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Primerica Reports First Quarter 2013 Results



  Primerica Reports First Quarter 2013 Results

  6% increase in diluted EPS to $0.65 and in diluted operating EPS to $0.66

                     13% growth in Term Life net premiums

            15% higher Investment and Savings Products (ISP) sales

 Client asset values reached all-time high of $39.85 billion as of March 31,
                                     2013

   Primerica Life Insurance Company (PLIC) paid a $150 million dividend to
                           Primerica, Inc. on May 7

Business Wire

DULUTH, Ga. -- May 07, 2013

Primerica, Inc. (NYSE: PRI) announced today financial results for the first
quarter ended March 31, 2013. Total revenues were $308.4 million in the first
quarter of 2013 and net income was $38.8 million, or $0.65 per diluted share.

Rick Williams, Chairman of the Board and Co-Chief Executive Officer said, “Our
strong distribution in core businesses drove the quarter’s results. We
continue to see steady growth in our Term Life business which provides a
stable, recurring future earnings stream, coupled with strong performance in
our high return ISP business. We remain focused on driving organic earnings
growth and providing meaningful, long-term shareholder value.”

John Addison, Chairman of Primerica Distribution and Co-Chief Executive
Officer said, “First quarter sales force results were in line with our
expectations as we worked to balance emphasis on recruiting and licensing new
representatives to drive sales force growth longer-term. Investment and
Savings Products sales increased 15% year-over-year as we continue to focus on
meeting the needs of our middle-income clients in order to generate sales
growth.”

In the first quarter of 2013 operating revenues increased by 8% to $306.2
million compared with $284.5 million in the first quarter of 2012 driven by
continued growth in the Term Life business as well as strong Investment and
Savings Products sales and the favorable impact of market performance on
client asset values. Net operating income was $39.3 million, or $0.66 per
diluted share in the first quarter of 2013 compared with $42.4 million, or
$0.62 per diluted share, in the prior year period. Results reflect a
year-over-year decline in net investment income, which was impacted by our
repurchase of 9.5 million shares throughout 2012 and a lower current yield on
invested assets related to the accumulation of cash for the excess capital
distribution from PLIC to Primerica, Inc. Net operating income was also
impacted by an increase in legal fees and expenses, higher interest expense
due to the execution of the redundant reserve financing in March 2012 and
increases in premium-related and employee-related expenses compared with the
first quarter of 2012.

Distribution Results

  * Sales force results in the first quarter of 2013 reflect seasonally lower
    recruiting in the fourth quarter and the absence of an incentive trip
    competition in the first half of 2013, which is typical of a convention
    year. In 2012 we introduced initiatives, including a life insurance
    compensation change, to focus our sales force on licensing more
    representatives. Adapting to these changes impacted recruiting. First
    quarter results were in line with our expectations as we recruited 46,348
    new representatives and life insurance licensed 7,165 representatives in
    the first quarter of 2013. The size of the sales force was 90,917 as of
    March 31, 2013.
  * Term Life net premium revenue increased 13% to $144.2 million in the first
    quarter of 2013 compared with the first quarter a year ago as we continue
    to build the Term Life book of business. In the first quarter of 2013,
    term life insurance policies issued were 50,356, a 10% decline from the
    first quarter of 2012 primarily related to strong recruiting in the prior
    year period. Sequentially, term life insurance policies issued were 4%
    lower than the fourth quarter largely reflecting fewer applications
    submitted during the typically slower holiday season.
  * The 15% year-over-year growth in Investment and Savings Products sales to
    $1.37 billion in the first quarter of 2013 resulted from a 16%, or $100.0
    million, increase in retail mutual funds sales as well as $92.9 million of
    fixed indexed annuity sales. Sales were driven by recent ISP initiatives
    and market performance in the first quarter. ISP sales increased 10%
    compared with the fourth quarter of 2012 primarily reflecting strong
    retirement and savings sales typical of the first quarter. Client asset
    values increased 10% to $39.85 billion at March 31, 2013 relative to a
    year ago and were up 7% from the end of the fourth 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)
                Q1 2013         Q1 2012       %            Q1 2013         Q1 2012         %
                                              Change                                       Change
Revenues:       ($ in thousands)                           ($ in thousands)
Term Life       $ 168,397       $ 151,804     11   %       $ 168,397       $ 151,804       11   %
Insurance
Investment
and Savings       108,722         100,134     9    %         108,722         100,134       9    %
Products
Corporate
and Other         31,326          34,663      -10  %         29,040          32,532        -11  %
Distributed
Products
Total           $ 308,445       $ 286,601     8    %       $ 306,159       $ 284,470       8    %
revenues
                                                                                            
Income
(loss)
before
income
taxes:
Term Life       $ 45,779        $ 44,283      3    %       $ 45,779        $ 44,283        3    %
Insurance
Investment
and Savings       26,371          28,870      -9   %         26,371          28,870        -9   %
Products
Corporate
and Other         (11,918 )       (9,688  )   -23  %         (11,186 )       (8,744  )     -28  %
Distributed
Products
Total
income
before          $ 60,232        $ 63,465      -5   %       $ 60,964        $ 64,409        -5   %
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.

Term Life Insurance. Term Life results in the first quarter reflect a 13%
increase in net premiums versus the prior year period from the continued
layering of New Term policies onto our maturing in force premium base.
Premium-related and employee-related expenses increased as did the interest
expense associated with our redundant reserve financing compared with the
first quarter of 2012. Non-deferred commissions were lower than in the prior
year period due to the changing nature of our incentive programs. Total
incurred claims grew at a rate consistent with our historical experience and
policy persistency improved modestly over the prior year period. In the first
quarter of 2013, operating revenues increased 11% to $168.4 million and
operating income before income taxes grew to $45.8 million compared with the
same period a year ago.

Sequentially, operating income before income taxes increased 3% reflecting
continued growth in net premiums as well as improved persistency relative to
seasonally lower persistency in the fourth quarter. Incurred claims were
slightly higher than in the fourth quarter of 2012 while insurance expenses
were in line with the prior period.

Investment and Savings Products. First quarter results reflect strong sales
and average client asset values, partially offset by growth-related expenses.
In addition, legal fees and expenses of $3.9 million were incurred in the
first quarter associated with a series of arbitration hearings in 2013,
impacting net operating earnings per diluted share by $0.04. During the period
operating revenues increased 9% to $108.7 million and operating income before
income taxes declined by $2.5 million to $26.4 million compared with the first
quarter of 2012.

Sequentially, operating income before income taxes declined 15% compared with
the fourth quarter of 2012 primarily reflecting higher first quarter legal
fees and expenses and favorable prior period items including the
volume-related variable annuity incentive payment. The mix of products sold in
the first quarter resulted in modestly lower sales-based income compared with
the fourth quarter of 2012 but should provide higher relative ongoing
earnings.

Corporate and Other Distributed Products. Results reflect a decline in net
investment income due to a lower invested asset base following our stock
repurchases as well as a lower yield on our invested assets. Results for the
segment were positively impacted by favorable claims experience in the
non-term insurance products underwritten by our New York subsidiary. Operating
revenues of $29.0 million were 11% lower and operating losses before income
taxes grew by $2.4 million compared with the first quarter of 2012.

Taxes

Our effective income tax rate for the first quarter of 2013 was 35.5% compared
with 34.2% in the prior year period primarily driven by tax benefits recorded
in the first quarter of 2012 related to Canadian tax reserves. Sequentially,
the effective income tax rate increased from the fourth quarter of 2012 due to
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

As of March 31, 2013, our investments and cash totaled $2.12 billion compared
with $2.07 billion as of December 31, 2012. Our invested asset portfolio had a
net unrealized gain of $175.4 million (net of unrealized losses of $4.2
million) at March 31, 2013, down from a net unrealized gain of $182.6 million
(net of unrealized losses of $4.3 million) at December 31, 2012. Net realized
gains for the quarter were $2.3 million, which included $0.1 million of
other-than-temporary impairments.

Our debt-to-capital ratio decreased slightly from the end of the fourth
quarter to 22.3% as of March 31, 2013. Primerica Life Insurance Company’s
statutory risk-based capital (RBC) ratio is estimated to be in excess of 610%
as of March 31, 2013. Following the $150 million ordinary dividend, PLIC’s RBC
ratio is estimated to be in excess of 480%, leaving the company
well-positioned to support existing operations and fund future growth.

Net income return on stockholders’ equity (ROE) was 12.0% (13.3% on a net
operating income and adjusted stockholders’ equity (ROAE) basis) for the
quarter ended March 31, 2013. The $150 million ordinary dividend from
Primerica Life Insurance Company to Primerica, Inc. provides opportunities for
ROAE expansion in 2013.

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 Wednesday, May 8, 2013 at 10:00 am EDT, to
discuss first 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 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
more than 4.3 million lives and approximately 1.9 million clients maintained
investment accounts with us at December 31, 2012. 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”.

PRIMERICA, INC. AND SUBSIDIARIES
Condensed Balance Sheets
                                                                 
                                               March 31,          December 31,
                                               2013 (1)           2012
                                               (In thousands)
Assets
Investments:
  Fixed maturity securities                    $ 1,837,929        $ 1,887,014
  available for sale, at fair value
  Equity securities available for                40,277             37,147
  sale, at fair value
  Trading securities, at fair value              9,417              7,762
  Policy loans and other invested                25,009             24,613
  assets
        Total investments                        1,912,632          1,956,536
Cash and cash equivalents                        202,512            112,216
Accrued investment income                        21,391             19,540
Due from reinsurers                              4,005,539          4,005,194
Deferred policy acquisition costs                1,098,124          1,066,422
Premiums and other receivables                   180,347            170,656
Intangible assets                                69,502             69,816
Income taxes                                     21,359             17,256
Other assets                                     307,241            302,126
Separate account assets                          2,614,669          2,618,115
        Total assets                           $ 10,433,316       $ 10,337,877
                                                                   
Liabilities and Stockholders' Equity
Liabilities:
Future policy benefits                         $ 4,898,538        $ 4,850,488
Unearned premiums                                10,214             6,056
Policy claims and other benefits                 254,333            254,533
payable
Other policyholders' funds                       350,345            345,721
Notes payable                                    374,445            374,433
Income taxes                                     122,925            114,611
Other liabilities                                366,669            358,577
Payable under securities lending                 133,325            139,927
Separate account liabilities                     2,614,669          2,618,115
        Total liabilities                        9,125,463          9,062,461
                                                                   
Stockholders' equity:
Common stock                                     567                564
Paid-in capital                                  609,100            602,269
Retained earnings                                535,609            503,173
Accumulated other comprehensive                  162,577            169,410
income, net of income tax
        Total stockholders' equity               1,307,853          1,275,416
        Total liabilities and                  $ 10,433,316       $ 10,337,877
        stockholders' equity
                                                                   
(1) Unaudited
 
 

PRIMERICA, INC. AND SUBSIDIARIES
Condensed Statements of Income
(Unaudited)
                                     
                                      Three months ended March 31,
                                      2013                     2012
                                      (In thousands, except per-share amounts)
Revenues:
Direct premiums                       $   570,899              $  561,037
Ceded premiums                            (410,604   )            (418,163  )
      Net premiums                        160,295                 142,874
Commissions and fees                      111,988                 103,905
Net investment income                     23,216                  26,097
Realized investment gains                 2,286                   2,131
(losses), including OTTI
Other, net                                10,660                  11,594     
      Total revenues                      308,445                 286,601    
                                                                
Benefits and expenses:
Benefits and claims                       74,246                  67,933
Amortization of deferred                  31,252                  26,531
policy acquisition costs
Sales commissions                         55,048                  49,717
Insurance expenses                        27,052                  22,444
Insurance commissions                     6,066                   8,496
Interest expense                          8,795                   6,910
Other operating expenses                  45,754                  41,105     
      Total benefits and                  248,213                 223,136    
      expenses
      Income before income                60,232                  63,465
      taxes
Income taxes                              21,387                  21,709     
      Net income                      $   38,845               $  41,756     
                                                                
Earnings per share:
      Basic                           $   0.67                 $  0.62       
      Diluted                         $   0.65                 $  0.61       
                                                                
Shares used in computing
earnings per share:
      Basic                               56,598                  65,133     
      Diluted                             58,407                  66,275     
                                                                             
                                                                             

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Operating Results Reconciliation
(Unaudited – in thousands, except per share amounts)
                                                                     
                                       Three months ended March 31,
                                       2013             2012          % Change
Operating revenues                     $  306,159       $ 284,470     8%
Realized investment gains                 2,286           2,131    
(losses), including OTTI
Total revenues                         $  308,445       $ 286,601     8%
                                                                       
Operating income before income         $  60,964        $ 64,409      -5%
taxes
Realized investment gains                 2,286           2,131
(losses), including OTTI
Other operating expense - equity          (3,018  )       (3,075  )
awards
Income before income taxes             $  60,232        $ 63,465      -5%
                                                                       
Net operating income                   $  39,317        $ 42,377      -7%
Realized investment gains                 2,286           2,131
(losses), including OTTI
Other operating expense - equity          (3,018  )       (3,075  )
awards
Tax impact of reconciling items           260             323      
Net income                             $  38,845        $ 41,756      -7%
                                                                       
Diluted operating earnings per         $  0.66          $ 0.62        6%
share (1)
Net after-tax impact of operating         (0.01   )       (0.01   )
adjustments
Diluted earnings per share (1)         $  0.65          $ 0.61        6%
                                                                       
(1) 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 March 31,
                                                  2013              2012
Operating revenues                                $  29,040         $ 32,532
Realized investment gains (losses),                  2,286            2,131   
including OTTI
Total revenues                                    $  31,326         $ 34,663  
                                                                     
Operating loss before income taxes                $  (11,186  )     $ (8,744 )
Realized investment gains (losses),                  2,286            2,131
including OTTI
Other operating expense - equity awards              (3,018   )       (3,075 )
Loss before income taxes                          $  (11,918  )     $ (9,688 )
                                                                              
                                                                              

PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders' Equity Reconciliation
(Unaudited – in thousands)
                                                               
                                                                March 31, 2013
Adjusted stockholders' equity                                   $   1,196,634
Unrealized net investment gains recorded in stockholders'           111,219
equity, net of income tax
Stockholders' equity                                            $   1,307,853

Contact:

Primerica, Inc.
Investor Contact:
Kathryn Kieser, 470-564-7757
investorrelations@primerica.com
or
Media Contact:
Mark L. Supic, 470-564-6329
mark.supic@primerica.com
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