Primerica (PRI) Misses on Q3 Earnings, Beats Revenues - Analyst Blog

Primerica, Inc. (PRI) reported third-quarter 2014 operating income of 76 cents per share, lagging the Zacks Consensus Estimate by 8.43%. However, results improved 3% year over year.

The improvement came on the back of strong growth in recurring life insurance revenues and solid Investment and Savings Products sales.

Though Primerica missed the Zacks Consensus Estimate, the year-over-year improvement was reflected in the stock price as it gained 0.38% and closed at $52.16 per share in the last trading session.

Notably, net income in the reported quarter fell 3.7% to $41.6 million or 75 cents per share from the prior-year quarter. This decline was owing to rise of equity compensation expense related to retirement plan modifications and higher claims incurred in the reported quarter.

Primerica's total revenue increased 9% year over year to $339.5 million driven by solid product performance, increase in total investment and savings product sales,  rise in average client asset values as well as in Term Life net premiums. Revenues also surpassed the Zacks Consensus Estimate of $335 million.

Net premiums in the reported quarter increased 9.9% year over year due to strong growth in Term Life net premiums.

Total benefits and expense increased 11.1% year over year to $275.2 million owing to rise in benefits and claims, amortization of deferred policy acquisition costs, sales commissions, insurance expenses, insurance commissions and other operating expenses.

The life-licensed sales force size grew 4% to 97,966 as of Sep 30, 2014. The rise came on the back of lower percentage of non-renewals and terminations with respect to size of the sales force.

Segment Details

The Term Life Insurance segment reported operating revenues of $193.6 million, up 9% year over year due to rise in net premiums. In the third quarter, Term Life Insurance policies issued grew 2% to 55,146 from 53,997.

Operating income before income taxes of Term Life Insurance declined 8% to $45.9 million in the quarter, as solid growth in net premiums was more than offset by rise of equity compensation expense and significantly higher claims incurred.

The Investment and Savings Products segment reported operating revenues of $129.3 million, up 13% from the year-ago quarter. In the third quarter, Investment and Savings Products sales grew 10% to $1.38 billion, primarily due to higher retail mutual funds and variable annuity sales, coupled with favorable market conditions and introduction of new products.

Operating income before income taxes of Investment and Savings Products increased 17% year over year to $36.9 million. The upside came on the back of rise in total product sales and average client asset values.

The Corporate and Other Distributed Products segment reported operating revenues of $16.6 million, down 9% from the year-ago quarter. The decline resulted from a fall in net investment income due to lower portfolio yields as well as lower return on the deposit asset supporting a coinsurance agreement.

Financial Update

Primerica exited the third quarter with cash and cash equivalents of $164.9 million, up 10.6% from 2013-end level.

Total assets as of Sep 30, 2014 came in at $10.7 billion, up nearly 4% from 2013-end.

Shareholders' equity rose 5.9% to $1.3 billion from the end of fourth-quarter 2013.

Dividend and Share Buyback  

On Jul 21, 2014, Primerica completed redundant reserve financing transaction, following which the company will receive $68.0 million of ordinary dividend payment from Primerica Life Insurance Company (PLIC).

As of Sep 30, 2014, PLIC's statutory risk-based capital (RBC) ratio increased to 540%. On an ordinary dividend payment of $165 million from PLIC to Primerica, Inc. in the fourth quarter, the RBC ratio is expected to be in the range of 400%.

In the reported quarter, the company repurchased 0.62 million shares worth $30.5 million. With this, Primerica has bought back 1.4 million shares worth $65.5 million to date. It further targets to repurchase shares worth $150 million by the year-end.

Zacks Rank

Primerica currently has a Zacks Rank #4 (Sell).

Performance of Other Life Insurers

Reinsurance Group of America Inc. (RGA) reported third-quarter 2014 operating income of $2.31 per share, surpassing the Zacks Consensus Estimate by 10.5% and improving 7.9% year over year.

Symetra Financial Corporation's (SYA) third-quarter 2014 adjusted operating income of 39 cents per share lagged the Zacks Consensus Estimate by 11.4% and declined 4.9% year over year.

StanCorp Financial Group Inc. (SFG) posted third-quarter 2014 operating net earnings of $1.73 per share, which outperformed the Zacks Consensus Estimate by 31% and improved 19.3% from the prior-year quarter.