A.M. Best Affirms Ratings of Primerica, Inc. and Its Subsidiaries

Online.wsj.com, 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 ratings.

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 www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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