Primerica (PRI)

Financial services company Primerica (NYSE:PRI) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 7.1% year on year to $793.3 million. Its non-GAAP profit of $5.46 per share was 4.9% above analysts’ consensus estimates.

Company Overview

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.

Life insurance companies collect premiums from policyholders in exchange for providing a future death benefit or retirement income stream. Interest rates matter for the sector (and make it cyclical), with higher rates allowing insurers to reinvest their fixed-income portfolios at more attractive yields and vice versa. Additionally, favorable demographic shifts, such as an aging population, are driving strong demand for retirement products while AI and data analytics offer significant opportunities to improve underwriting accuracy and operational efficiency. Conversely, the industry faces headwinds from persistent competition from agile insurtechs that threaten traditional distribution models.

Primerica competes with traditional life insurance companies like Northwestern Mutual and New York Life, discount brokerages such as Charles Schwab (NYSE:SCHW) and Fidelity, and other financial services firms targeting middle-income consumers including Edward Jones and Ameriprise Financial (NYSE:AMP).

Insurance companies earn revenue from three primary sources:

• The core insurance business itself, often called underwriting and represented in the income statement as premiums
• Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities
• Fees from various sources such as policy administration, annuities, or other value-added services

Over the last five years, Primerica grew its revenue at a decent 8.4% compounded annual growth rate. Its growth was slightly above the average insurance company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Primerica’s annualized revenue growth of 7.9% over the last two years aligns with its five-year trend, suggesting its demand was stable. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Primerica reported year-on-year revenue growth of 7.1%, and its $793.3 million of revenue exceeded Wall Street’s estimates by 0.9%.

Net premiums earned made up 57.6% of the company’s total revenue during the last five years, meaning Primerica’s growth drivers strike a balance between insurance and non-insurance activities.

While insurers generate revenue from multiple sources, investors view net premiums earned as the cornerstone - its direct link to core operations stands in sharp contrast to the unpredictability of investment returns and fees.

Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.

Primerica’s net premiums earned has grown at a 6.9% annualized rate over the last five years, slightly worse than the broader insurance industry and slower than its total revenue.

When analyzing Primerica’s net premiums earned over the last two years, we can see that growth decelerated to 4.2% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. While these supplementary streams affect the bottom line, their contribution can fluctuate. Some firms have been more successful and consistent in investing their float over the long term, but sharp movements in the fixed income and equity markets can play a substantial role in short-term performance.

In Q2, Primerica produced $432.8 million of net premiums earned, up 3.6% year on year. But this wasn’t enough juice to meet Wall Street Consensus estimates.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Primerica’s EPS grew at a remarkable 18.8% compounded annual growth rate over the last five years, higher than its 8.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Primerica, its two-year annual EPS growth of 23.1% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Primerica reported adjusted EPS at $5.46, up from $4.71 in the same quarter last year. This print beat analysts’ estimates by 4.9%. Over the next 12 months, Wall Street expects Primerica’s full-year EPS of $21.19 to grow 2.3%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float–premiums collected but not yet paid out–are invested, creating an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

Primerica’s BVPS grew at an impressive 11.4% annual clip over the last five years. The last two years show a similar trajectory as BVPS grew by 12.3% annually from $56.23 to $70.90 per share.

Over the next 12 months, Consensus estimates call for Primerica’s BVPS to grow by 6.6% to $69.41, paltry growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Primerica currently has $647.2 million of debt and $2.31 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for a financials business. Anything below 0.5× is a bonus.

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, Primerica has averaged an ROE of 26%, 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.

It was good to see Primerica narrowly top analysts’ revenue expectations this quarter. On the other hand, its net premiums earned missed. Overall, this was a weaker quarter. The stock remained flat at $267.16 immediately after reporting.

Updated: October 23, 2025 at 12:12 AM EDT

Before deciding whether to buy Primerica or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There’s plenty to admire about Primerica. To kick things off, its revenue growth was good over the last five years. And while its projected EPS for the next year is lacking, its stellar ROE suggests it has been a well-run company historically. On top of that, its expanding pre-tax profit margin shows the business has become more efficient.

Primerica’s P/B ratio based on the next 12 months is 3.5x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in. Primerica is a good one to add to your watchlist - there are companies featuring superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $311.86 on the company (compared to the current share price of $265.30).