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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 March 31, 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

 

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)

(770381-1000

(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 April 30, 2022, the registrant had 38,480,663 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 March 31, 2022 and December 31, 2021

 

2

Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021

 

3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021

 

4

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021

 

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 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.

 

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

47

Item 4. Controls and Procedures.

 

47

 

PART II – OTHER INFORMATION

 

47

Item 1. Legal Proceedings.

 

47

Item 1A. Risk Factors.

 

47

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

 

48

Item 6. Exhibits.

 

48

 

Signatures

 

49

 

 

 

 

i


 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

(Unaudited)

 

 

 

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $2,789,517 in 2022

   and $2,621,388 in 2021)

 

$

2,705,131

 

 

$

2,702,567

 

Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,445,074 in 2022 and

   $1,551,113 in 2021)

 

 

1,390,310

 

 

 

1,379,100

 

Short-term investments available-for-sale, at fair value (amortized cost: $43,733 in 2022

   and $85,246 in 2021)

 

 

43,700

 

 

 

85,243

 

Equity securities, at fair value (historical cost: $31,084 in 2022 and $34,255 in 2021)

 

 

39,531

 

 

 

42,551

 

Trading securities, at fair value (cost: $13,210 in 2022 and $24,769 in 2021)

 

 

12,717

 

 

 

24,355

 

Policy loans

 

 

30,295

 

 

 

30,612

 

Total investments

 

 

4,221,684

 

 

 

4,264,428

 

Cash and cash equivalents

 

 

359,779

 

 

 

392,501

 

Accrued investment income

 

 

19,541

 

 

 

18,702

 

Reinsurance recoverables

 

 

4,240,481

 

 

 

4,268,419

 

Deferred policy acquisition costs, net

 

 

2,994,367

 

 

 

2,943,782

 

Renewal commissions receivable

 

 

213,175

 

 

 

231,751

 

Agent balances, due premiums and other receivables

 

 

251,477

 

 

 

257,675

 

Goodwill

 

 

179,154

 

 

 

179,154

 

Intangible assets

 

 

193,400

 

 

 

195,825

 

Income taxes

 

 

89,373

 

 

 

81,799

 

Operating lease right-of-use assets

 

 

46,129

 

 

 

47,942

 

Other assets

 

 

429,362

 

 

 

441,253

 

Separate account assets

 

 

2,696,891

 

 

 

2,799,992

 

Total assets

 

$

15,934,813

 

 

$

16,123,223

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Future policy benefits

 

$

7,216,597

 

 

$

7,138,649

 

Unearned and advance premiums

 

 

17,368

 

 

 

16,437

 

Policy claims and other benefits payable

 

 

574,850

 

 

 

585,382

 

Other policyholders’ funds

 

 

515,830

 

 

 

501,823

 

Note payable - Short term

 

 

6,000

 

 

 

15,000

 

Note payable - Long term

 

 

592,303

 

 

 

592,102

 

Surplus note

 

 

1,389,811

 

 

 

1,378,585

 

Income taxes

 

 

217,327

 

 

 

241,311

 

Operating lease liabilities

 

 

52,078

 

 

 

53,920

 

Other liabilities

 

 

631,786

 

 

 

615,710

 

Payable under securities lending

 

 

93,171

 

 

 

94,529

 

Separate account liabilities

 

 

2,696,891

 

 

 

2,799,992

 

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

 

 

 

 

 

 

 

 

Total liabilities

 

 

14,004,012

 

 

 

14,033,440

 

 

 

 

 

 

 

 

 

 

Temporary Stockholders’ Equity

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests in consolidated entities

 

 

4,616

 

 

 

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 38,752 shares in 2022 and 39,368 shares in 2021)

 

 

388

 

 

 

394

 

Paid-in capital

 

 

-

 

 

 

5,224

 

Retained earnings

 

 

1,980,467

 

 

 

2,004,506

 

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

 

 

 

 

 

 

 

 

Unrealized foreign currency translation gains (losses)

 

 

11,769

 

 

 

8,611

 

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

 

 

(66,439

)

 

 

63,777

 

Total permanent stockholders’ equity

 

 

1,926,185

 

 

 

2,082,512

 

Total liabilities and temporary and permanent stockholders’ equity

 

$

15,934,813

 

 

$

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 March 31,

 

 

 

 

2022

 

 

2021

 

 

 

 

(In thousands, except per-share amounts)

Revenues:

 

 

 

 

 

 

 

 

 

Direct premiums

 

$

798,666

 

 

$

762,227

 

 

Ceded premiums

 

 

(399,885

)

 

 

(395,973

)

 

Net premiums

 

 

398,781

 

 

 

366,254

 

 

Commissions and fees

 

 

251,800

 

 

 

234,044

 

 

Investment income net of investment expenses

 

 

34,420

 

 

 

35,198

 

 

Interest expense on surplus note

 

 

(15,515

)

 

 

(15,146

)

 

Net investment income

 

 

18,905

 

 

 

20,052

 

 

Realized investment gains (losses)

 

 

577

 

 

 

622

 

 

Other investment gains (losses)

 

 

174

 

 

 

1,144

 

 

Investment gains (losses)

 

 

751

 

 

 

1,766

 

 

Other, net

 

 

20,989

 

 

 

15,595

 

 

Total revenues

 

 

691,226

 

 

 

637,711

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

 

Benefits and claims

 

 

187,069

 

 

 

183,789

 

 

Amortization of deferred policy acquisition costs

 

 

86,063

 

 

 

66,105

 

 

Sales commissions

 

 

133,924

 

 

 

121,894

 

 

Insurance expenses

 

 

59,509

 

 

 

48,766

 

 

Insurance commissions

 

 

7,721

 

 

 

8,740

 

 

Contract acquisition costs

 

 

20,649

 

 

 

-

 

 

Interest expense

 

 

6,853

 

 

 

7,145

 

 

Other operating expenses

 

 

86,435

 

 

 

72,963

 

 

Total benefits and expenses

 

 

588,223

 

 

 

509,402

 

 

Income before income taxes

 

 

103,003

 

 

 

128,309

 

 

Income taxes

 

 

24,239

 

 

 

30,437

 

 

Net income (loss)

 

 

78,764

 

 

 

97,872

 

 

Net income (loss) attributable to noncontrolling interests

 

 

(2,655

)

 

 

-

 

 

Net income (loss) attributable to Primerica, Inc.

 

$

81,419

 

 

$

97,872

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

2.07

 

 

$

2.47

 

 

Diluted earnings per share

 

$

2.06

 

 

$

2.46

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings

   per share:

 

 

 

 

 

 

 

 

 

Basic

 

 

39,221

 

 

 

39,456

 

 

Diluted

 

 

39,332

 

 

 

39,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 


 

3


 

 

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

(In thousands)

 

Net income (loss)

 

$

78,764

 

 

$

97,872

 

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

 

 

(164,937

)

 

 

(64,890

)

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

 

 

(658

)

 

 

(468

)

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

Change in unrealized foreign currency translation gains (losses)

 

 

3,158

 

 

 

4,992

 

Total other comprehensive income (loss) before income taxes

 

 

(162,437

)

 

 

(60,366

)

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

 

 

(35,379

)

 

 

(14,283

)

Other comprehensive income (loss), net of income taxes

 

 

(127,058

)

 

 

(46,083

)

Total comprehensive income (loss)

 

 

(48,294

)

 

 

51,789

 

Net income (loss) attributable to noncontrolling interests

 

 

(2,655

)

 

 

-

 

Comprehensive income (loss) attributable to Primerica, Inc.

 

$

(45,639

)

 

$

51,789

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

4


 

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity– Unaudited

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

(In thousands)

 

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

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

394

 

 

$

393

 

Repurchases of common stock

 

 

(7

)

 

 

-

 

Net issuance of common stock

 

 

1

 

 

 

1

 

Balance, end of period

 

 

388

 

 

 

394

 

 

 

 

 

 

 

 

 

 

Paid-in capital:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

5,224

 

 

 

-

 

Share-based compensation

 

 

14,820

 

 

 

14,105

 

Net issuance of common stock

 

 

(1

)

 

 

(1

)

Repurchases of common stock

 

 

(20,043

)

 

 

(5,966

)

Balance, end of period

 

 

-

 

 

 

8,138

 

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

2,004,506

 

 

 

1,705,786

 

Cumulative effect from the adoption of new accounting standards, net

 

 

-

 

 

 

-

 

Net income attributable to Primerica, Inc.

 

 

81,419

 

 

 

97,872

 

Dividends

 

 

(21,645

)

 

 

(18,620

)

Repurchases of common stock

 

 

(83,813

)

 

 

-

 

Balance, end of period

 

 

1,980,467

 

 

 

1,785,038

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

72,388

 

 

 

129,706

 

Change in foreign currency translation adjustment, net of income taxes

 

 

3,158

 

 

 

4,992

 

Change in net unrealized investment gains (losses) during the period, net of income taxes

 

 

(130,216

)

 

 

(51,075

)

Balance, end of period

 

 

(54,670

)

 

 

83,623

 

 

 

 

 

 

 

 

 

 

Total permanent stockholders’ equity

 

$

1,926,185

 

 

$

1,877,193

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests in consolidated entities/Temporary stockholders’ equity

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

7,271

 

 

$

-

 

Net income (loss) attributable to noncontrolling interests

 

 

(2,655

)

 

 

-

 

Balance, end of period

 

$

4,616

 

 

$

-

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.55

 

 

$

0.47

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

5


 

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows – Unaudited

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

78,764

 

 

$

97,872

 

Adjustments to reconcile net income to cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Change in future policy benefits and other policy liabilities

 

 

75,770

 

 

 

122,881

 

Deferral of policy acquisition costs

 

 

(130,881

)

 

 

(142,297

)

Amortization of deferred policy acquisition costs

 

 

86,063

 

 

 

66,105

 

Change in income taxes

 

 

4,725

 

 

 

25,497

 

Investment (gains) losses

 

 

(751

)

 

 

(1,766

)

Accretion and amortization of investments

 

 

1,356

 

 

 

1,112

 

Depreciation and amortization

 

 

8,688

 

 

 

5,408

 

Change in reinsurance recoverables

 

 

31,582

 

 

 

(67,301

)

Change in agent balances, due premiums and other receivables

 

 

2,245

 

 

 

(3,725

)

Change in renewal commissions receivable

 

 

18,576

 

 

 

(859

)

Trading securities sold, matured, or called (acquired), net

 

 

11,273

 

 

 

(18,923

)

Share-based compensation

 

 

12,437

 

 

 

11,653

 

Change in other operating assets and liabilities, net

 

 

14,452

 

 

 

23,801

 

Net cash provided by (used in) operating activities

 

 

214,299

 

 

 

119,458

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Available-for-sale investments sold, matured or called:

 

 

 

 

 

 

 

 

Fixed-maturity securities — sold

 

 

1,227

 

 

 

10,810

 

Fixed-maturity securities — matured or called

 

 

96,336

 

 

 

94,576

 

Short-term investments — matured or called

 

 

41,550

 

 

 

-

 

Equity securities —  matured or called

 

 

3,000

 

 

 

-

 

Available-for-sale investments acquired:

 

 

 

 

 

 

 

 

Fixed-maturity securities

 

 

(250,932

)

 

 

(247,253

)

Short-term investments

 

 

-

 

 

 

(50,902

)

Equity securities — acquired

 

 

(44

)

 

 

(291

)

Purchases of property and equipment and other investing activities, net

 

 

(7,676

)

 

 

(10,182

)

Cash collateral received (returned) on loaned securities, net

 

 

(1,358

)

 

 

15,036

 

Sales (purchases) of short-term investments using securities lending collateral, net

 

 

1,358

 

 

 

(15,036

)

Purchase of business, net of cash acquired

 

 

3,867

 

 

 

-

 

Net cash provided by (used in) investing activities

 

 

(112,672

)

 

 

(203,242

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividends paid

 

 

(21,645

)

 

 

(18,620

)

Common stock repurchased

 

 

(99,010

)

 

 

-

 

Payment on note issued to seller of business

 

 

(9,000

)

 

 

-

 

Tax withholdings on share-based compensation

 

 

(4,852

)

 

 

(5,966

)

Finance leases

 

 

(64

)

 

 

(66

)

Net cash provided by (used in) financing activities

 

 

(134,571

)

 

 

(24,652

)

Effect of foreign exchange rate changes on cash