Opportunity In Primerica

Apr. 20, 2017 9:17 PM ETPrimerica, Inc. (PRI)PRU, PFG62 Comments
Duane Bair profile picture
Duane Bair
486 Followers

Summary

  • Primerica's stock has soared in recent months.
  • Investors are assuming the DOL rule will be overturned.
  • Wise investors could make gains by examining the likelihood of this scenario.

When the Department of Labor introduced a new rule aimed at requiring financial services companies to act in their clients' best interests, some financial firms spoke out against the rules. Primerica (NYSE:PRI) was among the most vocal. The company relies on lax regulation to make often sales solicitations that may have violated the DOL rule designed to save consumers from predatory sales practices. With a new administration squarely focused on undoing the consumer protections, Primerica's stock has soared. Is the stock now too overbought? What are the chances the new administration is successful in pulling back the law?

Primerica does not operate like many other insurance and financial services firms. The business model is more comparable to a multi-level marketing firm which just happens to sell some insurance and financial products. At the end of 2016, the company had 97,827 sales reps in the US. According to the most recent BLS statistics, there are a total 351,300 licensed life insurance agents in the United States. Primerica, with 97,000 life agents, has 28% of ALL life insurance agents in America but has just 1.38% of life insurance market share. As a comparison, Prudential Insurance (PRU) has 5.34% market share and 7,680 life insurance agents, or 2.2% of all agents in the US. Primerica has more agents than the top 10 largest insurance companies combined.

Source: PRI Investor Presentation

The company explains these odd statistics by suggesting that its agent sales force is less concerned with a career in financial services and more concerned with just selling a policy to itself and/or family and friends. That would seemingly be supported by the fact that the average Primerica agent sells just two policies per year. More confusing, however, is that these part-time agents pay $100 to join than many pay $28 per month in technology fees. Why would a rational

This article was written by

Duane Bair profile picture
486 Followers
I am interested in researching and writing unique articles that combine politics and finance. With a background in Political Science and Economics, I often look at the impact regulations have on the bottom line. I generally take a short perspective when looking at companies. Too many companies get away with lying to investors and the public. I hope that my articles can shine some light on the misstatements made by various management teams and add to improved corporate governance in this country.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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