Primerica sets its own course after Citi split

Gwinnett-based financial company sees bright future with middle-income clients its primary focus

By J. Scott Trubey
The Atlanta Journal-Constitution, May 20, 2012

John Addison is fond of saying “America needs a Primerica.”

It’s self-affirming for the place the insurance and financial products seller holds in Middle America.

It also can be seen as a motto for the role Primerica hopes to fill following a devastating financial crisis that’s put buying life insurance and planning for retirement several notches behind keeping a household afloat for many struggling families.

Americans don’t have enough life insurance, said Addison, Primerica’s co-CEO, and the recession has put retirement savings and kids’ college funds on the back burner. Add in credit cards and other debts, and the picture is pretty bleak for many in the constituency Primerica serves.

“There is a huge need for what we do,” said Addison, who started with Duluth-based Primerica when he answered a want ad in The Atlanta Journal in 1982 for what was then A.L. Williams & Associates.

A little more than two years after Primerica’s split from New York financial conglomerate Citigroup, Addison sat down with The Atlanta Journal-Constitution to talk about Primerica, the challenges the company faces and where it’s headed.

Primerica is Gwinnett County’s fourth-largest private employer, and next year it will take up residence in its new headquarters on Ga. 120 near Meadow Church Road.

The company is probably best known in the metro Atlanta, however, for its mega convention of about 45,000 sales agents that fills the Georgia World Congress Center about every other year. The convention returns to Atlanta in mid-June.

The convention, part rock concert, part revival, is a key piece of the city’s convention business and was sorely missed in 2009 when Primerica was forced by Citi to cancel the event. The decision was wrapped around Citi’s acceptance of federal bailout funds and the public black eye other firms felt while facing accusations that they sent employees on junkets after receiving tax dollars.

That decision was among the prime motivators for Primerica to leave Citi. Primerica was financially sound, Addison said, and the annual conventions and sales contests motivate the sales force.

Primerica spun out of Citi in April 2010 after nearly four years of false starts in an attempt to break free. The parting was amicable, but it was delayed countless times by complications of the financial crisis, which rattled the stock market, made lenders hesitant to lend and turned creating a new public company into a logistical nightmare.

That winding path, though, kept Primerica independent and its 1,800 metro Atlanta employees here. Addison said Citi deserves credit for allowing Primerica to move on in a deal that benefited both companies.

Separate from Citi, Addison said Primerica is more nimble, able to set its own path.

Primerica sells term life insurance, mutual funds and other basic financial products to mostly middle-income customers in North America — many of whom work in education and public service — through a network of about 90,000 independent sales agents.

The average Primerica mutual account is opened with $4,800, according to company data. The average household income of a Primerica insurance client is about $63,000.

It’s an income base hit hard by the financial crash, a stubbornly high unemployment rate and the downturn in housing. The company is also shifting some of its attention to helping consumers tackle credit card debt, which Addison calls a “cancer.” The firm also held a recent policy summit with National Journal in Washington on economic security and the middle class.

Many in this income stratum don’t have life insurance or retirement accounts beyond policies offered by their employers (if they have that).

Thirty percent of U.S. households have no life insurance protection, according to a 2010 study by LIMRA International, formerly known as the Life Insurance Marketing Research Association. The report said half of U.S. households say they need more life coverage, and only 44 percent have individual life policies, a 50-year low.

In 2011, Primerica paid out more than $1 billion in life insurance claims, Addison said. That’s money that helped bring financial balance to families uprooted not only by the economy but the death of a breadwinner.

Ed Shields, an analyst with Sandler O’Neill & Partners, said Primerica has maintained its middle-income identity as other competitors have “gone upstream to a higher net worth.”

“Most of their peers don’t target that audience really well,” Shields said.
Primerica reported operating revenue of $284.5 million in the first quarter, up 6 percent over the same period last year.

Term life revenue grew 18 percent, while investment and savings product revenue was flat. Corporate and other distributed product revenue declined 15 percent, largely from fewer invested assets following a $200 million stock repurchase in the fourth quarter.

Operating income was $42.4 million in the first quarter, down about 2 percent.
An area that remains a challenge for Primerica is turning recruits into licensed agents, Shields said.

Shields said unemployed people haven’t jumped at the opportunity to become independent, commission-based sales agents, despite the difficult economy.

There is hesitation, he said, to move on from jobless benefits to being a contracted agent selling insurance and financial products.

Addison said the overall economy is the factor, not would-be agents fearing the loss of jobless benefits.

The firm is also readying its new headquarters. Addison said the new hub, which will bring Primerica personnel from nearly a dozen buildings into one, isn’t a palace. The cost, Addison said, is on par with renovating and re-leasing the buildings Primerica has occupied since the mid-1980s.

But it is a symbol of the faith Primerica has in its future.

Said Addison: “We’re incredibly confident about what our opportunities are.”