Primerica, Inc. (NYSE: PRI), a leading provider of financial products and services to middle-income households in the United States and Canada, reported its first quarter 2024 financial results, showcasing the resilience of its core businesses despite ongoing economic pressures facing its target market.

The company reported adjusted net operating income of $137 million for the first quarter of 2024, a 4% increase compared to the prior year period. Adjusted operating income per share was $3.91, up 10% year-over-year. These results reflect the fundamental strength of Primerica's Term Life Insurance and Investment and Savings Products segments, which were able to deliver growth despite the challenges posed by the high cost of living for middle-income families.

For the full year 2023, Primerica reported annual net income of $576.6 million, annual revenue of $2.82 billion, annual operating cash flow of $692.5 million, and annual free cash flow of $658.6 million. The company's quarterly results for the first quarter of 2024 demonstrate its ability to navigate the current economic environment and continue delivering value to its shareholders.

Business Overview

Term Life Insurance Segment Maintains Momentum

Primerica's Term Life Insurance segment reported operating revenues of $440 million in the first quarter of 2024, a 5% increase compared to the prior year period. Pretax operating income for the segment was $138 million, up 6% year-over-year. The segment's benefits and claims ratio remained stable at 58%, while the DAC amortization ratio was 12.2%, consistent with the prior year period.

The company's management noted that while mortality experience remained generally in line with expectations, they continue to see higher policy lapses across multiple durations, likely due to the financial pressures faced by middle-income families as a result of the elevated cost of living. Primerica expects the Term Life Insurance segment's annual direct premium growth to be approximately 5-6% for the full year 2024, with the benefits and claims ratio and DAC amortization ratio remaining stable around 58% and 12%, respectively. The segment's operating margin is expected to be around 22% for the full year.

Investment and Savings Products Segment Delivers Strong Results

Primerica's Investment and Savings Products segment reported operating revenues of $244 million in the first quarter of 2024, a 16% increase compared to the prior year period. Pretax operating income for the segment was $66 million, up 17% year-over-year. The increase in revenues and profitability was driven by a 24% rise in revenue-generating sales and a 15% increase in average client asset values.

The company's management noted that they are seeing strong demand for their investment products across the board, including U.S. and Canadian mutual funds, variable annuities, and managed accounts. Barring any unexpected changes in market sentiment, Primerica anticipates full-year 2024 sales in this segment to increase by as much as high single digits.

Senior Health Segment Faces Challenges, but Primerica Remains Committed

Primerica's Senior Health segment, which includes the operations of its e-TeleQuote subsidiary, reported a pretax operating loss of $14.2 million in the first quarter of 2024. This loss included a $7.8 million negative revenue adjustment due to lower-than-expected policy renewals, which the company attributed to increased policy churn as certain carriers made modifications to their plan benefits.

The company noted that the Senior Health segment has faced headwinds, including a 16% decline in the number of e-TeleQuote agents compared to the prior year period, as well as an industry-wide service disruption that impacted the ability of agents to verify applicant eligibility. Primerica expects the Senior Health segment to incur a loss of approximately $25-$30 million for the full year 2024.

Despite the challenges, Primerica remains committed to the Senior Health business, recognizing the attractive long-term opportunity presented by the aging U.S. population and the company's unique ability to reach middle-income families through its independent sales force. The company has retained a global management consulting firm to help it thoroughly understand the opportunities and challenges in this business and is taking measured steps as it continues to evaluate the segment.

Corporate and Other Distributed Products Segment Provides Diversification

Primerica's Corporate and Other Distributed Products segment reported a pretax operating loss of $11.7 million in the first quarter of 2024, compared to a loss of $11 million in the prior year period. This segment includes the company's net investment income, as well as revenues and expenses related to other distributed products, such as closed blocks of various insurance products, prepaid legal services, mortgage originations, and other financial products.

The increase in the segment's operating loss was primarily driven by higher operating expenses, which offset the growth in net investment income. Primerica's investment portfolio remains well-diversified, with a relatively short duration of 4.7 years and an average rating of A. The portfolio had a net unrealized loss of $231 million at the end of March 2024, slightly higher than the prior year-end, as interest rates increased during the quarter.

Financials

Robust Capital Position and Shareholder-Friendly Actions

Primerica maintains a strong capital position, which allows the company to continue its shareholder-friendly actions. During the first quarter of 2024, the company repurchased $109 million of its common stock and paid $26 million in regular dividends. The Board of Directors recently declared a $0.75 per share dividend, payable in June 2024.

The company's robust cash flow generation, with annual operating cash flow of $692.5 million and annual free cash flow of $658.6 million in 2023, provides ample liquidity to support its operations, capital deployment, and future growth initiatives.

Primerica's Unique Distribution Model Continues to Resonate

Primerica's unique distribution model, which relies on an independent sales force of licensed representatives, continues to be a key driver of the company's success. During the first quarter of 2024, Primerica recruited over 110,000 new individuals, representing an 18% year-over-year increase. The number of new life-licensed representatives also grew by 16% to nearly 13,000, fueling a 5% year-over-year increase in the size of the sales force, which reached 142,855 life-licensed representatives as of March 31, 2024.

The company's management noted that the appeal of Primerica's business opportunity continues to resonate, particularly in the current economic environment, as individuals seek additional income opportunities or alternatives to their current employment. Primerica's model, which provides a clear path for recruits to obtain their life insurance and securities licenses at a low cost, has proven effective in attracting and retaining a growing sales force.

Outlook

Despite the ongoing economic challenges facing middle-income families, Primerica remains well-positioned to navigate the current environment and continue delivering value to its shareholders. The company's core Term Life Insurance and Investment and Savings Products segments have demonstrated resilience, with the former expected to deliver annual direct premium growth of 5-6% and the latter anticipated to see high single-digit sales growth in 2024.

While the Senior Health segment has faced headwinds, Primerica remains committed to the business and is taking measured steps to understand and address the challenges. The company's diversified business model, strong capital position, and shareholder-friendly actions, combined with its unique distribution capabilities, position Primerica for continued success in the years ahead.