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Rating Action:

Moody's rates Primerica's senior debt at Baa2; stable outlook

Global Credit Research - 12 Jul 2012

Approximately $375 million of debt rated

New York, July 12, 2012 -- Moody's Investors Service has assigned a Baa2 senior unsecured debt rating to Primerica, Inc.'s, ("Primerica"; NYSE: PRI, provisional senior unsecured debt at (P)Baa2/stable) $375 million issuance of 10 year 4.75% coupon senior unsecured debt. The debt is a drawdown from a shelf registration filed in April 2011. Proceeds from the debt issuance are expected to be used to redeem a Citigroup, Inc. (Citi, senior unsecured debt at Baa2/negative) note and for general corporate purposes. The outlook on the debt is stable.

RATINGS RATIONALE

According to Moody's Vice-President, Ann Perry, "Although Primerica's debt issuance results in a higher financial leverage ratio, it remains in-line with our expectations for Primerica's current rating level." Pro-forma for the debt issuance, the financial leverage ratio increases to 23.0% from 19.7% as of March 31, 2012. Most of the proceeds from the debt issuance will be used to redeem a $300 million Citi note with a 5.5% coupon issued in April 2010 as part of the corporate reorganization and the remaining proceeds used for general corporate purposes, including share repurchases. The rating agency commented that it views debt-financed share repurchases as aggressive capital management.

Moody's noted that Primerica's credit ratings are based on the company's strong financial profile, including good asset quality, sound risk adjusted capital under base and stress scenarios, and sizeable free cash flow generated by unregulated entities that provide the company with good cash flow coverage of its interest expense. Primerica also benefits from consistent profitability, driven in part by good technology and operating scale, and uncomplicated asset liability management, given its predictable and non-interest sensitive liability cash flows.

The rating agency added that these strengths are offset by challenges in Primerica's business model. To maintain new business revenues, the company's large distribution system is dependent on significant and constant agent recruiting, which is likely to be constrained in economic downturns. In addition, Primerica's primary life operating company, Primerica Life Insurance Company (insurance financial strength rating at A2/stable) relies on a narrowly focused product portfolio of term life business that produces sizeable regulatory "XXX" reserves, which must be supported by the company's capital base and ability to generate future earnings, or handled through an outside financing arrangement.

RATING DRIVERS

According to Moody's, Primerica's ratings could go up as a result of 1) Consistently maintaining a return on capital (ROC) greater than 8%; 2) Financial and total leverage of less than 20%; and 3) Consistent cash flow coverage of more than 5 times. On the other hand, Primerica's ratings could go down as a result of 1) Adjusted financial leverage of greater than 30%; 2) Earnings coverage below 6 times; 3) Cash flow coverage less than 4 times; 4) NAIC RBC ratio below 300%; or 5) ROC of less than 5%.

Primerica is headquartered in Duluth, Georgia. As of March 31, 2012, Primerica reported total assets of $10.1 billion and total shareholders' equity of approximately $1.4 billion.

The principal methodology used in rating Primerica was "Moody's Global Rating Methodology for Life Insurers," published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of the methodology.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

For more information, visit our website at www.moodys.com/insurance.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates Primerica's senior debt at Baa2; stable outlook
No Related Data.
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