US-based financial services group Citigroup is reportedly planning to sell on Prime Re, a unit created in 2010 to help in the sale of Primerica, the multi-level distribution life business spun off by Citigroup in 2010.
Vermont-based Prime Re signed an 80% $3.2bn co-insurance agreement and a 10% coinsurance excess trust agreement with Primerica in March 2010 (http://1.usa.gov/1DyjNvn). That, along with two other coinsurance deals, effectively ceding between 80% and 90% of the risks and rewards of all term life policies in force at year-end 2009. This gave the spun-off Primerica a cleaner start than it would otherwise have had. As Primerica stated in its 2013 annual report, "Prime Re was formed solely for the purpose of entering into these reinsurance transactions, had no operating history at the time and does not possess a financial strength rating from any rating agency".
As such the portfolio for sale is effectively a closed life book and could be of interest to any one of the closed book consolidators that have appeared in recent years.
The sale of such capital-intensive subsidiaries has become popular among financial services groups in recent years, and Citigroup is no exception, having sought to focus its output on its core banking operations.
Prime Re reported $7bn of GAAP assets at the end of 2013 and was said by Citigroup to be running profitably, although without mention of the level of return on capital. It was already at this time termed as "held for sale". Citigroup has not said the amount that it is seeking for its sale. In 2013 Resolution Life Holdings under Clive Cowdery bought Lincoln Benefit Life from Allstate, which took a $500m bottom line loss, but a significant improvement in group return on equity. That would indicate that financial groups are prepared to sell at a loss in order to get capital-inefficient businesses off their books.