reports Third Quarter 2012 Results

  Primerica Reports Third Quarter 2012 Results

Diluted EPS of $0.72 up 57% from the prior year period; Diluted operating EPS
                               of $0.72 up 46%

 14.0% net income return on stockholders’ equity; 15.1% net operating income
                   return on adjusted stockholders’ equity

                   22% increase in Term Life pre-tax income

         18% growth in Investment and Savings Products pre-tax income

 Life insurance licensed sales force up modestly to 91,506 from June 30, 2012

Business Wire

DULUTH, Ga. -- November 07, 2012

Primerica, Inc. (NYSE: PRI) announced today financial results for the third
quarter ended September 30, 2012. Total revenues were $299.1 million in the
third quarter of 2012 and net income was $45.6 million, or $0.72 per diluted
share. Operating revenues increased by 7% to $295.2 million in the third
quarter of 2012, compared with $276.0 million in the third quarter of 2011.
Net operating income grew by 21% to $45.1 million, or $0.72 per diluted share,
in the third quarter of 2012, compared with $37.3 million, or $0.49 per
diluted share, in the third quarter of 2011. The year-over-year results
reflect the continued growth in Term Life income as well as the impact of
favorable market performance on Investment and Savings Products sales, client
asset-based earnings and Canadian segregated fund DAC amortization. Net
investment income was enhanced by certain unusual items during the quarter but
otherwise reflects the expected pressure of lower invested assets from stock
repurchases over the past 12 months and lower market yields. Net income return
on stockholders’ equity (ROE) was 14.0% (15.1% on a net operating income and
adjusted stockholders’ equity basis) for the quarter ended September 30, 2012.

Rick Williams, Chairman of the Board and Co-Chief Executive Officer said, “Our
strong third quarter results were marked by solid core performance across
business segments. Our long-term recurring life insurance revenues coupled
with positive Investment and Savings Product performance and share repurchases
drove net operating income return on adjusted stockholders’ equity to 15.1%,
underscoring the strength of our franchise.”

John Addison, Chairman of Primerica Distribution and Co-Chief Executive
Officer said, “The size of our life licensed sales force remained consistent
with the prior quarter and prior year period despite the challenging
year-over-year comparisons. Recruiting and licensing of new representatives
were significantly higher in the prior year period following the short-term
recruiting initiative launched at our convention. Our continued focus is on
growing the size of our sales force to generate long-term organic growth.”

Distribution Results

      The size of our life-licensed insurance sales force was 91,506 at
      September 30, 2012, up modestly from 90,868 at June 30, 2012. There was
      downward pressure on recruiting in the second and third quarters as we
      placed more focus on licensing initiatives, which improved the
      percentage of new recruits obtaining a license in those quarters. Lower
      sequential recruiting levels in the second quarter and a 3% decline in
 •  recruiting in the third quarter from the second quarter translated into
      12% fewer new life licenses in the third quarter than in the second
      quarter of 2012. On a year-over-year basis, the life-licensed sales
      force was down slightly from 91,970 at September 30, 2011. Coming off
      the unusually high post-convention recruiting surge in 2011, recruiting
      declined 43% to 47,639, and new life licenses declined 17% to 8,613
      compared with the third quarter of 2011.
      
      Term Life net premium revenue increased 17% to $137.8 million in the
      third quarter of 2012 compared with the third quarter a year ago as we
      continue to build the Term Life book of business. In the third quarter
      of 2012, term life insurance policies issued were 53,506, or 18% lower
  •   than the third quarter of 2011, primarily reflecting a return to a
      normal productivity level from the higher productivity level in the
      prior year period from the post-convention recruiting surge.
      Sequentially, term life insurance policies issued decreased 12% from the
      seasonally strong second quarter.
      
      Investment and Savings Products sales grew 3% to $1.09 billion in the
      third quarter of 2012 from the year ago quarter primarily as a result of
      sales growth in our recently launched fixed indexed annuity and managed
      account products. Variable annuity sales resulting from clients
      transferring their older variable annuity contracts to the current Prime
  •   Elite IV variable annuity have normalized from the high levels in the
      prior year period. Without these prior year elevated transactions, total
      Investment and Savings Products sales would have increased 10%
      year-over-year. Sales declined 9% from the seasonally strong second
      quarter. Client asset values at September 30, 2012 increased 17% to
      $36.90 billion relative to a year ago and grew 5% compared with June 30,
      2012, primarily reflecting market conditions in the U.S. and Canada.

Segment Results

Primerica operates in two primary business segments: Term Life Insurance and
Investment and Savings Products, and has a third segment, Corporate and Other
Distributed Products. Results for the segments are shown below.

                          Actual                             Operating   
                                                                       (1)
                Q3 2012      Q3 2011 (2)  %            Q3 2012      Q3 2011 (2)  %
                                            Change                                   Change
Revenues:       ($ in thousands)                         ($ in thousands)
Term Life       $ 164,011     $ 141,713     16  %        $ 164,011     $ 141,713     16   %
Insurance
Investment
and Savings       101,163       97,486      4   %          101,163       97,486      4    %
Products
Corporate
and Other        33,914     36,592    -7  %         30,042     36,770    -18  %
Distributed
Products
Total           $ 299,088   $ 275,791   8   %        $ 295,216   $ 275,969   7    %
revenues
                                                                                     
Income
(loss)
before
income
taxes:
Term Life       $ 48,576      $ 39,664      22  %        $ 48,576      $ 39,664      22   %
Insurance
Investment
and Savings       31,608        26,748      18  %          31,608        26,748      18   %
Products
Corporate
and Other        (9,628  )   (10,905 )  12  %         (10,396 )   (7,418  )  -40  %
Distributed
Products
Total
income
before          $ 70,556    $ 55,507    27  %        $ 69,788    $ 58,994    18   %
income
taxes

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

(2) Reflects revised accounting standards related to costs associated with
acquiring or renewing insurance contracts.


Term Life Insurance. Operating revenues grew by 16% to $164.0 million in the
third quarter of 2012 compared with the same period a year ago. Net premiums
were up 17% from the prior year period reflecting the continued layering of
New Term policies onto our recurring in force premium base. Allocated net
investment income increased year-over-year consistent with the growth in Term
Life assets. Net investment income also benefitted from the allocated portion
of $1.8 million from securities called from our bond portfolio and a $1.0
million recovery of interest from a previously defaulted fixed income
security.

Operating income before income taxes increased by 22% over the prior year
period to $48.6 million reflecting revenue growth and higher commission
deferrals partially offset by growth in premium-related expenses and higher
interest expense related to the redundant reserve financing executed earlier
this year. Incurred claims were consistent with the third quarter of 2011
while persistency experience was moderately lower for New Term and moderately
higher for Legacy compared with the prior year period.

Sequentially, operating income before income taxes declined by 6% reflecting
the second quarter strong seasonal persistency and lower incurred claims,
partially offset by continued New Term premium growth and higher allocated
investment income.

Investment and Savings Products. Operating revenues increased 4% to $101.2
million and operating income before income taxes grew 18% to $31.6 million in
the third quarter of 2012 compared with the third quarter of 2011, reflecting
a 5% increase in our average client asset values consistent with market
performance. We also continue to experience a modest shift in sales mix
towards managed accounts, which provide ongoing asset-based revenues rather
than sales-based revenues. Canadian segregated fund DAC amortization was
favorably impacted in the third quarter of 2012 by positive equity returns
resulting in a $2.6 million year-over-year reduction in DAC amortization.

Sequentially, operating income before income taxes increased 7% compared with
the second quarter of 2012 primarily reflecting the continued growth in the
managed account product client asset values and lower Canadian segregated fund
DAC amortization, partially offset by seasonally higher sales in the second
quarter.

Corporate and Other Distributed Products. Operating revenues decreased by 18%
to $30.0 million in the third quarter of 2012 from the third quarter of 2011
largely reflecting lower net investment income due to our lower invested asset
base following our stock repurchases over the past year. In the third quarter
of 2012, employee merit increases and another layer of stock compensation
increased ongoing expenses by $1.3 million, but were more than offset by the
prior year’s $2.7 million discontinuation of carrying inventory in our print
operations. Year-over-year, operating losses before income taxes for this
segment increased by $3.0 million to $10.4 million primarily due to lower
investment income.

Taxes

Our effective income tax rate for the third quarter of 2012 was 35.4%,
compared with 36.8% for the same quarter a year ago primarily due to a lower
effective Canadian tax rate in 2012. The lower rate in 2012 was caused by
decreasing Canadian statutory income tax rates combined with capital planning
decisions for Canadian unremitted earnings.

Capital and Liquidity

The $75 million share repurchase program that commenced in the third quarter
of 2012 was completed in October, when the Company repurchased $60 million of
Primerica common stock beneficially owned by funds affiliated with Warburg
Pincus, LLC at a purchase price of $28.74 per share. Prior to this
transaction, we repurchased 488,214 shares of common stock for $14.3 million
through open market repurchases.

As of September 30, 2012, our investments and cash totaled $2.18 billion
compared with $2.02 billion as of June 30, 2012. Our invested asset portfolio
had a net unrealized gain of $191.6 million (net of unrealized losses of $4.2
million) at September 30, 2012, up from a net unrealized gain of $166.7
million (net of unrealized losses of $6.2 million) at June 30, 2012. Net
realized gains for the quarter were $3.9 million, which included $0.2 million
of other-than-temporary impairments.

Our debt-to-capital ratio was 21.9% as of September 30, 2012 following our
July public debt offering of $375 million in aggregate principal amount of
Senior Notes due in 2022. Primerica Life Insurance Company’s statutory
risk-based capital (RBC) ratio is estimated to be in excess of 570% as of
September 30, 2012, and the Company remains well-positioned to support
existing operations and fund future growth.

Non-GAAP Financial Measures

We report financial results in accordance with U.S. generally accepted
accounting principles (GAAP). We also present operating revenues, operating
income before income taxes, net operating income and adjusted stockholders’
equity. Operating revenues, operating income before income taxes and net
operating income exclude the impact of realized investment gains and losses
for all periods presented. Operating income before income taxes and net
operating income exclude the expense associated with our IPO-related equity
awards for all periods presented. Adjusted stockholders' equity excludes the
impact of net unrealized gains and losses on invested assets for all periods
presented. 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 our 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 our core ongoing
business. These measures have limitations, and investors should not consider
them in isolation or as a substitute for analysis of our results as reported
under GAAP. Reconciliations of non-GAAP to GAAP financial measures are
attached to this release.

Earnings Webcast Information

Primerica will hold a webcast Thursday, November 8, 2012 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 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 our sales
representatives; our or our sales representatives’ violation of or
non-compliance with laws and regulations; incorrect assumptions used to price
our insurance policies; the failure of our investment products to remain
competitive with other investment options; 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; inadequate or unaffordable reinsurance or the failure of
our reinsurers to perform their obligations; heightened standards of conduct
or more stringent licensing requirements for our sales representatives; the
inability of our subsidiaries to pay dividends or make distributions; the loss
of key personnel; and general changes in economic and financial conditions,
including the effects of credit deterioration and interest rate fluctuations
on our invested asset portfolio. 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 families 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 insure
more than 4.3 million lives and approximately 2 million clients maintain
investment accounts with us. Primerica is a member of the Russell 2000 stock
index and is traded on The New York Stock Exchange under the symbol “PRI”.

PRIMERICA, INC. AND SUBSIDIARIES
Condensed Balance Sheets
                                                      
                                            September 30,        December 31,
                                            2012 (1)             2011 (2)
                                            (In thousands)
Assets
Investments:
  Fixed maturity securities
  available for sale, at fair               $ 1,912,456          $ 1,959,156
  value
  Equity securities available for             36,693               26,712
  sale, at fair value
  Trading securities, at fair                 17,081               9,640
  value
  Policy loans and other invested            24,669             25,996    
  assets
         Total investments                    1,990,899            2,021,504
Cash and cash equivalents                     185,823              136,078
Accrued investment income                     21,646               21,579
Due from reinsurers                           3,993,603            3,855,318
Deferred policy acquisition costs             1,036,020            904,485
Premiums and other receivables                177,791              163,845
Intangible assets                             69,376               71,928
Other assets                                  328,651              268,485
Separate account assets                      2,630,630          2,408,598 
         Total assets                       $ 10,434,439        $ 9,851,820 
                                                                 
Liabilities and Stockholders'
Equity
Liabilities:
Future policy benefits                      $ 4,797,815          $ 4,614,860
Unearned premiums                             6,765                7,022
Policy claims and other benefits              242,265              241,754
payable
Other policyholders' funds                    346,352              340,766
Note payable                                  374,421              300,000
Income taxes                                  96,408               81,316
Other liabilities                             424,706              381,496
Payable under securities lending              177,666              149,358
Separate account liabilities                 2,630,630          2,408,598 
         Total liabilities                    9,097,028            8,525,170
                                                                 
Stockholders' equity:
Common stock                                  597                  649
Paid-in capital                               691,885              835,232
Retained earnings                             468,223              344,104
Accumulated other comprehensive              176,706            146,665   
income, net of income tax
         Total stockholders'                 1,337,411          1,326,650 
         equity
         Total liabilities and              $ 10,434,439        $ 9,851,820 
         stockholders' equity

(1) Unaudited
(2) Reflects revised accounting standards related to costs associated with
acquiring or renewing insurance contracts.


PRIMERICA, INC. AND SUBSIDIARIES
Condensed Statements of Income
                                
                                      Three months ended September 30,
                                      2012 (1)               2011 (1) (2)
                                      (In thousands, except per-share amounts)
Revenues:
Direct premiums                       $   567,273              $  560,739
Ceded premiums                           (414,991   )           (425,643  )
      Net premiums                        152,282                 135,096
Commissions and fees                      104,337                 100,883
Net investment income                     26,881                  27,103
Realized investment gains                 3,872                   (178      )
(losses), including OTTI
Other, net                               11,716                12,887    
      Total revenues                     299,088               275,791   
                                                               
Benefits and expenses:
Benefits and claims                       70,738                  64,101
Amortization of deferred                  29,234                  26,645
policy acquisition costs
Sales commissions                         49,370                  47,135
Insurance expenses                        23,744                  22,133
Insurance commissions                     6,684                   10,538
Interest expense                          8,828                   7,000
Other operating expenses                 39,934                42,732    
      Total benefits and                 228,532               220,284   
      expenses
      Income before income                70,556                  55,507
      taxes
Income taxes                             24,957                20,409    
      Net income                      $   45,599              $  35,098    
                                                               
Earnings per share:
      Basic                           $   0.74                $  0.46      
      Diluted                         $   0.72                $  0.46      
                                                               
Shares used in computing
earnings per share:
      Basic                              60,060                73,658    
      Diluted                            61,563                74,199    

(1) Unaudited
(2) Reflects revised accounting standards related to costs associated with
acquiring or renewing insurance contracts.


PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Operating Results Reconciliation
(Unaudited – in thousands)
                                                                  
                                   Three months ended September 30,
                                   2012             2011 (1)         % Change
Operating revenues                 $  295,216        $  275,969       7    %
Realized investment gains            3,872           (178     )
(losses), including OTTI
Total revenues                     $  299,088       $  275,791      8    %
                                                                      
Operating income before income     $  69,788         $  58,994        18   %
taxes
Realized investment gains             3,872             (178     )
(losses), including OTTI
Other operating expense -            (3,104   )       (3,309   )
equity awards
Income before income taxes         $  70,556        $  55,507       27   %
                                                                      
Net operating income               $  45,104         $  37,301        21   %
Realized investment gains             3,872             (178     )
(losses), including OTTI
Other operating expense -             (3,104   )        (3,309   )
equity awards
Tax impact of reconciling            (273     )       1,284    
items
Net income                         $  45,599        $  35,098       30   %
                                                                      
Diluted operating earnings per     $  0.72           $  0.49          46   %
share (2)
Net after-tax impact of              -               (0.03    )
operating adjustments
Diluted earnings per share (2)     $  0.72          $  0.46         57   %

(1) Reflects revised accounting standards related to costs associated with
acquiring or renewing insurance contracts.
(2) Percentage change in earnings per share is calculated prior to rounding
per share amounts.


CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT
Operating Results Reconciliation
(Unaudited – in thousands)
                                          
                                              Three months ended September 30,
                                              2012             2011 (1)
Operating revenues                            $  30,042         $  36,770
Realized investment gains (losses),             3,872           (178     )
including OTTI
Total revenues                                $  33,914        $  36,592   
                                                                
Operating loss before income taxes            $  (10,396  )     $  (7,418   )
Realized investment gains (losses),              3,872             (178     )
including OTTI
Other operating expense - equity awards         (3,104   )       (3,309   )
Loss before income taxes                      $  (9,628   )     $  (10,905  )
                                                                            
                                                                            

PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders' Equity Reconciliation
(Unaudited – in thousands)
                                                         
                                                            September 30, 2012
Adjusted stockholders' equity                               $     1,218,939
Unrealized net investment gains recorded in                      118,472
stockholders' equity, net of income tax
Stockholders' equity                                        $     1,337,411

Contact:

Primerica, Inc.
Investor Contact:
Kathryn Kieser, 770-564-7757
investorrelations@primerica.com
or
Media Contact:
Mark L. Supic, 770-564-6329
mark.supic@primerica.com
 
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