(RTTNews) - Financial services provider Citigroup, Inc. (C) announced Thursday that its wholly-owned subsidiary and life-insurance unit Primerica, Inc. has filed a form S-1 with the U.S. Securities and Exchange Commission or SEC, for an initial public offering that could raise hundreds of millions of dollars. Primerica noted that all of the shares sold in the offering will be sold by Citigroup, and Citigroup will receive all the proceeds from the offering.

Primerica, a distributor of financial products to middle income households in North America, did not disclose either the number of shares it intends to offer, nor its price range. In a statement, Primerica co-chief executive officer, Rick Williams said, "This is an important step in our company's history, and we look forward to completing the offering and becoming a public company. Becoming a public company is an opportunity to align the interests of our independent sales force and our employees with our future performance." However, Citigroup noted that the IPO announcement represents an important step in simplifying its organization and demonstrates the continued success in finding solutions for Citi Holdings, its non-core businesses. Citigroup believes that this is the best separation alternative for this franchise. Citigroup put up the unit for sale months ago, but failed to attract private equity groups or rival insurance companies to buy the unit.

Reports suggest that Citigroup is looking to divest about 20% of Primerica through the offering. Citigroup said it intends to divest its remaining interest in Primerica as soon as is practicable, after completion of this offering.

Under the terms of the IPO, Primerica will enter into a reinsurance deal with Citigroup that will leave the bank with all the premiums and risks associated with term life insurance policies on the books at the end of the year. The deal would also see Primerica pay a dividend to Citi and swap some assets with the bank, with shareholders set to reap the benefit of any insurance sale made after January 1 2010.

Prior to completion of this offering, Primerica will enter into co-insurance agreements with three affiliates of Citigroup, to cede between 80% and 90% of the risks and rewards of our term life insurance policies that will be in force at December 31, 2009. Citigroup will also assume future policy benefit reserves, and Primerica will transfer an equal amount of invested assets to Citigroup prior to the completion of this offering.

The Citi reinsurance transactions will reduce the amount of Primerica capital and will result in a substantial reduction in Primerica's insurance exposure. Further, Primerica will retain its operating platform and infrastructure and continue to administer all policies subject to these reinsurance agreements.

As a result of the Citi reinsurance transactions, the revenues and earnings of Primerica's term life insurance segment are expected to initially decline in proportion to the amount of revenues and earnings associated with its existing in force book of term life insurance policies ceded to Citigroup.

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