Primerica, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone Q4 report; the supplied filing does not provide a clear standalone Q4 financial result. Primerica provides term life insurance and distributes investment, savings, Medicare-related and other financial products, primarily to middle-income households in the U.S. and Canada.
Key financial metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $2.816 billion | $2.720 billion |
| Income before taxes | $751.7 million | $620.0 million |
| Net income attributable to Primerica | $576.6 million | $472.1 million |
| Diluted EPS | $15.94 | $12.33 |
| Net cash from operating activities | $692.5 million | $757.7 million |
| Cash and cash equivalents at year-end | $613.1 million | $489.2 million |
| Stockholders’ equity | $2.066 billion | $2.031 billion |
Revenue increased 4% and net income attributable to Primerica rose 22%. The implied net margin was approximately 20.5%, up from approximately 17.4% in 2022. The effective tax rate was 23.3%, versus 24.7% reported in 2022; excluding 2022’s nondeductible goodwill impairment, that year’s rate was 22.5%.
Business and segment performance
- Term Life Insurance: Revenue was $1.693 billion, up 3%; pretax income rose 7% to $552.2 million. Policies issued were 358,860, and face amount in force reached $944.6 billion. The company insured approximately 5.7 million lives and ceded about 86% of life insurance in force to reinsurers.
- Investment and Savings Products: Revenue was $865.3 million, essentially flat; pretax income declined 1% to $242.8 million. Total product sales fell 8% to $9.212 billion, while ending client asset values rose to $96.7 billion from $83.9 billion, supported primarily by market recovery. Net flows remained positive but were lower than in 2022.
- Senior Health: Revenue increased 7% to $67.2 million, but the segment recorded a $20.1 million pretax loss, improving from a $98.7 million loss in 2022. Approved policies fell to 58,457 from 77,086. The 2023 LTV-to-CAC ratio was 1.00, versus 0.97 in 2022.
- Corporate and Other Distributed Products: Revenue was $190.2 million, up 20%, largely reflecting higher investment income. The segment reported a $23.3 million pretax loss, an improvement from $41.6 million.
Cash flow, investments, debt and capital
Operating cash flow decreased 9% to $692.5 million; management attributed much of the decline to the timing of reinsurer collections received in 2022. Investing activities used $90.1 million of cash, and financing activities used $479.6 million, including $375.1 million of common-stock repurchases and $93.7 million of dividends paid.
At year-end, total investments were $4.206 billion. The available-for-sale fixed-maturity portfolio had a fair value of $2.719 billion and unrealized losses of $215.7 million, down from $305.9 million a year earlier. Management said it had the ability and intent to hold the affected securities and did not expect interest-rate-driven losses to impair recovery. The portfolio’s average rating was A, average duration was 4.7 years, and average book yield was 3.83%.
Primerica had $600 million principal amount of senior unsecured notes due in 2031, bearing 2.80% interest; carrying value was $593.7 million. A separate $1.4 billion surplus note supports a reserve-financing arrangement and is contractually matched by a held-to-maturity note; management said the arrangement is non-recourse to the Parent Company and Primerica Life. The $200 million revolving credit facility had no borrowings at year-end and matures in 2026. Parent-company cash and invested assets were $381.9 million. Insurance subsidiaries paid $352.3 million in dividends to the Parent Company during 2023; dividend capacity remains subject to regulatory and capital constraints.
The Board authorized a $425 million repurchase program covering November 2023 through December 2024. The company declared a $0.75-per-share quarterly dividend in Q1 2024 and said it currently expects comparable quarterly dividends, subject to Board discretion.
Material changes, outlook and risks
- Adoption of long-duration insurance contract accounting (LDTI) was effective January 1, 2023, with prior periods restated from January 1, 2021. The change substantially altered insurance reserve, deferred acquisition cost and discount-rate accounting; it included a roughly $1.5 billion after-tax reduction to opening AOCI at transition.
- Higher investment yields lifted net investment income 46% to $135.8 million. The company also reported a $5.9 million total investment loss, compared with a $1.0 million loss in 2022.
- Senior Health had no goodwill impairment in 2023, after a $60 million charge in 2022 and $76 million in 2021. Remaining goodwill was $127.7 million; the 2023 impairment test found estimated fair value above carrying value.
- Canadian regulatory changes ended most upfront commissions on new segregated-fund contracts from June 2023; related sales declined 41%. The Canadian mutual-fund principal-distributor model is subject to further regulatory scrutiny.
- Management expects operating cash flows to support operating liquidity over the next 12 months and believes cash flows and potential funding sources will support longer-term liquidity. The filing provides no specific earnings or revenue guidance.
- Key risks include recruiting, licensing and retention of independent representatives; possible worker-classification changes; mortality, persistency and disability experience; reinsurer or reserve-financing counterparty failure; interest-rate and credit-market movements; regulation of investment products and Medicare distribution; e-TeleQuote policy retention and lead costs; cybersecurity; and litigation or regulatory action.
- Effective January 2, 2024, Primerica Life recaptured the Peach Re block and terminated the related financing facility. The filing says this reduced statutory capital and ordinary dividend capacity by $53.2 million.
Important facts for investors to verify
- Whether life-policy lapse and persistency trends, including cost-of-living pressure, affect future premium growth, claims and acquisition-cost recovery.
- Whether Senior Health can improve agent tenure, lead conversion, policy retention and economics; assess the assumptions behind LTV, CAC and the renewal commissions receivable.
- How Canadian compensation-rule developments affect the principal-distributor mutual-fund model and segregated-fund sales.
- The quality and liquidity of the investment portfolio, the remaining unrealized losses, and the company’s ability to hold securities through recovery.
- Insurance-subsidiary capital ratios, dividend capacity after the Peach Re recapture, and reliance on reinsurers and reserve-financing counterparties.
- The filing reports unqualified audit opinions on the financial statements and internal control. Review the LDTI transition, actuarial assumptions and Senior Health goodwill valuation, which were highlighted as critical audit matters.