Citigroup Inc. (NYSE: C) Set To Spin Off Primerica Unit in IPO

Citigroup Inc. (NYSE: C) filed paperwork with the Securities and Exchange Commission (SEC) late Thursday to spin off its successful Primerica Inc. life insurance unit in an Initial Public Offering (IPO).  The IPO is part of a perceived effort by Citigroup to divest of certain business units, as well as streamline and simplify its operations.  Citigroup is hoping to raise as much as $100 million through the sale of stock in Primerica.

Primerica Inc. life insurance was acquired by Citigroup in the late 1980’s and currently has approximately 100,000 sales representatives selling life insurance and investment products.  The unit had a net income of $244 million on revenue of just over $1 billion in the first half of 2009, and was one of the few successful money making segments of Citigroup.

The move to sell off the profitable life insurance unit comes as Citigroup continues to suffer significant losses from its collection of troubled consumer loans, credit cards, and investments.  Faced with the need to raise cash, Citigroup will sell all shares of Primerica being offered in the IPO and utilize the proceeds to shore up its shaky balance sheet, as well as potentially repay the US government the $45 billion in federal funds it has received over the last year.

The sale of Primerica by Citigroup comes on the heels of other recent moves by the company to raise cash.  Most recently Citigroup sold its commodities trading unit, brokerage unit in Japan, as well as some of its credit card assets.  The company also announced in September that it will sell its 50% stake in wealth management firm Smith Barney to Morgan Stanley, which owns the other 50% of Smith Barney.

Primerica Inc. has its genesis in the A.L. Williams & Assoc. company, founded in 1977, and was originally focused on selling life insurance through independent sales reps throughout the United States.  The company quickly became a major player in the life insurance arena and went public in 1982, and subsequently was acquired by Citigroup in the late 1980’s.  Considering the profitability and revenue generation capacity of Primerica, it is likely to generate considerable interest on the open market.

Many see the sale of Primerica as the first step Citigroup will take to move out of non-core businesses and focus on banking and financial services.  Citigroup received $45 billion from the US government in bailout funds from the US government, which currently owns a 34% stake in the company, and raising cash to repay the government could be an additional motivation for selling off Primerica.