Citigroup offloads remainder of Primerica

By Tom Braithwaite
Financial Times Online, December 14, 2011

Citigroup gained about $180m by selling the remainder of its stake in Primerica, the life assurance company that was a crucial building block in Sandy Weill’s attempt to create a financial supermarket in the 1990s.

Vikram Pandit, Citi chief executive, spun off Primerica last year as part of efforts to bring in cash and shrink the troubled bank after its $45bn government bail-out during the financial crisis.

The residual stake – 11 per cent before Tuesday’s sale – was kept in Citi Holdings, the bank’s portfolio of non-core assets that it is looking to wind down or sell. Citigroup said the sale “demonstrates continued progress in reducing non-core assets in Citi Holdings”.

Primerica said on Tuesday that Citi had launched a public offering for its remaining 8.1m shares. Shares in Primerica fell 93 cents, or 4 per cent, to $22.29 during late afternoon trading in New York. The sale, managed by Citi’s own global markets unit, was also priced at $22.29.

Warburg Pincus, the private equity firm, is the largest shareholder in Primerica, with a 22 per cent stake before Tuesday’s offering.

Now with a market capitalization of $1.6bn, Primerica was a grander name in US finance in previous decades. Mr Weill and Jamie Dimon, his then lieutenant and now chief executive of JPMorgan Chase, acquired the company and used it in 1993 to buy Travelers, another insurance group. In 1998, the company bought Citicorp, then the largest US bank and the world’s biggest credit card issuer, to create Citigroup.

Last month, Primerica reported a 14 per cent increase in revenue to $275.8m in the third quarter. Net income was up 3 per cent to $40.6m.

Citi is still trying to recover from its near-death experience during the financial crisis when only a government capital infusion and debt guarantees saved it from collapse. Its stock has fallen by 43 per cent this year and fell 2 per cent on Tuesday.

But the bank has shown some signs of pulling away from its problems. Analysts believe it will be able to increase its dividend pay-out to shareholders next year after a successful completion of stress tests imposed by the Federal Reserve. Other banks, notably Bank of America, are not expected to be granted permission to increase their pay-outs to investors. BofA shares have fallen by 60 per cent this year.