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A.M. Best Affirms Primerica’s Strong Credit Ratings

Photo above: Primerica’s corporate headquarters in Duluth, Ga.

Primerica Life Insurance Co. and its subsidiaries, including direct selling company Primerica Inc., have received another round of superior ratings from global credit rating agency A.M. Best.

The agency affirmed its previous A+ financial strength rating and aa- issuer credit rating (ICR) of Primerica Life, based in Boston, with affiliates in New York City and Ontario. Declaring a stable outlook for all ratings, A.M. Best also affirmed the strong a- ICR of distribution arm Primerica Inc., headquartered in Duluth, Georgia, and an a- issue rating on company debt, amounting to $375 million or 4.75 percent in senior unsecured notes due in 2022. At the end of 2015, Primerica had more than 106,000 life insurance agents selling its term life and investment and savings products.

A.M. Best ratings are based on a quantitative and qualitative evaluation of balance sheet strength, operating performance and business profile. In the case of Primerica Life, a strong market position, experienced management team and solid financial performance boosted the company’s rating. A.M. Best also noted that Primerica Life’s risk-adjusted capitalization is sufficient to cover its current business and insurance risks, according to Best’s Capital Adequacy Ratio, a calculation based on the impact of various scenarios on an insurer’s balance sheet.

Factors that hurt the company’s overall rating were its somewhat narrow business profile and aggressive, or relatively high-risk, capital management strategy. Primerica Life has relied heavily on what is known as captive reinsurance to fund its Regulation XXX reserves, the U.S. statutory reserve requirements for term life insurers. A.M. Best assigns a lower-quality rating to an operating company’s capital when it cedes its XXX reserves to a captive—a company that is created and owned by the insurer for the purpose of insuring its owner—than when it self-funds those reserves.

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