OLDWICK, New Jersey – (COMMERCIAL THREAD) –AM Best confirmed the financial strength rating of A + (superior) and the long-term issuer credit rating (long-term ICR) of âaa-â (superior) of Primerica Life Insurance Company (Nashville, TN) and its affiliates, National Benefit Life Insurance Company (Long Island City, NY) and Primerica Life Insurance Company of Canada (Mississauga, Ontario), collectively referred to as Primerica Life. Additionally, AM Best has confirmed the long-term ICR of âa-â (Excellent) from Primerica, Inc. (Primerica) (head office in Duluth, GA) [NYSE: PRI], which is the holding company for the group’s operating insurance and non-insurance companies. AM Best also confirmed Primerica’s long-term issue credit rating of âa-â (excellent) on $ 375 million 4.75% senior unsecured notes, due 2022. The outlook for these credit ratings (ratings) is stable.
The ratings reflect the strength of Primerica Life’s balance sheet, which AM Best considers to be very strong, as well as its very good operating performance, favorable business profile and appropriate management of business risks.
Primerica Life’s ratings recognize the group’s highest risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), as well as good liquidity, financial flexibility and a traditionally investment portfolio. more focused on fixed income securities with no alternative asset classes, as well as very modest mortgage exposure, limited to commercial mortgage backed securities. Primerica’s product risk is almost exclusively made up of term life insurance, which is considered low risk in the AM Best product continuum. However, the group continues to maintain higher allocations to NAIC Tier 2 bonds compared to industry averages. The risk-adjusted capitalization ratios are qualitatively mitigated by high reinsurance leverage with a heavy reliance on captive reinsurance solutions to fund its XXX regulatory reserves, which are expected to subside over time as new cases are entered into under principled reserve-building practices. The company also has strong leverage and interest coverage ratios that are in line with AM Best’s guidelines for these ratings. Operating leverage is still within AM Best’s overall GAAP tolerance; however, it is in the upper range, mainly due to the use of operating leverage linked to the reserves in Regulation XXX.
Primerica Life’s earnings were in line with AM Best’s expectations as the group continuously generated strong levels of GAAP and statutory net income due to favorable loss ratios, although there was a slight increase in earnings. claims due to the COVID-19 pandemic, although more recently this has moderated. Primerica has demonstrated consistent premium growth in its insurance segment and favorable income growth in its investment and savings products segment. The company has managed to pivot its life insurance sales efforts during the pandemic. Premium growth was partially offset by higher than industry lapse rates and historically high dividend payout ratios, as well as insurance and other operating expenses as the company continues to invest. in the infrastructure. Primerica Life’s operating profile benefits from non-insurance revenues that represent a substantial portion of overall GAAP revenues, through the sale of mutual funds and other investment savings products, as well as than the distribution of annuity products from other manufacturers, which generates fee-based income and provides a source of income diversification.
The pandemic has created a strong demand for financial solutions for Primerica Life, which is one of the largest term life insurers in the United States, with a strong and continuing position in the market attributable to its dedicated distribution subsidiary, Primerica Financial. Services, LLC. This integrated distribution includes approximately 135,000 life insurance agents and nearly 26,000 authorized mutual fund representatives across the country. Primerica Life’s business profile in the United States and Canada is further enhanced by its experienced management team, who have successfully built and supported its strong sales force. However, its business model relies heavily on the need to recruit agents constantly to maintain its competitive advantage, and the COVID-19 pandemic initially created some challenges with agent licensing. However, this has since normalized.
The offsetting rating factors are the somewhat narrow focus of Primerica Life’s insurance business profile, which has focused on term life insurance products. At the same time, however, Primerica continues to expand its relationships with its affiliates, and AM Best notes a new mortgage brokerage program launched in partnership with Quicken Loans, through which Primerica’s approved mortgage originators can now negotiate loans. mortgage in order to diversify its business profile. further away. In addition, Primerica announced the acquisition of e-TeleQuote, a direct-to-consumer broker focused on distributing Medicare Advantage policies, for approximately $ 600 million to further diversify its business profile.
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