A.M. Best has affirmed the financial strength rating of A+
(Superior) and the 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 $375 million 4.75% senior
unsecured notes due 2022 of Primerica as well as the indicative 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 included approximately 95,400 life agents at the end of the
first quarter of 2014. Primerica's business profile in both the United
States and Canada is further reinforced by its experienced management
team, which successfully built and supports 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 $163
million for 2013. On a statutory accounting basis, Primerica Life also
booked an annual operating profit for 2013, with the inclusion of
ongoing income relate 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 2013 GAAP
financial leverage of 24%, excluding other comprehensive income, and
GAAP interest coverage of more than eight times remain well within the
guidelines for the company's current ratings.
A.M. Best views Primerica Life's regulatory risked-adjusted
capitalization as favorable, 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. While A.M. Best anticipates
that risk-adjusted capitalization will decline over the near term as the
anticipated capital benefits from additional excess reserve financing is
expected to be offset by dividends to the holding company, longer-term,
risk-adjusted capital ratios are expected to remain at a level
commensurate with the current ratings.
Offsetting these positive rating factors are Primerica's somewhat narrow
business profile, aggressive capital management policy and reinsurance
transactions that have diminished its absolute capital position and
earnings power. Primerica utilizes significant levels of reinsurance as
a capital management and risk mitigation tool for its sizeable term
insurance business, with 89% of its life insurance in-force reinsured at
year-end 2013. In addition, while A.M. Best expects the consolidated
statutory earnings of the insurance operating companies to benefit from
the use of captives to fund Regulation XXX reserves, statutory capital
and earnings growth of the insurance operating companies will likely be
constrained by continued dividend payments to Primerica. At the parent
level, more than 100% of its operating earnings have been returned to
stockholders in each of the last three years.
Positive rating movement is unlikely in the near to medium term.
Negative rating actions may occur should the organization's
risk-adjusted capital levels fall below A.M. Best's expectations,
earnings levels diminish significantly and/or other changes occur that
adversely impact Primerica's ability to successfully fund its redundant
term insurance reserves.
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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