AM Best Affirms Credit Ratings of Primerica, Inc. and Its Subsidiaries

Business Wire, October 6, 2021

AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of Primerica Life Insurance Company (Nashville, TN) and its affiliates, National Benefit Life Insurance Company (Long Island City, NY) and Primerica Life Insurance Company of Canada (Mississauga, Ontario), collectively referred to as Primerica Life. Additionally, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) of Primerica, Inc. (Primerica) (headquartered in Duluth, GA) [NYSE: PRI], which is the holding company for the group’s insurance and noninsurance operating companies. AM Best also has affirmed the Long-Term Issue Credit Rating of “a-” (Excellent) on $375 million, 4.75% senior unsecured notes, due 2022, of Primerica. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Primerica Life’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, favorable business profile and appropriate enterprise risk management.

Primerica Life’s ratings recognize the group’s strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), along with good liquidity, financial flexibility and an investment portfolio that traditionally is more focused on fixed income with no alternative asset classes, as well as very modest mortgage exposure, limited to commercial mortgage-backed securities. Primerica’s product risk is almost exclusively composed of term life insurance, which is viewed as low risk on AM Best’s product continuum. However, the group continues to maintain higher allocations to NAIC class 2 bonds relative to industry averages. Risk-adjusted capitalization ratios are dampened qualitatively by high reinsurance leverage with heavy reliance on captive reinsurance solutions to fund its Regulation XXX reserves, which should moderate over time as new business is issued under principles-based reserving practices. The company also has solid financial leverage and interest coverage ratios that are within AM Best’s guidelines for these ratings. Operating leverage is still within AM Best’s overall GAAP tolerance; however, it is at the upper range, driven primarily by the use of operating leverage related to Regulation XXX reserves.

Primerica Life’s earnings have been consistent with AM Best’s expectations, as the group continuously has generated solid levels of GAAP and statutory net income due to favorable loss ratios, although there has been some uptick in claims as a result of the COVID-19 pandemic, although more recently that has tempered. Primerica has demonstrated consistent premium growth in its insurance segment and favorable revenue growth in its investment and savings products segment. The company successfully has been able to pivot life insurance sales efforts during the pandemic. Premium growth has been offset partially by higher-than-industry lapse rates and historically high dividend payout ratios, along with insurance and other operating expenses as the company continues to invest in infrastructure. Primerica Life’s operating profile benefits from noninsurance revenue that represent a substantial portion of overall GAAP revenue, through the sale of mutual funds and other investment savings products, along with distribution of other manufacturers’ annuity products, which generates fee-based revenues and provides a source of earnings diversification.

The pandemic created strong demand for financial solutions for Primerica Life, which is one of the largest writers of term life insurance in the United States, with a continued strong market position attributable to its dedicated distribution affiliate, Primerica Financial Services, LLC. This integrated distribution includes approximately 135,000 life agents with almost 26,000 mutual fund-licensed representatives across the country. Primerica Life’s business profile in the United States and Canada is reinforced further by its experienced management team, which successfully built and supports its sizable sales force. However, its business model is heavily reliant upon the need to recruit agents continuously to maintain its competitive advantage, and the COVID-19 pandemic initially created some challenges with agent licensing. However, this has since normalized.

Offsetting rating factors is Primerica Life’s somewhat narrow insurance business profile focus, which has been focused on term life products. At the same time, however, Primerica continues to expand its affiliated relationships, and AM Best notes a new mortgage brokerage program initiated in partnership with Quicken Loans, whereby Primerica’s licensed mortgage loan originators can now broker mortgage loans in an effort to diversify its business profile further. Furthermore, Primerica announced the acquisition of e-TeleQuote, a direct-to-consumer broker focused on distribution of Medicare Advantage policies, for approximately $600 million to diversify its business profile further.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit