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TEXT-Fitch affirms Primerica Life Insurance Co rating
July 2, 2012 / 4:19 PM / 5 years ago

TEXT-Fitch affirms Primerica Life Insurance Co rating

July 2 - Fitch Ratings has affirmed the Insurer Financial Strength (IFS)
rating of Primerica Life Insurance Company (Primerica Life) at 'A+'. The Rating
Outlook is Stable.

Primerica Life's rating is supported by the company's solid risk adjusted 
capitalization, strong competitive position in the individual term insurance 
market, efficient captive distribution force, conservative asset profile, and 
good operating performance. Partially offsetting these positives are Primerica 
Life's narrow product profile and the size of its in-force block of term life 
insurance, which was materially reduced through a series of reinsurance treaties
the company entered into prior to its initial public offering on March 31, 2010.

Fitch views Primerica Life's consolidated profitability to be good in the 
quarters following its separation from Citigroup. The company's earnings 
continue to reflect its conservative new business pricing which supports its 
strong margins. For the first three months of 2012, Primerica, Inc., Primerica 
Life's parent company, reported consolidated pretax operating income of $61.3 
million and annualized return on equity of 12.8%. Fitch anticipates that 
operating earnings will improve gradually over the intermediate-term as the 
company rebuilds its in-force block. 

Primerica Life's risk-based capitalization (RBC ratio) declined significantly to
426% of company action level at Dec. 31, 2011, from 619% at Dec. 31, 2010. The 
decline was driven by the payment of a statutory dividend of $200 million to its
parent company in November 2011. The dividend was used to fund the execution of 
an agreement to purchase approximately nine million shares of its common stock 
from its former parent, Citigroup.

In addition, on March 31, 2012, Primerica Life completed a reserve financing 
transaction covering Regulation XXX reserves on its individual term life 
insurance block and, as a result of the released reserves, subsequently paid an 
extraordinary dividend to its parent company in the amount of $150 million. The 
dividend was used to fund the repurchase of 5.7 million of Primerica, Inc. 
shares held by Warburg Pincus, its largest shareholder. Although Primerica 
Life's estimated RBC ratio was reported to be in excess of 560% at March 31, 
2012, in Fitch's view, the reserve financing transaction and subsequent dividend
reduces the conservatism of Primerica Life's statutory reserves and weakens the 
quality of the company's reported statutory capitalization. However, the reserve
financing transaction is in line with Fitch's rating expectations and is 
consistent with industry practice.

Fitch views Primerica Life's unique distribution force as a competitive 
advantage which has been an important factor in the company's strong record of 
profitability. Fitch believes that a material weakening of this channel could 
adversely affect Primerica Life's operating performance and its rating.

Primerica Life remains one of the nation's largest individual term life 
insurance writers, with nearly $1.8 billion in direct statutory life insurance 
premiums written in 2011. 

Key rating triggers that could result in an upgrade include:

--sustained improvement in statutory net operating gain over the next 12-to-18 
months.

The key rating triggers that could result in a downgrade include:

--a sustained decline in RBC below 400%;

--a sustained increase in parent leverage as measured by debt-to-total capital 
above 25% or TFC ratio above 1.2x;

--a material decline in the effectiveness of the company's distribution channel.

Fitch affirms the following rating with a Stable Rating Outlook:

Primerica Life Insurance Company
--IFS at 'A+'.

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