UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
OR
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-34680
Primerica, Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
27-1204330 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
1 Primerica Parkway Duluth, Georgia |
|
30099 |
|
(Address of principal executive offices) |
|
(ZIP Code) |
(770) 381-1000
(Registrant’s telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
|
|
|
|
|
|
Non-accelerated filer |
☐ (Do not check if a smaller reporting company) |
Smaller reporting company |
☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class |
|
As of October 31, 2016 |
|
Common Stock, $0.01 Par Value |
|
45,801,431 shares |
|
|
|
|
i
PART I – FINANCIAL INFORMATION
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
|
(In thousands) |
|
|||||
|
Assets |
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
|
Fixed-maturity securities available-for-sale, at fair value (amortized cost: $1,660,347 in 2016 and $1,690,043 in 2015) |
|
$ |
1,761,174 |
|
|
$ |
1,731,459 |
|
|
Fixed-maturity securities held-to-maturity, at amortized cost (fair value: $500,823 in 2016 and $371,742 in 2015) |
|
|
454,000 |
|
|
|
365,220 |
|
|
Equity securities available-for-sale, at fair value (cost: $37,966 in 2016 and $39,969 in 2015) |
|
|
47,539 |
|
|
|
47,839 |
|
|
Trading securities, at fair value (cost: $12,268 in 2016 and $5,383 in 2015) |
|
|
12,259 |
|
|
|
5,358 |
|
|
Policy loans |
|
|
30,801 |
|
|
|
28,627 |
|
|
Total investments |
|
|
2,305,773 |
|
|
|
2,178,503 |
|
|
Cash and cash equivalents |
|
|
195,323 |
|
|
|
152,294 |
|
|
Accrued investment income |
|
|
17,449 |
|
|
|
17,080 |
|
|
Due from reinsurers |
|
|
4,161,537 |
|
|
|
4,110,628 |
|
|
Deferred policy acquisition costs, net |
|
|
1,672,454 |
|
|
|
1,500,259 |
|
|
Agent balances, due premiums and other receivables |
|
|
226,539 |
|
|
|
190,379 |
|
|
Intangible assets, net (accumulated amortization: $74,381 in 2016 and $71,828 in 2015) |
|
|
55,766 |
|
|
|
58,318 |
|
|
Income taxes |
|
|
29,313 |
|
|
|
35,067 |
|
|
Other assets |
|
|
356,713 |
|
|
|
304,356 |
|
|
Separate account assets |
|
|
2,347,816 |
|
|
|
2,063,899 |
|
|
Total assets |
|
$ |
11,368,683 |
|
|
$ |
10,610,783 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Future policy benefits |
|
$ |
5,629,967 |
|
|
$ |
5,431,711 |
|
|
Unearned premiums |
|
|
526 |
|
|
|
628 |
|
|
Policy claims and other benefits payable |
|
|
246,514 |
|
|
|
238,157 |
|
|
Other policyholders’ funds |
|
|
348,975 |
|
|
|
356,123 |
|
|
Notes payable |
|
|
372,827 |
|
|
|
372,552 |
|
|
Surplus note |
|
|
453,247 |
|
|
|
364,424 |
|
|
Income taxes |
|
|
215,454 |
|
|
|
148,125 |
|
|
Other liabilities |
|
|
436,621 |
|
|
|
417,910 |
|
|
Payable under securities lending |
|
|
95,843 |
|
|
|
71,482 |
|
|
Separate account liabilities |
|
|
2,347,816 |
|
|
|
2,063,899 |
|
|
Commitments and contingent liabilities (see Commitments and Contingent Liabilities note) |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
10,147,790 |
|
|
|
9,465,011 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock ($0.01 par value; authorized 500,000 in 2016 and 2015; issued and outstanding 45,962 shares in 2016 and 48,297 shares in 2015) |
|
|
460 |
|
|
|
483 |
|
|
Paid-in capital |
|
|
66,510 |
|
|
|
180,250 |
|
|
Retained earnings |
|
|
1,090,388 |
|
|
|
952,804 |
|
|
Accumulated other comprehensive income (loss), net of income tax: |
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation gains (losses) |
|
|
(8,227 |
) |
|
|
(19,801 |
) |
|
Net unrealized investment gains (losses): |
|
|
|
|
|
|
|
|
|
Net unrealized investment gains not other-than-temporarily impaired |
|
|
71,827 |
|
|
|
32,107 |
|
|
Net unrealized investment losses other-than-temporarily impaired |
|
|
(65 |
) |
|
|
(71 |
) |
|
Total stockholders’ equity |
|
|
1,220,893 |
|
|
|
1,145,772 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
11,368,683 |
|
|
$ |
10,610,783 |
|
See accompanying notes to condensed consolidated financial statements.
1
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income – Unaudited
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
||||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
||||
|
|
|
(In thousands, except per-share amounts) |
|||||||||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct premiums |
|
$ |
616,587 |
|
|
$ |
587,882 |
|
|
$ |
1,825,906 |
|
|
$ |
1,753,589 |
|
|
|
Ceded premiums |
|
|
(399,676 |
) |
|
|
(393,987 |
) |
|
|
(1,201,692 |
) |
|
|
(1,198,382 |
) |
|
|
Net premiums |
|
|
216,911 |
|
|
|
193,895 |
|
|
|
624,214 |
|
|
|
555,207 |
|
|
|
Commissions and fees |
|
|
134,282 |
|
|
|
132,368 |
|
|
|
400,005 |
|
|
|
404,353 |
|
|
|
Investment income net of investment expenses |
|
|
24,356 |
|
|
|
22,487 |
|
|
|
74,742 |
|
|
|
67,918 |
|
|
|
Interest expense on surplus note |
|
|
(4,957 |
) |
|
|
(3,772 |
) |
|
|
(13,716 |
) |
|
|
(8,954 |
) |
|
|
Net investment income |
|
|
19,399 |
|
|
|
18,715 |
|
|
|
61,026 |
|
|
|
58,964 |
|
|
|
Realized investment gains (losses), including other-than- temporary impairment losses |
|
|
(35 |
) |
|
|
(259 |
) |
|
|
2,623 |
|
|
|
1,623 |
|
|
|
Other, net |
|
|
13,069 |
|
|
|
10,990 |
|
|
|
37,353 |
|
|
|
30,605 |
|
|
|
Total revenues |
|
|
383,626 |
|
|
|
355,709 |
|
|
|
1,125,221 |
|
|
|
1,050,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and claims |
|
|
93,022 |
|
|
|
88,599 |
|
|
|
272,983 |
|
|
|
253,621 |
|
|
|
Amortization of deferred policy acquisition costs |
|
|
45,428 |
|
|
|
40,797 |
|
|
|
127,277 |
|
|
|
113,392 |
|
|
|
Sales commissions |
|
|
66,700 |
|
|
|
67,402 |
|
|
|
203,489 |
|
|
|
207,358 |
|
|
|
Insurance expenses |
|
|
32,837 |
|
|
|
30,266 |
|
|
|
98,873 |
|
|
|
93,365 |
|
|
|
Insurance commissions |
|
|
4,709 |
|
|
|
4,619 |
|
|
|
13,328 |
|
|
|
11,953 |
|
|
|
Interest expense |
|
|
7,184 |
|
|
|
8,718 |
|
|
|
21,534 |
|
|
|
26,036 |
|
|
|
Other operating expenses |
|
|
45,309 |
|
|
|
40,355 |
|
|
|
137,206 |
|
|
|
126,439 |
|
|
|
Total benefits and expenses |
|
|
295,189 |
|
|
|
280,756 |
|
|
|
874,690 |
|
|
|
832,164 |
|
|
|
Income before income taxes |
|
|
88,437 |
|
|
|
74,953 |
|
|
|
250,531 |
|
|
|
218,588 |
|
|
|
Income taxes |
|
|
30,400 |
|
|
|
25,603 |
|
|
|
87,991 |
|
|
|
76,664 |
|
|
|
Net income |
|
$ |
58,037 |
|
|
$ |
49,350 |
|
|
$ |
162,540 |
|
|
$ |
141,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
1.22 |
|
|
$ |
0.98 |
|
|
$ |
3.38 |
|
|
$ |
2.73 |
|
|
|
Diluted earnings per share |
|
$ |
1.22 |
|
|
$ |
0.98 |
|
|
$ |
3.37 |
|
|
$ |
2.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
47,008 |
|
|
|
50,082 |
|
|
|
47,736 |
|
|
|
51,494 |
|
|
|
Diluted |
|
|
47,051 |
|
|
|
50,104 |
|
|
|
47,775 |
|
|
|
51,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment losses |
|
$ |
(478 |
) |
|
$ |
(1,564 |
) |
|
$ |
(3,308 |
) |
|
$ |
(2,433 |
) |
|
|
Impairment losses recognized in other comprehensive income before income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Net impairment losses recognized in earnings |
|
|
(478 |
) |
|
|
(1,564 |
) |
|
|
(3,308 |
) |
|
|
(2,433 |
) |
|
|
Other net realized investment gains (losses) |
|
|
443 |
|
|
|
1,305 |
|
|
|
5,931 |
|
|
|
4,056 |
|
|
|
Realized investment gains (losses), including other-than- temporary impairment losses |
|
$ |
(35 |
) |
|
$ |
(259 |
) |
|
$ |
2,623 |
|
|
$ |
1,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
0.18 |
|
|
$ |
0.16 |
|
|
$ |
0.52 |
|
|
$ |
0.48 |
|
|
See accompanying notes to condensed consolidated financial statements.
2
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
Net income |
|
$ |
58,037 |
|
|
$ |
49,350 |
|
|
$ |
162,540 |
|
|
$ |
141,924 |
|
|
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized investment gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized holding gains/(losses) on investment securities |
|
|
5,129 |
|
|
|
(18,019 |
) |
|
|
63,414 |
|
|
|
(35,078 |
) |
|
Reclassification adjustment for realized investment (gains) losses included in net income |
|
|
33 |
|
|
|
381 |
|
|
|
(2,300 |
) |
|
|
(1,892 |
) |
|
Foreign currency translation adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized foreign currency translation gains (losses) before income tax expense (benefit) |
|
|
(3,165 |
) |
|
|
(16,323 |
) |
|
|
11,704 |
|
|
|
(33,731 |
) |
|
Total other comprehensive income (loss) before income taxes |
|
|
1,997 |
|
|
|
(33,961 |
) |
|
|
72,818 |
|
|
|
(70,701 |
) |
|
Income tax expense (benefit) related to items of other comprehensive income (loss) |
|
|
1,777 |
|
|
|
(6,345 |
) |
|
|
21,518 |
|
|
|
(13,306 |
) |
|
Other comprehensive income (loss), net of income taxes |
|
|
220 |
|
|
|
(27,616 |
) |
|
|
51,300 |
|
|
|
(57,395 |
) |
|
Total comprehensive income |
|
$ |
58,257 |
|
|
$ |
21,734 |
|
|
$ |
213,840 |
|
|
$ |
84,529 |
|
See accompanying notes to condensed consolidated financial statements.
3
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity – Unaudited
|
|
|
Nine months ended September 30, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
|
|
(In thousands) |
|
|||||
|
Common stock: |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
$ |
483 |
|
|
$ |
522 |
|
|
Repurchases of common stock |
|
|
(29 |
) |
|
|
(41 |
) |
|
Net issuance of common stock |
|
|
6 |
|
|
|
5 |
|
|
Balance, end of period |
|
|
460 |
|
|
|
486 |
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital: |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
180,250 |
|
|
|
353,337 |
|
|
Share-based compensation |
|
|
21,564 |
|
|
|
28,073 |
|
|
Net issuance of common stock |
|
|
(6 |
) |
|
|
(5 |
) |
|
Repurchases of common stock |
|
|
(135,298 |
) |
|
|
(187,180 |
) |
|
Adjustments to paid-in capital, other |
|
|
- |
|
|
|
1,089 |
|
|
Balance, end of period |
|
|
66,510 |
|
|
|
195,314 |
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings: |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
952,804 |
|
|
|
795,740 |
|
|
Net income |
|
|
162,540 |
|
|
|
141,924 |
|
|
Dividends |
|
|
(24,956 |
) |
|
|
(24,915 |
) |
|
Balance, end of period |
|
|
1,090,388 |
|
|
|
912,749 |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
12,235 |
|
|
|
95,527 |
|
|
Change in foreign currency translation adjustment, net of income tax expense (benefit) |
|
|
11,574 |
|
|
|
(33,365 |
) |
|
Change in net unrealized investment gains (losses) during the period, net of income taxes: |
|
|
|
|
|
|
|
|
|
Change in net unrealized investment gains (losses) not-other-than temporarily impaired, net of income tax expense (benefit) |
|
|
39,720 |
|
|
|
(24,419 |
) |
|
Change in net unrealized investment losses other-than-temporarily impaired, net of income tax expense (benefit) |
|
|
6 |
|
|
|
389 |
|
|
Balance, end of period |
|
|
63,535 |
|
|
|
38,132 |
|
|
Total stockholders’ equity |
|
$ |
1,220,893 |
|
|
$ |
1,146,681 |
|
See accompanying notes to condensed consolidated financial statements.
4
PRIMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows – Unaudited
|
|
|
Nine months ended September 30, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
|
|
(In thousands) |
|
|||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
162,540 |
|
|
$ |
141,924 |
|
|
Adjustments to reconcile net income to cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
Change in future policy benefits and other policy liabilities |
|
|
177,744 |
|
|
|
167,886 |
|
|
Deferral of policy acquisition costs |
|
|
(281,397 |
) |
|
|
(243,346 |
) |
|
Amortization of deferred policy acquisition costs |
|
|
127,277 |
|
|
|
113,392 |
|
|
Change in income taxes |
|
|
51,598 |
|
|
|
31,349 |
|
|
Realized investment (gains) losses, including other-than-temporary impairments |
|
|
(2,623 |
) |
|
|
(1,623 |
) |
|
Accretion and amortization of investments |
|
|
(1,091 |
) |
|
|
(1,094 |
) |
|
Depreciation and amortization |
|
|
10,879 |
|
|
|
8,201 |
|
|
Change in due from reinsurers |
|
|
(34,907 |
) |
|
|
(33,248 |
) |
|
Change in agent balances, due premiums and other receivables |
|
|
(36,160 |
) |
|
|
(21,553 |
) |
|
Trading securities sold, matured, or called (acquired), net |
|
|
(6,917 |
) |
|
|
1,143 |
|
|
Share-based compensation |
|
|
11,754 |
|
|
|
12,918 |
|
|
Change in other operating assets and liabilities, net |
|
|
(13,809 |
) |
|
|
(34,957 |
) |
|
Net cash provided by (used in) operating activities |
|
|
164,888 |
|
|
|
140,992 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Available-for-sale investments sold, matured or called: |
|
|
|
|
|
|
|
|
|
Fixed-maturity securities — sold |
|
|
76,540 |
|
|
|
104,097 |
|
|
Fixed-maturity securities — matured or called |
|
|
195,803 |
|
|
|
201,722 |
|
|
Equity securities |
|
|
4,864 |
|
|
|
4,700 |
|
|
Available-for-sale investments acquired: |
|
|
|
|
|
|
|
|
|
Fixed-maturity securities |
|
|
(228,986 |
) |
|
|
(264,457 |
) |
|
Equity securities |
|
|
(1,074 |
) |
|
|
(794 |
) |
|
Purchases of property and equipment and other investing activities, net |
|
|
(11,410 |
) |
|
|
(5,924 |
) |
|
Cash collateral received (returned) on loaned securities, net |
|
|
24,361 |
|
|
|
33,009 |
|
|
Sales (purchases) of short-term investments using securities lending collateral, net |
|
|
(24,361 |
) |
|
|
(33,009 |
) |
|
Net cash provided by (used in) investing activities |
|
|
35,737 |
|
|
|
39,344 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(24,956 |
) |
|
|
(24,915 |
) |
|
Common stock repurchased |
|
|
(131,570 |
) |
|
|
(181,121 |
) |
|
Excess tax benefits on share-based compensation |
|
|
1,684 |
|
|
|
4,624 |
|
|
Tax withholdings on share-based compensation |
|
|
(3,757 |
) |
|
|
(6,101 |
) |
|
Cash proceeds from stock options exercised |
|
|
- |
|
|
|
136 |
|
|
Net cash provided by (used in) financing activities |
|
|
(158,599 |
) |
|
|
(207,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash |
|
|
1,003 |
|
|
|
(4,395 |
) |
|
Change in cash and cash equivalents |
|
|
43,029 |
|
|
|
(31,436 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
152,294 |
|
|
|
191,997 |
|
|
Cash and cash equivalents, end of period |
|
$ |
195,323 |
|
|
$ |
160,561 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
PRIMERICA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements — Unaudited
(1) Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies
Description of Business. Primerica, Inc. (the "Parent Company"), together with its subsidiaries (collectively, "we", "us" or the "Company"), is a leading distributor of financial products to middle income households in the United States and Canada. We assist our clients in meeting their needs for term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. Our primary subsidiaries include the following entities: Primerica Financial Services, Inc. ("PFS"), a general agency and marketing company; Primerica Life Insurance Company ("Primerica Life"), our principal life insurance company; Primerica Financial Services (Canada) Ltd., a holding company for our Canadian operations, which includes Primerica Life Insurance Company of Canada ("Primerica Life Canada") and PFSL Investments Canada Ltd. ("PFSL Investments Canada"); and PFS Investments Inc. ("PFS Investments"), an investment products company and broker-dealer. Primerica Life, domiciled in Massachusetts, owns National Benefit Life Insurance Company ("NBLIC"), a New York insurance company. We established Peach Re, Inc. ("Peach Re") and Vidalia Re, Inc. (“Vidalia Re”) as special purpose financial captive insurance companies and wholly owned subsidiaries of Primerica Life. Peach Re and Vidalia Re have each entered into separate coinsurance agreements with Primerica Life whereby Primerica Life has ceded certain level premium term life insurance policies to Peach Re and Vidalia Re (respectively, the “Peach Re Coinsurance Agreement” and the “Vidalia Re Coinsurance Agreement”).
Basis of Presentation. We prepare our financial statements in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). These principles are established primarily by the Financial Accounting Standards Board ("FASB"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect financial statement balances, revenues and expenses and cash flows, as well as the disclosure of contingent assets and liabilities. Management considers available facts and knowledge of existing circumstances when establishing the estimates included in our financial statements.
The accompanying unaudited condensed consolidated financial statements contain all adjustments, generally consisting of normal recurring accruals, which are necessary to fairly present the balance sheets as of September 30, 2016 and December 31, 2015 and the statements of income and comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015, and the statements of stockholders' equity and cash flows for the nine months ended September 30, 2016 and 2015. Results of operations for interim periods are not necessarily indicative of results for the entire year or of the results to be expected in future periods.
These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are sufficient to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2015 ("2015 Annual Report").
Use of Estimates. The most significant items that involve a greater degree of accounting estimates and actuarial determinations subject to change in the future are the valuation of investments, deferred policy acquisition costs ("DAC"), liabilities for future policy benefits and unpaid policy claims, and income taxes. Estimates for these and other items are subject to change and are reassessed by management in accordance with U.S. GAAP. Actual results could differ from those estimates.
Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and those entities required to be consolidated under applicable accounting standards. All material intercompany profits, transactions, and balances among the consolidated entities have been eliminated.
Reclassifications. Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications. These reclassifications had no impact on net income or total stockholders' equity.
Subsequent Events. The Company has evaluated subsequent events for recognition and disclosure for occurrences and transactions after the date of the unaudited condensed consolidated financial statements dated as of September 30, 2016.
Significant Accounting Policies. All significant accounting policies remain unchanged from the 2015 Annual Report.
Future Application of Accounting Standards. Recent accounting guidance not discussed is not applicable, is immaterial to our financial statements, or did not or is not expected to have a material impact on our business. For additional information on new accounting pronouncements and recent accounting principles and their impact, if any, on our financial position or results of operations, see Note 1 (Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies) in our 2015 Annual Report and in the unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2016 and June 30, 2016.
6
(2) Segment and Geographical Information
Segments. We have two primary operating segments — Term Life Insurance and Investment and Savings Products. We also have a Corporate and Other Distributed Products segment.
Results of operations by segment were as follows:
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term life insurance segment |
|
$ |
222,598 |
|
|
$ |
197,205 |
|
|
$ |
639,253 |
|
|
$ |
563,795 |
|
|
Investment and savings products segment |
|
|
130,080 |
|
|
|
128,596 |
|
|
|
387,604 |
|
|
|
392,561 |
|
|
Corporate and other distributed products segment |
|
|
30,948 |
|
|
|
29,908 |
|
|
|
98,364 |
|
|
|
94,396 |
|
|
Total revenues |
|
$ |
383,626 |
|
|
$ |
355,709 |
|
|
$ |
1,125,221 |
|
|
$ |
1,050,752 |
|
|
Income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term life insurance segment |
|
$ |
58,137 |
|
|
$ |
46,519 |
|
|
$ |
162,234 |
|
|
$ |
127,284 |
|
|
Investment and savings products segment |
|
|
35,760 |
|
|
|
34,811 |
|
|
|
103,514 |
|
|
|
107,600 |
|
|
Corporate and other distributed products segment |
|
|
(5,460 |
) |
|
|
(6,377 |
) |
|
|
(15,217 |
) |
|
|
(16,296 |
) |
|
Total income before income taxes |
|
$ |
88,437 |
|
|
$ |
74,953 |
|
|
$ |
250,531 |
|
|
$ |
218,588 |
|
Total assets by segment were as follows:
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
|
(In thousands) |
|
|||||
|
Assets: |
|
|
|
|
|
|
|
|
|
Term life insurance segment |
|
$ |
5,878,013 |
|
|
$ |
5,638,682 |
|
|
Investment and savings products segment(1) |
|
|
2,462,111 |
|
|
|
2,157,548 |
|
|
Corporate and other distributed products segment |
|
|
3,028,559 |
|
|
|
2,814,553 |
|
|
Total assets |
|
$ |
11,368,683 |
|
|
$ |
10,610,783 |
|
(1) The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the Investment and Savings Products segment assets were approximately $114.4 million and $93.8 million as of September 30, 2016 and December 31, 2015, respectively.
See “Management's Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report for more information regarding the results of our operating segments.
Geographical Information. Results of operations by country and long-lived assets, primarily tangible assets reported in Other assets in our unaudited condensed consolidated balance sheets, were as follows:
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
Revenues by country: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
323,560 |
|
|
$ |
298,671 |
|
|
$ |
947,618 |
|
|
$ |
876,363 |
|
|
Canada |
|
|
60,066 |
|
|
|
57,038 |
|
|
|
177,603 |
|
|
|
174,389 |
|
|
Total revenues |
|
$ |
383,626 |
|
|
$ |
355,709 |
|
|
$ |
1,125,221 |
|
|
$ |
1,050,752 |
|
|
Income before income taxes by country: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
71,525 |
|
|
$ |
61,116 |
|
|
$ |
200,137 |
|
|
$ |
170,172 |
|
|
Canada |
|
|
16,912 |
|
|
|
13,837 |
|
|
|
50,394 |
|
|
|
48,416 |
|
|
Total income before income taxes |
|
$ |
88,437 |
|
|
$ |
74,953 |
|
|
$ |
250,531 |
|
|
$ |
218,588 |
|