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Section 1: 10-Q (10-Q)

pri-10q_20160930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-34680

 

Primerica, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

27-1204330

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1 Primerica Parkway

Duluth, Georgia

 

30099

(Address of principal executive offices)

 

(ZIP Code)

(770) 381-1000

(Registrant’s telephone number, including area code)

Not applicable.

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

As of October 31, 2016

Common Stock, $0.01 Par Value

 

45,801,431 shares

 

 

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

1

Item 1. Financial Statements (unaudited).

 

1

Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015

 

1

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015

 

2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015

 

3

Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2016 and 2015

 

4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015

 

5

Notes to Condensed Consolidated Financial Statements

 

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

35

Item 4. Controls and Procedures.

 

35

 

PART II – OTHER INFORMATION

 

36

Item 1. Legal Proceedings.

 

36

Item 1A. Risk Factors.

 

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

37

Item 6. Exhibits.

 

37

 

Signatures

 

38

 

 

 

 

i


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

(Unaudited)

 

 

 

 

 

 

 

September 30, 2016

 

 

December 31, 2015

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $1,660,347 in 2016

   and $1,690,043 in 2015)

 

$

1,761,174

 

 

$

1,731,459

 

Fixed-maturity securities held-to-maturity, at amortized cost (fair value: $500,823 in 2016 and

   $371,742 in 2015)

 

 

454,000

 

 

 

365,220

 

Equity securities available-for-sale, at fair value (cost: $37,966 in 2016 and $39,969 in 2015)

 

 

47,539

 

 

 

47,839

 

Trading securities, at fair value (cost: $12,268 in 2016 and $5,383 in 2015)

 

 

12,259

 

 

 

5,358

 

Policy loans

 

 

30,801

 

 

 

28,627

 

Total investments

 

 

2,305,773

 

 

 

2,178,503

 

Cash and cash equivalents

 

 

195,323

 

 

 

152,294

 

Accrued investment income

 

 

17,449

 

 

 

17,080

 

Due from reinsurers

 

 

4,161,537

 

 

 

4,110,628

 

Deferred policy acquisition costs, net

 

 

1,672,454

 

 

 

1,500,259

 

Agent balances, due premiums and other receivables

 

 

226,539

 

 

 

190,379

 

Intangible assets, net (accumulated amortization: $74,381 in 2016 and $71,828 in 2015)

 

 

55,766

 

 

 

58,318

 

Income taxes

 

 

29,313

 

 

 

35,067

 

Other assets

 

 

356,713

 

 

 

304,356

 

Separate account assets

 

 

2,347,816

 

 

 

2,063,899

 

Total assets

 

$

11,368,683

 

 

$

10,610,783

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Future policy benefits

 

$

5,629,967

 

 

$

5,431,711

 

Unearned premiums

 

 

526

 

 

 

628

 

Policy claims and other benefits payable

 

 

246,514

 

 

 

238,157

 

Other policyholders’ funds

 

 

348,975

 

 

 

356,123

 

Notes payable

 

 

372,827

 

 

 

372,552

 

Surplus note

 

 

453,247

 

 

 

364,424

 

Income taxes

 

 

215,454

 

 

 

148,125

 

Other liabilities

 

 

436,621

 

 

 

417,910

 

Payable under securities lending

 

 

95,843

 

 

 

71,482

 

Separate account liabilities

 

 

2,347,816

 

 

 

2,063,899

 

Commitments and contingent liabilities (see Commitments and Contingent Liabilities note)

 

 

 

 

 

 

 

 

Total liabilities

 

 

10,147,790

 

 

 

9,465,011

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock ($0.01 par value; authorized 500,000 in 2016 and 2015; issued and

   outstanding 45,962 shares in 2016 and 48,297 shares in 2015)

 

 

460

 

 

 

483

 

Paid-in capital

 

 

66,510

 

 

 

180,250

 

Retained earnings

 

 

1,090,388

 

 

 

952,804

 

Accumulated other comprehensive income (loss), net of income tax:

 

 

 

 

 

 

 

 

Unrealized foreign currency translation gains (losses)

 

 

(8,227

)

 

 

(19,801

)

Net unrealized investment gains (losses):

 

 

 

 

 

 

 

 

Net unrealized investment gains not other-than-temporarily impaired

 

 

71,827

 

 

 

32,107

 

Net unrealized investment losses other-than-temporarily impaired

 

 

(65

)

 

 

(71

)

Total stockholders’ equity

 

 

1,220,893

 

 

 

1,145,772

 

Total liabilities and stockholders’ equity

 

$

11,368,683

 

 

$

10,610,783

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

1


PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income – Unaudited

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

(In thousands, except per-share amounts)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums

 

$

616,587

 

 

$

587,882

 

 

$

1,825,906

 

 

$

1,753,589

 

 

Ceded premiums

 

 

(399,676

)

 

 

(393,987

)

 

 

(1,201,692

)

 

 

(1,198,382

)

 

Net premiums

 

 

216,911

 

 

 

193,895

 

 

 

624,214

 

 

 

555,207

 

 

Commissions and fees

 

 

134,282

 

 

 

132,368

 

 

 

400,005

 

 

 

404,353

 

 

Investment income net of investment expenses

 

 

24,356

 

 

 

22,487

 

 

 

74,742

 

 

 

67,918

 

 

Interest expense on surplus note

 

 

(4,957

)

 

 

(3,772

)

 

 

(13,716

)

 

 

(8,954

)

 

Net investment income

 

 

19,399

 

 

 

18,715

 

 

 

61,026

 

 

 

58,964

 

 

Realized investment gains (losses), including other-than-

   temporary impairment losses

 

 

(35

)

 

 

(259

)

 

 

2,623

 

 

 

1,623

 

 

Other, net

 

 

13,069

 

 

 

10,990

 

 

 

37,353

 

 

 

30,605

 

 

Total revenues

 

 

383,626

 

 

 

355,709

 

 

 

1,125,221

 

 

 

1,050,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and claims

 

 

93,022

 

 

 

88,599

 

 

 

272,983

 

 

 

253,621

 

 

Amortization of deferred policy acquisition costs

 

 

45,428

 

 

 

40,797

 

 

 

127,277

 

 

 

113,392

 

 

Sales commissions

 

 

66,700

 

 

 

67,402

 

 

 

203,489

 

 

 

207,358

 

 

Insurance expenses

 

 

32,837

 

 

 

30,266

 

 

 

98,873

 

 

 

93,365

 

 

Insurance commissions

 

 

4,709

 

 

 

4,619

 

 

 

13,328

 

 

 

11,953

 

 

Interest expense

 

 

7,184

 

 

 

8,718

 

 

 

21,534

 

 

 

26,036

 

 

Other operating expenses

 

 

45,309

 

 

 

40,355

 

 

 

137,206

 

 

 

126,439

 

 

Total benefits and expenses

 

 

295,189

 

 

 

280,756

 

 

 

874,690

 

 

 

832,164

 

 

Income before income taxes

 

 

88,437

 

 

 

74,953

 

 

 

250,531

 

 

 

218,588

 

 

Income taxes

 

 

30,400

 

 

 

25,603

 

 

 

87,991

 

 

 

76,664

 

 

Net income

 

$

58,037

 

 

$

49,350

 

 

$

162,540

 

 

$

141,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.22

 

 

$

0.98

 

 

$

3.38

 

 

$

2.73

 

 

Diluted earnings per share

 

$

1.22

 

 

$

0.98

 

 

$

3.37

 

 

$

2.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings

   per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

47,008

 

 

 

50,082

 

 

 

47,736

 

 

 

51,494

 

 

Diluted

 

 

47,051

 

 

 

50,104

 

 

 

47,775

 

 

 

51,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total impairment losses

 

$

(478

)

 

$

(1,564

)

 

$

(3,308

)

 

$

(2,433

)

 

Impairment losses recognized in other comprehensive income

   before income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

Net impairment losses recognized in earnings

 

 

(478

)

 

 

(1,564

)

 

 

(3,308

)

 

 

(2,433

)

 

Other net realized investment gains (losses)

 

 

443

 

 

 

1,305

 

 

 

5,931

 

 

 

4,056

 

 

Realized investment gains (losses), including other-than-

  temporary impairment losses

 

$

(35

)

 

$

(259

)

 

$

2,623

 

 

$

1,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.18

 

 

$

0.16

 

 

$

0.52

 

 

$

0.48

 

 

See accompanying notes to condensed consolidated financial statements.


 

2


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Net income

 

$

58,037

 

 

$

49,350

 

 

$

162,540

 

 

$

141,924

 

Other comprehensive income (loss) before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized investment gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized holding gains/(losses) on investment

    securities

 

 

5,129

 

 

 

(18,019

)

 

 

63,414

 

 

 

(35,078

)

Reclassification adjustment for realized investment (gains) losses

   included in net income

 

 

33

 

 

 

381

 

 

 

(2,300

)

 

 

(1,892

)

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized foreign currency translation gains (losses)

    before income tax expense (benefit)

 

 

(3,165

)

 

 

(16,323

)

 

 

11,704

 

 

 

(33,731

)

Total other comprehensive income (loss) before income taxes

 

 

1,997

 

 

 

(33,961

)

 

 

72,818

 

 

 

(70,701

)

Income tax expense (benefit) related to items of other comprehensive

   income (loss)

 

 

1,777

 

 

 

(6,345

)

 

 

21,518

 

 

 

(13,306

)

Other comprehensive income (loss), net of income taxes

 

 

220

 

 

 

(27,616

)

 

 

51,300

 

 

 

(57,395

)

Total comprehensive income

 

$

58,257

 

 

$

21,734

 

 

$

213,840

 

 

$

84,529

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

3


PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity – Unaudited

 

 

Nine months ended September 30,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Common stock:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

483

 

 

$

522

 

Repurchases of common stock

 

 

(29

)

 

 

(41

)

Net issuance of common stock

 

 

6

 

 

 

5

 

Balance, end of period

 

 

460

 

 

 

486

 

 

 

 

 

 

 

 

 

 

Paid-in capital:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

180,250

 

 

 

353,337

 

Share-based compensation

 

 

21,564

 

 

 

28,073

 

Net issuance of common stock

 

 

(6

)

 

 

(5

)

Repurchases of common stock

 

 

(135,298

)

 

 

(187,180

)

Adjustments to paid-in capital, other

 

 

-

 

 

 

1,089

 

Balance, end of period

 

 

66,510

 

 

 

195,314

 

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

952,804

 

 

 

795,740

 

Net income

 

 

162,540

 

 

 

141,924

 

Dividends

 

 

(24,956

)

 

 

(24,915

)

Balance, end of period

 

 

1,090,388

 

 

 

912,749

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

12,235

 

 

 

95,527

 

Change in foreign currency translation adjustment, net of income tax expense (benefit)

 

 

11,574

 

 

 

(33,365

)

Change in net unrealized investment gains (losses) during the period, net of income taxes:

 

 

 

 

 

 

 

 

Change in net unrealized investment gains (losses) not-other-than temporarily

   impaired, net of income tax expense (benefit)

 

 

39,720

 

 

 

(24,419

)

Change in net unrealized investment losses other-than-temporarily impaired, net

   of income tax expense (benefit)

 

 

6

 

 

 

389

 

Balance, end of period

 

 

63,535

 

 

 

38,132

 

Total stockholders’ equity

 

$

1,220,893

 

 

$

1,146,681

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

4


PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows – Unaudited

 

 

Nine months ended September 30,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

162,540

 

 

$

141,924

 

Adjustments to reconcile net income to cash provided by (used in) operating

   activities:

 

 

 

 

 

 

 

 

Change in future policy benefits and other policy liabilities

 

 

177,744

 

 

 

167,886

 

Deferral of policy acquisition costs

 

 

(281,397

)

 

 

(243,346

)

Amortization of deferred policy acquisition costs

 

 

127,277

 

 

 

113,392

 

Change in income taxes

 

 

51,598

 

 

 

31,349

 

Realized investment (gains) losses, including other-than-temporary impairments

 

 

(2,623

)

 

 

(1,623

)

Accretion and amortization of investments

 

 

(1,091

)

 

 

(1,094

)

Depreciation and amortization

 

 

10,879

 

 

 

8,201

 

Change in due from reinsurers

 

 

(34,907

)

 

 

(33,248

)

Change in agent balances, due premiums and other receivables

 

 

(36,160

)

 

 

(21,553

)

Trading securities sold, matured, or called (acquired), net

 

 

(6,917

)

 

 

1,143

 

Share-based compensation

 

 

11,754

 

 

 

12,918

 

Change in other operating assets and liabilities, net

 

 

(13,809

)

 

 

(34,957

)

Net cash provided by (used in) operating activities

 

 

164,888

 

 

 

140,992

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Available-for-sale investments sold, matured or called:

 

 

 

 

 

 

 

 

Fixed-maturity securities — sold

 

 

76,540

 

 

 

104,097

 

Fixed-maturity securities — matured or called

 

 

195,803

 

 

 

201,722

 

Equity securities

 

 

4,864

 

 

 

4,700

 

Available-for-sale investments acquired:

 

 

 

 

 

 

 

 

Fixed-maturity securities

 

 

(228,986

)

 

 

(264,457

)

Equity securities

 

 

(1,074

)

 

 

(794

)

Purchases of property and equipment and other investing activities, net

 

 

(11,410

)

 

 

(5,924

)

Cash collateral received (returned) on loaned securities, net

 

 

24,361

 

 

 

33,009

 

Sales (purchases) of short-term investments using securities lending collateral, net

 

 

(24,361

)

 

 

(33,009

)

Net cash provided by (used in) investing activities

 

 

35,737

 

 

 

39,344

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividends paid

 

 

(24,956

)

 

 

(24,915

)

Common stock repurchased

 

 

(131,570

)

 

 

(181,121

)

Excess tax benefits on share-based compensation

 

 

1,684

 

 

 

4,624

 

Tax withholdings on share-based compensation

 

 

(3,757

)

 

 

(6,101

)

Cash proceeds from stock options exercised

 

 

-

 

 

 

136

 

Net cash provided by (used in) financing activities

 

 

(158,599

)

 

 

(207,377

)

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

 

1,003

 

 

 

(4,395

)

Change in cash and cash equivalents

 

 

43,029

 

 

 

(31,436

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

152,294

 

 

 

191,997

 

Cash and cash equivalents, end of period

 

$

195,323

 

 

$

160,561

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

5


PRIMERICA, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — Unaudited

(1) Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies

Description of Business. Primerica, Inc. (the "Parent Company"), together with its subsidiaries (collectively, "we", "us" or the "Company"), is a leading distributor of financial products to middle income households in the United States and Canada. We assist our clients in meeting their needs for term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. Our primary subsidiaries include the following entities: Primerica Financial Services, Inc. ("PFS"), a general agency and marketing company; Primerica Life Insurance Company ("Primerica Life"), our principal life insurance company; Primerica Financial Services (Canada) Ltd., a holding company for our Canadian operations, which includes Primerica Life Insurance Company of Canada ("Primerica Life Canada") and PFSL Investments Canada Ltd. ("PFSL Investments Canada"); and PFS Investments Inc. ("PFS Investments"), an investment products company and broker-dealer. Primerica Life, domiciled in Massachusetts, owns National Benefit Life Insurance Company ("NBLIC"), a New York insurance company. We established Peach Re, Inc. ("Peach Re") and Vidalia Re, Inc. (“Vidalia Re”) as special purpose financial captive insurance companies and wholly owned subsidiaries of Primerica Life. Peach Re and Vidalia Re have each entered into separate coinsurance agreements with Primerica Life whereby Primerica Life has ceded certain level premium term life insurance policies to Peach Re and Vidalia Re (respectively, the “Peach Re Coinsurance Agreement” and the “Vidalia Re Coinsurance Agreement”).

Basis of Presentation. We prepare our financial statements in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). These principles are established primarily by the Financial Accounting Standards Board ("FASB"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect financial statement balances, revenues and expenses and cash flows, as well as the disclosure of contingent assets and liabilities. Management considers available facts and knowledge of existing circumstances when establishing the estimates included in our financial statements.

The accompanying unaudited condensed consolidated financial statements contain all adjustments, generally consisting of normal recurring accruals, which are necessary to fairly present the balance sheets as of September 30, 2016 and December 31, 2015 and the statements of income and comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015, and the statements of stockholders' equity and cash flows for the nine months ended September 30, 2016 and 2015. Results of operations for interim periods are not necessarily indicative of results for the entire year or of the results to be expected in future periods.

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are sufficient to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2015 ("2015 Annual Report").

Use of Estimates. The most significant items that involve a greater degree of accounting estimates and actuarial determinations subject to change in the future are the valuation of investments, deferred policy acquisition costs ("DAC"), liabilities for future policy benefits and unpaid policy claims, and income taxes. Estimates for these and other items are subject to change and are reassessed by management in accordance with U.S. GAAP. Actual results could differ from those estimates.

Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and those entities required to be consolidated under applicable accounting standards. All material intercompany profits, transactions, and balances among the consolidated entities have been eliminated.

Reclassifications. Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications. These reclassifications had no impact on net income or total stockholders' equity.

Subsequent Events. The Company has evaluated subsequent events for recognition and disclosure for occurrences and transactions after the date of the unaudited condensed consolidated financial statements dated as of September 30, 2016.

Significant Accounting Policies. All significant accounting policies remain unchanged from the 2015 Annual Report.

Future Application of Accounting Standards. Recent accounting guidance not discussed is not applicable, is immaterial to our financial statements, or did not or is not expected to have a material impact on our business. For additional information on new accounting pronouncements and recent accounting principles and their impact, if any, on our financial position or results of operations, see Note 1 (Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies) in our 2015 Annual Report and in the unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2016 and June 30, 2016.

 

 

6


(2) Segment and Geographical Information

Segments. We have two primary operating segments — Term Life Insurance and Investment and Savings Products. We also have a Corporate and Other Distributed Products segment.

Results of operations by segment were as follows:

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term life insurance segment

 

$

222,598

 

 

$

197,205

 

 

$

639,253

 

 

$

563,795

 

Investment and savings products segment

 

 

130,080

 

 

 

128,596

 

 

 

387,604

 

 

 

392,561

 

Corporate and other distributed products segment

 

 

30,948

 

 

 

29,908

 

 

 

98,364

 

 

 

94,396

 

Total revenues

 

$

383,626

 

 

$

355,709

 

 

$

1,125,221

 

 

$

1,050,752

 

Income (loss) before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term life insurance segment

 

$

58,137

 

 

$

46,519

 

 

$

162,234

 

 

$

127,284

 

Investment and savings products segment

 

 

35,760

 

 

 

34,811

 

 

 

103,514

 

 

 

107,600

 

Corporate and other distributed products segment

 

 

(5,460

)

 

 

(6,377

)

 

 

(15,217

)

 

 

(16,296

)

Total income before income taxes

 

$

88,437

 

 

$

74,953

 

 

$

250,531

 

 

$

218,588

 

 

Total assets by segment were as follows:

 

 

September 30, 2016

 

 

December 31, 2015

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

Term life insurance segment

 

$

5,878,013

 

 

$

5,638,682

 

Investment and savings products segment(1)

 

 

2,462,111

 

 

 

2,157,548

 

Corporate and other distributed products segment

 

 

3,028,559

 

 

 

2,814,553

 

Total assets

 

$

11,368,683

 

 

$

10,610,783

 

 

(1) The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the Investment and Savings Products segment assets were approximately $114.4 million and $93.8 million as of September 30, 2016 and December 31, 2015, respectively.

See “Management's Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report for more information regarding the results of our operating segments.

Geographical Information. Results of operations by country and long-lived assets, primarily tangible assets reported in Other assets in our unaudited condensed consolidated balance sheets, were as follows:

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

Revenues by country:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

323,560

 

 

$

298,671

 

 

$

947,618

 

 

$

876,363

 

Canada

 

 

60,066

 

 

 

57,038

 

 

 

177,603

 

 

 

174,389

 

Total revenues

 

$

383,626

 

 

$

355,709

 

 

$

1,125,221

 

 

$

1,050,752

 

Income before income taxes by country:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

71,525

 

 

$

61,116

 

 

$

200,137

 

 

$

170,172

 

Canada

 

 

16,912