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Primerica Spinoff to Bolster Citigroup

Francesco Guerrera, Financial Times

Citigroup will today close a chapter in its troubled history with the spin-off of Primerica, its door-to-door insurance unit, in a move that will raise about $250m and should enable the US bank to move more than $2 billion in assets off its balance sheet.

Citi sign
Sharon Lorimer

The listing of Primerica - one of the building blocks of the company that later became Citigroup - is part of the US financial company's plans to sell some $900 billion in unwanted business and assets after suffering huge losses during the crisis.

People close to the situation said Citi's investment banking unit, which is arranging the initial public offering, was expected to price the 18 million shares, or about 24 percent of the company, it is selling in Primerica after US markets close today.

Citi can also sell a further 2.7 million shares if there is strong investor demand.

In a recent regulatory filing, Primerica, one of the first businesses acquired by Sandy Weill as he was building a financial services conglomerate in the late 1980s - said the shares would be priced between $12 and $14 each.

At the top end of the range, Citi would raise $252 million, valuing the whole of Primerica, which has an army of 100,000 self-employed insurance agents, at more than $1 billion.

Primerica had revenues of $2.2 billion and net income of $495 million last year.

Citi also stands to reap a further gain of up to $330 million by selling an additional stake to Warburg Pincus, the private equity group, as well as receiving a $454 million dividend to be paid by Primerica to compensate Citi for keeping most of its old policies.

The gains are expected to be partly offset by a one-off loss stemming from the fact that Citi is selling shares in Primerica below its book value.

Citi executives hope that the combination of the public sale and the deal with Warburg Pincus will allow them to treat Primerica as a separate business for accounting purposes.

Such treatment is crucial to Citi's goal of reducing its balance sheet and meeting demands from regulators and investors for speedy divestments of the $540 billion-plus in non-core assets that the company still holds.

People familiar with the matter say that if Citi sells more than 50 percent in Primerica, it will be able to move more than $2 billion in assets off its balance sheet.

The Primerica spin-off comes a day after the US Treasury said it would sell its 27 percent stake in Citi before the end of the year.

Separately, Citi yesterday said it had appointed Edward Skyler, a deputy major in New York City, as global head of public affairs. Mr Skyler worked at Bloomberg, the information company, before joining its owner, Michael Bloomberg, when he became mayor in 2002.

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