SUMMARY

Primerica (PRI): $1,125mm market cap, priced March 31, 2010 at $15 up from expected $13 range mid-point, shares increased to 21.36mm from 18mm, trades Thursday April 1.

This Primerica sale by Citigroup is part of Citi’s asset divestiture program

Even at the IPO price of $15 PRI will sell at a discount (based on P/E ratios & book values) to some of the peers mentioned in the PRI SEC filing. PRI will pay a small dividend. See table below

Post-IPO:

. If all options are exercised -- and it is likely they will be – then Citi will own 33% of PRI. .Warburg Pincus will own 38% if all options are exercised." . "Citi intends to divest its remaining interest in us as soon as is practicable"

BUSINESS

> 100,000 licensed sales reps distribute term life insurance and investment/savings products. PRI believes its "distribution model uniquely positions us to reach underserved middle income consumers in a cost effective manner and has proven itself in both favorable and challenging economic environments."

• Term Life Insurance – 51% of revenue

Distributes term life insurance products in North America that PRI originates through its three life insurance company subsidiaries, Primerica Life, NBLIC and Primerica Life Canada. Investment income earned on assets supporting the required statutory reserves and targeted capital is allocated to the Term Life Insurance segment.

• Investment and Savings Products – 33% of revenue

Distributes mutual funds, variable annuities and segregated funds. In the United States, distributes mutual fund products of several third-party mutual fund companies and variable annuity products of MetLife and its affiliates.

> Also has a Corporate and Other Distributed Products segment – 16% of revenue

Consists primarily of revenues and expenses related to other distributed products, including loans, various insurance products and prepaid legal services. These products are distributed pursuant to distribution arrangements with third parties, except for certain life and disability insurance products underwritten by PRI that are not distributed through PRI’s sales force. In addition, the Corporate and Other Distributed Products segment includes unallocated corporate income and expenses, and realized gains and losses on PRI’s invested asset portfolio.

BUSINESS TRENDS & CONDITIONS

Economic and financial market conditions in North America deteriorated throughout 2008, accelerating in the second half of 2008 and into early 2009. Conditions stabilized, and in some limited instances improved, toward the end of 2009. Nevertheless, declining business and consumer confidence, rising unemployment, concerns over inflation, the lack of available credit, the collapse of the U.S. mortgage market and a declining real estate market in the United States contributed to an economic slowdown and severe recession, the effects of which are continuing. Credit markets continue to experience reduced liquidity, higher than historical volatility and wider credit spreads across numerous asset classes as the financial markets grapple with counterparty risk and defaults. The failure or near failure of a number of large financial service companies resulted in government intervention. Downgrades in ratings and a weakening of the overall economy during such periods all contributed to illiquidity and declining asset values.

These challenging market and economic conditions and rising unemployment levels influenced, and will continue to influence, investment and spending decisions by middle income consumers. Sales and the value of consumer investment products across a wide spectrum of asset classes, as well as consumer spending and borrowing levels, declined precipitously during the financial crisis. Although PRI’s operations remained profitable through these challenging times, PRI was not immune to these macro economic trends and market forces affecting the industry

COMPETITION

Competitors with respect to term life insurance products consist both of stock and mutual insurance companies, as well as other financial intermediaries, such as AIG, Allstate, Ameriprise, Genworth Financial, MetLife, Protective, Prudential, State Farm and USAA. Competitive factors affecting the sale of life insurance products include the level of premium rates, benefit features, risk selection practices, compensation of sales representatives and financial strength ratings from ratings agencies such as A.M. Best.

Sales representatives compete for clients with a range of other advisors, broker-dealers and direct channels, including wirehouses, regional broker-dealers, independent broker-dealers, insurers, banks, asset managers, registered investment advisors, mutual fund companies and other direct distributors, such as Edward Jones, Raymond James and Waddell & Reed. The mutual funds that we offer face competition from other mutual fund families and alternative investment products, such as exchange traded funds.

Annuity products compete with products from numerous other companies, such as Hartford, Lincoln National, MetLife and Nationwide. Competitive factors affecting the sale of annuity products include price, product features, investment performance, commission structure, perceived financial strength, claims-paying ratings, service and distribution capabilities.

RISK

Pre-IPO -- as a wholly owned subsidiary of Citi -- PRI marketed its products and services using the tag line, "Primerica, a Citi Company." Post IPO "Citi" branding will be unavailable to PRI.

USE OF IPO PROCEEDS

All of the net proceeds from this offering and the concurrent private sale will be received by Citi.

Concurrent private sale to Warburg Pincus. Citi has entered into a securities purchase agreement with Warburg Pincus and us pursuant to which Citi will sell to Warburg Pincus approximately 17,210,993 shares of common stock and warrants to purchase approximately 4,302,748 additional shares of common stock. The warrants will have a seven-year term and an exercise price equal to 120% of the public offering price.

If Warburg Pincus and the underwriters exercise all options in full, then Citigroup will maintain a 33% ownership in PRI and Warburg will own 38%.

"Citi intends to divest its remaining interest in us as soon as is practicable"

 

Compare & Contrast
VALUATION RATIOS	IPO Mrkt	Price /	Price /	Price /	Price /	Divident
trailing 12 months	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	yield
Primerica (PRI)	$1,125	1.2	8	0.8	1.9	0.2%
Ameriprise Financial (AMP)	$11,590	1.46	16.1	1.2	1.3	1.5%
Genworth Financial (GNW)	$8,970	0.99	-19.5	0.7	0.9	0.0%
MetLIfe (MET)	$35,500	0.86	-15.8	1.1	1.3	1.8%
Prudential Financial (PRU)	$28,130	0.86	9.0	1.1	1.1	1.2%
Primerica (PRI)	PRI, C+, 7					Post-IPO shares: 75mm
dist financial products				Proforma
Duluth, GA				2009		IPO Mkt
Revenue ($mm)				$903		Cap (mm)
Term life insurance			$460			@$15
Investment & savings produts			$300
Corporate & other dist products			$143
Pretax income
Term life insurance			$172
Investment & savings produts			$93
Corporate & other dist products			-$44
After-tax income				$144
% after tax income				16%
VALUATION RATIOS	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
annualizing Dec qrt	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Primerica (PRI)	$1,125	1.2	8	0.8	1.6	28%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	1	3	1	7