Primerica(PRI) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides unaudited condensed consolidated financial statements and management's analysis for Primerica, Inc. for Q1 2022 Item 1. Financial Statements (unaudited). This section presents Primerica, Inc.'s unaudited Q1 2022 financial statements, with detailed notes on accounting and key financial areas Condensed Consolidated Balance Sheets This section provides the condensed consolidated balance sheets of Primerica, Inc. as of March 31, 2022, and December 31, 2021 - Total assets decreased by 1.17% from $16.123 billion at December 31, 2021, to $15.935 billion at March 31, 2022[7] - Total liabilities decreased by 0.21% from $14.033 billion at December 31, 2021, to $14.004 billion at March 31, 2022[7] - Total permanent stockholders' equity decreased by 7.51% from $2.083 billion at December 31, 2021, to $1.926 billion at March 31, 2022, primarily due to a significant decrease in net unrealized investment gains (losses) on available-for-sale securities[7] Condensed Consolidated Balance Sheet Highlights | Metric (in millions) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total assets | $15,934.8 | $16,123.2 | | Total liabilities | $14,004.0 | $14,033.4 | | Total permanent stockholders' equity | $1,926.2 | $2,082.5 | | Net unrealized investment gains (losses) on available-for-sale securities | $(66.4) | $63.8 | Condensed Consolidated Statements of Income This section presents the condensed consolidated statements of income for Primerica, Inc. for the three months ended March 31, 2022 and 2021 - Total revenues increased by 8.39% year-over-year, from $637.7 million in Q1 2021 to $691.2 million in Q1 2022[9] - Net income attributable to Primerica, Inc. decreased by 16.81% year-over-year, from $97.9 million in Q1 2021 to $81.4 million in Q1 2022[9] - Diluted EPS decreased by 16.26% year-over-year, from $2.46 in Q1 2021 to $2.06 in Q1 2022[9] Condensed Consolidated Statements of Income Highlights | Metric (in millions, except per-share) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenues | $691.2 | $637.7 | | Total benefits and expenses | $588.2 | $509.4 | | Income before income taxes | $103.0 | $128.3 | | Net income attributable to Primerica, Inc. | $81.4 | $97.9 | | Diluted earnings per share | $2.06 | $2.46 | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the condensed consolidated statements of comprehensive income (loss) for Primerica, Inc. for the three months ended March 31, 2022 and 2021 - Total comprehensive income (loss) attributable to Primerica, Inc. significantly decreased from a gain of $51.8 million in Q1 2021 to a loss of $(45.6) million in Q1 2022[10] - This change was primarily driven by a substantial negative shift in unrealized investment gains (losses) on available-for-sale securities, which moved from a loss of $(64.9) million before tax in Q1 2021 to a loss of $(164.9) million before tax in Q1 2022[10] Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights | Metric (in millions) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $78.8 | $97.9 | | Change in unrealized holding gains (losses) on available-for-sale securities (before income taxes) | $(164.9) | $(64.9) | | Other comprehensive income (loss), net of income taxes | $(127.1) | $(46.1) | | Total comprehensive income (loss) attributable to Primerica, Inc. | $(45.6) | $51.8 | Condensed Consolidated Statements of Stockholders' Equity This section presents the condensed consolidated statements of stockholders' equity for Primerica, Inc. for the three months ended March 31, 2022 and 2021 - Total permanent stockholders' equity decreased by 7.51% from $2.083 billion at December 31, 2021, to $1.926 billion at March 31, 2022[7][13] - Accumulated other comprehensive income shifted from a beginning balance of $72.4 million to an ending balance of $(54.7) million, primarily due to a significant change in net unrealized investment gains (losses) during the period, net of income taxes, of $(130.2) million[13] - Dividends declared per share increased from $0.47 in Q1 2021 to $0.55 in Q1 2022[13] Condensed Consolidated Statements of Stockholders' Equity Highlights | Metric (in millions, except per-share) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total permanent stockholders' equity (end of period) | $1,926.2 | $1,877.2 | | Retained earnings (end of period) | $1,980.5 | $1,785.0 | | Change in net unrealized investment gains (losses) during the period, net of income taxes | $(130.2) | $(51.1) | | Dividends declared per share | $0.55 | $0.47 | Condensed Consolidated Statements of Cash Flows This section presents the condensed consolidated statements of cash flows for Primerica, Inc. for the three months ended March 31, 2022 and 2021 - Net cash provided by operating activities increased significantly by 79.43% from $119.5 million in Q1 2021 to $214.3 million in Q1 2022[16] - Net cash used in investing activities decreased by 44.46% from $(203.2) million in Q1 2021 to $(112.7) million in Q1 2022[16] - Net cash used in financing activities increased substantially by 448.91% from $(24.7) million in Q1 2021 to $(134.6) million in Q1 2022, primarily due to common stock repurchases[16] Condensed Consolidated Statements of Cash Flows Highlights | Metric (in millions) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | Change ($) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net cash provided by (used in) operating activities | $214.3 | $119.5 | $94.8 | 79.43% | | Net cash provided by (used in) investing activities | $(112.7) | $(203.2) | $90.6 | -44.56% | | Net cash provided by (used in) financing activities | $(134.6) | $(24.7) | $(109.9) | 445.89% | | Change in cash and cash equivalents | $(32.7) | $(107.6) | $74.9 | -69.60% | Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering accounting policies, segment information, investments, and other key financial disclosures Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies This section outlines Primerica's business model, including its financial product offerings and the e-TeleQuote acquisition, along with the basis of financial statement presentation and significant accounting policies, notably the anticipated impact of ASU 2018-12 - Primerica, Inc. is a leading provider of financial products to middle-income households in the United States and Canada, primarily through a network of independent contractor sales representatives[18] - The company underwrites term life insurance and distributes mutual funds, annuities, managed investments, and other financial products, primarily on behalf of third parties[18] - On July 1, 2021, Primerica acquired 80% of e-TeleQuote Insurance, Inc., which markets Medicare-related insurance products underwritten by third-party health insurance carriers[18] - The adoption of ASU 2018-12 (effective January 1, 2023) will change accounting for long-duration contracts, requiring annual assumption updates for future policy benefits and impacting DAC amortization and discount rates; the company anticipates a significant decrease in accumulated other comprehensive income upon adoption[25][26] Segment and Geographical Information This section details Primerica's operating segments, including Term Life, Investment and Savings, Senior Health, and Corporate, along with geographical revenue distribution, highlighting the Senior Health segment's Q1 2022 loss - The company's primary operating segments are Term Life Insurance, Investment and Savings Products, Senior Health (as of July 1, 2021), and Corporate and Other Distributed Products[28] Revenues by Segment (Three months ended March 31, in millions) | Segment | 2022 | 2021 | | :------------------------------------ | :-------- | :-------- | | Term life insurance | $418.4 | $382.0 | | Investment and savings products | $241.0 | $223.4 | | Senior health | $5.8 | N/A | | Corporate and other distributed products | $25.9 | $32.3 | | Total revenues | $691.2 | $637.7 | Income (loss) before income taxes by Segment (Three months ended March 31, in millions) | Segment | 2022 | 2021 | | :------------------------------------ | :-------- | :-------- | | Term life insurance | $91.6 | $88.2 | | Investment and savings products | $64.6 | $63.4 | | Senior health | $(23.1) | N/A | | Corporate and other distributed products | $(30.0) | $(23.3) | | Total income before income taxes | $103.0 | $128.3 | Revenues by Country (Three months ended March 31, in millions) | Country | 2022 | 2021 | | :------------ | :-------- | :-------- | | United States | $586.2 | $538.9 | | Canada | $105.1 | $98.8 | | Total revenues | $691.2 | $637.7 | Investments This section details the company's investment portfolio, primarily available-for-sale fixed-maturity securities, which saw increased unrealized losses in Q1 2022 due to rising interest rates Available-for-sale Fixed-Maturity Securities (in millions) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Amortized cost | $2,789.5 | $2,621.4 | | Gross unrealized gains | $22.7 | $95.0 | | Gross unrealized losses | $(107.1) | $(13.9) | | Fair value | $2,705.1 | $2,702.6 | - The sharp increase in interest rates during Q1 2022 was the primary driver of the increase in unrealized losses on available-for-sale securities[45] - Net investment income decreased from $20.1 million in Q1 2021 to $18.9 million in Q1 2022[40] - The company did not recognize credit losses on available-for-sale securities with unrealized losses due to interest rate sensitivity and changes in credit spreads, as it has the ability and no present intention to hold these investments until maturity or market recovery[45] Fair Value of Financial Instruments This section describes the fair value hierarchy for financial instruments, noting that total fair value assets were $5.858 billion as of March 31, 2022, with a significant increase in Level 3 assets - Fair value assets are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[49] Total Fair Value Assets (in millions) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Total fair value assets | $5,857.7 | $6,047.2 | | Level 1 | $400.4 | $395.3 | | Level 2 | $5,446.6 | $5,648.3 | | Level 3 | $10.7 | $3.6 | - The roll-forward of Level 3 assets showed an increase from $3.6 million at the beginning of the period to $10.7 million at the end of Q1 2022, driven by $5.9 million in purchases and $1.4 million in transfers into Level 3[54] - The company uses a third-party pricing service for approximately 99% of its securities measured at fair value, with internal reasonableness assessments and challenges to unusual valuations[50][51] Reinsurance This section details the company's extensive use of reinsurance, with 86% of life insurance in-force ceded and $4.240 billion in reinsurance recoverables as of March 31, 2022 - Percentage of reinsured life insurance in-force remained at 86% as of March 31, 2022, consistent with December 31, 2021[61] Reinsurance Recoverables (in millions) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Reinsurance recoverables | $4,240.5 | $4,268.4 | | Allowance for credit losses | $(3.1) | $(2.9) | - Benefits and claims ceded to reinsurers decreased from $552.6 million in Q1 2021 to $503.8 million in Q1 2022[62] - The allowance for credit losses on reinsurance recoverables increased from $2.9 million at the beginning of the period to $3.1 million at the end of Q1 2022[66] Policy Claims and Other Benefits Payable This section outlines policy claims and other benefits payable, noting a decrease in the net balance to $(77.2) million by the end of Q1 2022, with stable incurred claims and decreased net claims paid Policy Claims and Other Benefits Payable (in millions) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net balance, beginning of period | $(52.6) | $(26.1) | | Total incurred | $72.7 | $72.1 | | Total paid | $(97.3) | $(157.8) | | Net balance, end of period | $(77.2) | $(111.7) | | Balance, end of period (gross) | $574.9 | $526.7 | - The liability for policy claims includes estimated unpaid claims and claims incurred but not yet reported, based on historical activity and current trends[68] Stockholders' Equity This section details changes in stockholders' equity, including a decrease in outstanding common shares to 38.752 million due to repurchases, and an increased share repurchase program authorization of $325.0 million Common Stock Outstanding (in millions) | Metric | March 31, 2022 | March 31, 2021 | | :-------------------------- | :------------- | :------------- | | Common stock, end of period | 38.752 | 39.414 | - The Board of Directors authorized an increase of $50.0 million to the Share Repurchase Program, bringing the total to $325.0 million through December 31, 2022[70] - The company repurchased 835,058 shares for $117.8 million through March 31, 2022, with approximately $207.2 million remaining available[70] Earnings Per Share This section presents earnings per share, noting a decrease in both basic and diluted EPS to $2.07 and $2.06 respectively in Q1 2022, and outlines the calculation methodologies Earnings Per Share (per-share amounts) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------------ | :-------------------------------- | :-------------------------------- | | Basic earnings per share | $2.07 | $2.47 | | Diluted earnings per share | $2.06 | $2.46 | - The company calculates EPS using the two-class method for basic EPS and the treasury-stock method for diluted EPS, considering RSUs, PSUs, and stock options[72][74] Share-Based Transactions This section details share-based transactions, including equity award expense recognition of $12.2 million in Q1 2022, and recent grants of RSUs and PSUs to management and executives Equity Awards Impact (in millions) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Equity awards expense recognized | $12.2 | $11.7 | | Equity awards expense deferred | $2.4 | $2.4 | - On February 24, 2022, 85,844 RSUs were awarded to management with time-based vesting over approximately three years[83] - 26,475 PSUs were awarded to four top executives, contingent on achieving targeted three-year ROAE and average EPS growth for the period from January 1, 2022, through December 31, 2024[83] Commitments and Contingent Liabilities This section outlines commitments and contingent liabilities, including a $145.1 million letter of credit for Regulation XXX reserves and ongoing legal and regulatory matters with unestimable potential losses - Peach Re maintains a credit facility agreement with Deutsche Bank, with a letter of credit outstanding of $145.1 million as of March 31, 2022, to support Regulation XXX reserves[80] - The company is involved in legal disputes, regulatory inquiries, and arbitration proceedings in the normal course of business, and is unable to estimate the possible loss or range of loss for these matters[82] Other Comprehensive Income This section details other comprehensive income (loss), which significantly declined to a $(127.1) million loss in Q1 2022, primarily due to increased unrealized holding losses on available-for-sale securities Components of Other Comprehensive Income (in millions) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Change in unrealized foreign currency translation gains (losses), net of income taxes | $3.2 | $5.0 | | Change in unrealized holding gains (losses) arising during period before income taxes | $(164.9) | $(64.9) | | Change in unrealized gains (losses) on available-for-sale securities, net of income taxes and reclassification adjustment | $(130.2) | $(51.1) | - The significant decline in OCI was mainly due to increased unrealized holding losses on available-for-sale securities[84] Debt This section details the company's debt, including $600.0 million in Senior Notes, a $200.0 million undrawn revolving credit facility, and a $1.4 billion Surplus Note, along with a short-term Majority Shareholder Note - The company has $600.0 million of publicly-traded, senior unsecured notes (Senior Notes) with a 2.80% annual interest rate, maturing on November 19, 2031[85] - A $15.0 million unsecured, subordinated Majority Shareholder Note, issued as part of the e-TeleQuote acquisition, had a remaining principal of $2.6 million as of March 31, 2022, and matures on July 1, 2022[87] - Vidalia Re has a $1.4 billion Surplus Note outstanding, which fluctuates with the LLC Note's principal amount to coincide with policy reserves supported under the Vidalia Re Coinsurance Agreement[88] - The company maintains an unsecured $200.0 million revolving credit facility, which was undrawn during the three months ended March 31, 2022[90][91] Revenue from Contracts with Customers This section describes revenues from contracts with customers, including commissions and fees from various financial products, noting a $19.1 million negative tail revenue adjustment in the Senior Health segment in Q1 2022 - Revenues from contracts with customers include commissions and fees from investment and savings products, investment advisory/administrative services, transfer agent/custodial services, Medicare-related insurance distribution, mortgage distribution, and other products like monthly subscription fees[93] Segment Revenues from Contracts with Customers (Three months ended March 31, 2022, in millions) | Segment | Revenues from Contracts with Customers | | :------------------------------------ | :------------------------------------- | | Term Life Insurance | $12.2 | | Investment and Savings Products | $225.3 | | Senior Health | $5.8 | | Corporate and Other Distributed Products | $13.7 | - The Senior Health segment recognized a $19.1 million negative tail revenue adjustment in Q1 2022 due to lower-than-expected renewals for policies approved in prior periods, offsetting $20.3 million in commissions and fees revenue for newly approved policies[96] Acquisition This section details the July 2021 acquisition of an 80% interest in e-TeleQuote for approximately $350 million, including the purchase price allocation, subsequent goodwill impairment, and e-TeleQuote's Q1 2022 financial performance - On July 1, 2021, Primerica acquired an 80% interest in e-TeleQuote Insurance, Inc. for approximately $350 million in cash, replacement of $146 million debt, a $15 million Majority Shareholder Note, and a 20% equity stake to minority shareholders[96][97] - The updated preliminary purchase price allocation as of December 31, 2021, included $153.0 million for customer relationships (intangible assets) and $255.2 million for goodwill[98][100] - A non-cash goodwill impairment charge of $76.0 million was recognized at December 31, 2021, reducing goodwill from the acquisition to $179.2 million as of March 31, 2022[101] - e-TeleQuote's actual statements of income for the three months ended March 31, 2022, reported revenue of $5.8 million and a net loss of $(19.2) million[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's discussion and analysis of Primerica's financial condition and operational results for Q1 2022, covering business segments, market trends, and key performance drivers Business Overview This section provides an overview of Primerica's business model, including its financial product offerings and operating segments, notably the Senior Health segment through e-TeleQuote - Primerica provides financial products to middle-income households in the US and Canada, including term life insurance, mutual funds, annuities, managed investments, and other financial products[105] - The company operates through four segments: Term Life Insurance, Investment and Savings Products, Senior Health (acquired July 1, 2021), and Corporate and Other Distributed Products[105] - The Senior Health segment, through e-TeleQuote, distributes Medicare-related insurance products underwritten by third-party carriers[108] Business Trends and Conditions This section discusses business trends and conditions, including the impact of financial markets, COVID-19, sales force activity, investment product sales, Senior Health segment performance, and regulatory changes Independent Sales Force Activity (Three months ended March 31) | Metric | 2022 | 2021 | Change (%) | | :------------------------------------------ | :------ | :------ | :--------- | | New recruits | 84,707 | 94,633 | -10.49% | | New life-licensed independent sales representatives | 9,983 | 10,833 | -7.70% | | Life-licensed independent sales representatives, at period end | 130,206 | 132,030 | -1.38% | - New policies issued decreased from 82,667 in Q1 2021 to 71,324 in Q1 2022, normalizing towards pre-pandemic levels[119] Investment and Savings Products Sales (Three months ended March 31, in millions) | Product Sales | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------- | :----- | :----- | :--------- | :--------- | | Retail mutual funds | $1,736 | $1,686 | $50 | 3% | | Annuities and other | $726 | $683 | $43 | 6% | | Managed investments | $454 | $330 | $124 | 37% | | Total product sales | $3,066 | $2,854 | $212 | 7% | Senior Health Key Performance Indicators (Three months ended March 31, 2022) | Metric | 2022 | | :-------------------------------------- | :---- | | Number of Senior Health submitted policies | 26,231 | | Number of Senior Health approved policies | 23,594 | | LTV per policy approved during the period | $862 | | CAC per policy approved during the period | $875 | | LTV/CAC per approved policy | 0.98 | - Regulatory changes like Reg BI, the DOL Rule, and the Canadian DSC Ban (effective June 1, 2022) are expected to impact investment and savings products business, potentially decreasing short-term pre-tax operating income in Canada[141][144][145] Factors Affecting Our Results This section identifies key factors affecting Primerica's results, including sales volumes, actuarial experience, reinsurance, client asset values, LTV and CAC in Senior Health, net investment income, and capital structure - Term Life Insurance segment results are driven by sales volumes, actual experience matching pricing assumptions (mortality, persistency, disability, interest rates), reinsurance terms, and expenses[147][150][151][152][153] - Persistency lower than pricing assumptions accelerates DAC amortization but reduces benefits and claims expense, with a complex near-term impact on results[151] - The Investment and Savings Products segment results are primarily driven by sales, the value of assets in client accounts (generating management, marketing, and distribution fees), and the number of transfer agent recordkeeping positions[156][157][158][159][160] - Senior Health segment results are primarily driven by approved policies, LTV per approved policy, tail revenue adjustments, and CAC per approved policy; LTV is influenced by commission rates, expected policy turnover, and chargeback activity[161][163][164][165] - The Corporate and Other Distributed Products segment's net investment income is impacted by the size and performance of the invested asset portfolio, interest rates, credit spreads, and asset mix[169] Critical Accounting Estimates This section outlines critical accounting estimates, including DAC, policy benefit reserves, income taxes, and goodwill, noting no changes in methodology during Q1 2022 - Critical accounting estimates include the valuation of investments, deferred policy acquisition costs ("DAC"), future policy benefit reserves and corresponding amounts recoverable from reinsurers, renewal commissions receivable, income taxes, and valuation of intangible assets and goodwill[174] - These estimates involve significant judgment and are susceptible to changes in future periods, which could affect results of operations and financial position[174] - No changes in accounting methodology for critical accounting estimates occurred during the three months ended March 31, 2022[175] Results of Operations This section analyzes the results of operations, showing an 8% increase in total revenues to $691.2 million but a 17% decrease in net income to $81.4 million in Q1 2022, partly due to the Senior Health segment's loss Consolidated Results (Three months ended March 31, in millions) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :----------------------------------- | :-------- | :-------- | :--------- | :--------- | | Total revenues | $691.2 | $637.7 | $53.5 | 8% | | Total benefits and expenses | $588.2 | $509.4 | $78.8 | 15% | | Net income attributable to Primerica, Inc. | $81.4 | $97.9 | $(16.5) | -17% | Term Life Insurance Segment (Three months ended March 31, in millions) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :------------------------ | :------- | :------- | :--------- | :--------- | | Total revenues | $418.4 | $382.0 | $36.4 | 10% | | Income before income taxes | $91.6 | $88.2 | $3.3 | 4% | - Term Life direct premiums increased 5% due to new policy sales and elevated persistency; benefits and claims increased 2%, including $16 million in excess death claims from COVID-19 (net of reinsurance), down from $21 million in Q1 2021; amortization of DAC increased 31% due to lower year-over-year persistency[183][185][186] Investment and Savings Products Segment (Three months ended March 31, in millions) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :------------------------ | :------- | :------- | :--------- | :--------- | | Total revenues | $241.0 | $223.4 | $17.6 | 8% | | Income before income taxes | $64.6 | $63.4 | $1.2 | 2% | - Investment and Savings Products commissions and fees increased due to higher asset-based revenues (higher average client asset values) and sales-based revenues (demand for variable annuity and mutual funds)[190] Senior Health Segment (Three months ended March 31, 2022, in millions) | Metric | 2022 | | :------------------------ | :-------- | | Total revenues | $5.8 | | Loss before income taxes | $(23.1) | - Senior Health commissions and fees were net of a $19.1 million negative tail revenue adjustment due to lower-than-expected renewals[196] Corporate and Other Distributed Products Segment (Three months ended March 31, in millions) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :------------------------ | :-------- | :-------- | :--------- | :--------- | | Total revenues | $25.9 | $32.3 | $(6.3) | -20% | | Loss before income taxes | $(30.0) | $(23.3) | $6.8 | 29% | - Corporate and Other Distributed Products total revenues decreased primarily due to lower net investment income and more allocation to the Term Life segment[201] Financial Condition This section describes the company's financial condition, highlighting a conservative investment strategy and the shift to an $84.4 million unrealized loss in the invested asset portfolio by March 31, 2022, primarily due to rising interest rates - The company's investment strategy emphasizes preservation of invested assets and adequate liquidity, with restrictions on portfolio composition (asset type, issuer limits, credit quality, duration)[204] - The invested asset portfolio shifted from an unrealized gain of $81.2 million at December 31, 2021, to an unrealized loss of $84.4 million as of March 31, 2022, primarily due to a significant increase in interest rates[209] Fixed-Maturity Portfolio Metrics (excluding held-to-maturity security) | Metric | March 31, 2022 | December 31, 2021 | | :----------------- | :------------- | :---------------- | | Average rating | A | A | | Average duration | 4.9 years | 4.8 years | | Average book yield | 3.18% | 3.12% | - The majority of the fixed-maturity portfolio is investment grade (AAA to BBB), with 40% in BBB-rated securities as of March 31, 2022[210] Liquidity and Capital Resources This section discusses liquidity and capital resources, noting increased operating cash flows in Q1 2022, higher cash used in financing due to share repurchases, and the strong statutory capital positions of the company's insurance subsidiaries - The Parent Company's principal sources of cash are dividends and other payments from its subsidiaries, used for stockholder dividends, interest on notes payable, operating expenses, and common stock repurchases[213] - Net cash provided by operating activities increased by $94.8 million in Q1 2022 compared to Q1 2021, primarily due to the timing of cash payments received from reinsurers for ceded claims[219] - Net cash used in financing activities increased by $109.9 million in Q1 2022 compared to Q1 2021, primarily due to common stock repurchases[221] - U.S. life insurance subsidiaries maintain statutory capital and surplus substantially in excess of regulatory requirements (RBC standards), and Primerica Life Insurance Company of Canada complies with OSFI's minimum capital requirements[223][224] - The company uses redundant reserve financing transactions (Peach Re and Vidalia Re) to efficiently manage and deploy capital, which significantly reduced statutory policy benefit reserve requirements for business issued after January 1, 2018, due to the adoption of principle-based reserves (PBR)[225][226][227] Item 3. Quantitative and Qualitative Disclosures About Market Risk. There have been no material changes in the company's exposures to market risk (interest rate, foreign currency exchange, and credit risks) since December 31, 2021 - No material changes in exposures to market risk (interest rate, foreign currency exchange, and credit risks) since December 31, 2021[252] Item 4. Controls and Procedures. The company's disclosure controls and procedures were deemed effective as of March 31, 2022, with the exclusion of internal controls for the recently acquired e-TeleQuote processes; no material changes in internal control over financial reporting occurred during the quarter - The company's disclosure controls and procedures were evaluated and concluded to be effective as of March 31, 2022[253] - The assessment excluded internal controls for the acquired processes of e-TeleQuote, consistent with SEC guidance[253] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[254] PART II – OTHER INFORMATION This section presents other information, including legal proceedings, risk factors, equity security sales, and required exhibits Item 1. Legal Proceedings. The company is routinely involved in legal disputes, regulatory inquiries, and arbitration proceedings; as of the report date, no pending legal proceedings require disclosure under this item - The company is involved in legal disputes, regulatory inquiries, and arbitration proceedings in the normal course of business[256] - As of the report date, no pending legal proceeding is deemed to require disclosure[256] Item 1A. Risk Factors. This section incorporates by reference the comprehensive risk factors from the 2021 Annual Report, covering distribution, insurance, investments, senior health, economic, technological, financial, and regulatory risks - Risk Factors from the 2021 Annual Report are incorporated by reference[257] - Key risk categories include: Distribution Structure, Insurance and Reinsurance, Investments and Savings Products, Mortgage Distribution, e-TeleQuote's Senior Health Insurance Distribution, Economic Downcycles/Public Health Crises/Catastrophes, Information Technology and Cybersecurity, Financial Risks, Legislative and Regulatory Changes, and General Risk Factors[239][240][241][242][244][245][246][247][249] - These risks and uncertainties could cause actual results to differ materially from forward-looking statements[250] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During Q1 2022, the company repurchased 748,181 shares of common stock for an average price of $138.80, including open market repurchases under its $325.0 million share repurchase program; approximately $207.3 million remained available under the program as of March 31, 2022 Share Repurchase Activity (Three months ended March 31, 2022) | Period | Total shares purchased | Average price paid per share | | :-------------------- | :--------------------- | :--------------------------- | | January 1 - 31, 2022 | 162,834 | $153.52 | | February 1 - 28, 2022 | 193,852 | $144.44 | | March 1 - 31, 2022 | 391,495 | $129.89 | | Total | 748,181 | $138.80 | - The share repurchase program was increased by $50.0 million to $325.0 million, authorized through December 31, 2022[259] - Approximately $207.3 million remained available for repurchases under the program as of March 31, 2022[258][259] Item 6. Exhibits. This section lists the exhibits filed with the report, including certifications by the CEO and CFO (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. 1350) and Inline XBRL documents; the representations and warranties in these agreements are for the benefit of the parties and may not reflect the actual state of affairs for investors - Exhibits include Rule 13a-14(a)/15d-14(a) Certifications and 18 U.S.C. 1350 Certifications by the CEO and CFO[262] - Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase are also filed[262] - Representations and warranties in exhibit agreements are solely for the benefit of the parties and should not be relied upon by investors as categorical statements of fact[261] Signatures The report was duly signed on behalf of Primerica, Inc. by Alison S. Rand, Executive Vice President and Chief Financial Officer, on May 6, 2022 - The report was signed by Alison S. Rand, Executive Vice President and Chief Financial Officer, on May 6, 2022[266]