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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34680

 

img184963210_0.jpg 

Primerica, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

27-1204330

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1 Primerica Parkway

Duluth, Georgia

 

30099

(Address of principal executive offices)

 

(ZIP Code)

(770) 381-1000

(Registrant’s telephone number, including area code)

Not applicable.

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

PRI

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of October 31, 2022, the registrant had 36,898,170 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

2

Item 1. Financial Statements (unaudited).

 

2

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

 

2

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021

 

3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021

 

4

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

 

5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

 

6

Notes to Condensed Consolidated Financial Statements

 

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

53

Item 4. Controls and Procedures.

 

53

 

PART II – OTHER INFORMATION

 

53

Item 1. Legal Proceedings.

 

53

Item 1A. Risk Factors.

 

54

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

55

Item 6. Exhibits.

 

55

Signatures

 

57

 

 

i

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

(Unaudited)

 

 

 

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $2,779,015 in 2022
   and $2,621,388 in 2021)

 

$

2,457,989

 

 

$

2,702,567

 

Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,320,222 in 2022 and
   $1,551,113 in 2021)

 

 

1,433,760

 

 

 

1,379,100

 

Short-term investments available-for-sale, at fair value (amortized cost: $0 in 2022
   and $85,246 in 2021)

 

 

-

 

 

 

85,243

 

Equity securities, at fair value (historical cost: $29,424 in 2022 and $34,255 in 2021)

 

 

33,079

 

 

 

42,551

 

Trading securities, at fair value (cost: $4,335 in 2022 and $24,769 in 2021)

 

 

3,718

 

 

 

24,355

 

Policy loans and other invested assets

 

 

48,787

 

 

 

30,612

 

Total investments

 

 

3,977,333

 

 

 

4,264,428

 

Cash and cash equivalents

 

 

438,025

 

 

 

392,501

 

Accrued investment income

 

 

19,949

 

 

 

18,702

 

Reinsurance recoverables

 

 

4,033,897

 

 

 

4,268,419

 

Deferred policy acquisition costs, net

 

 

3,049,102

 

 

 

2,943,782

 

Renewal commissions receivable

 

 

198,027

 

 

 

231,751

 

Agent balances, due premiums and other receivables

 

 

266,831

 

 

 

257,675

 

Goodwill

 

 

127,707

 

 

 

179,154

 

Intangible assets

 

 

188,150

 

 

 

195,825

 

Income taxes

 

 

90,719

 

 

 

81,799

 

Operating lease right-of-use assets

 

 

42,343

 

 

 

47,942

 

Other assets

 

 

403,452

 

 

 

441,253

 

Separate account assets

 

 

2,206,608

 

 

 

2,799,992

 

Total assets

 

$

15,042,143

 

 

$

16,123,223

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Future policy benefits

 

$

7,314,688

 

 

$

7,138,649

 

Unearned and advance premiums

 

 

16,153

 

 

 

16,437

 

Policy claims and other benefits payable

 

 

496,563

 

 

 

585,382

 

Other policyholders’ funds

 

 

492,479

 

 

 

501,823

 

Note payable - Short term

 

 

-

 

 

 

15,000

 

Note payable - Long term

 

 

592,705

 

 

 

592,102

 

Surplus note

 

 

1,433,293

 

 

 

1,378,585

 

Income taxes

 

 

129,347

 

 

 

241,311

 

Operating lease liabilities

 

 

47,935

 

 

 

53,920

 

Other liabilities

 

 

611,646

 

 

 

615,710

 

Payable under securities lending

 

 

80,754

 

 

 

94,529

 

Separate account liabilities

 

 

2,206,608

 

 

 

2,799,992

 

Commitments and contingent liabilities (see Commitments and Contingent Liabilities note)

 

 

 

 

 

 

Total liabilities

 

 

13,422,171

 

 

 

14,033,440

 

 

 

 

 

 

 

 

Temporary Stockholders’ Equity

 

 

 

 

 

 

Redeemable noncontrolling interests in consolidated entities

 

 

-

 

 

 

7,271

 

Permanent Stockholders’ Equity

 

 

 

 

 

 

Equity attributable to Primerica, Inc.:

 

 

 

 

 

 

Common stock ($0.01 par value; authorized 500,000 shares in 2022 and 2021; issued and
   outstanding 37,027 shares in 2022 and 39,368 shares in 2021)

 

 

370

 

 

 

394

 

Paid-in capital

 

 

-

 

 

 

5,224

 

Retained earnings

 

 

1,887,952

 

 

 

2,004,506

 

Accumulated other comprehensive income (loss), net of income tax:

 

 

 

 

 

 

Unrealized foreign currency translation gains (losses)

 

 

(15,437

)

 

 

8,611

 

Net unrealized investment gains (losses) on available-for-sale securities

 

 

(252,913

)

 

 

63,777

 

Total permanent stockholders’ equity

 

 

1,619,972

 

 

 

2,082,512

 

Total liabilities and temporary and permanent stockholders’ equity

 

$

15,042,143

 

 

$

16,123,223

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

2

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income – Unaudited

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands, except per-share amounts)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums

 

$

810,079

 

 

$

785,277

 

 

$

2,417,639

 

 

$

2,327,804

 

Ceded premiums

 

 

(404,870

)

 

 

(401,295

)

 

 

(1,223,804

)

 

 

(1,211,117

)

Net premiums

 

 

405,209

 

 

 

383,982

 

 

 

1,193,835

 

 

 

1,116,687

 

Commissions and fees

 

 

225,468

 

 

 

269,796

 

 

 

717,956

 

 

 

754,529

 

Investment income net of investment expenses

 

 

40,629

 

 

 

35,741

 

 

 

112,148

 

 

 

106,970

 

Interest expense on surplus note

 

 

(16,283

)

 

 

(15,741

)

 

 

(47,613

)

 

 

(46,382

)

Net investment income

 

 

24,346

 

 

 

20,000

 

 

 

64,535

 

 

 

60,588

 

Realized investment gains (losses)

 

 

292

 

 

 

1,730

 

 

 

924

 

 

 

3,762

 

Other investment gains (losses)

 

 

(2,991

)

 

 

(320

)

 

 

(4,765

)

 

 

114

 

Investment gains (losses)

 

 

(2,699

)

 

 

1,410

 

 

 

(3,841

)

 

 

3,876

 

Other, net

 

 

20,965

 

 

 

18,051

 

 

 

60,709

 

 

 

49,958

 

Total revenues

 

 

673,289

 

 

 

693,239

 

 

 

2,033,194

 

 

 

1,985,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and claims

 

 

171,293

 

 

 

183,425

 

 

 

511,619

 

 

 

535,561

 

Amortization of deferred policy acquisition costs

 

 

90,925

 

 

 

62,214

 

 

 

262,367

 

 

 

182,604

 

Sales commissions

 

 

105,915

 

 

 

129,268

 

 

 

359,602

 

 

 

382,465

 

Insurance expenses

 

 

57,552

 

 

 

51,901

 

 

 

176,521

 

 

 

149,246

 

Insurance commissions

 

 

7,666

 

 

 

8,412

 

 

 

22,982

 

 

 

25,990

 

Contract acquisition costs

 

 

13,446

 

 

 

23,524

 

 

 

53,479

 

 

 

23,524

 

Interest expense

 

 

6,802

 

 

 

7,529

 

 

 

20,469

 

 

 

21,814

 

Goodwill impairment loss

 

 

60,000

 

 

 

-

 

 

 

60,000

 

 

 

-

 

Other operating expenses

 

 

73,791

 

 

 

79,864

 

 

 

239,952

 

 

 

219,559

 

Total benefits and expenses

 

 

587,390

 

 

 

546,137

 

 

 

1,706,991

 

 

 

1,540,763

 

Income before income taxes

 

 

85,899

 

 

 

147,102

 

 

 

326,203

 

 

 

444,875

 

Income taxes

 

 

34,092

 

 

 

35,663

 

 

 

90,069

 

 

 

107,403

 

Net income

 

 

51,807

 

 

 

111,439

 

 

 

236,134

 

 

 

337,472

 

Net income (loss) attributable to noncontrolling interests

 

 

-

 

 

 

(1,017

)

 

 

(5,038

)

 

 

(1,017

)

Net income attributable to Primerica, Inc.

 

$

51,807

 

 

$

112,456

 

 

$

241,172

 

 

$

338,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.38

 

 

$

2.83

 

 

$

6.26

 

 

$

8.53

 

Diluted earnings per share

 

$

1.37

 

 

$

2.82

 

 

$

6.24

 

 

$

8.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings
   per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,438

 

 

 

39,561

 

 

 

38,342

 

 

 

39,516

 

Diluted

 

 

37,541

 

 

 

39,679

 

 

 

38,452

 

 

 

39,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3

 

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Net income

 

$

51,807

 

 

$

111,439

 

 

$

236,134

 

 

$

337,472

 

Other comprehensive income (loss) before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized investment gains (losses) on available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized holding gains (losses) on available-for-sale securities

 

 

(97,516

)

 

 

(13,796

)

 

 

(401,335

)

 

 

(52,669

)

Reclassification adjustment for investment (gains) losses included in net income

 

 

(154

)

 

 

(1,879

)

 

 

(867

)

 

 

(3,052

)

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized foreign currency translation gains (losses)

 

 

(18,086

)

 

 

(5,892

)

 

 

(24,048

)

 

 

6,490

 

Total other comprehensive income (loss) before income taxes

 

 

(115,756

)

 

 

(21,567

)

 

 

(426,250

)

 

 

(49,231

)

Income tax expense (benefit) related to items of other comprehensive income (loss)

 

 

(20,504

)

 

 

(3,386

)

 

 

(85,512

)

 

 

(12,294

)

Other comprehensive income (loss), net of income taxes

 

 

(95,252

)

 

 

(18,181

)

 

 

(340,738

)

 

 

(36,937

)

Total comprehensive income (loss)

 

 

(43,445

)

 

 

93,258

 

 

 

(104,604

)

 

 

300,535

 

Net income (loss) attributable to noncontrolling interests

 

 

-

 

 

 

(1,017

)

 

 

(5,038

)

 

 

(1,017

)

Comprehensive income (loss) attributable to Primerica, Inc.

 

$

(43,445

)

 

$

94,275

 

 

$

(99,566

)

 

$

301,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity– Unaudited

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Equity attributable to Primerica, Inc./Permanent stockholders’ equity