The current market leaders could run into some challengers.
OLDWICK, N.J.--(BUSINESS WIRE)--
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 (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 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. 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 90,000 life agents at the end of the
first quarter of 2012 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 GAAP net income of $157 million for
year-end 2011. On a statutory basis, Primerica experienced an operating
profit for year-end 2011, 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 2011 GAAP financial leverage of 20%
(excluding other comprehensive income) and GAAP interest coverage of
almost 10 times remains well within the guidelines for the company’s
After ceding 80%-90% of its inforce business to Citigroup, Inc. (which
substantially reduced the group’s absolute levels of assets, reserves
and surplus), Primerica’s year-end 2011 regulatory capital ratio
declined significantly from 2010 levels. However, risked-based
capitalization has improved at the end of the first quarter of 2012,
through the creation of Peach Re, Inc, a domestic captive that funded
Regulation XXX term life excess reserves on the December 31, 2009
in-force block not ceded to Citigroup, Inc. as well as on business
issued in 2010.
Offsetting these positive rating factors is Primerica’s separation from
Citigroup, Inc. and the associated reinsurance transactions, which 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 www.ambest.com/ratings/methodology.
Founded in 1899, 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 © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.Robert AdamsSenior Financial
Analyst908-439-2200, ext. email@example.comRachelle
MorrowSenior Manager, Public Relations908-439-2200,
RosendaleAssistant Vice President908-439-2200,
PeavyAssistant Vice President, Public Relations908-439-2200,
Source: A.M. Best Co.