Primerica has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 15.2% to $289.21 per share while the index has gained 12.7%.
Is now the time to buy PRI? Find out in our full research report, it’s free.
Why Does Primerica Spark Debate?
With a sales force of over 140,000 licensed representatives operating on an independent contractor model, Primerica (NYSE:PRI) provides term life insurance, investment products, and other financial services to middle-income households in the United States and Canada.
One Thing to Like:
Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) is a crucial yardstick for insurance companies, measuring their ability to generate returns on the capital provided by shareholders. Insurers that consistently deliver superior ROE tend to create more value for their investors over time through strategic capital allocation and shareholder-friendly policies.
Over the last five years, Primerica has averaged an ROE of 28.5%, exceptional for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This shows Primerica has a strong competitive moat.
One Reason to Be Careful:
Net Premiums Earned Point to Soft Demand
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Primerica’s net premiums earned has grown at a 2.9% annualized rate over the last two years, much worse than the broader insurance industry and slower than its total revenue.
Final Judgment
Primerica’s merits more than compensate for its flaws. At $289.21 per share (or 3.3× forward P/B), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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