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Fitch Affirms Primerica Life's IFS at 'A+'; Outlook Stable

Business Wire, Inc.

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating of Primerica Life Insurance Company (Primerica Life) at 'A+'. The Rating Outlook is Stable.

Primerica Life's rating is supported by the company's solid risk adjusted capitalization, strong competitive position in the individual term insurance market, efficient captive distribution force, conservative asset profile, and good operating performance. Partially offsetting these positives are Primerica Life's narrow product profile and the size of its in-force block of term life insurance, which was materially reduced through a series of reinsurance treaties the company entered into prior to its initial public offering on March 31, 2010.

Fitch views Primerica Life's consolidated profitability to be good in the quarters following its separation from Citigroup. The company's earnings continue to reflect its conservative new business pricing which supports its strong margins. For the first three months of 2012, Primerica, Inc., Primerica Life's parent company, reported consolidated pretax operating income of $61.3 million and annualized return on equity of 12.8%. Fitch anticipates that operating earnings will improve gradually over the intermediate-term as the company rebuilds its in-force block.

Primerica Life's risk-based capitalization (RBC ratio) declined significantly to 426% of company action level at Dec. 31, 2011, from 619% at Dec. 31, 2010. The decline was driven by the payment of a statutory dividend of $200 million to its parent company in November 2011. The dividend was used to fund the execution of an agreement to purchase approximately nine million shares of its common stock from its former parent, Citigroup.

In addition, on March 31, 2012, Primerica Life completed a reserve financing transaction covering Regulation XXX reserves on its individual term life insurance block and, as a result of the released reserves, subsequently paid an extraordinary dividend to its parent company in the amount of $150 million. The dividend was used to fund the repurchase of 5.7 million of Primerica, Inc. shares held by Warburg Pincus, its largest shareholder. Although Primerica Life's estimated RBC ratio was reported to be in excess of 560% at March 31, 2012, in Fitch's view, the reserve financing transaction and subsequent dividend reduces the conservatism of Primerica Life's statutory reserves and weakens the quality of the company's reported statutory capitalization. However, the reserve financing transaction is in line with Fitch's rating expectations and is consistent with industry practice.

Fitch views Primerica Life's unique distribution force as a competitive advantage which has been an important factor in the company's strong record of profitability. Fitch believes that a material weakening of this channel could adversely affect Primerica Life's operating performance and its rating.

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Primerica Life remains one of the nation's largest individual term life insurance writers, with nearly $1.8 billion in direct statutory life insurance premiums written in 2011.

Key rating triggers that could result in an upgrade include:

--sustained improvement in statutory net operating gain over the next 12-to-18 months.

The key rating triggers that could result in a downgrade include:

--a sustained decline in RBC below 400%;

--a sustained increase in parent leverage as measured by debt-to-total capital above 25% or TFC ratio above 1.2x;

--a material decline in the effectiveness of the company's distribution channel.

Fitch affirms the following rating with a Stable Rating Outlook:

Primerica Life Insurance Company

--IFS at 'A+'.

Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

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Fitch Ratings
Primary Analyst
Bradley S. Ellis, CFA
Director
+1-312-368-2089
Fitch, Inc., 70 W. Madison Street, Chicago, IL 60602
or
Secondary Analyst
Douglas L. Meyer, CFA
Managing Director
+1-312-368-2061
or
Committee Chairperson
Keith M. Buckley, CFA
Managing Director
+1-312-368-3211
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

Source: Fitch Ratings

Copyright:Copyright Business Wire 2012
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