Primerica Reports Fourth Quarter 2012 Results

  Primerica Reports Fourth Quarter 2012 Results

          Diluted EPS of $0.67 up 29% in the fourth quarter of 2012;
                    Diluted operating EPS of $0.69 up 36%

 8% increase in net income in the fourth quarter of 2012; 14% increase in net
                               operating income

  30% growth in Investment and Savings Products sales in the fourth quarter

           Life insurance licensed sales force increased to 92,373

Business Wire

DULUTH, Ga. -- February 7, 2013

Primerica, Inc. (NYSE: PRI) announced today financial results for the fourth
quarter and full year ended December 31, 2012. Total revenues were $304.5
million in the fourth quarter of 2012 and net income was $40.3 million, or
$0.67 per diluted share. For the full year 2012, total revenues were $1.19
billion and net income was $173.8 million or $2.71 net income per diluted
share.

Operating revenues increased by 12% to $303.4 million in the fourth quarter of
2012 compared with $271.6 million in the fourth quarter of 2011. Net operating
income per diluted share grew 36% to $0.69 from $0.51 in the prior year period
with net operating income growing 14% to $41.6 million in the fourth quarter
of 2012 from $36.7 million in the fourth quarter of 2011. Net income return on
stockholders’ equity (ROE) was 12.3% (14.0% on a net operating income and
adjusted stockholders’ equity basis) for the quarter ended December 31, 2012.
Results for the fourth quarter of 2012 reflect continued growth in the Term
Life business as well as strong Investment and Savings Products (ISP) sales
and the favorable impact of market performance on client assets values. Net
investment income declined compared with the fourth quarter of 2011 largely
due to our lower invested asset base following our stock repurchases.
Year-over-year net operating income was impacted by an increase in
premium-related and employee-related expenses as well as higher legal fees and
expenses, partially offset by specific charges in the fourth quarter of 2011.

For the full year 2012, net operating income increased 12% to $174.5 million
compared with $156.0 million for 2011, which when combined with active capital
management, resulted in a 32% year-over-year increase in diluted operating EPS
to $2.72. Our 2012 results were driven by growth in the Term Life business
coupled with lower non-deferred commissions as well as increased Investment
and Savings Products sales and client asset values. Results also reflect lower
invested assets due to our $257.3 million of share repurchases during the year
and increased interest expense largely related to the redundant reserve
financing executed in 2012.

Rick Williams, Chairman of the Board and Co-Chief Executive Officer said, “Our
results were marked by solid performance across segments including 20% growth
in Term Life net premiums for the full year 2012. During the year we retired
15% of our common stock outstanding as of December 31, 2011 through
repurchases. Our strong balance sheet and solid business fundamentals will
enable us to continue delivering shareholder value long-term.”

John Addison, Chairman of Primerica Distribution and Co-Chief Executive
Officer said, “2012 was a pivotal year, demonstrating our ability to maintain
financial momentum while reigniting growth in the size of the sales force. We
made enhancements to the life insurance licensing process that drove a 30%
increase in the ratio of recruits obtaining a license and contributed to
growth in the size of the sales force in 2012. Our Investment and Saving
Products platform was expanded with the addition of third party fixed indexed
annuities and managed accounts. ISP sales grew 30% in the fourth quarter and
increased 10% in 2012. We are proud of our sales force leaders’
accomplishments and their unwavering commitment to serving the financial needs
of Main Street families. We continue to be confident in the strength of our
business and our ability to execute a strategy that positions Primerica for
future success.”

Distribution Results

  *The size of our life-licensed insurance sales force increased to 92,373 at
    December 31, 2012 from 91,506 at September 30, 2012 and 91,176 at December
    31, 2011. While recruiting of new representatives declined 16% to 36,586
    from the fourth quarter of 2011 due to the increased emphasis on the
    licensing of new recruits, our new life licenses increased by 3%, to
    8,376, largely reflecting a 22% increase in the fourth quarter in the rate
    of new recruits obtaining a license compared to the year ago period.
    Non-renewals were lower than the fourth quarter a year ago, primarily due
    to Hurricane Sandy related mandated license renewal extensions in 2012 in
    New York and New Jersey and a high level of terminations last year
    following the convention recruiting surge. Sequentially, recruiting
    declined by 23% and new life licenses declined by 3% from the third
    quarter of 2012 reflecting seasonally-higher third quarter experience.
  *Term Life net premium revenue increased 16% to $139.9 million in the
    fourth quarter of 2012 compared with the fourth quarter a year ago as we
    continue to build the Term Life book of business. In the fourth quarter of
    2012, term life insurance policies issued were 52,324, a 15% decline from
    the fourth quarter of 2011 largely due to productivity returning to a
    normalized level compared with the elevated productivity levels related to
    the post-convention recruiting surge in the prior year period.
    Sequentially, term life insurance policies issued were flat with the third
    quarter.
  *The 30% year-over-year growth in Investment and Savings Products sales to
    $1.24 billion in the fourth quarter of 2012 resulted from a 24%, or $116.0
    million, increase in retail mutual funds sales as well as $154.9 million
    of fixed indexed annuity sales. Sales were driven by the successful
    implementation of new products in 2012 and growing investor confidence in
    the market in the fourth quarter. ISP sales increased 13% compared with
    the third quarter of 2012. Client asset values increased by 11% to $37.39
    billion at December 31, 2012 relative to a year ago and were consistent
    with the end of the third quarter, primarily reflecting market performance
    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)
              Q4 2012       Q4 2011 (2)   %             Q4 2012       Q4 2011 (2)   %      
                                              Change                                         Change
Revenues:     ($ in thousands)                               ($ in thousands)
Term Life     $ 164,490     $ 144,678     14     %       $ 164,490     $ 144,678     14     %
Insurance
Investment
and Savings     109,700         93,785        17     %         109,700         93,785        17     %
Products
Corporate
and Other      30,311      37,392     -19    %        29,253      33,136     -12    %
Distributed
Products
Total         $ 304,501    $ 275,855    10     %       $ 303,443    $ 271,599    12     %
revenues
                                                                                                      
Income
(loss)
before
income
taxes:
Term Life     $ 44,246        $ 37,045        19     %       $ 44,246        $ 37,045        19     %
Insurance
Investment
and Savings     31,194          28,821        8      %         31,194          28,821        8      %
Products
Corporate
and Other      (14,494 )    (9,185  )   -58    %        (12,478 )    (10,026 )   -24    %
Distributed
Products
Total
income
before        $ 60,946     $ 56,681     8      %       $ 62,962     $ 55,840     13     %
income
taxes
                                                                                                      
(1) See the Non-GAAP Financial Measures section and the segment Operating Results Reconcilations 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 14% to $164.5 million in the
fourth quarter of 2012 compared with the same period a year ago. Net premiums
were up 16% 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 allocated assets.

Operating income before income taxes increased by 19% over the prior year
period to $44.2 million reflecting revenue growth and lower non-deferred
commissions, partially offset by growth in premium-related and
employee-related expenses as well as higher interest expense associated with
our redundant reserve financing. While total incurred claims were slightly
lower versus the prior year period, the trend was largely driven by the fourth
quarter 2011 charge related to our search of public death records. Excluding
this charge in 2011, incurred claims increased reflecting higher experience
and growth in the business. Persistency experience in the fourth quarter
improved modestly over the prior year period.

Sequentially, operating income before income taxes declined by 9%. The
continued growth in net premium was more than offset by increased DAC
amortization due to seasonally worse persistency in the fourth quarter and
higher insurance expenses due to a favorable annual true-up of employee
benefit accruals and other items in the previous quarter.

Investment and Savings Products. Operating revenues increased 17% to $109.7
million and operating income before income taxes grew 8% to $31.2 million in
the fourth quarter of 2012 compared with the fourth quarter of 2011. Results
reflect strong sales and an 11% increase in our average client asset values,
partially offset by a lower volume-related incentive payment earned for 2012
variable annuity sales. We also incurred $2.9 million of legal fees and
expenses, which impacted net operating earnings per diluted share by $.03,
associated with preparation for hearings that have been scheduled in 2013 in
connection with arbitrations that have been described in our SEC filings.
Canadian segregated fund DAC amortization was unfavorably impacted in the
fourth quarter of 2012 by lower equity returns compared with a favorable
impact in the prior year period, resulting in a $1.5 million year-over-year
increase in DAC amortization.

Sequentially, operating income before income taxes was consistent with the
third quarter of 2012 primarily reflecting the fourth quarter sales growth,
the higher client asset values and the variable annuity incentive payment,
offset by legal fees and expenses as well as higher Canadian segregated fund
DAC amortization.

Corporate and Other Distributed Products. Operating revenues decreased by 12%
to $29.3 million and operating losses before income taxes increased by $2.5
million compared with the fourth quarter of 2011. Results largely reflect
lower net investment income due to a lower invested asset base following our
stock repurchases and lower expenses due to non-recurring charges from the
fourth quarter of 2011, partially offset by higher employee-related expenses
in 2012.

Taxes

Our effective income tax rate for the fourth quarter of 2012 was 33.9%,
consistent with the prior year period and lower than the 35.4% in the third
quarter. Sequentially, the lower tax rate in the fourth quarter reflects the
recognition of certain tax benefits due to statute of limitations expirations
that occur annually at the end of the calendar year.

Capital and Liquidity

We repurchased $98.2 million of common stock in the fourth quarter of 2012.
For the full year, 9.5 million shares of common stock were repurchased for
$257.3 million, enabling us to retire 15% of the common stock outstanding as
of December 31, 2011.

As of December 31, 2012, our investments and cash totaled $2.07 billion
compared with $2.18 billion as of September 30, 2012. Our invested asset
portfolio had a net unrealized gain of $182.6 million (net of unrealized
losses of $4.3 million) at December 31, 2012, down from a net unrealized gain
of $191.6 million (net of unrealized losses of $4.2 million) at September 30,
2012. Net realized gains for the quarter were $1.1 million, which included
$0.1 million of other-than-temporary impairments.

Our debt-to-capital ratio increased slightly from the end of the third quarter
to 22.7% as of December 31, 2012 following capital redeployment in the
quarter. Primerica Life Insurance Company’s statutory risk-based capital (RBC)
ratio is estimated to be approximately 600% as of December 31, 2012 remaining
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 Friday, February 8, 2013 at 9:00 am EST, to
discuss fourth 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
                                                        
                                      December 31,            December 31,
                                        2012 (1)              2011 (2)   
                                      (In thousands)
Assets
Investments:
      Fixed maturity securities
      available for sale, at fair     $  1,887,014            $  1,959,156
      value
      Equity securities available        37,147                  26,712
      for sale, at fair value
      Trading securities, at             7,762                   9,640
      fair value
      Policy loans and other            24,613                25,996     
      invested assets
          Total investments              1,956,536               2,021,504
Cash and cash equivalents                112,216                 136,078
Accrued investment income                19,540                  21,579
Due from reinsurers                      4,005,194               3,855,318
Deferred policy acquisition              1,066,422               904,485
costs
Premiums and other receivables           165,188                 163,845
Intangible assets                        69,816                  71,928
Other assets                             302,126                 268,485
Separate account assets                 2,618,115             2,408,598  
          Total assets                $  10,315,153          $  9,851,820  
                                                              
Liabilities and Stockholders'
Equity
Liabilities:
Future policy benefits                $  4,850,488            $  4,614,860
Unearned premiums                        6,056                   7,022
Policy claims and other benefits         254,533                 241,754
payable
Other policyholders' funds               345,721                 340,766
Notes payable                            374,433                 300,000
Income taxes                             91,887                  81,316
Other liabilities                        358,577                 381,496
Payable under securities lending         139,927                 149,358
Separate account liabilities            2,618,115             2,408,598  
          Total liabilities              9,039,737               8,525,170
                                                              
Stockholders' equity:
Common stock                             564                     649
Paid-in capital                          602,269                 835,232
Retained earnings                        503,173                 344,104
Accumulated other comprehensive         169,410               146,665    
income, net of income tax
          Total stockholders'           1,275,416             1,326,650  
          equity
          Total liabilities and       $  10,315,153          $  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 December 31,
                                          2012 (1)           2011 (1) (2)
                                        (In thousands, except per-share
                                        amounts)
Revenues:
Direct premiums                         $  569,591            $  555,778
Ceded premiums                            (414,783  )          (419,630   )
             Net premiums                  154,808               136,148
Commissions and fees                       112,772               97,282
Net investment income                      24,221                25,643
Realized investment gains (losses),        1,058                 4,256
including OTTI
Other, net                                11,642              12,526     
             Total revenues               304,501             275,855    
                                                              
Benefits and expenses:
Benefits and claims                        71,151                63,688
Amortization of deferred policy            34,628                30,185
acquisition costs
Sales commissions                          54,007                43,876
Insurance expenses                         25,764                24,273
Insurance commissions                      5,916                 9,548
Interest expense                           8,857                 6,973
Other operating expenses                  43,232              40,631     
             Total benefits and           243,555             219,174    
             expenses
             Income before income          60,946                56,681
             taxes
Income taxes                              20,675              19,479     
             Net income                 $  40,271            $  37,202     
                                                              
Earnings per share:
             Basic                      $  0.68              $  0.52       
             Diluted                    $  0.67              $  0.51       
                                                              
Shares used in computing earnings
per share:
             Basic                        57,416              69,366     
             Diluted                      58,935              70,169     
                                                              
(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
                                  
                                     Year ended December 31,
                                       2012 (1)             2011 (2)
                                     (In thousands, except per-share amounts)
Revenues:
Direct premiums                      $  2,267,975            $  2,229,467
Ceded premiums                         (1,663,753  )          (1,703,075  )
             Net premiums               604,222                 526,392
Commissions and fees                    427,775                 412,979
Net investment income                   100,804                 108,601
Realized investment gains               11,382                  6,440
(losses), including OTTI
Other, net                             46,532                48,681      
             Total revenues            1,190,715             1,103,093   
                                                             
Benefits and expenses:
Benefits and claims                     278,747                 242,696
Amortization of deferred policy         118,598                 104,034
acquisition costs
Sales commissions                       204,569                 191,722
Insurance expenses                      96,541                  89,192
Insurance commissions                   27,555                  38,618
Interest expense                        33,101                  27,968
Other operating expenses               164,716               164,954     
             Total benefits and        923,827               859,184     
             expenses
             Income before              266,888                 243,909
             income taxes
Income taxes                           93,082                86,718      
             Net income              $  173,806             $  157,191     
                                                             
Earnings per share:
             Basic                   $  2.77                $  2.11        
             Diluted                 $  2.71                $  2.08        
                                                             
Shares used in computing earnings
per share:
             Basic                     61,059                72,283      
             Diluted                   62,401                73,107      
                                                             
(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 December 31,
                          2012               2011 (1)             %       
                                                                    Change
Operating revenues        $  303,443           $  271,599           12      %
Realized investment
gains (losses),             1,058              4,256    
including
OTTI
Total revenues            $  304,501          $  275,855          10      %
                                                                    
Operating income          $  62,962            $  55,840            13      %
before income taxes
Realized investment
gains (losses),
including
OTTI                         1,058                4,256
Other operating
expense - equity            (3,074   )          (3,415   )
awards
Income before income      $  60,946           $  56,681           8       %
taxes
                                                                    
Net operating             $  41,603            $  36,652            14      %
income
Realized investment
gains (losses),
including
OTTI                         1,058                4,256
Other operating
expense - equity             (3,074   )           (3,415   )
awards
Tax impact of               684                (291     )
reconciling items
Net income                $  40,271           $  37,202           8       %
                                                                    
Diluted operating         $  0.69              $  0.51              36      %
earnings per share (2)
Net after-tax impact
of operating                (0.02    )          -        
adjustments
Diluted earnings per      $  0.67             $  0.51             29      %
share (2)
                                                                    
(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 December 31,
                                             2012              2011 (1)
Operating revenues                           $  29,253           $ 33,136
Realized investment gains (losses),            1,058            4,256   
including OTTI
Total revenues                               $  30,311          $ 37,392  
                                                                             
Operating loss before income taxes           $  (12,478  )       $ (10,026 )
Realized investment gains (losses),             1,058              4,256
including OTTI
Other operating expense - equity awards        (3,074   )        (3,415  )
Loss before income taxes                     $  (14,494  )       $ (9,185  )
                                                                             
                                                                             

PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders' Equity Reconciliation
(Unaudited – in thousands)
                                     
                                                             December 31, 2012
Adjusted stockholders' equity                                $    1,161,493
Unrealized net investment gains recorded in stockholders'
equity,
net of income tax                                                113,923
Stockholders' equity                                         $    1,275,416

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
 
Press spacebar to pause and continue. Press esc to stop.