Primerica, Inc. PRI reported second-quarter 2015 operating income of 93 cents per share, in line with the Zacks Consensus Estimate. Results, however, improved 5.7% year over year.
The bottom-line growth was driven by strong performances at the Term Life segment (on the back of solid policy persistency, higher net premiums and increase in policies issued) and at the Investment and Savings Products segment (driven by higher sales and average client asset values). Moreover, lower share count via share buybacks provided additional support..
Including net after-tax impact of operating adjustments of a penny, net income came in at 94 cents per share, up 5.6% year over year.
Behind the Headlines
Primerica’s operating revenues increased 6% year over year to $350.3 million on the back of solid performance by Term Life segment. Revenues also surpassed the Zacks Consensus Estimate of $349 million.
Total benefits and expenses increased 7.3% year over year to $274 million owing to a rise in benefits and claims, amortization of deferred policy acquisition costs, sales commissions, insurance expenses, and interest expenses.
The life-licensed sales force size grew 5% year over year to 101,008 as of Jun 30, 2015.
Segment Details
The Term Life Insurance segment reported operating revenues of $201.4 million, up 9.3% year over year due to a rise in net premiums and higher net investment income.
Pretax operating income increased 4% to $57.3 million on solid growth in net premiums. However, higher benefits and claims expenses partially limited the upside.
The Investment and Savings Products segment reported operating revenues of $135.1 million, up 5.4% from the year-ago quarter. Investment and Savings Products sales as well as average client asset values grew 7% each during the quarter. Moreover, account-based revenues increased 10% due to the addition of a mutual fund provider.
Pretax operating income increased 4.7% year over year to $37.7 million. The upside came from higher sales and an increase in average client asset values.
The Corporate and Other Distributed Products segment reported operating revenues of $13.8 million, down 22.7% from the year-ago quarter due to declining net investment income assigned to this segment.
Pretax operating loss of $18.2 million widened from $15.4 million incurred in the year-earlier quarter.
Financial Update
Primerica exited the quarter with cash and investments of $2.29 billion, up from $2.26 billion at the end of 2014.
Notes payable totaled $374.6 million, almost flat with the 2014-end level.
Total assets as of Jun 30, 2015 came in at $10.78 billion, up from $10.73 billion at year-end 2014.
Shareholders’ equity declined 3.8% from the 2014-end level to $1.20 billion.
As of Jun 30, 2015, PLIC’s statutory risk-based capital (RBC) ratio increased to more than 430%.
Share Buyback Update
Primerica spent $100.3 million to buy back 2.2 million shares from April through Aug 5 2015 following the company’s announcement of accelerating its share repurchase activity on Jun 4, 2015.
Zacks Rank
Primerica currently holds a Zacks Rank #2 (Buy).
Performance of Other Life Insurers
The bottom line at StanCorp Financial Group Inc. SFG and American Equity Investment Life Holding Co. AEL surpassed their respective Zacks Consensus Estimate, while Genworth Financial, Inc.’s GNW earnings missed the same in the second quarter.
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