Primerica Financial Services, which is a life insurance business that Citibank (NYSE: C) owns, plans to sell to shares in an initial public offering, which may have a starting valuation of $1.6 billion, according to an analyst at Fox-Pitt.
Citibank announced yesterday that it would be taking its life insurance unit, one of the bank’s original businesses, public in 2010. The stock sale is expected to raise up to $100 million in new capital for Citi, according to a filing that Primerica made yesterday. The number of shares that will be sold has not been disclosed yet.
Primerica received 92% of its pretax profits from its life insurance business during the first half of the year, but won’t receive any proceeds from its IPO. The “new” Primerica will consist of its 100,000 sales representatives, 10% to 20% of its existing life insurance policies and the right to sell or underwrite future insurance and other financial products.
Citibank Chief Executive, Vikram Pandit, said in January that the bank would sell, wind down or restructure at least 8 of its businesses to generate new capital to pay off the $45 billion in bailout money that it received from the Federal Government. Citibank is currently 34% owned by the U.S. government. Citibank has already made arrangements to sell some of its business units, including brokerage Nikko Cordial Securities Inc.
Primerica was founded in 1977 by Arthur Williams and sells life insurance and investment products through a mostly part-time sales for of independent agents. Former Citigroup Chairman, Sanford Weill’s, Commercial Credit Corp. took control of Primerica in 1988 and used it as a platform to assemble a financial services titan.
As part of the deal, Primerica will cede 80%-90% of its existing life insurance policies and the risk and rewards associated with them to three different Citibank divisions prior to the completion of the IPO.
In the company’s prospectus, the firm wrote, “The revenues and earnings of our term life insurance segment are expected to initially decline in proportion to the amount of revenues and earnings associated with our existing in force book of term life insurance policies ceded to Citi.”
Through the end of June, Primerica had a net income of $244.7 million based on a revenue of $1.09 billion, according to the filing.
