Primerica Reports Third Quarter 2016 Results

Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended September 30, 2016. In the third quarter, total revenues and operating revenues both increased 8% to $383.6 million and $383.7 million, respectively, and net income grew 18% (17% on an operating basis) to $58.0 million compared with the third quarter of 2015. Net earnings per diluted share (EPS) and net operating earnings per diluted share both increased 25% to $1.22 compared with $0.98 in the third quarter of 2015, driven by earnings growth and ongoing share repurchases. ROE expanded to 19.1% and operating ROAE expanded to 20.3% in the current period versus 16.8% and 17.7%, respectively, in the prior year period.

Third quarter results reflect the continued strength in the Term Life business with ongoing growth in policies issued. Net premiums grew 12% year-over-year and claims experience was below historical levels. Investment and Savings Products (ISP) performance improved reflecting higher average client asset values, partially offset by slightly lower ISP sales versus the prior year period.

Glenn Williams, Chief Executive Officer said, "Strong core performance combined with recent share repurchases drove 25% growth in EPS and a 230 basis point increase in ROE compared to the third quarter a year ago. We delivered double-digit increases in the size of our life insurance licensed sales force and term life insurance policies issued year-over-year. Our sales force leadership, successful execution of building distribution and significant capital deployment position us to continue to deliver value for our stakeholders."

Distribution & Segment Results
 
Distribution Results  
       

Q3 2016
      Q3 2015      

% Change
      Q2 2016      

% Change
Life Licensed Sales Force (1) 115,345 104,702 10 % 112,365 3 %
Recruits 73,706 65,945 12 % 65,273 13 %
New Life-Licensed Representatives 11,739 11,160 5 % 12,171 (4 )%
Life Insurance Policies Issued 75,374 66,658 13 % 77,384 (3 )%
Life Productivity (2) 0.22 0.22 * 0.23 *
ISP Product Sales ($ billions) $ 1.34 $ 1.37 (2 )% $ 1.47 (9 )%
Average Client Asset Values ($ billions) $ 50.68 $ 47.96 6 % $ 48.94 4 %
 
(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
        Q3 2016       Q3 2015      

% Change
        Q2 2016      

% Change
($ in thousands)
Operating Revenues: (1)
Term Life Insurance $ 222,598 $ 197,204 13 % $ 210,559 6 %
Investment and Savings Products 130,080 128,597 1 % 132,608 (2 )%
Corporate and Other Distributed Products   30,983     30,167   3 %   32,387   (4 )%
Total operating revenues (1) $ 383,661   $ 355,968   8 % $ 375,553   2 %
 
Operating Income (loss) before income taxes: (1)
Term Life Insurance $ 58,137 $ 46,519 25 % $ 58,017 *
Investment and Savings Products 35,760 34,811 3 % 36,065 (1 )%
Corporate and Other Distributed Products   (5,425 )   (6,118 ) (11 )%   (5,642 ) (4 )%
Total operating income before income taxes (1) $ 88,472   $ 75,212   18 % $ 88,440   *
 

(1) See the Non-GAAP Financial Measures section and the segment Operating Results Reconciliations at the end of this release for additional information.
* Less than 1%.
 

Life Insurance Licensed Sales Force. Strong recruiting and licensing trends in recent quarters drove 10% year-over-year growth in the life insurance licensed sales force to 115,345 representatives at the end of the third quarter. Recruiting of new representatives increased 12% and new life insurance licenses grew 5% from the year ago period. On a sequential quarter basis, recruiting increased 13% and new life insurance licenses declined 4% from the second quarter.

Term Life Insurance. In the third quarter of 2016, term life insurance policies issued increased 13% year-over-year driven by the larger life insurance licensed sales force and productivity of 0.22 policies per life insurance licensed representative per month, which continues to be at the top end of the historical productivity range. Term Life revenues increased 13% to $222.6 million compared with the year ago period driven by a 12% increase in net premiums from increased levels of issued policies in recent years and the growth in the in force business not subject to IPO-related coinsurance agreements. Income before income taxes grew 25% to $58.1 million year-over-year. Claims experience during the third quarter was approximately $3 million below historical levels and led to benefits and claims growing slower than net premiums. Persistency experience was slightly lower versus the prior year period which also contributed to slower growth in benefits and claims, but led to higher growth in deferred acquisition costs (DAC) amortization relative to net premiums. Insurance expenses grew year-over-year largely due to $2.3 million of higher technology spending to enhance our sales force support system's mobile application and accommodate increased capacity.

Investment and Savings Products (ISP). In the third quarter, ISP revenues increased 1% to $130.1 million and income before income taxes grew 3% to $35.8 million compared with the year ago period. Results reflect a 2% year-over-year decline in product sales to $1.34 billion as U.S. retail mutual fund sales increased 9% and fixed indexed annuities sales increased 32% while variable annuity sales declined 22%, consistent with industry trends. Average client asset values increased 6% to a record $50.7 billion and account-based revenue increased 4% versus the prior year period. Positive Canadian market performance and lower segregated fund redemptions in the third quarter of 2016 led to a $0.8 million deceleration of DAC amortization in the period, and a year-over-year improvement of $1.7 million. ISP expenses increased from the year ago period largely due to $1.7 million of implementation costs related to the Department of Labor's (DOL) Fiduciary Rule in the third quarter.

Corporate and Other Distributed Products (C&O) . The C&O segment operating revenues were $31.0 million, and operating losses before income taxes were $5.4 million in the third quarter of 2016. Results were impacted by a modest increase in insurance and other expenses primarily reflecting higher employee-related expenses partially offset by a $1.5 million negotiated reduction in the interest expense on an IPO-related reinsurance agreement. Net investment income increased $0.3 million as the prior year period was impacted by a negative mark-to-market on the deposit asset backing an IPO-related reinsurance agreement. Net unrealized gains increased slightly to $110.4 million at quarter-end from $105.2 million at June 30, 2016.

Capital

Primerica repurchased $41.0 million or approximately 743,000 shares of its common stock in the third quarter and repurchased $131.5 million, or 2.7 million shares year-to-date through September. Primerica Life Insurance Company's statutory risk-based capital (RBC) ratio was estimated to be approximately 430% as of September 30, 2016.

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