Over the past six months, Primerica’s stock price fell to $269.85. Shareholders have lost 7.2% of their capital, which is disappointing considering the S&P 500 has climbed by 16.5%. This might have investors contemplating their next move.
Following the pullback, is now a good 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.
Two Things to Like:
2. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) serves as a comprehensive measure of an insurer's performance, showing how efficiently it converts shareholder capital into profits. Strong ROE performance typically translates to better returns for investors through a combination of earnings retention, share repurchases, and dividend distributions.
Over the last five years, Primerica has averaged an ROE of 26.7%, 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 gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Primerica’s net premiums earned has grown at a 4.2% annualized rate over the last two years, worse than the broader insurance industry and slower than its total revenue.
Final Judgment
Primerica’s positive characteristics outweigh the negatives. With the recent decline, the stock trades at 3.7× forward P/B (or $269.85 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Primerica
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