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Why Should You Retain Primerica (PRI) in Your Portfolio?

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Primerica’s (PRI - Free Report) compelling portfolio, strong market presence and sturdy financial position along with growth estimates make it worth retaining in one’s portfolio.

It has a decent surprise history of delivering earnings surprise in three of the last four reported quarters, while missing in one, with the average beat being 8.11%.

Zacks Rank & Price Performance

Primerica currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 18.9%, compared with the industry’s increase of 9.3% and the Zacks S&P 500 composite’s rise of 10.5%.

Growth Projections

The Zacks Consensus Estimate for 2021 earnings is pegged at $11.12, indicating a year-over-year increase of 14.6% on 13.4% higher revenues of $2.5 billion. The consensus estimate for 2022 earnings is pegged at $12.37, implying a year-over-year increase of 11.2% on 6.6% higher revenues of $2.8 billion.

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 22.8%, comparing favorably with the industry’s 13.2%, reflecting the company’s efficiency in utilizing shareholders’ fund.  

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 0.5% and 0.3% higher in the past 30 days, reflecting analyst optimism.

Style Score

The company is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Business Tailwinds

This second largest issuer of term life insurance coverage in North America continues to witness strong demand for protection products, driving sales growth and policy persistency. Its strategic focus encompasses broadening and strengthening its Protection product portfolio, enhancing Investment & Savings Products to expand opportunity as well as developing digital capabilities.

Though the company estimates life sales to be slightly negative in the second quarter and drop 5% in 2021 due to the pandemic, it projects 2021 sales to be 10% higher than pre-pandemic levels.  Primerica estimates adjusted direct premiums to grow 13% in 2021.

Its pending acquisition of Etelequote Limited, a senior health insurance distributor of Medicare-related insurance policies, is expected to expand its financial services portfolio. This apart, the acquisition will augment Primerica’s middle-income focused client reach.

The company estimates COVID-related claims of about $6 million in the second quarter based on expected 0.06 million deaths in the United States and Canada. Assuming COVID-related deaths continue to decline, Primerica projects benefits and claims ratio to get back to its historical range between 58% and 59% later in 2021. Thus, it estimates benefits ratio to be between 60% and 61% for 2021. Term life margins are expected to be in the mid-19% range for 2021.

Primerica had $369 million in liquidity as on Mar 31, 2021. Primerica Life Insurance Company statutory risk-based capital ratio was about 400%. While its leverage ratio has been improving, times interest earned has increased over the last two years.

The life insurer has raised dividend 10 times in the last nine years. Total stockholder return has continually outperformed the S&P 500 Index over the last five years.

Stocks to Consider

Some better-ranked stocks from the insurance space include Manulife Financial Corporation (MFC - Free Report) , American Financial Group (AFG - Free Report) and Alleghany Corporation (Y - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Manulife surpassed estimates in the last four quarters, the average being 13.01%.

American Financial surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 32.20%.

Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63%.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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