On Thursday, Citigroup Inc. C announced that its subsidiary – Prime Reinsurance Company, Inc. (“Prime Re”) has been replaced as Primerica Life Insurance Company’s reinsurer by a subsidiary of Swiss Re Life & Health America Inc. (“Swiss Re”) per a coinsurance agreement. Notably, the deal covers a block of term life insurance policies that were in action on Dec 18, 2009.
The deal has reduced assets worth about $2.5 billion from Citi Holdings’ balance sheet. Prime Re is a part of Citi Holdings, consisting of the non-core assets of Citigroup.
Following Primerica, Inc.’s initial public offering (IPO) and final separation from Citigroup, mostly Citigroup’s reinsurance activities with Primerica were mentioned in the coinsurance agreement. Notably, reinsurance agreements, which were implemented before Primerica’s IPO with Prime Re and some Citigroup affiliated reinsurers will be in continuation by Primerica Life Insurance Company.
Citi Holdings CEO Francesco Vanni d’Archirafi said, “This transaction represents another key step for Citi Holdings. We appreciate our long-standing productive relationship with Primerica and Swiss Re.”
Since its inception, Citi Holdings’ assets have been reduced by about $700 billion. Notably, as of Dec 31, 2015, Citi Holdings’ assets represented about 4% of total Citigroup assets, down from the peak level of about 40%.
Bottom Line
We believe that these streamlining initiatives will bolster the company’s capital position, reduce expenses and drive operational efficiencies. Though we remain encouraged as Citigroup continues with its repositioning and restructuring initiatives, legal issues remain a headwind.
Currently, Citigroup carries a Zacks Rank #4 (Sell). Some better-ranked finance stocks include Enterprise Financial Services Corp. EFSC, MainSource Financial Group, Inc. MSFG and Mercantile Bank Corp. MBWM. All three carry a Zacks Rank #2 (Buy).
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