Bank & Insurance Underwriter - Ratings and Research
| Trone: Primerica IPO impact minimal near term with small gain in future |  |
November 06, 2009 6:44 PM ET
By Mindi Westhoff
|  Related Companies | Related Articles | Related Research Reports |
Following Citigroup Inc.'s announced spinoff of Primerica Inc., Fox-Pitt Kelton Cochran Caronia Waller analyst David Trone said Nov. 6 that the move will likely have little impact on Citi in the near term but has potential to create an incremental benefit for the hobbled financial giant. Trone wrote that Citi will retain most of Primerica's profit stream on its life insurance policies following the transfer of between 80% and 90% of Primerica's economic interest in the policies to Citi, which he believes is meant to reduce the new company's balance sheet and make the size of Primerica's IPO more manageable. While registration documents estimated the size of the IPO at $100 million to determine a registration fee, the analyst valued the new company at about $1.6 billion depending on equity market conditions when the deal closes in the first quarter of 2010. "Citi will most likely record a relatively small gain on this transaction," Trone wrote, adding that it could continue to be a majority shareholder in the new company and consolidate the results before it divests its investment completely, making the near-term impact of the deal minimal. "We suspect Citi was unable to find reasonable buyers for the Primerica franchise, which led to the IPO," the analyst wrote. "Nonetheless, this transaction exhibits Citi's commitment and/or regulatory pressure to sell non-core businesses." | 
Add to Library
