Primerica Reports Fourth Quarter 2020 Results

DULUTH, Ga.–(BUSINESS WIRE)–Feb 9, 2021–
Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended December 31, 2020. Total revenues of $598.3 million increased 12% compared to the fourth quarter of 2019. Net income of $100.1 million increased 7%, while earnings per diluted share of $2.52 increased 13% compared to the same quarter last year. ROE was 22.5% for the current quarter.
Adjusted operating revenues were $594.7 million, increasing 12% compared to the fourth quarter of 2019. Adjusted net operating income of $97.3 million increased 5%, while diluted adjusted operating earnings per share of $2.45 increased 10% compared to the same quarter last year. ROAE was 23.4% during the fourth quarter of 2020.
During the fourth quarter, the COVID-19 pandemic continued to have a significant impact on the Company’s Term Life segment. COVID-19 related death claims were approximately $14 million, net of reinsurance, their highest level since the onset of the pandemic. COVID-19 impacted customer behavior, with strong sales and policy persistency continuing in the quarter. The Investment and Savings Products (ISP) segment benefited from favorable market performance during the fourth quarter driving ending client asset values to a record $82 billion. ISP sales during the quarter continued to shift toward mutual funds and managed accounts and away from annuity products.
“The COVID-19 pandemic caused middle income consumers to clearly understand their need for protection today and investments for tomorrow. The adaptability of our sales force allowed us to meet those needs more than ever before,” said Glenn Williams, Chief Executive Officer. “I am very proud of how our Primerica team navigated the unique challenges of 2020 to continue to help clients achieve their financial goals.”
Results for the full year ended December 31, 2020 were also heavily impacted by the pandemic. COVID-19 related death claims, net of reinsurance, were approximately $33 million, while issued life policies were up 23% year-over-year with a record $109 billion of face amount issued. Policy persistency also reached record levels during the year. ISP sales for 2020 were a record $7.8 billion, up 4% year-over-year, despite a brief period of disruption following the market correction in March. Term Life and ISP income before taxes increased 16% and 6% year-over-year, respectively. Total revenues of $2.2 billion increased 8% year-over-year, setting a new annual record for the Company. Net income of $386.2 million and earnings per diluted share of $9.57 increased 5% and 11%, respectively, and also represent new records.
Fourth Quarter Distribution & Segment Results

 
Distribution Results
    Q4 2020     Q4 2019     % Change    
Life-Licensed Sales Force (1)     134,907       130,522       3 %  
Recruits     80,599       60,466       33 %  
New Life-Licensed Representatives     12,119       11,073       9 %  
Life Insurance Policies Issued     87,307       71,469       22 %  
Life Productivity (2)     0.21       0.18     *    
ISP Product Sales ($ billions)   $ 2.07     $ 1.98       4 %  
Average Client Asset Values ($ billions)   $ 76.09     $ 68.24       12 %  
Closed U.S. Mortgage Volume ($ million brokered)   $ 203.8     $ 18.1     *    
————————————————————————
(1)   End of period
(2)   Life productivity equals policies issued divided by the average number of life insurance licensed representatives per month
* Not calculated
 
 
Segment Results
    Q4 2020     Q4 2019     % Change    
    ($ in thousands)
Adjusted Operating Revenues:                          
Term Life Insurance   $ 368,992     $ 318,992       16 %  
Investment and Savings Products     193,316       182,698       6 %  
Corporate and Other Distributed Products (1)     32,412       29,250       11 %  
Total adjusted operating revenues (1)   $ 594,720     $ 530,940       12 %  
                           
Adjusted Operating Income (Loss) before
income taxes:
                         
Term Life Insurance   $ 89,440     $ 81,995       9 %  
Investment and Savings Products     56,714       52,991       7 %  
Corporate and Other Distributed Products (1)     (18,124 )     (13,861 )     31 %  
Total adjusted operating income before
income taxes (1)
  $ 128,030     $ 121,125       6 %  
————————————————————————
(1)   See the Non-GAAP Financial Measures section and the Adjusted Operating Results reconciliation tables at the end of this release for additional information.
   

Life Insurance Licensed Sales Force
At the end of the year, the Company had 134,907 independent life-licensed representatives, which represents a 3% increase year-over-year. Special COVID-19 licensing measures enacted by various states added 3,597 licenses that were issued on a temporary basis and 2,508 licenses with extended renewal dates. The Company estimates that approximately 4,200 individuals included in the year-end number will either not pursue the steps necessary to obtain a permanent license or will not renew an expiring license.
Recruiting activity remained robust with 80,599 new recruits added in the fourth quarter of 2020, a 33% increase year-over-year. The licensing process remains challenged; however, gradual improvements led to a total of 12,119 new licenses during the quarter, including 1,668 temporary licenses issued by the states under their special COVID-19 policies, and represented a 9% increase compared to the prior year’s fourth quarter.
Term Life Insurance
Demand for protection products continued to positively impact sales during the fourth quarter. The Company issued 87,307 new life insurance policies during the period, a 22% increase compared to the fourth quarter of 2019. Productivity for the quarter, defined as policies issued per life insurance licensed representative per month, was 0.21 compared to 0.18 in the prior year period.
Revenues of $369.0 million during the fourth quarter increased 16% compared to the fourth quarter of 2019, while pre-tax income of $89.4 million increased 9% year-over-year. Higher sales, along with favorable persistency throughout the year, moved the growth rate in adjusted direct premiums up to 15% year-over-year and added $7 million to pre-tax income for the quarter. Strong persistency also led to $23 million less DAC amortization and $13 million higher benefit reserve increases being recognized year-over-year. COVID-19 related death claims, net of reinsurance, during the quarter were estimated to be $14 million. As typically done in the fourth quarter, actuarial assumptions were locked in for 2020 business, resulting in a $5.5 million increase in benefit reserves due to lower long-term interest rate assumptions.
Investment and Savings Products
During the fourth quarter, investment product sales were $2.1 billion, a 4% increase year-over-year. Sales of mutual funds and managed accounts were both up 17%, while annuities declined 15% as the income benefits on these products become less attractive. Net client inflows of $642 million during the quarter continued to compare very favorably to the prior year period due to a combination of strong sales and low client redemptions. Average client asset values were $76.1 billion, an increase of 12% compared to the fourth quarter of 2019.
Revenues of $193.3 million during the fourth quarter increased 6% compared to the same quarter in 2019, while pre-tax income of $56.7 million increased 7%. Despite a 5% increase in revenue generating sales, associated revenues were flat year-over-year as the mix of products sold continued to weigh more heavily toward mutual funds, which have a lower sales-based commission rate compared to annuities. Asset-based revenues increased 11% year-over-year, in line with the increase in average client asset values. Sales-based and asset-based commissions were largely correlated to associated revenues. Results also reflected a $1 million reduction in Canadian segregated fund DAC amortization due to favorable market performance and lower redemptions.
Corporate and Other Distributed Products
During the fourth quarter of 2020, the segment recorded an operating loss before taxes of $18.1 million compared to $13.9 million in the fourth quarter of 2019. Consolidated net investment income was largely unchanged year-over-year as growth in the size of the investment portfolio was largely offset by lower interest rates. However, on a segment basis, net investment income allocated to the C&O segment was down $2.2 million as we continue to allocate a larger portion of net investment income to the Term Life segment in support of the growing block of business. The newly launched the U.S. mortgage distribution business added $3.7 million of revenues and about $1.0 million of pre-tax income to the segment’s results. Benefits and claims were $2.1 million higher year-over-year, largely due to a reserve adjustment on a closed block of business to reflect the sustained low interest rate environment.
Taxes
The fourth quarter effective income tax rate was 24.0% compared to 23.4% in the fourth quarter of 2019. The rate increase was largely driven by higher state income taxes and Canadian earnings partially offset by higher exposure reserve releases in the current year period.
Capital
During the fourth quarter of 2020, the Company repurchased 115,433 shares of common stock for $13.4 million, bringing the annual total to $231.4 million. The Board of Directors authorized the repurchase of up to $300 million of the Company’s common stock through June 2022 and approved an 18% increase in stockholder dividends to $0.47 per share, payable on March 15, 2021, to stockholders of record on February 22, 2021.
Primerica has a strong balance sheet and continues to be well-capitalized to meet future needs. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be approximately 400% as of December 31, 2020.
Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company presents certain non-GAAP financial measures. Specifically, the Company presents adjusted direct premiums, other ceded premiums, adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income, adjusted stockholders’ equity and diluted adjusted operating earnings per share. Adjusted direct premiums and other ceded premiums are net of amounts ceded under coinsurance transactions that were executed concurrent with our initial public offering (the “IPO coinsurance transactions”) for all periods presented. We exclude amounts ceded under the IPO coinsurance transactions in measuring adjusted direct premiums and other ceded premiums to present meaningful comparisons of the actual premiums economically maintained by the Company. Amounts ceded under the IPO coinsurance transactions will continue to decline over time as policies terminate within this block of business. Adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income and diluted adjusted operating earnings per share exclude the impact of realized investment gains (losses) and fair value mark-to-market (“MTM”) investment adjustments, including credit impairments, for all periods presented. We exclude realized investment gains (losses), including credit impairments, and MTM investment adjustments in measuring these non-GAAP financial measures to eliminate period-over-period fluctuations that may obscure comparisons of operating results due to items such as the timing of recognizing gains (losses) and market pricing variations prior to an invested asset’s maturity or sale that are not directly associated with the Company’s insurance operations. Adjusted stockholders’ equity excludes the impact of net unrealized investment gains (losses) recorded in accumulated other comprehensive income (loss) for all periods presented. We exclude unrealized investment gains (losses) in measuring adjusted stockholders’ equity as unrealized gains (losses) from the Company’s available-for-sale securities are largely caused by market movements in interest rates and credit spreads that do not necessarily correlate with the cash flows we will ultimately realize when an available-for-sale security matures or is sold.
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 the Company’s 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 the core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Reconciliations of GAAP to non-GAAP financial measures are attached to this release.
Earnings Webcast Information
Primerica will hold a webcast on Wednesday, February 10, 2021 at 10:00 am EST, to discuss the quarter’s results. 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. This release and a detailed financial supplement will be posted on Primerica’s website.
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 sales representatives; new laws or regulations that could apply to our distribution model, which could require us to modify our distribution structure; changes to the independent contractor status of sales representatives; our or sales representatives’ violation of or non-compliance with laws and regulations; any failure to protect the confidentiality of client information; differences between our actual experience and our expectations regarding mortality or persistency as reflected in the pricing for our insurance policies; changes in federal, state and provincial legislation or regulation that affects our insurance, investment product, and mortgage businesses; our failure to meet regulatory capital ratios or other minimum capital and surplus requirements; a significant downgrade by a ratings organization; the failure of our reinsurers or reserve financing counterparties to perform their obligations; the failure of our investment products to remain competitive with other investment options or the loss of our relationship with one or more of the companies whose investment products we provide; litigation and regulatory investigations and actions concerning us or sales representatives; heightened standards of conduct or more stringent licensing requirements for sales representatives; inadequate policies and procedures regarding suitability review of client transactions; revocation of our subsidiary’s status as a non-bank custodian; economic down cycles that impact our business, financial condition and results of operations; major public health pandemics, epidemics or outbreaks or other catastrophic events; the failure of our information technology systems, breach of our information security, failure of our business continuity plan or the loss of the Internet; the effects of credit deterioration and interest rate fluctuations on our invested asset portfolio and other assets; incorrectly valuing our investments; changes in accounting standards may impact how we record and report our financial condition and results of operations; the inability of our subsidiaries to pay dividends or make distributions; litigation and regulatory investigations and actions; a significant change in the competitive environment in which we operate; the loss of key personnel or sales force leaders; any acquisition or investment in businesses that do not perform as we expect or are difficult to integrate; and fluctuations in the market price of our common stock or Canadian currency exchange rates. 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 provider of financial services to middle-income households in the United States and Canada. Primerica educates clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, underwritten by the Company , and mutual funds, annuities and other financial products, distributed primarily on behalf of third parties. Primerica insured over 5.5 million lives and had approximately 2.6 million client investment accounts at December 31, 2020. Through its insurance company subsidiaries, Primerica was the #2 issuer of Term Life insurance coverage in North America in 2019. Primerica stock is included in the S&P MidCap 400 and the Russell 1000 stock indices and is traded on The New York Stock Exchange under the symbol “PRI”.

 
 
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
   
    (Unaudited)          
    December 31, 2020     December 31, 2019  
    (In thousands)  
Assets                
Investments:                
Fixed-maturity securities available-for-sale, at fair value   $ 2,464,611     $ 2,356,996  
Fixed-maturity security held-to-maturity, at amortized cost     1,346,350       1,184,370  
Equity securities, at fair value     38,023       40,684  
Trading securities, at fair value     16,300       43,233  
Policy loans     30,199       32,927  
Total investments     3,895,483       3,658,210  
Cash and cash equivalents     547,569       256,876  
Accrued investment income     17,618       17,361  
Reinsurance recoverables     4,273,904       4,169,823  
Deferred policy acquisition costs, net     2,629,644       2,325,750  
Agent balances, due premiums and other receivables     259,448       227,100  
Intangible assets, net     45,275       45,275  
Income taxes     73,290       70,492  
Operating lease right-of-use assets     46,567       47,265  
Other assets     456,967       384,634  
Separate account assets     2,659,520       2,485,745  
Total assets   $ 14,905,285     $ 13,688,531  
                 
Liabilities and Stockholders’ Equity                
Liabilities:                
Future policy benefits   $ 6,790,557     $ 6,446,569  
Unearned and advance premiums     17,136       15,470  
Policy claims and other benefits payable     519,711       339,954  
Other policyholders’ funds     447,765       388,663  
Notes payable     374,415       374,037  
Surplus note     1,345,772       1,183,728  
Income taxes     223,496       209,221  
Operating lease liabilities     52,806       53,487  
Other liabilities     566,068       510,443  
Payable under securities lending     72,154       28,723  
Separate account liabilities     2,659,520       2,485,745  
Total liabilities     13,069,400       12,036,040  
                 
Stockholders’ equity:                
Common stock     393       412  
Paid-in capital            
Retained earnings     1,705,786       1,593,281  
Accumulated other comprehensive income (loss), net of income tax     129,706       58,798  
Total stockholders’ equity     1,835,885       1,652,491  
Total liabilities and stockholders’ equity   $ 14,905,285     $ 13,688,531  
 
 
 
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
                 
    Three months ended December 31,  
    2020     2019  
    (In thousands, except per-share amounts)  
Revenues:                
Direct premiums   $ 750,818     $ 697,060  
Ceded premiums     (397,676 )     (390,364 )
Net premiums     353,142       306,696  
Commissions and fees     204,112       188,302  
Net investment income     22,731       22,418  
Realized investment gains (losses)     2,650       766  
Other, net     15,695       13,778  
Total revenues     598,330       531,960  
                 
Benefits and expenses:                
Benefits and claims     180,945       127,784  
Amortization of deferred policy acquisition costs     53,342       67,279  
Sales commissions     102,588       94,238  
Insurance expenses     49,546       45,991  
Insurance commissions     9,263       6,624  
Interest expense     7,225       7,222  
Other operating expenses     63,781       60,677  
Total benefits and expenses     466,690       409,815  
Income before income taxes     131,640       122,145  
Income taxes     31,556       28,588  
Net income   $ 100,084     $ 93,557  
                 
Earnings per share:                
Basic earnings per share   $ 2.53     $ 2.25  
Diluted earnings per share   $ 2.52     $ 2.24  
                 
Weighted-average shares used in computing earnings per share:                
Basic     39,421       41,471  
Diluted     39,554       41,614  
 
 
 
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
                 
    Year ended December 31,  
    2020     2019  
    (In thousands, except per-share amounts)  
Revenues:                
Direct premiums   $ 2,907,149     $ 2,753,866  
Ceded premiums     (1,580,766 )     (1,569,729 )
Net premiums     1,326,383       1,184,137  
Commissions and fees     751,271       713,804  
Net investment income     83,814       94,073  
Realized investment gains (losses)     (4,996 )     4,965  
Other, net     61,069       55,525  
Total revenues     2,217,541       2,052,504  
                 
Benefits and expenses:                
Benefits and claims     615,569       493,820  
Amortization of deferred policy acquisition costs     224,321       254,552  
Sales commissions     376,636       357,198  
Insurance expenses     188,117       178,817  
Insurance commissions     32,134       25,051  
Interest expense     28,839       28,811  
Other operating expenses     245,195       237,144  
Total benefits and expenses     1,710,811       1,575,393  
Income before income taxes     506,730       477,111  
Income taxes     120,566       110,720  
Net income   $ 386,164     $ 366,391  
                 
Earnings per share:                
Basic earnings per share   $ 9.60     $ 8.65  
Diluted earnings per share   $ 9.57     $ 8.62  
                 
Shares used in computing earnings per share:                
Basic     40,065       42,181  
Diluted     40,185       42,314  
 
 
 
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Adjusted Operating Results Reconciliation
(Unaudited – in thousands, except per share amounts)
                         
    Three months ended December 31,          
    2020     2019     % Change  
Total revenues   $ 598,330     $ 531,960       12 %
Less: Realized investment gains (losses)     2,650       766          
Less: 10% deposit asset MTM included in NII     960       254          
Adjusted operating revenues   $ 594,720     $ 530,940       12 %
                         
Income before income taxes   $ 131,640     $ 122,145       8 %
Less: Realized investment gains (losses)     2,650       766          
Less: 10% deposit asset MTM included in NII     960       254          
Adjusted operating income before income taxes   $ 128,030     $ 121,125       6 %
                         
Net income   $ 100,084     $ 93,557       7 %
Less: Realized investment gains (losses)     2,650       766          
Less: 10% deposit asset MTM included in NII     960       254          
Less: Tax impact of preceding items     (865 )     (239 )        
Adjusted net operating income   $ 97,339     $ 92,776       5 %
                         
Diluted earnings per share (1)   $ 2.52     $ 2.24       13 %
Less: Net after-tax impact of operating adjustments     0.07       0.02          
Diluted adjusted operating earnings per share (1)   $ 2.45     $ 2.22       10 %
————————————————————————
(1)   Percentage change in earnings per share is calculated prior to rounding per share amounts.
 
 
 
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Adjusted Operating Results Reconciliation
(Unaudited – in thousands, except per share amounts)
                         
    Year ended December 31,          
    2020     2019     % Change  
Total revenues   $ 2,217,541     $ 2,052,504       8 %
Less: Realized investment gains (losses)     (4,996 )     4,965          
Less: 10% deposit asset MTM included in net investment income (NII)     (1,995 )     5,382          
Adjusted operating revenues   $ 2,224,532     $ 2,042,157       9 %
                         
Income before income taxes   $ 506,730     $ 477,111       6 %
Less: Realized investment gains (losses)     (4,996 )     4,965          
Less: 10% deposit asset MTM included in NII     (1,995 )     5,382          
Adjusted operating income before income taxes   $ 513,721     $ 466,764       10 %
                         
Net income   $ 386,164     $ 366,391       5 %
Less: Realized investment gains (losses)     (4,996 )     4,965          
Less: 10% deposit asset MTM included in NII     (1,995 )     5,382          
Less: Tax impact of preceding items     1,571       (2,387 )        
Adjusted net operating income   $ 391,584     $ 358,431       9 %
                         
Diluted earnings per share (1)   $ 9.57     $ 8.62       11 %
Less: Net after-tax impact of operating adjustments     (0.13 )     0.19          
Diluted adjusted operating earnings per share (1)   $ 9.70     $ 8.43       15 %
————————————————————————
(1)   Percentage change in earnings per share is calculated prior to rounding per share amounts.
 
 
 
 
 
TERM LIFE INSURANCE SEGMENT
Adjusted Premiums Reconciliation
(Unaudited – in thousands)
                         
    Three months ended December 31,          
    2020     2019     % Change  
Direct premiums   $ 745,559     $ 691,546       8 %
Less: Premiums ceded to IPO coinsurers     253,039       264,786          
Adjusted direct premiums   $ 492,520     $ 426,760       15 %
                         
Ceded premiums   $ (395,767 )   $ (388,237 )        
Less: Premiums ceded to IPO coinsurers     (253,039 )     (264,786 )        
Other ceded premiums   $ (142,728 )   $ (123,451 )        
                         
Net premiums   $ 349,792     $ 303,309       15 %
                         
 
 
 
CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT
Adjusted Operating Results Reconciliation
(Unaudited – in thousands)
                         
    Three months ended December 31,          
    2020     2019     % Change  
Total revenues   $ 36,022     $ 30,270       19 %
Less: Realized investment gains (losses)     2,650       766          
Less: 10% deposit asset MTM included in NII     960       254          
Adjusted operating revenues   $ 32,412     $ 29,250       11 %
                         
Loss before income taxes   $ (14,514 )   $ (12,841 )     13 %
Less: Realized investment gains (losses)     2,650       766          
Less: 10% deposit asset MTM included in NII     960       254          
Adjusted operating loss before income taxes   $ (18,124 )   $ (13,861 )     31 %
 
 
 
PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders’ Equity Reconciliation
(Unaudited – in thousands)
                         
    December 31, 2020     December 31, 2019     % Change  
Stockholders’ equity   $ 1,835,885     $ 1,652,491       11 %
Less: Unrealized net investment gains (losses) recorded in stockholders’ equity, net of income tax     128,128       64,563          
Adjusted stockholders’ equity   $ 1,707,757     $ 1,587,928       8 %
 
 
 

 
View source version on businesswire.com:https://www.businesswire.com/news/home/20210209006113/en/
CONTACT: Investor Contact:
Nicole Russell
470-564-6663
Email:investorrelations@primerica.comMedia Contact:
Keith Hancock
470-564-6328
Email:Keith.Hancock@Primerica.com
KEYWORD: GEORGIA UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: FINANCE CONSULTING PROFESSIONAL SERVICES OTHER PROFESSIONAL SERVICES INSURANCE
SOURCE: Primerica, Inc.
Copyright Business Wire 2021.
PUB: 02/09/2021 04:15 PM/DISC: 02/09/2021 04:15 PM
http://www.businesswire.com/news/home/20210209006113/en