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Primerica (PRI) Up 15% in 6 Months: Will the Rally Continue?

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Primerica, Inc. (PRI - Free Report) shares have gained 14.5% in six months compared with the industry's increase of 10.8% and the Finance sector’s increase of 13.6%. The Zacks S&P 500 composite has risen 16.1% in the said time frame. With market capitalization of $5.5 billion, average volume of shares traded in the last three months was 0.2 million.

A compelling product portfolio, strong market presence and solid capital position continue to drive Primerica. The company has a solid track of delivering earnings surprise in the last 10 reported quarters.

The company has been effectively improving its return on equity (ROE) over the years. Its ROE of 23.7% in the trailing twelve months was better than the industry average of 10.8%, reflecting the company’s efficiency in utilizing shareholders’ fund.  

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 5.5% and 3.8%, respectively in the past 60 days, reflecting analysts’ optimism.  

Primerica boasts being the second largest issuer of term life insurance coverage in North America. It noted middle-income households in the United States need about $12 trillion of life insurance to be properly protected. Also, the pandemic has resulted in stronger demand for insurance protection. This in turn should drive growth opportunities for the life insurer. Its mortgage distribution business is also gaining traction.

Primerica expects issued policies to increase between 15% and 20% in the fourth quarter and 20% in 2020. However, sales at the ISP business are expected to decline 5% year over year in the fourth quarter while 2020 sales are expected to be flat with 2019 level.

The company exited the third quarter with $331 million holding company liquidity and Primerica Life Insurance Company’s (PLIC) RBC ratio around 425. The company enjoys solid ratings from credit rating agencies.

Primerica has a solid track record of total stockholder return consistently outperforming the S&P 500 Index. This Zacks Rank #2 (Buy) life insurer has increased its dividend nine times in eight years at a CAGR of 17.5%.  It expects to buy back $250 million worth of shares in 2020.

The Zacks Consensus Estimate for 2020 and 2021 indicates year-over-year increase of 16% and 10.7% respectively. Its earnings witnessed a five-year CAGR (2015-2019) of 24%.

Other Stocks to Consider

Investors interested in the same space can look at Sun Life Financial (SLF - Free Report) , Brighthouse Financial (BHF - Free Report) and Reinsurance Group of America (RGA - Free Report) .

Sun Life delivered an earnings surprise of 20.00% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank.

Brighthouse Financial delivered an earnings surprise of 26.59% in the last reported quarter. It currently carries a Zacks Rank #2.

Reinsurance Group delivered an earnings surprise of 77.27% in the last reported quarter. It currently carries a Zacks Rank #2

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