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Primerica (PRI) Rises 14% YTD: Can It Retain the Bull Run?

Primerica’s PRI shares have gained 14.1% year to date against the industry’s decline of 3.9%. While the Finance sector has decreased 4.3%, the Zacks S&P 500 composite has risen 3.1% in the same period.  With a market capitalization of $5.9 billion, the average volume of shares traded in the last three months was about 0.2 million.

Compelling portfolio, strong market presence and a solid capital position continue to drive this Zacks Rank #1 (Strong Buy) insurer. This second-largest issuer of term-life insurance coverage in North America has a decent history of delivering earnings surprises in two of the last four reported quarters while missing in other two.

Can PRI Retain the Momentum?

The Zacks Consensus Estimate for 2023 earnings stands at $14.80, suggesting an increase of 29.4% on 3.5% higher revenues of $2.8 billion. The consensus estimate for 2024 earnings stands at $16.50, suggesting an increase of 11.5% on 5.3% higher revenues of $3 billion. Its earnings have grown 14.4% over the last five years, outperforming the industry average of 2.6%.

Strong demand for protection products should drive sales growth and policy persistency for the insurer. PRI’s strong business model makes it well-poised to cater to the middle market's increased demand for financial security.  

Licensed representatives play a major role in driving operational results for PRI. The insurer thus remains focused on growing licensed representatives

Given mid-single-digit sales growth, PRI expects adjusted direct premium growth to hover around 6% per year for the next three years.

Life insurers are direct beneficiaries of an improving interest rate environment. The Fed raised interest rates seven times in 2022 and once in 2023 so far, 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.

The insurer had solid liquidity with cash and cash equivalents. Primerica has been strengthening its balance sheet by improving its leverage ratio. PRI thus scores strongly with credit rating agencies.

PRI expects the Term Life business to be the primary source of deployable capital. It has hiked dividends 10 times in the last nine years. The insurer also engages in share buyback.

Primerica envisions to be a successful senior health business while continuing to enhance its shareholders’ value. Banking on the operational strength, estimates for 2023 and 2024 moved 7.5% and 13.2% in the last 30 days, reflecting analyst optimism.

Other Stocks to Consider

Some other top-ranked stocks from the life insurance industry are Brighthouse Financial BHF, Sun Life Financial SLF and Voya Financial VOYA.

Brighthouse Financial delivered a trailing four-quarter average earnings surprise of 2.07%. Year to date, BHF has lost 18%.

The Zacks Consensus Estimate for BHF’s 2023 and 2024 earnings indicates a respective year-over-year increase of 33.5% and 11.5%. The insurer sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Life’s earnings surpassed estimates in each of the last four quarters, the average being 9.14%. Year to date, SLF has lost 5.9%.

The Zacks Consensus Estimate for SLF’s 2024 earnings implies a year-over-year rise of 8.1%. The insurer carries a Zacks Rank #2 (Buy).

Voya Financial has a solid track record of beating earnings estimates in each of the last four quarters, the average earnings surprise being 38.68%. Year to date, VOYA has gained 7.9%.

The Zacks Consensus Estimate for VOYA’s 2023 and 2024 earnings indicates a respective year-over-year increase of 7.3% and 13%. The insurer carries a Zacks Rank #2.

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