Primerica, Inc. (NYSE: PRI) is a distributor of financial services and sells products through representatives in the United States, Canada, Puerto Rico and Guam. As of 2011, it was the largest independent financial services marketing organization in North America with 90,000 representatives.
On March 15, 2013 the company moved to its new international headquarters at 1 Primerica Parkway, Duluth, Georgia.
Primerica conducts business principally in the United States, Canada and Puerto Rico.
Business model
Primerica, Inc. is a multi-level marketing company which sells financial products and services using a hybrid model of direct selling, franchising and distribution.
Headquartered in unincorporated Gwinnett County, Georgia, Primerica spun off from its former parent company Citi through an initial public offering on April 1, 2010. It is a financial services marketing organization in North America with approximately 90,000 independent representatives, including 22,000 Financial Industry Regulatory Authority (FINRA) Series 6 licensed through Primerica's securities broker-dealer affiliate PFS Investments, Inc. in the United States, and through PFSL Investments Canada Ltd. in Canada. The company focuses on the sale of term life insurance, as well as providing other financial products and services including mutual funds, annuities, segregated funds, managed accounts, long-term care insurance, pre-paid legal services, auto insurance, home insurance, credit monitoring and debt management plans. The company has more than 4.3 million life insurance clients and over 2 million client investment accounts.
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History
Founded in 1977 by Arthur L. Williams, Jr. as A.L. Williams & Associates (A.L. Williams), the company established its base by mass-marketing the concept of "Buy Term and Invest the Difference." With "BTID" the company illustrated how its mostly middle-income client base could purchase sufficient protection with term life insurance and systematically save and invest in separate investment vehicles, such as mutual fund Individual Retirement Accounts. A.L. Williams was initially established as a privately held general agency, at first selling term life insurance policies underwritten by Financial Assurance, Inc. (FAI).
The company expanded, outgrowing the capacity of FAI to process its business. In 1980, A.L. Williams entered into a contract with Boston-based Massachusetts Indemnity and Life Insurance Company (MILICO), a larger underwriter of life insurance, whose parent was PennCorp Financial Services based in Santa Monica. To support A.L. Williams headquartered in Atlanta, MILICO established a regional office in that city. In 1981, the company established First American National Corporation (later renamed The A.L. Williams Corporation) as a holding company for First American Life Insurance (later renamed A.L. Williams Life Insurance Company) and First American National Securities (later renamed PFS Investments, Inc). In 1982, The A.L. Williams Corporation (ALWC) underwrote a public stock offering, listed in the Over the Counter (OTC) market under the symbol ALWC. In 1983, the company became listed on the NASDAQ exchange under the same symbol.
Origin of "Primerica" name
PennCorp's growth due to MILICO's underwriting caught the attention of Bill Woodside, Chairman & CEO of American Can Company, a former Dow Jones 30 blue chip can and container producing company based in Greenwich, Connecticut founded in 1901. Due to the growing rise of plastic as a replacement for aluminum cans, the company looked to acquire financial services providers and move away from the dying manufacturing industry, having acquired life insurance holding company Associated Madison from Gerry Tsai Jr in 1982. With this acquisition Woodside created a new financial services division for American Can and hired Tsai, who succeeded him as Chairman & CEO, as the new head.
In September 1982, American Can and PennCorp signed a merger agreement.
In 1983, the merger was finalized, making American Can the parent company of PennCorp and MILICO, signing a new contract with ALWC through the year 2000. In 1986 Nelson Peltz's Triangle Industries bought American Can's packaging division, along with rights to the name of the company. Therefore, on March 6, 1987 American Can announced that it would change its 86-year-old name to Primerica Corporation, hence giving birth to the new and currently recognized name "Primerica."
Acquisition by Commercial Credit
The newly named Primerica Corporation targeted Smith Barney as the first significant purchase that moved the company completely into financial services with the May 1987 announcement of its intent to buy the Wall Street brokerage for $750 million, which would later end up as Primerica's sister company under Citigroup in 1998.
In 1985, ALWC began the procedure to open business in Canada. After encountering legal and cultural roadblocks to expanding outside the United States, ALWC began selling insurance products of Pennsylvania Life Insurance Company, a Primerica subsidiary, in Canada in 1986.
On November 30, 1988, ALWC acquired MILICO from Primerica Corporation through a stock merger acquisition for 44.58 million shares of ALWC stock, making Primerica Corporation the majority shareholder of ALWC. In December 1988, Sanford Weill's Commercial Credit acquired Primerica Corporation for $1.54 billion, retaining the Primerica name. At this time, the major businesses under Primerica Corporation were A.L. Williams, Smith Barney and Commercial Credit. On February 6, 1989, Primerica Corporation began trading on the New York Stock Exchange.
Travelers and Citigroup era
In November 1989, Primerica purchased the remaining 30% of ALWC that it did not previously own and the privately held General Agent, A.L. Williams, Inc. In 1991, Primerica Corporation changed the name of A.L. Williams to Primerica Financial Services. The following year MILICO, Primerica's life insurance underwriter, changed its name to Primerica Life Insurance Company, and its broker-dealer FANS changed to PFS Investments, Inc.
In December 1993, Primerica acquired the remaining 73% of Travelers Insurance Corporation and adopted the name Travelers Inc., which was changed to Travelers Group the following year. Travelers Group included Primerica Financial Services, Smith Barney, Travelers Life and Annuity, Travelers Property/Casualty, Commercial Credit and other financial businesses.
Joe Plumeri was Chairman and CEO of Primerica Financial Services from 1995 to 1999. In 1998, Primerica had net income of $398 million on net sales of $1.65 billion, compared to a 1994 $209 million net income on net sales of $1.28 billion.
In December 1997, Primerica announced it was going to begin offering pre-paid legal through Pre-Paid Legal Services, Inc., at the time both subsidiaries of Travelers Group, Inc.
In 1998, the U.S. Securities and Exchange Commission (SEC) censured and fined PFS Investments Inc., the securities arm for Primerica, for failure to properly supervise a group of registered representatives in Dearborn, Michigan. The SEC found that PFS Investments Inc. had failed to have in place effective policies and procedures to follow up adequately on three complaints received about the Dearborn registered representatives, "selling away" activities. Prior to the SEC's ruling, PFS Investments Inc. hired an independent consultant to review its supervisory and compliance policies and procedures to prevent and detect violations of the federal securities laws. By the date of the ruling, PFS Investments reported it had complied with the final recommendations made by the independent consultant.
In 1998, Travelers Group and banking giant Citicorp merged creating Citigroup (NYSE: C). Primerica and its affiliates continued to operate as subsidiaries of Citigroup, although the Travelers insurance business was spun off in 2002. Along with Primerica, other major brand names under Citigroup included Citibank, CitiFinancial, Citicorp Trust Bank, Smith Barney, and Banamex.
Long-time veteran executives John Addison and Rick Williams, whom Art Williams quoted in his book Coach as "two true sons of A.L. Williams", were hired as co-CEOs in 2000, with Glen Williams promoted to President in 2005.
Separation from Citi
Citigroup attempted to sell Primerica in 2008, having received several bids from life insurance companies and private equity firms interested in buying. At the time the market value of the company was estimated to be $7 billion, roughly 15 times its annual earnings and Citi was trying to match various bidders in groups that could bid for the unit together. Initially, a sale to JC Flowers & Co. LLC and Protective Life Corp was underway until the deal was canceled last minute for publicly undisclosed reasons.
In May 2009 the Primerica executive team led by co-CEOs John Addison and Rick Williams approached private equity firm J.C. Flowers & Co. yet again, as well as Blackstone Group LP and TPG Inc in a new attempt to have the company bought, a plan which Citigroup did not endorse.
Initial Public Offering
On November 5, 2009 Citi announced that it intended to spin off Primerica through an initial public offering. The Primerica executive and legal team filed an S-1 with the U.S. Securities and Exchange Commission (SEC), having officially publicly announced the intention of becoming a public company. Citi would claim all profit from the primary offering, as well as continue to receive income from a significant portion of existing Primerica business, with Citi Holdings CEO Michael Corbit claiming the move to be "the best separation alternative for this franchise.
Primerica filed a final amended S-1 and preliminary prospectus with the SEC on March 17, 2010, indicating that it will offer 18 million shares to the public through the IPO, with underwriters having the option to purchase an additional 2.7 million shares. The first trading occurred on April 1, 2010. Initially, the expected share price was in the $12 - $14 range, having ended up being priced $15 a share on March 31, 2010, resulting in Citi raising 27 percent or $30 million more than $290 million projected through the IPO by selling 3.36 million more shares than the anticipated 18 million. The first day of trading saw the stock surge 31 percent to end up closing at $19.65 a share. In a separate offering, Private equity firm Warburg Pincus has bought 17.2 million shares, resulting in a 23 percent stake in Primerica, and up to 33 percent if Warburg decides to exercise warrants to purchase an additional 4.3 million shares from Citi. Following the IPO, Citi's stake was between 32 percent and 46 percent and expected to divest its interest in Primerica "as soon as possible" to fulfill its original goal of raising cash by shedding assets to improve financial performance.
On December 19, 2011, Citigroup sold its remaining equity stake in Primerica (approximately 8 million shares of Primerica's common stock), completing the separation from Citi.
Technology
In 2005 Primerica began using Palm-based smartphone applications, using the name TurboApps, to allow representatives to obtain insurance quotes and file life insurance applications electronically. TurboApps was later expanded to support the Windows Mobile platform. In November 2011, Primerica released the Primerica App, which allows representatives to provide insurance quotes to clients without the need for online connectivity.
Awards
Primerica Life Insurance Company, and its New York subsidiary, National Benefit Life, have received several awards from A. M. Best, Standard & Poor's and the Insurance Marketplace Standards Association (IMSA) for their financial strength, high standards and quality business.
Primerica has also received awards for Customer Service.
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