Shares of Primerica Inc. PRI closed at $263.34 on Tuesday, near a 52-week high of $265.67. A compelling portfolio, strong market presence and solid capital position are driving the share price higher.
This second-largest issuer of term-life insurance coverage in North America envisions being a successful senior health business while continuing to enhance its shareholders’ value. PRI’s earnings have risen 17.6% in the past five years, outperforming the industry average of 4.6%.
Shares of PRI have gained 11.6% in the past three months, outperforming the industry’s growth of 11.4%, the Finance sector’s increase of 2.7% and the Zacks S&P 500 composite’s increase of 3.9%.
PRI shares are trading well above the 50-day moving average, indicating a bullish trend.
Based on short-term price targets offered by five analysts, the Zacks average price target is at $275.20 per share. The average suggests a potential 4.5% upside from Tuesday’s closing price.
Four of the six analysts covering the stock have raised estimates for 2024 and 2025 over the past 60 days. The consensus estimate for 2024 and 2025 has moved 1.2% and 1.6%, respectively, in the past 60 days.
The Zacks Consensus Estimate for 2024 implies an 11.7% year-over-year increase, while the same for 2025 suggests an 11.5% increase.
Return on equity (ROE), a profitability measure to identify how efficiently a company is utilizing its shareholders’ funds, has been improving over the last several years. PRI’s trailing 12-month ROE of 27.8% is better than the industry average of 15.5%.
Also, the return on invested capital in the trailing 12 months was 7.2%, better than the industry average of 0.7%, reflecting PRI’s efficiency in utilizing funds to generate income.
Primerica’s solid business model makes it well-poised to cater to the middle market's increased demand for financial security. Nearly 48% of middle-income Americans are ready for retirement based on their investment and savings habits. A compelling portfolio and a strong lineup of life-licensed sales representatives will poise PRI to capitalize on the opportunities.
Management estimates more than a 5% rise in sales force size in 2024. This should help cater to an estimated number of Term Life policies growth in low single digits and about 15% in Investment and Savings Products sales.
The life insurer has also decided to exit the senior health market as it believes this business will not be able to return the desired value for shareholders, given a challenging senior health distribution market. This will help PRI channel resources to businesses that will accelerate growth.
Primerica has a solid balance sheet, courtesy of improving leverage ratio and solid liquidity. It also scores strongly with credit rating agencies.
The strength of its Term-life insurance business ensures consistent free cash flow. Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting solid earnings.
Banking on operational expertise, the life insurer raises dividends each year as well as buys back shares. It increased dividends at a 10-year CAGR of 16.8%. It also has $173.2 million worth of shares remaining under authorization.
PRI shares are trading at a price-to-book multiple of 4.27, higher than the industry average of 1.94.
Shares of other insurers like The Allstate Corporation ALL are trading at a multiple higher than the industry average, while shares of MetLife Inc. MET and American International Group, Inc. AIG are trading at a multiple lower than the industry average.
Strong demand for protection products ensures sales growth and policy persistency. Primerica thus has upside potential backed by its solid growth prospects and financial health.
Despite its premium valuation, this Zacks Rank #2 (Buy) life insurer is worth adding to an investor’s portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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