Home Substantial portion AM Best confirms the credit ratings of Primerica, Inc. and its subsidiaries

AM Best confirms the credit ratings of Primerica, Inc. and its subsidiaries

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OLDWICK, NJ, October 13, 2022–(BUSINESS WIRE)–AM Best affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit rating (long-term ICR) of “aa-” (Superior) of Primerica Life its affiliates, National Benefit Life Insurance Company (Long Island City, NY) and Primerica Life Insurance Company of Canada (Mississauga, Ontario), collectively known as Primerica Group. Additionally, AM Best confirmed the long-term KPI of “a-” (Excellent) from Primerica, Inc. (Primerica) (headquarters in Duluth, GA) [NYSE: PRI], which is the holding company for the group’s insurance and non-insurance operating companies. AM Best also affirmed Primerica’s $600 million, 2.8% senior unsecured notes, due 2031, long-term issue credit rating of “a-” (Excellent). The outlook for these Credit Ratings (ratings) is stable.

The ratings reflect Primerica Group’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, favorable business profile and appropriate management of business risks.

Primerica Group’s ratings continue to recognize the highest level of risk-adjusted capitalization in the group, as measured by Best’s capital adequacy ratio (BCAR). Furthermore, the ratings reflect the company’s good liquidity, its financial flexibility and an investment portfolio traditionally more focused on fixed income securities without alternative asset classes, as well as a very modest mortgage exposure, limited to backed by commercial mortgages. Overall, the group continues to maintain a favorable reserve profile comprised almost exclusively of term life products, considered low risk on AM Best’s product risk continuum, supported by a large majority of quality bonds, although it maintains higher allocations to NAIC class 2 bonds relative to the industry average.

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 continue to moderate over time at as new business is originated under principles-based funding practices. The company also has strong leverage and interest coverage ratios, still within AM Best’s guidelines for these ratings. Operating leverage is still within AM Best’s overall GAAP tolerance; however, it is in the higher range, primarily due to the use of operating leverage related to the XXX Regulation reserves.

Primerica Group earnings have consistently generated strong levels of GAAP and statutory net earnings due to favorable loss ratios. There has been some increase in claims as a result of the COVID-19 pandemic, although more recently this has continued to decline. Primerica also experienced consistent premium growth in its insurance segment and favorable revenue growth in its investment and savings products segment, but this was partially offset by higher average lapse rates than industry and historically high dividend payout ratios. Additionally, insurance costs and other operating expenses have increased as the company continues to grow and invest in infrastructure. Primerica Group’s operating profile benefits from non-insurance revenue, which represents a substantial portion of overall GAAP revenue; this comes from the sale of mutual funds and other investment savings products, as well as the distribution of annuity products from other manufacturers, which generate fee-based income and provide a source of diversification of income.

Primerica Group, which is one of the largest underwriters of term life insurance in the United States, maintained a strong market position through its dedicated distribution subsidiary, Primerica Financial Services, LLC., with nearly 130 000 life insurance agents and approximately 26,000 mutual funds. authorized representatives across the country. Primerica Group’s business model in the United States and Canada is highly dependent on the need to continually recruit agents to maintain its competitive advantage. AM Best notes some rating factors offsetting the Primerica Group’s somewhat narrow corporate profile, focused on term life insurance and investment and savings products, through expanding relationships, such as the mortgage origination for Rocket Mortgage, LLC, a mortgage lender, and the acquisition of e-TeleQuote Insurance, Inc., which markets Medicare-related insurance products underwritten by third-party health insurance companies.

This press release relates to credit ratings that have been published on AM Best’s website. For all rating information relating to the release and relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit AM Best’s Recent Rating Activity web page. For more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see the Guide to Proper Use of Best’s Best ratings and reviews.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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