Warburg Pincus to Invest in Primerica

The Wall Street Journal Online, March 3, 2010
By Peter Lattman and Randall Smith

Private-equity firm Warburg Pincus has agreed to invest $230 million in Primerica Inc., the life-insurance and mutual-fund sales unit of Citigroup Inc., according to securities filings.

In November the struggling bank said it plans to spin off Primerica via an initial public offering of stock, which has yet to happen. In return for its investment, New York-based Warburg will hold a roughly 23% stake in the company, according to a person familiar with the deal. It also will receive two board seats once Primerica spins off into an independent company.

Warburg also has the option to invest $100 million at the IPO price, which could increase its stake to more than 30%. The investment from Warburg, a well-regarded private-equity firm, could bolster the investment case for Primerica at a time when the IPO market has weakened.

Citigroup, which will pocket the proceeds of the Warburg investment and the IPO, will retain a roughly 50% stake in Primerica.

Headquartered in Duluth, Ga., but with roughly 100,000 sales representatives scattered across the U.S., Primerica sells insurance, mutual funds and other financial products to lower-end customers. Along with the Smith Barney retail brokerage, which Citigroup reduced its stake in last year, Primerica was a cornerstone of the financial-services supermarket cobbled together by former Citigroup Chairman and CEO Sanford Weill.

Warburg, which is currently investing a $15 billion private-equity fund, has made a number of substantial minority investments in financial-services companies, including reinsurer Arch Capital Group, Connecticut bank Webster Financial Corp. and bond insurer MBIA Inc.