As earnings season rolls on for the nation's biggest insurers, a smaller player is set to report fourth-quarter results on Monday: Primerica (PRI 1.60%). The niche life insurer is sure to get some big attention in the coming days, so here's what to keep an eye on.
Big jump
Even before the company has reported its fourth-quarter and full year 2013 results, investors have been getting hyped on Primerica's prospects. Following a 52-week high in mid-Jan. and an analyst upgrade, there will certainly be a large number of eyes on the insurer come Monday.
The rise in share price came after the company announced its sales initiatives for 2014, spurring on investor confidence that the insurer's place within the niche, middle-income demographic is sure to pay off this year. Economic indicators have pointed to evidence that the insurer's target customers will be looking for more financial products -- leaving Primerica smack in the middle of an under served population.
According to Raymond James analysts, the company's prime demographic is "seriously under-penetrated," giving more support for investor confidence in anticipated growth.
But first...
Though much of the discussion is about future sales growth, investors should keep an eye out for 2013 results and how the company addressed growth opportunities. Though some of the bigger players in the life insurance market have yet to report earnings, Genworth Financial (GNW -1.64%) found some softness in its LI segment following an increase in pricing for its life insurance products.
Though Genworth also has to contend with a product change -- transitioning to term and universal life products -- there has been solid evidence that pricing increases have been largely tolerated by customers in other product areas. Though it doesn't offer life insurance, The Hartford (HIG -0.17%) found that pricing increases were acceptable to customers, even in voluntary coverage divisions like group benefits.
Already disclosing some preliminary figures in a press release, the company is celebrating the highest sales levels for the full year 2013, with total Investment and Savings Products sales of $5.21 billion.
Estimates
Analysts have been disappointed in three of the last four quarters, with only Sept. posting an estimates beat. With a record-breaking level of sales, matched with expense reduction initiatives, investors should look out for a second consecutive quarter of analyst beats.
| Quarterly Metric | Analyst Estimate |
|---|---|
| EPS | $0.79 |
| Change v. 2012 Actual | 14.5% |
| Revenue | $325.9 million |
| Change v. 2012 Actual | 7% |
| Estimate beats in prev. 4 qtrs. | Sept. 2013 |
Source: Yahoo! Finance
Based on the estimated sales for the fourth quarter, released by Primerica, the analysts were way off. At $1.28 billion, the fourth-quarter estimated sales are nearly 3x the analyst's best guess! We'll have to wait until Monday for the verified number, but Primerica has a lot of leeway before it would disappoint investors on the sales front.
Getting your money's worth
One of the key threads running through most insurers that have reported earnings so far is capital returns. The Hartford announced the most comprehensive capital plan during its earnings call, with $2 billion slated for share buybacks, while Traveler's Companies (NYSE: TRV) and AFLAC (NYSE: AFL) announced quarterly dividends of $0.50 and $0.37 per share, respectively.
Source: Flickr, Simon Cunningham
Primerica's last quarterly dividend was $0.11 per share, a bit behind the pack, but investors shouldn't expect the insurer to try and keep up with the Joneses unless it's record sales really pushed excess capital to the necessary levels fur such a big hike.
Exciting time
For Primerica investors, the news that the company is in the pole position for a big jump in growth for the middle income demos should serve as a welcome improvement for your investment. If you're not already invested in the niche insurer, be sure to keep an ear out next week following the firm's earnings release. Though growth would certainly make the insurer a more attractive investment, the company currently trades above 1.8 times book value, signaling that there may be some better priced life insurers in the market. For more coverage on the Primerica's earnings and the insurance market, keep logging on to Fool.com.
