Citi spinoff Primerica soars on hopes for economy – Yahoo! News
NEW YORK (Reuters) –
Citigroup Inc's (C.N) spinoff of its life insurance unit, Primerica Inc (PRI.N) saw its shares gain more than a third in its debut on optimism that the life insurer will benefit from a rebounding economy.
The IPO's reception was also the latest glimmer of positive news for the third-largest U.S. bank, which was forced to seek various government rescues in 2008 and 2009. Citi shares closed up 3.2 percent at $4.18.
The first day rally followed investor interest that led underwriters to raise the size of the offering by 19 percent to 21.36 million shares. The shares were priced at $15 each, above the expected range of $12 to $14.
But the IPO still sold at a price-to-book value discount to Ameriprise Financial (AMP.N), MetLife (MET.N) and Prudential Financial (PRU.N), which it identified in its prospectus as competitors, said IPOdesktop.com President Francis Gaskins.
The relatively low valuation, plus signs of confidence in a gradually rebounding economy, both contributed to the share's gains, analysts said.
“Life insurance has been hammered by the recession like everything else has, but there has been an uptick over the past year in applications for issuance of traditional bread-and-butter life insurance,” said Clark Troy, a senior analyst at Aite Group LLC. “Insurers have been looking to bulk up their sales forces, and Primerica has one.”
The Dow Jones U.S. Life Insurance index has more than quadrupled since March 2009 (.DJUSIL).
Primerica shares rose much as 35 percent above their initial public offering price. They opened at $19.15 and rose as high as $20.20 Thursday afternoon.
The shares closed up 31 percent, at $19.65, on the New York Stock Exchange.
DIVIDING THE SPOILS
Citi, which accepted $45 billion worth of U.S. government bailout funds, is seeking to divest assets that are not part of its core banking business.
The bank tried to sell Primerica last year, but failed to find a buyer willing to pay a high enough price. Citi has taken nearly $1 billion in dividends out of the company since 2007 and will take another $622 million before the end of the IPO process.
Citi will take all of the proceeds from the offering and most of Primerica's existing accounts. Primerica will keep its new policies.
Primerica said in its prospectus that it would enter into co-insurance agreements with three affiliates of Citi. Those affiliates would take 80 to 90 percent of the risks and rewards of the term life insurance policies Primerica held at the end of 2009.
Despite Citi's retention of most accounts, Primerica is gaining more autonomy over its strategy, analysts said.
“This will give an opportunity for Primerica management to step out of the shadow of the larger organization and assert itself,” Troy said.
With a door-to-door sales force of independent contractors topping 100,000, Primerica sells life insurance to households earning between $30,000 and $100,000 annually.
Co-Chief Executives John Addison and Rick Williams told CNBC they planned to add sales people.
“We're going to be a smaller, faster-growing company going forward,” Williams said. “When we grow the sales force, the underlying sales grow.”
Citi was the sole bookrunner on the IPO. If the company and other underwriters purchase their full overallotment of 3.2 million shares, Citi's stake in Primerica will be reduced to 39 percent.
ANOTHER STEP FOR CITI'S SELL-OFF
Cutting troubled assets has been a major goal of Citi's restructuring. The IPO and a private deal with Warburg Pincus LLC (WP.UL) should reduce Citi's GAAP assets by about $5 billion during the second quarter, the bank said in a statement.
Michael Holland, chairman of Holland & Co in New York, said that Primerica's offering was a good sign for Citi, “but I wouldn't overstate the significance. It's something they had to do and they did it well.”
Holland said the offering could provide some momentum for banks trying to rid themselves of non-core assets. The Primerica offering is a good way to “go out there and test the marketplace,” he said.
The life insurance portion of Primerica was founded in 1977, but the company has roots in American Can Co, a food packaging business. It became part of Citigroup in the 1980s.
(Reporting by Clare Baldwin and Maria Aspan; Editing by Maureen Bavdek, Richard Chang and Leslie Gevirtz)
Some Factors For Term Life Insurance Policies
A term life insurance policy may be something to consider once you have reached a certain age. The main purpose of obtaining one is the security of your family’s future. There are a number of different options that can be offered to you depending on the information you supply the insurance companies. Before attaining an insurance policy, you must give the insurance brokers your personal details such as age and medical history. This will help them gauge what portfolio may be best suited for you. When you apply for a term life insurance however, you should make sure that you are doing so in accordance with the processes needed before getting one.
Do not go for deals with haste. It is better to consult with an agent and discuss the different benefits that can be provided by the different plans you may consider. This is in order for you to yield the maximum benefit from a term life insurance plan. Also, there are a lot of cheap deals available. Always remember that when it comes to things like an insurance policy, the price is not always the only factor to consider. You should be aware of the company you are engaging business with. They should have financial strength or stability and should possess a reputable service history.
Availing of an insurance plan for term life is an investment you will be making. It is wise to consider a company whose standards are above par. This will definitely ensure that your beneficiaries will have no problems in the future. You can go online to look at different term life insurance brokers. Make sure to get an insurance quote from a number of different brokers. It is best to have these quotes in writing so as to avoid any misunderstandings later on. The general prices online may not be the one offered to you. The calculations for your insurance policy will be based on you overall capacity to pay and of course your health condition. It is essential to read the fine print for every term life insurance contract. Some companies have the tendency to fool clients through these. You might be informed about something and be given something else in its place.
You can find a number of affordable yet reliable term life insurance policies nowadays. Just be sure that you will obtain this from a reliable company as well. Most of them have different payment options which you can avail of and some offer the opp
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ortunity to have your initial policy be converted into a modified one when the time calls for it. You can also convert your term life insurance plan from a temporary to a permanent one. Your term life insurance policy should be flexible so as to yield the greatest amount of benefits possible. Also, under the plan holder’s discretion, the plan can have additional benefits or riders placed upon them. Some examples of which are disability benefits and accidental death clauses.
By: milonruther
Article Directory: http://www.articledashboard.com
The term life insurance plan is the convertible term insurance. The policy holder can change his term insurance policy into the annual renewable, renewable, level premium or decreasing term insurance plan. As the risk involved in this policy is more, the cost of this policy is also on the higher side. For more information visit us at www.usinsuranceonline.com/life-insurance/policy-types/term-life-insurance.php
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