Primerica

Primerica, Inc.
Type	Public
Traded as	NYSE: PRI; S&P 400 Component;
Industry	Financial services; Multi-level marketing;
Founded	February 10, 1977; 41 years ago
Headquarters	Duluth, Georgia, United States
Key people	D. Richard Williams; (Chairman of the Board); Glenn J. Williams; (CEO); Alison S. Rand; (Executive VP & CFO);
Products	Insurance; Investment funds; Credit monitoring; Debt management plans;
Revenue	US$ 1.69 billion (2017)
Operating income	US$ 408.01 million (2017)
Net income	US$ 350.26 million (2017)
Total assets	US$ 12.46 billion (2017)
Total equity	US$ 1.42 billion (2017)
Number of employees	2,104 (Full-time; 2017); 614 (On-call; 2017);
Website	Primerica.com
	Footnotes / references;

A Primerica building in Hillsboro, Oregon.

Primerica, Inc. is a United States-based multi-level marketing company that sells insurance and financial services.^[3]^[4]^[5]^[6] As of September 2017, it had 124,436 independent representatives.^[7] Primerica is headquartered in Duluth, Georgia and conducts business mainly in the United States, Canada and Puerto Rico.

Business model

Primerica, Inc. is an insurance and financial services company that uses multi-level marketing^[3]^[4]^[5]^[6]^[8] to sell financial products and services. Headquartered in unincorporated Gwinnett County, Georgia,^[9]^[10] 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 120,000 independent representatives,^[11]^[12] including 22,000 Financial Industry Regulatory Authority (FINRA) Series 6 licensed^[1] 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,^[1] 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.^[11]

History

A.L. Williams & Associates (A.L. Williams), the progenitor of Primerica, was founded in 1977 by Arthur L. Williams Jr. The company employed a mass-marketing concept of "buy term and invest the difference", to illustrate 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.^[1] 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).

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 and a subsidiary of Santa Monica-based PennCorp Financial Services. 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 finalized a merger agreement with American Can Company in 1983, and became its subsidiary along MILICO. In 1986 Triangle Industries bought American Can's packaging division and the rights to the company's name, and in 1987 American Can announced that it would change its 86-year-old name to Primerica Corporation,^[13] hence giving birth to the new and currently recognized name "Primerica."

Acquisition by Commercial Credit

After encountering legal and cultural roadblocks to expanding outside the United States, ALWC began selling the insurance products of Pennsylvania Life Insurance Company, a Primerica subsidiary, in Canada in 1986. Primerica announced in May 1987 that it intended to purchase Wall Street brokerage firm Smith Barney for $750 million and move into the financial services sector.^[14] 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.^[15] 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.^[15] 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.^[16]^[17]^[18] 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.^[19]

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.^[20] 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.^[21]

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. John Addison and Rick Williams were hired as co-CEOs in 2000, and Glen Williams was promoted to President in 2005.^[22]

Separation from Citi

Citigroup attempted to sell Primerica in 2008,^[23] having received several bids from life insurance companies and private equity firms interested in buying.^[24]^[25] At the time the market value of the company was estimated to be $7 billion, roughly 15 times its annual earnings^[26] 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.^[27]

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 ^[23] in a new attempt to have the company bought, a plan which Citigroup did not endorse.^[28]

Initial public offering

On November 5, 2009 Citi announced that it intended to spin off Primerica through an initial public offering.^[29] 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,^[30] 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.^[31] The first day of trading saw the stock surge 31 percent to end up closing at $19.65 a share.^[32]

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"^[33] 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.^[34]

Sales force recruitment and earnings

A Primerica convention in 2007.

In Primerica’s eleven-tiered multilevel-marketing system, the company’s sales representatives receive a commission for selling financial products, while a portion of the sale is also paid to the representative’s recruiter, the recruiter’s recruiter, and so on, up to eleven levels.^[3] Sales agents are tasked with selling the company’s products to a "warm market” including their family and friends.^[3] As of 2010, Primerica required its sales representatives to pay a $25 monthly fee, and it is estimated that these fees netted the company revenue of $2.5 million per month from its own employees.^[5] In 2010, Primerica was reported to have over 100,000 representatives selling the company’s financial products, with individual earnings averaging $5,156 per year.^[3] More than 190,000 new sales recruits paid a fee to sign up for Primerica in 2014, but the company only boosted its total licensed sales force by 3,700 that year, and each member of the sales team earned an average of $6,030.^[5]

In October 2015, James Wilcox, a school district superintendent in Longview, Texas and other Primerica representatives were censured by the Longview school district for holding Primerica recruitment pitch meetings at a local high school. The meetings generated numerous complaints and violated the school district's employee policy manual, which prohibits employees from using their position with the district "to attempt to sell products or services".^[35] In 2017, Primerica representatives reportedly tried to recruit students on the campus of Brooklyn College, in violation of the college’s rules.^[36]

2012 Florida lawsuit and settlement

In 2012, Primerica was the target of multiple lawsuits alleging that the company’s representatives sought to profit by earning commissions after convincing Florida firefighters, teachers and other public workers to divest from safe government-secured retirement investments to inappropriate high-risk retirement products offered by Primerica. In January 2014, the company set aside $15.4 million to settle allegations involving 238 lawsuits.^[5]^[37]