My friend just called me to let me know that Primerica is finally going public! After several unsuccessful attempts to sell Primerica, Citigroup found no other choice but to offer the first Primerica IPO. In fact, Citigroup is expecting to get as much as $100 million.
I don’t have time to write more about Primerica IPO right now, but I’ll come back with more thoughts on it later on… Let’s just say this could mean significant changes in many Primerica agents’ business models…
While you can read the full story over at Bloomberg, I was more concerned about each individual’s business model.
As I have mentioned in my Primerica Reviews, Primerica’s business model is based on recruiting. The real way of making money through Primerica is to build a sales force who sells insurance products to their relatives. We may debate if their term insurance products are good or not, this is not the point of the post. My main question is, will Primerica’s business model be threatened by this IPO?
When you read Primerica’s contract, it clearly stated that clients of Primerica remain under the control of Primerica if the agent was ever leave the company. So, what if a major insurance company buys Primerica shares to take over control of it?
Some say that it will take over a huge sales force (more than 100,000 Primerica agents). Others, the evilest of us, may think about buying one of the biggest client databases in term of insurance products.
This would mean that the so called “business” Primerica agents built could change hands within a few years (and a lot of millions invested in stock ). I am not saying it will happen overnight, but it is surely a sign that nothing can be taken for granted.
The potential new owner could also decide to cut the pyramidal aspect (commission wise) and name Regional Directors and VPs and pay them as salaried employees (this would cut their pay checks drastically and significantly increase Primerica’s profit… which is always good for shareholders!).
Not much unless they have $100M to spend on the shares! While $100M will provide new cash to Citigroup and won’t really affect Primerica’s upper management, it still opens a breech. This breech will force Primerica to open its books and show how interesting (or uninteresting) the company could be for a potential bidder (hostile or not).
Then again, another point is the following: Do you feel safe building a business that is not yours? You can’t really call it a team since they are not your agents and they don’t sell to your clients… I am wondering…what about you?
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