Primerica Investor Presentation
Transcription
Primerica Investor Presentation
Primerica Investor Presentation Full Year 2014 Forward-Looking Statements, Non-GAAP Financial Measures and Confidentiality This presentation may contain forward-looking statements and information. Additional information and factors that could cause results to differ materially from those in this presentation are available in our Form 10-K for the year ended December 31, 2013, available in the “Investor Relations” section of our website, http://investors.primerica.com. This presentation also contains non-GAAP financial measures. A reconciliation of those measures to GAAP financial measures is included in our Financial Supplement, which is posted in the financial information page of the Investor Relations section of our website, http://investors.primerica.com. Except for the GAAP reconciliations referred to in the preceding sentence, none of the information on our website shall be deemed to be a part of this presentation. Reported amounts may not agree due to rounding. 2 Major Distributor of Financial Services to Middle Income Families Large sales force allows effective penetration of the vast and frequently ignored middle income market in North America 98,360 life insurance licensed representatives 1 22,600 mutual fund licensed representatives 1 $682 billion of Term Life face amount in force 1 $49 billion in client asset values 1 1 As of December 31, 2014 3 Approximately 4,500 Primerica Regional Vice President businesses in the U.S., Canada and Puerto Rico Primerica’s Middle Income Clients Average household income 1 $65,000 Average face amount of issued term life policy 2 $245,000 Average initial mutual fund investment Assets in qualified retirement plans 3 1. Primerica Financial Need Analysis Clients 2. Full-year 2014 3. As of December 31, 2014 4 2 $5,000 74% Offer Broad Selection of Financial Products Core Products Debt Solutions 1,6 Referrals by Primerica Client Services, Inc. to Term Life Insurance Products underwritten by Primerica, Inc. companies TermNow (10, 15, 20, 30, 35 years) CustomAdvantage (10, 15, 20, 30, 35 years) Life Insurance Managed Accounts1,4 Annuities1,3 Auto & Home Insurance Referral Program Quotes from such companies as: Safeco, Progressive Legal Protection 401(k) Plans1,3 Mutual Funds3,5 Investment & Savings Products through third-party providers Mutual Funds Managed Accounts Annuities 401(k)s 5 1 Not all products/services available in all states or provinces. A representative’s ability to market products from the companies listed is subject to state and federal licensing and/or certification requirements. 2 Not available to residents of Washington, D.C. 3 In the United States, securities are offered by PFS Investments Inc. (PFSI), 1 Primerica Parkway., Duluth, Georgia 30099-0001. 4 PFS Investments Inc. (PFSI) is an SEC Registered Investment Adviser doing business as Primerica Advisors. PFSI is a member of FINRA and SIPC. Lockwood Advisors, Inc. (Lockwood) is an SEC Registered Investment Adviser and an affiliate of Pershing LLC, each subsidiaries of The Bank of New York Mellon Corporation (BNY Mellon). Pershing LLC, member FINRA, NYSE, SIPC. SEC registration neither implies nor asserts the SEC or any state securities authority has approved or endorsed PFSI or Lockwood or the contents of this disclosure. In addition, SEC registration does not carry any official imprimatur or indication PFSI or Lockwood have attained a particular level of skill or ability. Neither Lockwood nor BNY Mellon is affiliated with Primerica. 5 In Canada, mutual funds are offered by PFSL Investments Canada Ltd., mutual fund dealer, Segregated funds are offered by Primerica Life Insurance Company of Canada. 6 Neither PCS nor its representatives offer or provide services such as credit repair or improvement, debt or credit counseling, debt settlement or other similar services. Competitive Advantage: Distribution Capability Primerica Sales Force (in 000s) Life Licensed Reps ~98 Primerica Mutual Fund Licensed Reps Insurance Agents 71 Brokers Financial Advisors 18 ~23 Aflac2 State 3 Farm 17 12 9 Allstate 4 TMK 5 BAML7 16 MSSB 6 12 10 Edward 8 Jones AMP 9 Source: company filings, annual reports and websites. 1. Size of life sales force as of December 31, 2014. Approximately 22,600 sales representatives are also licensed to sell mutual funds in North America as of December 31, 2014. 2. Aflac U.S. licensed sales associates from website dated 2/23/15 3. Number of licensed sales professionals from website dated 2/11/15 4. Number of licensed agents from website dated 2/23/15 6 5. 6. 7. 8. 9. 10. Number of producing exclusive and independent agents as of 2/23/2015 Wealth management representatives as of 2/23/2015 Number of financial advisors from website dated 2/23/15 Number of financial advisors from website dated 2/23/15 Number of financial advisors from website dated 2/23/15 Number of financial advisors from website dated 2/23/15 6 Raymond 10 James Competitive Advantage: Large Target Market With substantial needs… Household Income • Inadequate life insurance 20% • Need help saving • Too much consumer debt • Lack of trusted advice • Need for supplementary income Primerica’s Target Market Source: U.S. Census Bureau, Statistical Abstract of the United States 2012. Based upon 118mm households 7 49% 31% Strategy to Drive Stockholder Value Organic Sales Growth Active Capital Deployment TEXT 8 TEXT Long-Term Organic Growth Strategy Build Distribution Build Distribution • Distribution growth is beneficial to all product line results • Middle income market demographic trends provide opportunities 9 Enhance Product Offerings • Add products to fill gaps in middle-income market financial needs • Products must complement, not compete for discretionary income LongTerm Sales Growth Long-Term Organic Growth Strategy Consistent Focus Leads to Growth • Enhanced incentive programs and representative training – 3% growth in the life insurance licensed sales force at year end 2014 versus 2013 – 98,358 life insurance licensed representative as of December 31, 2014 • Expanded product offerings with the addition of variable and fixed indexed annuities as well as managed account portfolios – All-time high Investment & Savings Products sales of $5.68 billion in 2014 – 9% growth in Investment and Savings Product sales in 2014 – 8% growth ending client asset-values as of December 31, 2014 Future Initiatives • Balance short-term incentive programs to increase recruiting levels while maintaining life insurance licensing ratio in the 18-20% range • Continue to expand Investment & Savings Products product offerings • Consider additional product opportunities including debt-related and supplemental health products 10 Capital Deployment Strategy Anticipated Annual Capital Deployment 1 Businesses U.S. Term Life Insurance – Capital intensive and strictly regulated capital distribution ~$110 million Redundant reserve financing transaction completed in 2014 will fund capital redeployment in 2015 and 2016 Financing transactions free up assets backing redundant reserves and allow future statutory distribution to be accelerated Other Business – Generally low capital requirements with unrestricted cash flow ~$40 million Investment & Savings Products ‒ Free cash flow covers holding company expenses including stockholder dividends and interest expense Canadian Term Life Insurance ‒ Generates distributable capital annually Total ~$150 million ~$150 million is in addition to current stockholder dividend level 1 In 2015 and 2016 11 $760 Million of Capital used to Retire 32% of Primerica Shares since the IPO through 2014 Driver of Growth in Operating Earnings per Diluted Share:1, 2 $3.31 $2.90 $2.72 $0.34 $0.69 $0.57 Diluted Operating EPS impact of share retirement $2.08 Diluted Operating EPS without share retirement1 $1.72 2010 $2.05 2011 $2.38 $2.33 2012 2013 $2.62 2014 1 The impact of capital deployment to diluted operating EPS is measured assuming all capital deployment transactions had not occurred, no shares or warrants are retired, the capital deployed remains in the investment portfolio earning a 3.5% yield, and all transactional costs and interest incurred related to the transactions removed. 2 Earnings per Diluted Share for the comparable periods was $3.06 (2010 Pro Forma), $2.08 (2011), $2.71 (2012), $2.83 (2013) and $3.29 (2014) Driver of Growth in ROAE: Net Operating Return on Adjusted Stockholders’ Equity (ROAE) 12 2010 2011 2012 2013 2014 10.9% 11.8% 14.3% 14.7% 15.3% Net Return on Stockholders’ Equity for the comparable periods was 12.6% (2010 Pro Forma), 11.0% (2011), 13.1% (2012), 13.3% (2013) and 14.3% (2014) Not a Traditional Life Insurance Company Primerica Traditional Life Company Operating Revenue1 Fee-Based & Other Revenue 42.4% Significant Investment & Savings Products business with substantial recurring revenue 20.3% Insurance Premiums 51.1% Stable margin through extensive reinsurance 52.7% Investment Income 6.5% Minimal earnings dependency 26.9% Investment Leverage2 1.9x Less susceptible to market volatility Net Annualized Operating Return on Average Adjusted Equity3 15.3% ROAE above average 8.6x 13.7% Variable cost structure of distribution model provides scalable infrastructure Note: Traditional Life Company references the mean financial metrics of Torchmark, Lincoln Financial, MetLife and Prudential. Prudential’s metrics are for Financial Services segment only. Peer Adjusted Equity defined as Common Equity less unrealized gains/(losses). 1 For full year 2014 2 Calculated as (Cash + Invested Assets) / Adjusted Equity without unrealized gains 3 Full year 2014 operating income divided by the average of Q1, Q2, Q3 and Q4 2014 average adjusted equity. 13 Unique Investment Opportunity 14 Sales force Large North American sales force Opportunity Vast opportunity in the middle income market Income Diverse sources of recurring income lowers volatility Equity Strong return on equity Earnings Solid earnings and return of capital
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