A.M. Best Affirms Ratings of Primerica, Inc. and Its Subsidiaries
OLDWICK, N.J. -- June 18, 2013
A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and
issuer credit ratings (ICR) of “aa-” of Primerica Life Insurance Company
(Primerica Life) (Boston, MA) and its affiliates, National Benefit Life
Insurance Company (New York, NY) and Primerica Life Insurance Company of
Canada (Mississauga, Ontario). Additionally, A.M. Best has affirmed the ICR of
“a-” of Primerica, Inc. (Primerica) (Duluth, GA), which is the holding company
for the group’s insurance and non-insurance operating companies. A.M. Best
also has affirmed the debt rating of “a-“ on Primerica Inc.’s $375 million
4.75% senior unsecured notes due 2022, and the indicative debt ratings of “a-”
for senior unsecured debt, “bbb+” for subordinated debt and “bbb” for junior
subordinated debt and preferred stock, which may be issued under Primerica’s
shelf registration statement. The outlook for all ratings is stable.
Primerica’s ratings recognize its status as one of the largest writers of term
life insurance in the United States, with its strong market position
attributable to its dedicated distribution affiliate, Primerica Financial
Services, Inc. This integrated distribution and operating platform includes
approximately 91,000 life agents at the end of the first quarter of 2013 and
has been the primary driver of Primerica’s excellent historical operating
performance. Primerica’s business profile is further reinforced by its
experienced management team, which has successfully built and supported its
sizable sales force.
Primerica’s earnings also have been consistent with A.M. Best’s expectations,
as the group recorded annual GAAP net income of $174 million for 2012. On a
statutory accounting basis, Primerica also booked an annual operating profit
for 2012, with the inclusion of ongoing income related to the Citigroup Inc.
reinsurance transactions (statutory accounting rules require that the gain on
the reinsured business be deferred and recognized as income as earnings
emerge). A.M. Best also notes that Primerica’s year-end 2012 GAAP financial
leverage of 24% (excluding other comprehensive income) and GAAP interest
coverage of almost nine times remain well within the guidelines for the
company’s current ratings.
Primerica Life’s regulatory risked-adjusted capitalization increased
significantly in 2012, in part supported by Peach Re, Inc., a special purpose
domestic captive that funded Regulation XXX term life excess reserves on the
2009 in-force block not ceded to Citigroup Inc., as well as on new business
issued in 2010. However, following a $150 million ordinary dividend paid to
Primerica in May, Primerica Life’s regulatory risk-adjusted capitalization
declined to approximately 480%, which nevertheless provides a solid foundation
to support future growth. A.M. Best anticipates that risk-adjusted
capitalization will decline further over the near term as Primerica internally
funds new term business and as funding provided by its Peach Re, Inc. captive
is replaced with invested assets over time. Longer term, risk-adjusted capital
ratios are expected to stabilize at a level commensurate with the current
Offsetting these positive rating factors is Primerica’s separation from
Citigroup Inc. and the associated reinsurance transactions that have
diminished its absolute capital position and earnings power. While A.M. Best
expects the consolidated statutory earnings of the insurance operating
companies to benefit from the use of its Peach Re, Inc. captive to fund
Regulation XXX reserves, statutory capital growth may be somewhat constrained
by dividend payments to the holding company.
A.M. Best believes Primerica is well positioned at its current rating level
for the foreseeable future. Factors that could result in negative rating
actions include a significant decline in its risk-adjusted capitalization as
measured by Best’s Capital Adequacy Ratio (BCAR) model or net operating
performance that does not meet A.M. Best’s expectations.
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
A.M. Best Company is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
Senior Financial Analyst
(908) 439-2200, ext. 5225
Assistant Vice President
(908) 439-2200, ext. 5201
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
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