Executives at Citigroup Inc’s Primerica Financial Services unit have approached private-equity firms, including JC Flowers & Co, Blackstone Group LP and TPG Inc, to gauge their interest in buying the division’s 100,000- person sales arm, said four people with knowledge of the matter.
Executives started the discussions after Citigroup failed to find a buyer for the entire life insurance company during the past year, said the people, declining to be identified as the talks aren’t public. Citigroup, the recipient of a $52 billion government bailout, hasn’t endorsed the plan, the people said.
Citigroup canceled Primerica’s annual sales convention and a trip to the Bahamas for top agents after the government rescue last year. Primerica is part of Citi Holdings, created by Citigroup Chief Executive Officer Vikram Pandit to house “non- core” units that he wants to eventually sell or wind down as he undoes the legacy of former CEO Sanford “Sandy” Weill.
Primerica’s co-CEOs, John Addison and Rick Williams, declined to comment through spokesman Mark Supic. Citigroup spokesman Stephen Cohen declined to comment, as did officials at Blackstone and TPG J Christopher Flowers, founder of the firm that bears his name, didn’t return a call seeking comment.
Addison told employees in January that he planned to remove any reference to the parent company on Duluth, Georgia-based Primerica’s business cards, brochures, and marketing materials.
Citigroup gained 9 cents to $3.75 in German trading today. The stock has plummeted 84 per cent during the past year in New York Stock Exchange composite trading.
More From This Section
In one plan under discussion, Primerica’s marketing arm would split from New York-based Citigroup and start selling policies backed by a new insurer, while Citigroup would retain assets and liabilities from Primerica policies that have already been sold, two of the people said. A transaction wouldn’t yield Citigroup much cash because there are few tangible assets associated with the marketing arm, they said.
Founded in 1977 by Arthur L Williams, Primerica sells life insurance and investment products such as mutual funds through a mostly part-time sales force of independent agents. Weill’s Commercial Credit Corp. took control of the firm in 1988, using it as a platform to assemble the financial-services titan eventually known as Citigroup.
The division had $2.2 billion of sales last year and net income of $355 million, according to a fact sheet provided by the company.
Citigroup sought buyers for the unit last year and held discussions about a three-way deal to sell it to Flowers and Protective Life Corp, people with knowledge of those talks said. The negotiations ended as the global credit crisis eroded the value of life insurers’ invested assets. Protective’s stock- market value fell 65 per cent last year. Eva Robertson, a Protective spokeswoman, didn’t return a call seeking comment.
Citigroup put off plans to buy a $50 million corporate jet in January after criticism from the government. The company also canceled some Primerica events, which are used to motivate the sales force.
The annual Primerica convention attracted 55,000 people in 2007. This year’s event had been scheduled to take place in June at the Georgia World Congress and Georgia Dome, home to the Atlanta Falcons football team. Trips for top agents to the Atlantis Resort on Paradise Island in the Bahamas and the Eden Roc resort in Miami were also shelved.
Citigroup must raise $5.5 billion in additional equity to withstand a prolonged recession, the Federal Reserve said last week in announcing results of nationwide stress tests of the biggest financial companies. The bank plans to exchange more preferred securities into common stock to comply with the demand.
Bank of America Corp, under pressure from US regulators to raise $33.9 billion, has sold part of a stake in China Construction Bank Corp for about $7.3 billion, two people with knowledge of the matter said yesterday.