Primerica (PRI) Q1 2025 Earnings Call May 08, 2025 10:00 AM ET Speaker0 Greetings, and welcome to Primerica's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Nicole Russell, SVP, Investor Relations. Thank you. You may begin. Speaker1 Thank you, operator, and good morning, everyo ...

Primerica (PRI) came out with quarterly earnings of $5.02 per share, beating the Zacks Consensus Estimate of $4.77 per share. This compares to earnings of $3.91 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 5.24%. A quarter ago, it was expected that this life insurance and financial products company would post earnings of $4.96 per share when it actually produced earnings of $5.03, delivering a surprise of 1.41%.Over the las ...

Analysts on Wall Street project that Primerica (PRI) will announce quarterly earnings of $4.77 per share in its forthcoming report, representing an increase of 22% year over year. Revenues are projected to reach $787.37 million, increasing 6.2% from the same quarter last year.Over the last 30 days, there has been a downward revision of 0.6% in the consensus EPS estimate for the quarter, leading to its current level. This signifies the covering analysts' collective reconsideration of their initial forecasts ...

Group 1 - Primerica (PRI) is classified as a life insurance company, which influences its regulation, strength ratings, and market perception [1] - The company has a long history of investment, with over 20 years of experience in managing personal and family funds [1] Group 2 - No stock, option, or similar derivative positions are held by the analyst in any of the companies mentioned, but there is a potential for initiating a short position in PRI within the next 72 hours [2] - The article expresses the author's opinions and is not influenced by any business relationships with the companies mentioned [2]

Sales and Distribution - As of December 31, 2024, approximately 25,493 independent sales representatives were licensed to distribute mutual funds in the U.S. and Canada[88]. - During 2024, Franklin Templeton, Invesco, American Funds, and Fidelity collectively accounted for approximately 98% of mutual fund sales in the U.S.[90]. - The Lifetime Investment Program requires clients to have at least $25,000 of investable assets and utilizes 12 unaffiliated investment advisers as of December 31, 2024[97]. - In Canada, sales of segregated funds products underwritten by Primerica Life Canada have significantly decreased due to regulatory changes effective June 2023[101]. - Primerica reached an agreement with Canada Life to distribute new segregated fund contracts, with rollout beginning in early 2025[105]. Revenue Sources - Revenue from Investment and Savings Products in the U.S. is earned through upfront commissions, trailing fees, and account-based revenue[106]. - PFSL Investments Canada earns revenue from PD Funds primarily through fees based on client asset values and sales-based commissions[109]. - The company receives compensation from mortgage lenders based on a fixed percentage of the loan amount for mortgage brokering services provided[113]. - The company offers a Primerica-branded prepaid legal services program on a subscription basis, generating commissions from sales and renewals[114]. - The company has a contractual arrangement with Answer Financial, receiving commissions based on completed auto and homeowners' insurance placements and policy renewals[115]. - The company receives commissions from referrals to Vivint's home services, paying independent sales representatives a referral fee for each subscription[116]. - In Canada, the company has a referral program for mortgage loan products, earning referral fees based on the funded loan amount[118]. Financial Performance - Total revenues for 2024 increased by 12% to $3,089,143,000 compared to $2,748,507,000 in 2023, driven by higher commissions and fees, net premiums, and net investment income[408]. - Net premiums rose by 4% to $1,729,171,000 in 2024 from $1,660,314,000 in 2023, reflecting growth in the Term Life Insurance segment[408]. - Commissions and fees surged by 21% to $1,082,889,000 in 2024, up from $892,853,000 in 2023, indicating strong performance in the Investment and Savings Products segment[408]. - Net investment income increased by 14% to $155,501,000 in 2024, compared to $135,837,000 in 2023, highlighting improved returns on invested assets[408]. - Total benefits and expenses rose by 9% to $2,149,896,000 in 2024, primarily due to higher sales commissions and amortization of deferred acquisition costs (DAC)[411]. - Net income attributable to Primerica, Inc. decreased by 18% to $470,518,000 in 2024 from $576,601,000 in 2023, reflecting the loss from discontinued operations[408]. Employee and Management - As of December 31, 2024, the company employed 2,874 individuals, with 2,531 in the U.S. and 343 in Canada[174]. - The diversity of U.S. employees includes 50.6% female representation in executive management and 61.8% female representation in non-executive management[174]. - The employee retention rate for 2024 is 91%, indicating high employee satisfaction[180]. - Approximately 720 employees participate in an annual incentive program for 2024, which is tied to both corporate performance and individual achievement[178]. - The company has been recognized as a Top Workplace for eleven consecutive years from 2014 through 2024 by the Atlanta Journal-Constitution[180]. - The company was awarded by Forbes as one of America's Best Midsize Employers in 2024[180]. Regulatory Compliance - PFS Investments is registered and regulated in all 50 U.S. states and certain territories, ensuring compliance with various financial regulations[146]. - PFS Investments is required to file quarterly reports and annual audited financial statements with the SEC, adhering to minimum net capital requirements[148]. - The independent sales representatives in Canada must be registered in their respective provinces and territories, subject to regulation by the Autorité des marchés financiers and CIRO[156]. - Primerica Mortgage must hold an active mortgage company license in each state where mortgage products are offered, with independent sales representatives also needing individual licenses[161]. - The company’s U.S. insurance subsidiaries are required to conduct annual analyses of the sufficiency of their life insurance statutory reserves[135]. - The company’s U.S. insurance subsidiaries must submit an annual risk-based capital report to state regulators based on four categories of risk[138]. - OSFI has not requested Primerica Life Canada to enter into any prudential agreement nor issued any order against it[139]. - The company’s insurance subsidiaries are subject to extensive laws and regulations that may become more restrictive, potentially affecting operations[121]. Investment Strategy - The company maintains a conservative investment strategy, with no issuer concentrations outside the U.S. or Canada exceeding 5% of the fair value of the invested asset portfolio[440]. - As of December 31, 2024, the total investments in fixed-maturity securities amounted to $3,155,494, an increase of 6.8% from $2,953,595 in 2023[448]. - The distribution of fixed-maturity securities by rating shows that 42% are rated BBB, up from 39% in 2023, while AAA rated securities increased from 19% to 20%[448]. - Deferred policy acquisition costs increased by 7% to $3,680,430 in 2024, driven by new business not subject to IPO coinsurance agreements[452]. - Future policy benefits decreased by 4% to $6,503,064 in 2024, attributed to higher market observable interest rates used for discounting[453]. Cash Flow and Financing - Cash provided by operating activities increased to $862,088 in 2024 from $692,517 in 2023, primarily due to increased net income and insurance proceeds[459]. - Cash used in investing activities rose to $232,250 in 2024, influenced by timing fluctuations in debt securities and an increase in the investment portfolio size[461]. - Cash used in financing activities increased to $551,141 in 2024, reflecting higher share repurchases and stockholder dividends[463]. - As of December 31, 2024, the company maintained statutory capital and surplus well above regulatory requirements, supporting future growth[465]. - The company has established Vidalia Re as a special purpose financial captive insurance company to manage redundant reserve financing more efficiently[469]. - The company has an unsecured $200.0 million Revolving Credit Facility with a termination date of June 22, 2026[475]. - As of December 31, 2024, no amounts were outstanding under the Revolving Credit Facility, and the company was in compliance with its covenants[476]. - The applicable margins for SOFR rate loans range from 1.000% to 1.625% per annum, while base rate loans range from 0.000% to 0.625% per annum[476]. - The company expects to fully fund future policy benefits from cash flows from general account invested assets, claims reimbursed by reinsurers, and future premiums[477].

Core Insights - Primerica, Inc. (PRI) reported fourth-quarter 2024 adjusted earnings of $5.03 per share, beating the Zacks Consensus Estimate by 1.4% and reflecting an 18.4% increase from the prior-year quarter [2] - The company's total revenue for the quarter increased by 9.1% year over year to $790.1 million, surpassing the consensus mark by 3% [2] - Despite strong performance in Term Life and Investment and Savings Products, shares fell 4.3% post-earnings report due to higher benefits and expenses impacting investor confidence [1] Financial Performance - Net premiums for Q4 2024 were $440.3 million, a 3.8% increase from the previous year, but slightly missed consensus expectations [3] - Net investment income rose 1.3% year over year to $38.1 million, also missing consensus by 1.6% [3] - Commissions and fees increased by 29% year over year to $293.9 million, exceeding consensus by 9.1% [3] - Total benefits and expenses rose 12.5% to $569.6 million, driven by higher amortization of deferred policy acquisition costs and increased operating expenses [4] - Adjusted net operating income increased by 11% year over year to $169.2 million [4] Segment Performance - Term Life Insurance segment saw adjusted operating revenues increase by 4% to $450.6 million, but adjusted operating income before income taxes declined by 1% to $139.5 million, missing consensus by 3.9% [5] - Investment and Savings Products segment reported a 29% increase in adjusted operating revenues to $286 million, with adjusted operating income before income taxes rising 31% to $82 million, beating consensus by 6.5% [6] - Corporate and Other Distributed Products segment's adjusted operating revenues rose 5% to $53.5 million, with an adjusted operating loss of $1 million [7] Capital and Shareholder Returns - As of December 31, 2024, Primerica had cash and cash equivalents of $687.8 million, down from $594.1 million at the end of 2023 [8] - Total assets decreased to $14.6 billion from $15 billion at the end of 2023, while total shareholders' equity increased to $2.3 billion from $2.1 billion [8] - The company repurchased shares worth $44.4 million in Q4 and authorized a new share repurchase program of $450 million [11] - A dividend hike of 16% to $1.04 per share was approved, payable on March 14, 2025 [11] Full-Year Update - For the full year 2024, adjusted operating revenues rose by 10% year over year, and net investment income increased by 14.5% [12] - Diluted EPS for 2024 rose by 20% year over year to $19.84 per share [12]

Financial Data and Key Metrics Changes - Fourth quarter adjusted net operating income increased by 11% year-over-year, while diluted adjusted operating income per share rose by 17% [7] - For the full year, adjusted net operating income increased by 14%, and adjusted operating income per share increased by 20% [7] Business Line Data and Key Metrics Changes - In the term life segment, fourth quarter revenue was $451 million, an increase of 4% year-over-year, with a benefits and claims ratio of 58.6% compared to 58.2% in the prior year [11][12] - The investment and savings product segment saw fourth quarter revenues of $286 million, a 29% increase, driven by favorable equity market conditions and strong demand for investment solutions [18] - The corporate and other distributed product segment incurred a pre-tax adjusted operating loss of $1 million, an improvement from a loss of $5.4 million in the prior year [20] Market Data and Key Metrics Changes - The invested asset portfolio ended the year with a net unrealized loss of $206 million, compared to a loss of $131 million at the end of September [22] - The estimated RBC ratio for Primerica Life was 430% as of December 31, 2024, indicating a strong capital position [26] Company Strategy and Development Direction - The company aims for a 5% growth in adjusted client premiums (ADP) for 2025, considering the runoff of co-insurance and higher lapses [16][30] - There is a focus on improving operational efficiency through technology investments to enhance productivity and client experience [56][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of cost of living pressures on sales, particularly in the life insurance segment, but noted that the investment and savings product segment remains strong [35][49] - The company expects elevated operating expenses in the first quarter due to annual employee-related costs but anticipates normalization in the fourth quarter of 2025 [25][26] Other Important Information - The company returned 79% of earnings to shareholders in 2024, with expectations to maintain a similar ratio in 2025 [93][94] - The technology spend is expected to be a new run rate going forward, aimed at supporting organic growth and improving client interactions [102] Q&A Session Summary Question: Is 5% ADP growth a good run rate? - Management confirmed that the 5% growth guidance considers the runoff of co-insurance and higher lapses [30] Question: What is driving strong ISP sales despite cost of living pressures? - Management noted that larger retirement plan rollovers are less affected by cost of living pressures, contributing to strong ISP sales [36] Question: What is the expected duration of cost of living pressures? - Management indicated that improvement in cost of living is necessary for consumer behavior to normalize, but the timeline is uncertain [49] Question: How does the company plan to increase operational leverage? - Management emphasized ongoing efforts to improve processes through technology to enhance efficiency and productivity [52][56] Question: What is the outlook for term life issued policies? - Management acknowledged that cost of living headwinds have impacted sales but did not quantify the exact effect [108] Question: What are the drivers behind lower ISP redemption rates? - Management explained that a significant portion of accounts are retirement accounts, which typically have lower redemption rates [115]

Earnings Results Quarter Ended December 31, 2024 Forward-Looking Statements This presentation may contain forward-looking statements. Information on factors that could cause results to differ materially from those projected in this presentation is available in our Form 10-K for the year ended December 31, 2023, as may be modified by subsequent Forms 10-Q. These documents are available in the Investor Relations section of our website, https://investors.primerica.com. The forward- looking statements speak as ...

Core Insights - Primerica reported revenue of $790.13 million for the quarter ended December 2024, reflecting a 9.1% increase year-over-year, with EPS at $5.03 compared to $4.25 in the previous year [1] - The revenue exceeded the Zacks Consensus Estimate of $767.24 million by 2.98%, and the EPS also surpassed the consensus estimate of $4.96 by 1.41% [1] Financial Performance Metrics - The Life-Licensed Sales Force at the end of the period was 151,611, slightly below the average estimate of 152,342 [4] - Life Insurance Policies Issued totaled 89,664, compared to the estimated 91,743 [4] - Recruits numbered 95,497, exceeding the average estimate of 93,175 [4] - Average Client Asset Values were reported at $112.3 billion, slightly below the estimate of $112.64 billion [4] - Revenues from Commissions and Fees reached $293.85 million, a 19.1% increase year-over-year, surpassing the estimate of $269.24 million [4] - Revenues from Other, net, were $17.02 million, slightly below the estimate of $17.22 million, with a year-over-year change of 0.5% [4] - Net Premiums revenue was $440.29 million, compared to the estimate of $441.28 million, reflecting a 3.8% increase year-over-year [4] - Adjusted Operating Revenues from Investment and Savings Products were $286.05 million, exceeding the estimate of $263.01 million, with a year-over-year change of 29.1% [4] - Adjusted Operating Revenues from Term Life Insurance were $450.58 million, slightly above the estimate of $447.61 million, with a 4.5% year-over-year increase [4] - Net Investment Income was reported at $38.13 million, below the estimate of $38.76 million [4] - Adjusted Operating Revenues from Corporate and Other Distributed Products were $53.51 million, exceeding the estimate of $52.46 million, with a year-over-year change of 4.6% [4] - Direct Premiums revenue was $854.75 million, slightly below the estimate of $855.99 million, reflecting a 2.5% year-over-year increase [4] Stock Performance - Primerica's shares returned +7% over the past month, outperforming the Zacks S&P 500 composite's +4.2% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Viewpoint - Primerica reported quarterly earnings of $5.03 per share, exceeding the Zacks Consensus Estimate of $4.96 per share, and showing an increase from $4.25 per share a year ago, indicating a positive earnings surprise of 1.41% [1] Group 1: Earnings Performance - The company surpassed consensus EPS estimates three times over the last four quarters, with a revenue of $790.13 million for the quarter ended December 2024, which was 2.98% above the Zacks Consensus Estimate and an increase from $724.29 million year-over-year [2] - Primerica's earnings for the previous quarter were $5.68 per share, significantly higher than the expected $4.78, resulting in a surprise of 18.83% [1][2] Group 2: Stock Performance and Outlook - Primerica shares have increased by approximately 8% since the beginning of the year, outperforming the S&P 500's gain of 3.1% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Group 3: Earnings Estimates and Industry Context - The current consensus EPS estimate for the upcoming quarter is $4.63 on revenues of $775.19 million, and for the current fiscal year, it is $20.45 on revenues of $3.16 billion [7] - The Zacks Industry Rank indicates that the Insurance - Life Insurance sector is currently in the bottom 36% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]