Primerica CEO Discusses Q2 2012 Results - Earnings Call Transcript

Primerica (PRI)

Q2 2012 Earnings Call

August 8, 2012 09:00 AM ET


Kathryn Kieser - SVP, IR

Rick Williams - Chairman and Co-CEO

John Addison - Chairman, Primerica Distribution and Co-CEO

Alison Rand - CFO


Paul Sarran - Evercore Partners

Jeff Schuman - KBW

Steven Schwartz - Raymond James

Mark Hughes - SunTrust

Dan Bergman - UBS

Sean Dargan - Macquarie



Good morning and welcome to the Primerica Second Quarter Financial Results Conference Call. (Operator Instructions). I would now like to turn the conference over to Kathryn Kieser, Senior Vice President of Investor Relations. Please go ahead.

Kathryn Kieser

Good morning everyone. Thank you for joining today’s Primerica’s Results for the second quarter 2012. Yesterday afternoon we issued a press release reporting financial results for the quarter ended June 30, 2012. A copy of the press release is available on the investor relation section of our website at With us on the call this morning are Rick Williams, our Chairman and Co-CEO, John Addison, Chairman of Primerica Distribution, Co-CEO, and Alison Rand, our CFO.

We referenced certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures are provided because management uses them to making financial, operating and planning decisions and in evaluating the company’s performance. We believe these measures will assist you in assessing the company’s underlying performance for the periods been reported. These non-GAAP measures have limitations and reconciliations between non-GAAP and GAAP financial measures are attached to our press release. You can see our GAAP results on page three of the presentation. On today’s call we will make forward-looking statements in accordance with the Safe Harbor Provisions of the Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that may project, indicate or imply future results, events, performance or achievements and may contain words that is expect, intend, claim, anticipate, estimate and believe or similar words derived from those words.

They are not guarantees on such statements involve risk and uncertainties that could cause actual results to differ materially from these statements. For a discussion of these risks please read the risk factors contained in our Form 10K for the year as of December 30, 2011.

This morning’s call is been recorded and webcast live on the internet. The webcast and corresponding slides will be available on the investor relations section of our website for at least 30 days after the presentation. After the prepared remarks we will open the call to questions from the dial-in participants. Now I will turn the call over to Rick.

Rick Williams

Thank you Kathryn and good morning everyone. Welcome to Primerica’s second quarter 2012 earnings call. Beginning of slide four, you can see our strong second quarter results. Operating revenues increased by 9% to 296.2 million and net operating income increased 18% to 45.5 million over the prior year period. Net operating income for diluted share increased 40% to $0.71 from a year ago expecting strong performance in the term segment, lower insurance and operating expense levels due to year items. The execution of our first Redundant Reserve Financing and lower invested assets following our recent share repurchases.

Net operating income, return on adjusted stockholders equity increased to 14.8% from 11.6% in the year ago period was up from 13.5% at the end of the first quarter. This quarter's return on equity is the highest we have achieved since becoming a public company in 2010. Our investment and savings product sales levels were consistent with the first quarter of 2012. Sales increased 5% in the second quarter from the year ago quarter primarily reflecting new product sales growth, including 103 million of fixed indexed annuity sales and 40 million of managed account sales for the second quarter.

Managed account client asset values were 375 million at the end of the second quarter. Variable annuity sales continued to benefit from a slightly elevated rate of clients transferring their older variable annuity contracts to the current primarily four variable annuity that offers an attractive looking benefit. Although client transfers were down from a year ago. Our total client asset values declined 2% to 35.3 billion relative to a year ago in-line with the U.S. Canadian markets. Sequentially, investment savings product sales were flat with the first quarter reflecting strong prior quarter retirement saving sales typical of the first quarter trends during IRA and RRSP seasons.

Total client asset values declined 3% at the end of the first quarter primarily reflecting market conditions. In our term life business, life insurance issue policies increased by 1% in the second quarter, sequentially term life insurance policies issued increased 8% compared with the first quarter of 2012 largely reflecting typical seasonality. Our average policy issued premium of $790 in the second quarter remained consistent with both the first quarter of 2012 and the second quarter of last year.

In the second quarter, we further enhanced shareholder value by repurchasing 5.7 million shares of our common stock for 150 million. This repurchase completed the redeployment of 350 million of extraordinary dividends from the life company much of which was approved in conjunction with our recent redundant reserve financing. During the quarter we also increased our stockholder dividend 5/10ths per share as part of a longer term goal to increase our dividend yield to be more in-line with our peers. In July, we are able to complete another step in our capital plan by successfully executing a 375 million in our overall debt offering of 10 year senior notes at an annual interest rate of 4.75%.

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