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Primerica (PRI) Up 36% in a Year: Can It Retain the Momentum?

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Primerica Inc.’s (PRI - Free Report) shares have gained 35.7% in a year against the industry’s decrease of 1.2%. The Finance sector and the Zacks S&P 500 composite declined 6.3% and 7.9%, respectively, in the same time frame. With a market capitalization of $6.3 billion, the average volume of shares traded in the last three months was about 0.2 million.

A compelling portfolio, strong market presence position and solid capital position continue to drive this Zacks Rank #1 (Strong Buy) insurer.

The Zacks Consensus Estimate for 2023 and 2024 earnings has moved 4.4% and 4.1% north, respectively in the past seven days, reflecting analyst optimism.

Zacks Investment Research
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Will the Bull Run Continue?

The Zacks Consensus Estimate for Primerica’s 2023 earnings is pegged at $14.13 per share, indicating an increase of 23.5% on 3.5% higher revenues of $2.8 billion. The consensus estimate for 2024 earnings is pegged at $15.86, indicating an increase of 12.3% on 5.9% higher revenues of $2.9 billion.

Primerica is the second-largest issuer of term-life insurance coverage in North America. Thus, it aims to be a successful senior health business while continuing to enhance its shareholders’ value.

Strong demand for protection products that drives sales growth and policy persistency benefits Primerica. A strong business model makes it well-poised to cater to the middle market's increased demand for financial security.  

The insurer stays focused on increasing the size of the life license sales force through continued recruiting and licensing. PRI estimates a 3% rise in sales force size in 2023. Licensed representatives play a major role in driving operational results of PRI. The insurer thus remains focused on growing licensed representatives.

PRI estimates Term Life Insurance, issued policy growth of about 1% in the first quarter and mid-single digit growth in 2023. The company noted that though new products should accelerate growth, inflationary pressure will weigh on the upside.

However, in Investment and Savings Products, the insurer projects first-quarter 2023 sales to decline 25% year over year. Adjusted direct premiums are expected to increase 6% in 2023.

Life insurers are direct beneficiaries of an improving interest rate environment. The Fed raised interest rates seven times in 2022 and once so far in 2023, with more on the horizon this year. At its December meeting, the Fed indicated taking the interest rate to 5.1% in 2023 to combat its expected 3.1% inflation. Thus, an improving interest rate environment should aid net investment income.

While the insurer has solid liquidity, Primerica has been strengthening its balance sheet by improving its leverage ratio. PRI scores strongly with credit rating agencies.

Primerica has a solid dividend history, banking on the operational excellence of Term Life and ISP businesses. It has hiked dividends 10 times in the last nine years. The insurer also engages in share buyback. PRI expects the Term Life business to be the primary source of deployable capital.

Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are Axis Capital Holdings (AXS - Free Report) , Everest Re Group (RE - Free Report) and Kinsale Capital Group (KNSL - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axis Capital delivered a four-quarter average earnings surprise of 5.70%. In the past year, AXS has gained 10%.

The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings implies year-over-year increases of 29.6% and 11.8%, respectively.  

Everest Re delivered a four-quarter average earnings surprise of 18.41%. In the past year, RE has rallied 37.7%.

The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings indicates a respective year-over-year increase of 70% and 15.7%.

Kinsale delivered a four-quarter average earnings surprise of 13.83%. In the past year, the insurer has gained 48.3%.

The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates a respective year-over-year increase of 26.4% and 20.2%.

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