pri-10q_20150630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

For the quarterly period ended June 30, 2015

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.    x  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).    x  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

x

Accelerated filer

o

 

 

 

 

Non-accelerated filer

o  (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    x  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 July 31, 2015

Common Stock, $0.01 Par Value

 

49,595,363 shares

 

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

1

Item 1. Financial Statements (unaudited).

 

1

Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

 

1

Condensed Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014

 

2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2015 and 2014

 

3

Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2015 and 2014

 

4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014

 

5

Notes to Condensed Consolidated Financial Statements

 

6

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

 

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

34

Item 4. Controls and Procedures.

 

34

 

PART II – OTHER INFORMATION

 

35

Item 1. Legal Proceedings.

 

35

Item 1A. Risk Factors.

 

35

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

 

36

Item 6. Exhibits.

 

36

 

Signatures

 

38

 

 

 

 

i


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

(Unaudited)

 

 

 

 

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $1,659,078 in 2015

   and $1,667,500 in 2014)

 

$

1,724,743

 

 

$

1,759,120

 

Fixed-maturity securities held-to-maturity, at amortized cost (fair value: $330,338 in 2015 and

   $228,809 in 2014)

 

 

328,000

 

 

 

220,000

 

Equity securities available-for-sale, at fair value (cost: $42,577 in 2015 and $43,738 in 2014)

 

 

49,961

 

 

 

53,390

 

Trading securities, at fair value (cost: $7,943 in 2015 and $7,710 in 2014)

 

 

7,927

 

 

 

7,711

 

Policy loans

 

 

29,112

 

 

 

28,095

 

Total investments

 

 

2,139,743

 

 

 

2,068,316

 

Cash and cash equivalents

 

 

153,933

 

 

 

192,516

 

Accrued investment income

 

 

17,026

 

 

 

17,401

 

Due from reinsurers

 

 

4,137,425

 

 

 

4,115,533

 

Deferred policy acquisition costs, net

 

 

1,430,508

 

 

 

1,351,180

 

Premiums and other receivables

 

 

189,924

 

 

 

181,660

 

Intangible assets, net (accumulated amortization: $70,128 in 2015 and $68,426 in 2014)

 

 

60,019

 

 

 

61,720

 

Deferred income taxes

 

 

37,140

 

 

 

36,082

 

Other assets

 

 

290,483

 

 

 

273,403

 

Separate account assets

 

 

2,324,980

 

 

 

2,440,303

 

Total assets

 

$

10,781,181

 

 

$

10,738,114

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Future policy benefits

 

$

5,361,580

 

 

$

5,264,608

 

Unearned premiums

 

 

730

 

 

 

912

 

Policy claims and other benefits payable

 

 

254,047

 

 

 

264,832

 

Other policyholders’ funds

 

 

352,212

 

 

 

344,313

 

Notes payable

 

 

374,558

 

 

 

374,532

 

Surplus note

 

 

328,000

 

 

 

220,000

 

Income taxes

 

 

156,212

 

 

 

140,467

 

Other liabilities

 

 

367,337

 

 

 

392,810

 

Payable under securities lending

 

 

63,899

 

 

 

50,211

 

Separate account liabilities

 

 

2,324,980

 

 

 

2,440,303

 

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

 

 

 

 

 

 

 

 

Total liabilities

 

 

9,583,555

 

 

 

9,492,988

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock ($0.01 par value; authorized 500,000 in 2015 and 2014; issued and

   outstanding 50,111 shares in 2015 and 52,169 shares in 2014)

 

 

501

 

 

 

522

 

Paid-in capital

 

 

259,937

 

 

 

353,337

 

Retained earnings

 

 

871,440

 

 

 

795,740

 

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

 

 

 

 

 

 

 

 

Unrealized foreign currency translation gains (losses)

 

 

4,467

 

 

 

21,681

 

Net unrealized investment gains (losses):

 

 

 

 

 

 

 

 

Net unrealized investment gains not other-than-temporarily impaired

 

 

61,743

 

 

 

74,308

 

Net unrealized investment losses other-than-temporarily impaired

 

 

(462

)

 

 

(462

)

Total stockholders’ equity

 

 

1,197,626

 

 

 

1,245,126

 

Total liabilities and stockholders’ equity

 

$

10,781,181

 

 

$

10,738,114

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

1


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income – Unaudited

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In thousands, except per-share amounts)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums

 

$

588,248

 

 

$

576,740

 

 

$

1,165,707

 

 

$

1,144,945

 

Ceded premiums

 

 

(406,854

)

 

 

(410,546

)

 

 

(804,395

)

 

 

(813,261

)

Net premiums

 

 

181,394

 

 

 

166,194

 

 

 

361,312

 

 

 

331,684

 

Commissions and fees

 

 

139,150

 

 

 

132,039

 

 

 

271,985

 

 

 

258,970

 

Investment income net of investment expenses

 

 

21,782

 

 

 

21,681

 

 

 

45,431

 

 

 

43,280

 

Interest expense on surplus note

 

 

(2,707

)

 

 

-

 

 

 

(5,182

)

 

 

-

 

Net investment income

 

 

19,075

 

 

 

21,681

 

 

 

40,249

 

 

 

43,280

 

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

   temporary impairment losses

 

 

597

 

 

 

831

 

 

 

1,881

 

 

 

1,094

 

Other, net

 

 

10,651

 

 

 

10,385

 

 

 

20,579

 

 

 

20,430

 

Total revenues

 

 

350,867

 

 

 

331,130

 

 

 

696,006

 

 

 

655,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and claims

 

 

82,521

 

 

 

72,412

 

 

 

165,021

 

 

 

147,604

 

Amortization of deferred policy acquisition costs

 

 

36,384

 

 

 

32,696

 

 

 

72,595

 

 

 

67,890

 

Sales commissions

 

 

71,499

 

 

 

67,364

 

 

 

139,956

 

 

 

132,485

 

Insurance expenses

 

 

29,094

 

 

 

28,192

 

 

 

63,736

 

 

 

56,694

 

Insurance commissions

 

 

4,145

 

 

 

3,881

 

 

 

7,334

 

 

 

7,964

 

Interest expense

 

 

8,642

 

 

 

8,552

 

 

 

17,316

 

 

 

17,159

 

Other operating expenses

 

 

41,757

 

 

 

42,293

 

 

 

86,413

 

 

 

83,089

 

Total benefits and expenses

 

 

274,042

 

 

 

255,390

 

 

 

552,371

 

 

 

512,885

 

Income from continuing operations before income taxes

 

 

76,825

 

 

 

75,740

 

 

 

143,635

 

 

 

142,573

 

Income taxes

 

 

27,652

 

 

 

26,469

 

 

 

51,062

 

 

 

49,816

 

Income from continuing operations

 

 

49,173

 

 

 

49,271

 

 

 

92,573

 

 

 

92,757

 

Income from discontinued operations, net of income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,595

 

Net income

 

$

49,173

 

 

$

49,271

 

 

$

92,573

 

 

$

94,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.94

 

 

$

0.89

 

 

$

1.76

 

 

$

1.66

 

Discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.03

 

Basic earnings per share

 

$

0.94

 

 

$

0.89

 

 

$

1.76

 

 

$

1.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.94

 

 

$

0.89

 

 

$

1.76

 

 

$

1.66

 

Discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.03

 

Diluted earnings per share

 

$

0.94

 

 

$

0.89

 

 

$

1.76

 

 

$

1.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

51,787

 

 

 

54,927

 

 

 

52,212

 

 

 

55,075

 

Diluted

 

 

51,812

 

 

 

54,950

 

 

 

52,249

 

 

 

55,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total impairment losses

 

$

(632

)

 

$

(221

)

 

$

(869

)

 

$

(370

)

Impairment losses recognized in other comprehensive income

   before income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net impairment losses recognized in earnings

 

 

(632

)

 

 

(221

)

 

 

(869

)

 

 

(370

)

Other net realized investment gains (losses)

 

 

1,229

 

 

 

1,052

 

 

 

2,750

 

 

 

1,464

 

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

  temporary impairment losses

 

$

597

 

 

$

831

 

 

$

1,881

 

 

$

1,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.16

 

 

$

0.12

 

 

$

0.32

 

 

$

0.24

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


 

 

 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) – Unaudited

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In thousands)

 

Net income

 

$

49,173

 

 

$

49,271

 

 

$

92,573

 

 

$

94,352

 

Other comprehensive income (loss) before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized investment gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized holding gains/(losses) on investment

   securities

 

 

(32,720

)

 

 

20,792

 

 

 

(17,059

)

 

 

38,722

 

Reclassification adjustment for realized investment (gains)

   losses included in net income

 

 

(602

)

 

 

(578

)

 

 

(2,272

)

 

 

(766

)

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized foreign currency translation gains (losses)

 

 

3,157

 

 

 

8,444

 

 

 

(17,409

)

 

 

(233

)

Total other comprehensive income (loss) before income

   taxes

 

 

(30,165

)

 

 

28,658

 

 

 

(36,740

)

 

 

37,723

 

Income tax expense (benefit) related to items of other

   comprehensive income (loss)

 

 

(11,627

)

 

 

7,173

 

 

 

(6,961

)

 

 

13,277

 

Other comprehensive income (loss), net of income taxes

 

 

(18,538

)

 

 

21,485

 

 

 

(29,779

)

 

 

24,446

 

Total comprehensive income (loss)

 

$

30,635

 

 

$

70,756

 

 

$

62,794

 

 

$

118,798

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

3


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity – Unaudited

 

 

Six months ended June 30,

 

 

 

2015

 

 

2014

 

 

 

(In thousands)

 

Common stock:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

522

 

 

$

548

 

Repurchases of common stock

 

 

(25

)

 

 

(9

)

Net issuance of common stock

 

 

4

 

 

 

3

 

Balance, end of period

 

 

501

 

 

 

542

 

 

 

 

 

 

 

 

 

 

Paid-in capital:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

353,337

 

 

 

472,633

 

Share-based compensation

 

 

22,231

 

 

 

17,068

 

Net issuance of common stock

 

 

(4

)

 

 

(3

)

Repurchases of common stock

 

 

(115,763

)

 

 

(41,150

)

Adjustments to paid-in capital, other

 

 

136

 

 

 

(599

)

Balance, end of period

 

 

259,937

 

 

 

447,949

 

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

795,740

 

 

 

640,840

 

Net income

 

 

92,573

 

 

 

94,352

 

Dividends

 

 

(16,873

)

 

 

(13,404

)

Balance, end of period

 

 

871,440

 

 

 

721,788

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

95,527

 

 

 

108,006

 

Change in foreign currency translation adjustment, net of income tax expense (benefit) of $(195) in

   2015 and $(8) in 2014

 

 

(17,214

)

 

 

(225

)

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) of $(6,766) in 2015 and $13,285 in 2014

 

 

(12,565

)

 

 

24,671

 

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

   expense (benefit) of $(0) in 2015 and 2014

 

 

-

 

 

 

-

 

Balance, end of period

 

 

65,748

 

 

 

132,452

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

$

1,197,626

 

 

$

1,302,731

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

4


 

PRIMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows – Unaudited

 

 

Six months ended June 30,

 

 

 

2015

 

 

2014

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

92,573

 

 

$

94,352

 

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

 

 

 

 

 

 

 

 

Change in future policy benefits and other policy liabilities

 

 

123,388

 

 

 

107,236

 

Deferral of policy acquisition costs

 

 

(158,581

)

 

 

(146,313

)

Amortization of deferred policy acquisition costs

 

 

72,595

 

 

 

67,890

 

Change in income taxes

 

 

27,522

 

 

 

14,348

 

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

 

 

(1,881

)

 

 

(1,094

)

Gain from sale of business, net

 

 

-

 

 

 

(1,595

)

Accretion and amortization of investments

 

 

(984

)

 

 

(1,009

)

Depreciation and amortization

 

 

5,373

 

 

 

5,717

 

Change in due from reinsurers

 

 

(45,479

)

 

 

(23,511

)

Change in premiums and other receivables

 

 

(12,454

)

 

 

(8,873

)

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

 

 

(233

)

 

 

3,721

 

Share-based compensation

 

 

10,858

 

 

 

5,836

 

Change in other operating assets and liabilities, net

 

 

(27,391

)

 

 

(46,251

)

Net cash provided by (used in) operating activities

 

 

85,306

 

 

 

70,454

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Fixed-maturity securities — sold

 

 

63,584

 

 

 

46,163

 

Fixed-maturity securities — matured or called

 

 

148,730

 

 

 

163,038

 

Equity securities

 

 

1,920

 

 

 

188

 

Available-for-sale investments acquired:

 

 

 

 

 

 

 

 

Fixed-maturity securities

 

 

(201,717

)

 

 

(220,214

)

Equity securities

 

 

(709

)

 

 

(5,403

)

Purchases of property and equipment and other investing activities, net

 

 

(4,956

)

 

 

(4,177

)

Proceeds from sale of business

 

 

-

 

 

 

3,000

 

Cash collateral received (returned) on loaned securities, net

 

 

13,687

 

 

 

3,717

 

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

 

 

(13,687

)

 

 

(3,717

)

Net cash provided by (used in) investing activities

 

 

6,852

 

 

 

(17,405

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividends paid

 

 

(16,873

)

 

 

(13,404

)

Common stock repurchased

 

 

(109,712

)

 

 

(35,011

)

Excess tax benefits on share-based compensation

 

 

4,259

 

 

 

3,792

 

Tax withholdings on share-based compensation

 

 

(6,076

)

 

 

(6,148

)

Cash proceeds from stock options exercised

 

 

136

 

 

 

-

 

Payments of deferred financing costs

 

 

-

 

 

 

(403

)

Net cash provided by (used in) financing activities

 

 

(128,266

)

 

 

(51,174

)

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

 

(2,475

)

 

 

(443

)

Change in cash and cash equivalents

 

 

(38,583

)

 

 

1,432

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

192,516

 

 

 

149,189

 

Cash and cash equivalents, end of period

 

$

153,933

 

 

$

150,621

 

 

 

 

 

 

 

 

 

 

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 have 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 June 30, 2015 and December 31, 2014, the statements of income and comprehensive income (loss) for the three and six months ended June 30, 2015 and 2014, and the statements of stockholders' equity and cash flows for the six months ended June 30, 2015 and 2014. 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, 2014 ("2014 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 June 30, 2015.

Significant Accounting Policies. All significant accounting policies remain unchanged from the 2014 Annual Report.

New Accounting Principles. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, InterestImputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). Debt issuance costs related to a recognized debt liability are currently presented as a deferred charge, or asset, within the balance sheet. ASU 2015-03 requires the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in ASU 2015-03 are effective retrospectively for the Company beginning in fiscal year 2016, with early adoption permitted. The Company intends to adopt the amendments in ASU 2015-03 beginning in the first quarter of 2016. At June 30, 2015, the Company had debt issuance costs related to recognized liabilities of approximately $3.0 million within Other assets on our unaudited condensed consolidated balance sheets that would be reclassified and presented as a direct deduction from the carrying amount of debt liabilities under ASU 2015-03.

 

6


 

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.

(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 continuing operations by segment were as follows:

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term life insurance segment

 

$

201,433

 

 

$

184,366

 

 

$

399,798

 

 

$

367,346

 

Investment and savings products segment

 

 

135,081

 

 

 

128,148

 

 

 

264,155

 

 

 

251,418

 

Corporate and other distributed products segment

 

 

14,353

 

 

 

18,616

 

 

 

32,053

 

 

 

36,694

 

Total revenues

 

$

350,867

 

 

$

331,130

 

 

$

696,006

 

 

$

655,458

 

Income (loss) from continuing operations before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term life insurance segment

 

$

57,286

 

 

$

55,070

 

 

$

105,107

 

 

$

102,274

 

Investment and savings products segment

 

 

37,746

 

 

 

36,048

 

 

 

72,789

 

 

 

70,075

 

Corporate and other distributed products segment

 

 

(18,207

)

 

 

(15,378

)

 

 

(34,261

)

 

 

(29,776

)

Total income from continuing operations before income taxes

 

$

76,825

 

 

$

75,740

 

 

$

143,635

 

 

$

142,573

 

 

Total assets by segment were as follows:

 

 

 

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

 

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Term life insurance segment

 

 

 

 

 

$

7,429,104

 

 

$

7,165,373

 

Investment and savings products segment

 

 

 

 

 

 

2,432,875

 

 

 

2,545,372

 

Corporate and other distributed products segment

 

 

 

 

 

 

919,202

 

 

 

1,027,369

 

Total assets

 

 

 

 

 

$

10,781,181

 

 

$

10,738,114

 

 

The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the Investment and Savings Products segment assets were approximately $108.3 million and $105.5 million as of June 30, 2015 and December 31, 2014, respectively.

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

Geographical Information. Results of continuing 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 June 30,

 

 

Six months ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In thousands)

 

Revenues by country:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$