Primerica Reports First Quarter 2021 Results

Primerica, Inc. (NYSE: PRI) today announced financial results for the quarter ended March 31, 2021. Total revenues of $637.7 million increased 21% compared to the first quarter of 2020. Net income of $97.9 million increased 35%, while earnings per diluted share of $2.46 increased 41% compared to the same quarter last year. As previously disclosed, last year’s first quarter included pre-tax realized losses on the invested asset portfolio of $10.0 million and mark-to-market adjustments on the reinsurance deposit asset of $6.4 million, driven by a sharp market downturn at the onset of the COVID pandemic. ROE was 21.1% for the current quarter compared to 18.2% in the first quarter of 2020.

Adjusted operating revenues, adjusted net operating income and diluted adjusted operating earnings per share, which are non-GAAP financial measures, exclude the impact of realized gains/losses and the mark-to-market adjustment on the reinsurance deposit asset. A reconciliation of non-GAAP to GAAP financial measures is included at the end of this release.

Adjusted operating revenues were $636.7 million, increasing 18% compared to the first quarter of 2020. Adjusted net operating income of $97.1 million increased 14%, while diluted adjusted operating earnings per share of $2.44 increased 19% compared to the same quarter last year. ROAE was 22.2% during the first quarter of 2021 and 21.8% during the first quarter of 2020.

First quarter results reflect strong performance in the Investment and Savings Products (ISP) segment and the continued benefit of increased sales and heightened persistency in the Term Life segment. ISP sales were particularly robust at $2.9 billion, increasing 27% year-over-year due to increased demand for mutual funds and managed accounts. Demand for variable annuities also improved, increasing 7% compared to a robust first quarter in 2020. The Term Life segment continues to see strong demand for protection products, which directly impacts sales and persistency as well as higher claims as a result of the pandemic. During the quarter, the Company incurred approximately $21 million in COVID-related death claims, net of reinsurance. The onset of COVID in March 2020 had no significant impact on last year’s first quarter financial results.

“Our exceptional first quarter results reflect the strength of our business and the continuing momentum created by our ability to meet the financial needs of middle-market families,” said Glenn Williams, Chief Executive Officer. “The impact of COVID has heightened consumer awareness concerning their finances, helping to drive record production results for Primerica, including in recruiting, issued life policies and investment sales.”

First Quarter Distribution & Segment Results

Distribution Results
		Q1 2021			Q1 2020			% Change
Life-Licensed Sales Force (1)			132,030			130,095		1	%
Recruits			94,633			84,762		12	%
New Life-Licensed Representatives			10,833			10,599		2	%
Life Insurance Policies Issued			82,667			71,318		16	%
Life Productivity (2)			0.21			0.18		*
ISP Product Sales ($ billions)		$	2.85		$	2.25		27	%
Average Client Asset Values ($ billions)		$	83.13		$	66.59		25	%
Closed U.S. Mortgage Volume ($ million brokered)		$	262.3		$	12.9		*

_________________________
(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
		Q1 2021				Q1 2020				% Change
		($ in thousands)
Adjusted Operating Revenues:
Term Life Insurance		$	382,027			$	327,746			17	%
Investment and Savings Products			223,422				185,032			21	%
Corporate and Other Distributed Products (1)			31,289				28,567			10	%
Total adjusted operating revenues (1)		$	636,738			$	541,345			18	%
Adjusted Operating Income (Loss) before income taxes:
Term Life Insurance		$	88,236			$	82,892			6	%
Investment and Savings Products			63,363				47,700			33	%
Corporate and Other Distributed Products (1)			(24,263	)			(19,637	)		24	%
Total adjusted operating income before income taxes (1)		$	127,336			$	110,955			15	%

_________________________
(1)	See the Non-GAAP Financial Measures section and the Adjusted Operating Results reconciliation tables at the end of this release for additional information.

Life Insurance Licensed Sales Force
Recruiting activity remained strong during the first quarter, with a total of more than 94 thousand individuals recruited, an increase of 12% year-over-year. The licensing process remained challenged as social-distancing measures limited pre-licensing class access and states continued to work through COVID-related backlogs. As a result, the Company saw only a 2% increase in licensing.

At March 31, 2021, the Company had a total of 132,030 independent life-licensed representatives, including an estimated 2,400 individuals who we expect will not pursue the steps necessary to convert a COVID-related temporary license to a permanent license or renew a license with a COVID-related extended renewal date. Excluding these individuals from the quarter-end count, the total number of life-licensed representatives was largely unchanged year-over-year.

Term Life Insurance
Clients continue to prioritize protection for their families, which amplifies demand for our products. During the quarter, the Company issued nearly 83 thousand life insurance policies, an increase of 16% compared to the first quarter of 2020. This increased demand led productivity during the quarter to 0.21 policies per life-licensed representative per month compared to 0.18 in the prior year’s first quarter.

Revenues of $382.0 million increased 17% compared to the prior year’s first quarter, driven largely by a 16% increase in adjusted direct premiums. Pre-tax income of $88.2 million increased 6% year-over-year. Higher sales, along with favorable persistency trends, continued to positively impact adjusted direct premiums, adding an estimated $9 million to pre-tax operating income during the first quarter of 2021. Strong persistency also led to $12 million less DAC amortization, partly offset by $7 million higher benefit reserve increases. The Company also incurred an estimated $21 million in COVID-related death claims, net of reinsurance, in line with expectations.

Investment and Savings Products
Total product sales during the quarter were $2.9 billion, a 27% increase year-over-year. The primary sales drivers were mutual funds and managed accounts, which increased 40% and 34%, respectively, while annuities were up slightly compared to last year’s strong first quarter results. Net client inflows doubled from $543 million in the prior year period to $1.1 billion in the first quarter of 2021. Client asset values ended the quarter at $85.9 billion, an increase of 45% year-over-year, reflecting the sharp market downturn in March 2020 and strong subsequent market performance combined with nearly $3 billion of net client inflows over the last 12 months.

Revenues of $223.4 million during the first quarter increased 21% compared to the same quarter in 2020, while pre-tax income of $63.4 million increased 33%. Sales-based revenues increased 21%, slightly less than the 26% increase in revenue generating sales as the mix of products sold continues to shift toward mutual funds which have a lower sales-based commission rate. Asset-based revenues increased 24% year-over-year, in line with the increase in average client asset values. Sales-based commission expenses were largely correlated with sales-based revenues, as were asset-based commission expenses when factoring in Canadian segregated fund commissions that are reflected in insurance commissions and DAC amortization. Canadian segregated fund DAC amortization was lower year-over-year largely due to negative market performance during the first quarter of 2020.

Corporate and Other Distributed Products
During the first quarter of 2021, the segment recorded an operating loss before taxes of $24.3 million compared to $19.6 million in the prior year’s first quarter. Segment revenues increased $2.7 million year-over-year. Higher commissions and fees, including a $4.7 million increase from mortgage sales were offset by a $3.0 million reduction in net investment income due to lower portfolio yields and a higher allocation to the Term Life segment to support the growing block of business. Sales commissions and other operating expenses increased $9.0 million due in part to $3.5 million in mortgage commissions and support costs as well as growth in technology costs and employee-related expenses. Benefits and claims were lower year-over-year due to a $1.6 million loss associated with a reinsurance allowance on a discontinued line of business recognized in the prior year period.

Taxes
The effective tax rate remains relatively unchanged at 23.7% in the first quarter of 2021 compared to 23.4% in the first quarter of 2020.

Capital
As announced on April 19, the Company temporarily suspended its stock repurchase program to fund the planned acquisition of e-TeleQuote. Consequently, there were no shares repurchased during the first quarter of 2021 and the Company does not plan any repurchase activity during the remainder of 2021. Given the Company’s strong capital generation, repurchases are expected to resume in 2022. The Board of Directors approved a dividend of $0.47 per share, payable on June 14, 2021, to stockholders of record on May 21, 2021.

Primerica has a strong balance sheet and continues to be well-capitalized to meet the future funding needs of both Primerica and e-TeleQuote’s businesses. As of March 31, 2021, invested assets and cash at the holding company was $369.4 million, reflecting the liquidity build-up to fund the acquisition of e-TeleQuote. The $100 million distribution from the Company’s Canadian subsidiary is expected to occur just prior to the closing of the e-TeleQuote transaction. Primerica Life Insurance Company’s statutory risk-based capital (RBC) ratio was estimated to be approximately 400% at March 31, 2021.

Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company presents certain non-GAAP financial measures. Specifically, the Company presents adjusted direct premiums, other ceded premiums, adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income, adjusted stockholders’ equity and diluted adjusted operating earnings per share. Adjusted direct premiums and other ceded premiums are net of amounts ceded under coinsurance transactions that were executed concurrent with our initial public offering (the “IPO coinsurance transactions”) for all periods presented. We exclude amounts ceded under the IPO coinsurance transactions in measuring adjusted direct premiums and other ceded premiums to present meaningful comparisons of the actual premiums economically maintained by the Company. Amounts ceded under the IPO coinsurance transactions will continue to decline over time as policies terminate within this block of business. Adjusted operating revenues, adjusted operating income before income taxes, adjusted net operating income and diluted adjusted operating earnings per share exclude the impact of realized investment gains (losses) and fair value mark-to-market (“MTM”) investment adjustments, including credit impairments, for all periods presented. We exclude realized investment gains (losses), including credit impairments, and MTM investment adjustments in measuring these non-GAAP financial measures to eliminate period-over-period fluctuations that may obscure comparisons of operating results due to items such as the timing of recognizing gains (losses) and market pricing variations prior to an invested asset’s maturity or sale that are not directly associated with the Company’s insurance operations. Adjusted stockholders’ equity excludes the impact of net unrealized investment gains (losses) recorded in accumulated other comprehensive income (loss) for all periods presented. We exclude unrealized investment gains (losses) in measuring adjusted stockholders’ equity as unrealized gains (losses) from the Company’s available-for-sale securities are largely caused by market movements in interest rates and credit spreads that do not necessarily correlate with the cash flows we will ultimately realize when an available-for-sale security matures or is sold.

Our definitions of these non-GAAP financial measures may differ from the definitions of similar measures used by other companies. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. Furthermore, management believes that these non-GAAP financial measures may provide users with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of the core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Reconciliations of GAAP to non-GAAP financial measures are attached to this release.

Earnings Webcast Information
Primerica will hold a webcast on Thursday, May 6, 2021 at 10:00 a.m. Eastern, to discuss the quarter’s results. To access the webcast, go to https://investors.primerica.com at least 15 minutes prior to the event to register, download and install any necessary software. A replay of the call will be available for approximately 30 days. This release and a detailed financial supplement will be posted on Primerica’s website.

Forward-Looking Statements
Except for historical information contained in this press release, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from anticipated or projected results. Those risks and uncertainties include, among others, our failure to continue to attract and license new recruits, retain sales representatives or license or maintain the licensing of sales representatives; new laws or regulations that could apply to our distribution model, which could require us to modify our distribution structure; changes to the independent contractor status of sales representatives; our or sales representatives’ violation of or non-compliance with laws and regulations; any failure to protect the confidentiality of client information; differences between our actual experience and our expectations regarding mortality or persistency as reflected in the pricing for our insurance policies; changes in federal, state and provincial legislation or regulation that affects our insurance, investment product, and mortgage businesses; our failure to meet regulatory capital ratios or other minimum capital and surplus requirements; a significant downgrade by a ratings organization; the failure of our reinsurers or reserve financing counterparties to perform their obligations; the failure of our investment products to remain competitive with other investment options or the loss of our relationship with one or more of the companies whose investment products we provide; litigation and regulatory investigations and actions concerning us or sales representatives; heightened standards of conduct or more stringent licensing requirements for sales representatives; inadequate policies and procedures regarding suitability review of client transactions; revocation of our subsidiary’s status as a non-bank custodian; economic down cycles that impact our business, financial condition and results of operations; major public health pandemics, epidemics or outbreaks or other catastrophic events; the failure of our information technology systems, breach of our information security, failure of our business continuity plan or the loss of the Internet; the effects of credit deterioration and interest rate fluctuations on our invested asset portfolio and other assets; incorrectly valuing our investments; changes in accounting standards may impact how we record and report our financial condition and results of operations; the inability of our subsidiaries to pay dividends or make distributions; litigation and regulatory investigations and actions; a significant change in the competitive environment in which we operate; the loss of key personnel or sales force leaders; any acquisition or investment in businesses that do not perform as we expect or are difficult to integrate; and fluctuations in the market price of our common stock or Canadian currency exchange rates. These and other risks and uncertainties affecting us are more fully described in our filings with the Securities and Exchange Commission, which are available in the "Investor Relations" section of our website at http://investors.primerica.com. Primerica assumes no duty to update its forward-looking statements as of any future date.

About Primerica, Inc.
Primerica, Inc., headquartered in Duluth, GA, is a leading provider of financial services to middle-income households in North America. Independent licensed representatives educate Primerica clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. We insured approximately 5.5 million lives and had over 2.6 million client investment accounts at December 31, 2020. Primerica, through its insurance company subsidiaries, was the #2 issuer of Term Life insurance coverage in North America in 2020. Primerica stock is included in the S&P MidCap 400 and the Russell 1000 stock indices and is traded on The New York Stock Exchange under the symbol “PRI.”

PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
		(Unaudited)
		March 31, 2021			December 31, 2020
		(In thousands)
Assets
Investments:
Fixed-maturity securities available-for-sale, at fair value		$	2,538,197		$	2,464,611
Fixed-maturity security held-to-maturity, at amortized cost			1,362,210			1,346,350
Short-term investments available-for-sale, at fair value			50,758			-
Equity securities, at fair value			39,638			38,023
Trading securities, at fair value			35,046			16,300
Policy loans			30,278			30,199
Total investments			4,056,127			3,895,483
Cash and cash equivalents			439,944			547,569
Accrued investment income			19,964			17,618
Reinsurance recoverables			4,345,483			4,273,904
Deferred policy acquisition costs, net			2,712,169			2,629,644
Agent balances, due premiums and other receivables			268,660			259,448
Intangible assets			45,275			45,275
Income taxes			74,683			73,290
Operating lease right-of-use assets			45,318			46,567
Other assets			467,336			456,967
Separate account assets			2,638,901			2,659,520
Total assets		$	15,113,860		$	14,905,285
Liabilities and Stockholders' Equity
Liabilities:
Future policy benefits		$	6,885,115		$	6,790,557
Unearned and advance premiums			18,184			17,136
Policy claims and other benefits payable			526,654			519,711
Other policyholders' funds			475,511			447,765
Notes payable			374,511			374,415
Surplus note			1,361,648			1,345,772
Income taxes			235,234			223,496
Operating lease liabilities			51,521			52,806
Other liabilities			582,198			566,068
Payable under securities lending			87,190			72,154
Separate account liabilities			2,638,901			2,659,520
Total liabilities			13,236,667			13,069,400
Stockholders' equity:
Common stock			394			393
Paid-in capital			8,138			-
Retained earnings			1,785,038			1,705,786
Accumulated other comprehensive income (loss), net of income tax			83,623			129,706
Total stockholders' equity			1,877,193			1,835,885
Total liabilities and stockholders' equity		$	15,113,860		$	14,905,285

PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
		Three months ended March 31,
		2021				2020
		(In thousands, except per-share amounts)
Revenues:
Direct premiums		$	762,227			$	702,637
Ceded premiums			(395,973	)			(386,825	)
Net premiums			366,254				315,812
Commissions and fees			234,044				190,069
Net investment income			20,052				15,420
Realized investment gains (losses)			1,766				(10,030	)
Other, net			15,595				13,665
Total revenues			637,711				524,936
Benefits and expenses:
Benefits and claims			183,789				134,813
Amortization of deferred policy acquisition costs			66,105				70,311
Sales commissions			121,894				96,607
Insurance expenses			48,766				48,709
Insurance commissions			8,740				6,844
Interest expense			7,145				7,192
Other operating expenses			72,963				65,914
Total benefits and expenses			509,402				430,390
Income before income taxes			128,309				94,546
Income taxes			30,437				22,077
Net income		$	97,872			$	72,469
Earnings per share:
Basic earnings per share		$	2.47			$	1.75
Diluted earnings per share		$	2.46			$	1.75
Weighted-average shares used in computing earnings per share:
Basic			39,456				41,131
Diluted			39,581				41,238

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Adjusted Operating Results Reconciliation
(Unaudited – in thousands, except per share amounts)
		Three months ended March 31,
		2021				2020				% Change
Total revenues		$	637,711			$	524,936			21	%
Less: Realized investment gains (losses)			1,766				(10,030	)
Less: 10% deposit asset MTM included in NII			(793	)			(6,379	)
Adjusted operating revenues		$	636,738			$	541,345			18	%
Income before income taxes		$	128,309			$	94,546			36	%
Less: Realized investment gains (losses)			1,766				(10,030	)
Less: 10% deposit asset MTM included in NII			(793	)			(6,379	)
Adjusted operating income before income taxes		$	127,336			$	110,955			15	%
Net income		$	97,872			$	72,469			35	%
Less: Realized investment gains (losses)			1,766				(10,030	)
Less: 10% deposit asset MTM included in NII			(793	)			(6,379	)
Less: Tax impact of preceding items			(231	)			3,832
Adjusted net operating income		$	97,130			$	85,046			14	%
Diluted earnings per share (1)		$	2.46			$	1.75			41	%
Less: Net after-tax impact of operating adjustments			0.02				(0.30	)
Diluted adjusted operating earnings per share (1)		$	2.44			$	2.05			19	%

(1) Percentage change in earnings per share is calculated prior to rounding per share amounts.

TERM LIFE INSURANCE SEGMENT
Adjusted Premiums Reconciliation
(Unaudited – in thousands)
		Three months ended March 31,
		2021				2020				% Change
Direct premiums		$	756,514			$	696,564			9	%
Less: Premiums ceded to IPO coinsurers			249,944				260,076
Adjusted direct premiums		$	506,570			$	436,488			16	%
Ceded premiums		$	(394,550	)		$	(385,232	)
Less: Premiums ceded to IPO coinsurers			(249,944	)			(260,076	)
Other ceded premiums		$	(144,606	)		$	(125,156	)
Net premiums		$	361,964			$	311,332			16	%

CORPORATE AND OTHER DISTRIBUTED PRODUCTS SEGMENT
Adjusted Operating Results Reconciliation
(Unaudited – in thousands)
		Three months ended March 31,
		2021				2020				% Change
Total revenues		$	32,262			$	12,158			165	%
Less: Realized investment gains (losses)			1,766				(10,030	)
Less: 10% deposit asset MTM included in NII			(793	)			(6,379	)
Adjusted operating revenues		$	31,289			$	28,567			10	%
Loss before income taxes		$	(23,290	)		$	(36,046	)		(35	)%
Less: Realized investment gains (losses)			1,766				(10,030	)
Less: 10% deposit asset MTM included in NII			(793	)			(6,379	)
Adjusted operating loss before income taxes		$	(24,263	)		$	(19,637	)		24	%

PRIMERICA, INC. AND SUBSIDIARIES
Adjusted Stockholders' Equity Reconciliation
(Unaudited – in thousands)
		March 31, 2021			December 31, 2020			% Change
Stockholders' equity		$	1,877,193		$	1,835,885		2	%
Less: Unrealized net investment gains (losses) recorded in stockholders' equity, net of income tax			77,053			128,128
Adjusted stockholders' equity		$	1,800,140		$	1,707,757		5	%

 

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