Primerica Reports First Quarter 2014 Results

  Primerica Reports First Quarter 2014 Results

     16% growth in net income and a 12% increase in net operating income

           Diluted EPS of $0.81 and diluted operating EPS of $0.77

14.6% net income return on stockholders’ equity and 14.9% net operating income
                return on adjusted stockholders’ equity (ROAE)

                95,382 life insurance licensed representatives

Business Wire

DULUTH, Ga. -- May 5, 2014

Primerica, Inc. (NYSE: PRI) announced today financial results for the quarter
ended March 31, 2014. Total revenues were $324.3 million in the first quarter
of 2014 and net income was $45.1 million, or $0.81 per diluted share.

Operating revenues increased by 9% to $324.1 million and net operating income
increased by 12% to $43.3 million compared with $296.2 million and $38.6
million, respectively, in the year ago quarter. Net operating income per
diluted share increased 20% to $0.77 and ROAE was 14.9% in the first quarter
of 2014. Solid operating results in the first quarter were primarily driven by
growth in New Term premiums and strong Investment and Savings Products
performance including 15% growth in ending client asset values. Insurance and
operating expenses increased as expected with growth in our business and
reflect significantly lower expenses associated with the Florida Retirement
System (FRS) matter compared with the first quarter of 2013. First quarter
results also reflect lower net investment income highly correlated to our
stock repurchases throughout 2013 and a lower yield on invested assets.

Consistent with our strategy to focus on core distribution competencies, in
the first quarter of 2014 Primerica sold its short-term statutory disability
insurance business (DBL) and discontinued marketing its student life insurance
business, both of which were distributed through non-core distribution
channels managed by our New York insurance subsidiary. Results from the DBL
operations have been reported in discontinued operations, which are excluded
from segment and operating results, for all periods presented.

Rick Williams, Chairman of the Board and Co-Chief Executive Officer said, “We
started the year strong with a 12% increase in net operating income led by a
29% increase in Investment and Savings Products net operating income. Diluted
operating EPS grew by 20%, benefitting from 2013 share repurchases.”

John Addison, Chairman of Primerica Distribution and Co-Chief Executive
Officer said, “We continued to see positive sales force trends with growth in
the recruitment of new representatives, new life insurance licenses and the
size of the life insurance licensed sales force compared with the first
quarter a year ago.”

Distribution Results

  *The size of our life-licensed sales force increased 5% to 95,382 at March
    31, 2014 compared with 90,917 at March 31, 2013. In the first quarter,
    recruiting of new representatives increased 4% to 48,306 and new life
    insurance licenses grew 4% to 7,447 compared with the year ago quarter.
    The percentage of license non-renewals and terminations in relation to the
    size of the sales force declined versus the prior year period. The size of
    our life-licensed sales force remained consistent with the fourth quarter.
    On a sequential basis, recruiting of new representatives increased 27%
    from 38,022, primarily due to seasonally slower recruiting levels during
    the fourth quarter. The lower level of fourth quarter recruits, many of
    whom are licensed in the first quarter, also contributed to the 12%
    sequential decline in new life licenses from 8,485 in the prior quarter.
  *In the first quarter, term life insurance policies issued were down 2% to
    49,320 while the average annualized premium per issued policy increased 2%
    compared with the first quarter of 2013. Productivity in the quarter of
    .17X policies per life licensed representative per month was slightly
    lower than .18X in both the prior year and sequential quarter.
    Historically productivity in the first quarter has been lower than in
    other quarters and this year it was also impacted by severe weather across
    North America. On a sequential basis, fewer life insurance applications
    submitted during the slower holiday season led to a 6% decline in term
    life insurance policies issued compared with the fourth quarter of 2013.
  *In the first quarter of 2014, Investment and Savings Products sales grew
    3% to $1.41 billion primarily reflecting strong retail mutual funds sales
    compared with the first quarter a year ago. Sequentially, ISP sales
    increased 10% compared with the fourth quarter of 2013 reflecting strong
    retirement and saving sales typical of the first quarter. Market
    performance drove client asset values to an all-time high of $45.84
    billion, up 15% at March 31, 2014 relative to a year ago and up from
    $44.99 billion at the end of the fourth quarter.

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. As previously noted, results from the DBL operations,
including a $1.6 million after-tax gain on the sale recognized in the first
quarter of 2014, have been reported in discontinued operations for all periods
presented. As such, we have reclassified prior year period revenues, benefits
and expenses and net income of $10.0 million, $8.9 million and $0.7 million,
respectively, from Corporate and Other Distributed Products to discontinued
operations, thereby removing them from operating results. Results for the
segments are shown below.

              Actual                          Operating (1)
               Q1 2014     Q1 2013 (2) %        Q1 2014     Q1 2013 (2) %
                           (3)         Change               (3)         Change
Revenues:      ($ in thousands)                 ($ in thousands)
Term Life      $ 182,980   $ 167,833   9    %   $ 182,980   $ 167,833   9   %
Insurance
Investment
and Savings      123,270     108,722   13   %     123,270     108,722   13  %
Products
Corporate
and Other       18,078    21,895   -17  %    17,815    19,609   -9  %
Distributed
Products
Total          $ 324,328  $ 298,450  9    %   $ 324,065  $ 296,164  9   %
revenues
                                                                        
Income
(loss) from
continuing
operations
before
income
taxes:
Term Life      $ 47,204    $ 45,125    5    %   $ 47,204    $ 45,125    5   %
Insurance
Investment
and Savings      34,028      26,353    29   %     34,028      26,353    29  %
Products
Corporate
and Other       (14,400 )  (12,338 ) 17   %    (14,663 )  (11,614 ) 26  %
Distributed
Products
Total income
from
continuing     $ 66,832   $ 59,140   13   %   $ 66,569   $ 59,864   11  %
operations
before
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) In the second quarter of 2013, Primerica began classifying the deposit
asset underlying the 10% reinsurance agreement with Citigroup, Inc.
(Citigroup), as well as its related mark-to-market adjustments, within the
Corporate and Other Distributed Products segment instead of within the Term
Life Insurance segment. As such, results for Q1 2013 include the
reclassification of Net Investment Income from the Term Life Insurance Segment
to the Corporate and Other Distributed Products Segment of $564. The change
does not impact our consolidated financial statements.
                                                                        
(3) The results of operations from DBL prior to its disposal were reported in
our Corporate and Other Distributed Products segment. As such, we have
reclassified revenues, other operating expenses, and income from before income
taxes of $9,995, $1,630, and $1,092, respectively, in Q1 2013 from our
Corporate and Other Distributed Products segment into discontinued operations.

Term Life Insurance. In the first quarter of 2014, Term Life operating
revenues increased 9% to $183.0 million and operating income before income
taxes increased 5% to $47.2 million compared with the first quarter of 2013.
Revenue growth continues to be driven by net premiums, which increased by 11%
from the year ago period. Allocated net investment income was flat with the
prior year period, as growth in required assets was offset by lower yield on
invested assets. While policy persistency was stable and consistent with the
prior year period, DAC amortization in the first quarter grew faster than net
premiums due to an increased portion of commissions deferred in recent years.
Total incurred claims for the quarter were in-line with our historical
experience, while insurance expenses increased with growth in the business and
infrastructure.

Sequentially, operating income before income taxes declined 6% reflecting
higher insurance expenses, slightly higher incurred claims and lower allocated
net investment income in the first quarter, partially offset by seasonally
lower persistency in the fourth quarter. Several items positively impacted
results for the fourth quarter of 2013, including higher allocated net
investment income from called securities, a premium tax refund and a reversal
of previously amortized commissions.

Investment and Savings Products. In the first quarter, operating revenues
increased 13% to $123.3 million and operating income before income taxes
increased 29% to $34.0 million compared with the year ago period.
Year-over-year ISP sales increased 3%. Sales volumes shifted from Canadian
segregated funds, variable annuity internal transfers and other sales that
generate limited to no sales-based revenues in the prior year period to retail
mutual funds and fully commissionable variable annuity sales with higher
sales-based revenues in the current period. The growth in overall sales
combined with this shift in product mix drove a 17% year-over-year increase in
sales-based revenues. During the first quarter, asset-based revenue increased
13% primarily driven by 16% growth in average client asset values. Legal fees
and expenses associated with FRS were $0.6 million, significantly less than
the prior year level of $3.9 million. We’ve made significant progress in
resolving the FRS matter with over 95% of claimants accepting the settlement.

Sequentially, operating income before income taxes decreased 4% compared with
the fourth quarter as fluctuations in the mix of both product sales and client
asset values more than offset sequential growth in sales and assets. The
increase in sales-based revenues was consistent with the growth in sales of
products that generate sales-based revenue. A shift to retail mutual fund
sales from annuities during first quarter’s Individual Retirement Account
season resulted in a modest increase in the sales-based commission expense
payout rate. With regard to asset-based earnings, results were generally flat
with the fourth quarter as most of the growth in average client assets came
from U.S. products which generally have lower asset-based earnings than our
Canadian products. First quarter Canadian segregated fund DAC amortization was
slightly elevated compared with the fourth quarter due to market performance
and redemption rates.

Corporate and Other Distributed Products. Operating revenues of $17.8 million
were 9% lower and operating losses before income taxes grew by $3.0 million
compared with the first quarter of 2013. Results reflect higher
employee-related expenses as well as lower allocated net investment income
primarily due to growth in Term Life required assets, prior year capital
deployment and lower yield on invested assets versus the prior year period.

Taxes

Our effective income tax rate for the first quarter of 2014 was 34.9%, which
is lower than the prior year period rate of 35.5% primarily due to the limited
deductibility of IPO stock awards that fully vested in April 2013.
Sequentially, our effective income tax rate was consistent with 34.7% in the
fourth quarter.

Capital and Liquidity

In conjunction with our plan to deploy $150 million of capital in 2014, during
the first quarter we repurchased 283,000 shares of Primerica common stock for
$13.1 million with the majority of the years’ capital deployment anticipated
in the second half of the year, subject to the regulatory approval of a
reserve financing transaction. As of March 31, 2014, our investments and cash
totaled $2.01 billion compared with $1.98 billion as of December 31, 2013. Our
invested asset portfolio had a net unrealized gain of $113.2 million (net of
unrealized losses of $11.6 million) at March 31, 2014, up from $100.0 million
at December 31, 2013 due to a decline in interest rates.

Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio
was estimated to be in excess of 490% as of March 31, 2014, well positioned to
support existing operations and fund future growth. Our debt-to-capital ratio
was 23.0% March 31, 2014.

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,
including other than temporary impairments (OTTI), for all periods presented.
Operating income before income taxes and net operating income exclude the
expense associated with our IPO-related equity awards and the impact of
charges recorded for the potential settlement of claims made by certain
Florida Retirement System plan participants 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 Tuesday, May 6, 2014 at 10:00 am ET, 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 fourth 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 million lives and have over 2 million client investment accounts
at December 31, 2013. 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,
                                                 2014 (1)         2013
                                                 (In thousands)
Assets
Investments:
      Fixed maturity securities available for    $ 1,771,572      $ 1,755,712
      sale, at fair value
      Equity securities available for sale,        47,086           39,894
      at fair value
      Trading securities, at fair value            10,934           12,991
      Policy loans and other invested assets      26,580         26,806
              Total investments                    1,856,172        1,835,403
Cash and cash equivalents                          158,438          149,189
Accrued investment income                          19,689           18,127
Due from reinsurers                                4,074,527        4,055,054
Deferred policy acquisition costs                  1,242,983        1,208,466
Premiums and other receivables                     170,577          175,789
Intangible assets                                  67,692           68,863
Income taxes                                       35,548           32,450
Other assets                                       303,759          282,780
Separate account assets                           2,458,739      2,503,829
              Total assets                       $ 10,388,124    $ 10,329,950
                                                                  
Liabilities and Stockholders' Equity
Liabilities:
Future policy benefits                           $ 5,103,278      $ 5,063,103
Unearned premiums                                  1,465            1,802
Policy claims and other benefits payable           243,576          253,304
Other policyholders' funds                         340,175          337,977
Notes payable                                      374,494          374,481
Income taxes                                       127,906          105,885
Other liabilities                                  375,864          377,690
Payable under securities lending                   109,094          89,852
Separate account liabilities                      2,458,739      2,503,829
              Total liabilities                    9,134,591        9,107,923
                                                                  
Stockholders' equity:
Common stock                                       546              548
Paid-in capital                                    462,838          472,633
Retained earnings                                  679,182          640,840
Accumulated other comprehensive income, net of    110,967        108,006
income tax
              Total stockholders' equity          1,253,533      1,222,027
              Total liabilities and              $ 10,388,124    $ 10,329,950
              stockholders' equity
                                                                  
(1) Unaudited


PRIMERICA, INC. AND SUBSIDIARIES
Condensed Statements of Income
(Unaudited)
                                                           
                                            Three months ended March 31,
                                            2014               2013
                                            (In thousands, except per-share
                                            amounts)
Revenues:
Direct premiums                             $  568,205         $  560,904
Ceded premiums                                (402,715  )       (410,604  )
               Net premiums                    165,490            150,300
Commissions and fees                           126,933            112,273
Net investment income                          21,599             23,216
Realized investment gains (losses),            263                2,286
including OTTI
Other, net                                    10,043           10,375    
Total revenues                                324,328          298,450   
                                                               
Benefits and expenses:
Benefits and claims                            75,191             68,816
Amortization of deferred policy                35,193             31,252
acquisition costs
Sales commissions                              65,121             55,048
Insurance expenses                             28,502             25,512
Insurance commissions                          4,083              4,223
Interest expense                               8,606              8,795
Other operating expenses                      40,800           45,664    
Total benefits and expenses                   257,496          239,310   
Income from continuing operations before       66,832             59,140
income taxes
Income taxes                                  23,347           21,005    
Income from continuing operations              43,485             38,135
Income from discontinued operations, net      1,595            710       
of income taxes
               Net income                   $  45,080         $  38,845    
                                                               
Basic earnings per share:
Continuing operations                       $  0.78            $  0.66
Discontinued operations                       0.03             0.01      
               Basic earnings per           $  0.81           $  0.67      
               share
                                                               
Diluted earnings per share:
Continuing operations                       $  0.78            $  0.64
Discontinued operations                       0.03             0.01      
               Diluted earnings per         $  0.81           $  0.65      
               share
                                                               
Shares used in computing earnings per
share:
               Basic                          55,211           56,598    
               Diluted                        55,233           58,407    
                                                                            

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Operating Results Reconciliation
(Unaudited – in thousands, except per share amounts)
                                                                 
                                       Three months ended March 31,
                                       2014             2013          % Change
Operating revenues                     $  324,065       $ 296,164     9    %
Realized investment gains                263           2,286   
(losses), including OTTI
Total revenues                         $  324,328      $ 298,450    9    %
                                                                      
Operating income before income         $  66,569        $ 59,864      11   %
taxes
Realized investment gains                 263             2,286
(losses), including OTTI
Other operating expense - IPO            -             (3,010  )
equity awards
Income from continuing operations      $  66,832       $ 59,140     13   %
before income taxes
                                                                      
Net operating income                   $  43,314        $ 38,602      12   %
Realized investment gains                 263             2,286
(losses), including OTTI
Other operating expense - IPO             -               (3,010  )
equity awards
Tax impact of reconciling items          (92      )     257     
Income from continuing operations         43,485          38,135      14   %
Income from discontinued                 1,595         710     
operations, net of income taxes
Net income                             $  45,080       $ 38,845     16   %
                                                                      
Diluted operating earnings per         $  0.77          $ 0.64        20   %
share (1)
Net after-tax impact of operating
adjustments and discontinued             0.04          0.01    
operations
Diluted earnings per share (1)         $  0.81         $ 0.65       24   %
                                                                      
(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,
                                                  2014             2013
Operating revenues                                $  17,815        $ 19,609
Realized investment gains (losses), including       263           2,286   
OTTI
Total revenues                                    $  18,078       $ 21,895  
                                                                   
Operating loss before income taxes                $  (14,663  )    $ (11,614 )
Realized investment gains (losses), including        263             2,286
OTTI
Other operating expense - IPO equity awards         -             (3,010  )
Loss from continuing operations before income     $  (14,400  )    $ (12,338 )
taxes
                                                                   

PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders' Equity Reconciliation
(Unaudited – in thousands)
                                                              
                                                                March 31, 2014
Adjusted stockholders' equity                                   $   1,175,969
Unrealized net investment gains recorded in stockholders'          77,564
equity, net of income tax
Stockholders' equity                                            $   1,253,533

Contact:

Primerica, Inc.
Investor & Media Contact:
Kathryn Kieser, 470-564-7757
investorrelations@primerica.com
 
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