2 Reasons to Like PRI (and 1 Not So Much)

Over the last six months, Primerica’s shares have sunk to $252.89, producing a disappointing 7.2% loss - a stark contrast to the S&P 500’s 14.1% gain. This might have investors contemplating their next move.

Given the weaker price action, is now an opportune time to buy PRI? Find out in our full research report, it’s free for active Edge members.

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 Positive Attributes:

2. Stellar ROE Showcases Lucrative Growth Opportunities

Return on Equity, or ROE, ties everything together and is a vital metric. It tells us how much profit the insurer generates for each dollar of shareholder equity entrusted to management. Over a long period, insurers with higher ROEs tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Primerica has averaged an ROE of 27.2%, 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

Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.

Primerica’s net premiums earned has grown at a 4.1% annualized rate over the last two years, worse than the broader insurance industry and slower than its total revenue.

Final Judgment

Primerica’s merits more than compensate for its flaws. With the recent decline, the stock trades at 3.4× forward P/B (or $252.89 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.

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