(Bloomberg) -- Executives at Citigroup Inc.’s Primerica Financial Services unit have approached private-equity firms including J.C. Flowers & Co., Blackstone Group LP, and TPG Inc. to gauge their interest in buying the division’s 100,000- person sales arm, said four people familiar with the matter.
The executives started the talks after Citigroup failed to find a buyer for the entire life insurance company in the past year, said the people, declining to be identified because the talks aren’t public. Citigroup, the recipient of a $52 billion government bailout, hasn’t endorsed the plan, the people said.
Citigroup canceled Primerica’s annual sales convention and a trip to the Bahamas for top agents after the government rescue last year. Primerica is part of Citi Holdings, created by Citigroup Chief Executive Officer Vikram Pandit to house “non- core” units that he wants to eventually sell or wind down as he undoes the legacy of former CEO Sanford “Sandy” Weill.
Citigroup spokesman Stephen Cohen declined to comment. Blackstone and TPG declined to comment through spokespeople, and J. Christopher Flowers, founder of the private equity firm that bears his name, didn’t return a call seeking comment. Primerica’s co-CEOs, John Addison and Rick Williams, declined to comment through spokesman Mark Supic.
Addison told employees in January that he planned to remove any reference to the parent company on Duluth, Georgia-based Primerica’s business cards, brochures, and marketing materials.
New Insurer
In one plan under discussion, the marketing arm would split from Citigroup and start selling policies backed by a new insurer, while Citigroup would retain assets and liabilities from Primerica policies that have already been sold, two of the people said. A transaction wouldn’t yield Citigroup much cash because there are few tangible assets associated with the marketing arm, they said.
Founded in 1977 by Arthur L. Williams, Primerica sells life insurance and investment products such as mutual funds through a mostly part-time sales force of independent agents. Weill’s Commercial Credit Corp. took control of the firm in 1988, using it as a platform to assemble the financial-services titan eventually known as Citigroup.
The division had $2.2 billion of sales last year and net income of $355 million, according to a fact sheet provided by the company.
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Tuesday, May 12, 2009
Fed Views Jump in Treasury Yields as Sign of Better Outlook
(Bloomberg) -- The Federal Reserve considers the recent jump in Treasury yields more as a reflection of a better economic outlook than a signal it needs to step up purchases of U.S. government debt, according to central bank officials who declined to be identified.
It’s too early to judge the effectiveness of the Fed’s $300 billion plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government- bond rates.
The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month.
“It would be very different if the economy still appeared to be in freefall and yields were backing up, but it’s not,” said John Ryding, founder of RDQ Economics LLC in New York and a former Fed researcher. Increasing Treasury purchases would “fight against what is in my opinion a recovery signal, or a signal that the recession is drawing to a close.”
Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. The Treasuries market, along with stocks and some commodities, have reflected those shifts.
Inflation Expectations
Ten-year note yields closed at 3.18 percent late yesterday, up from as low as 2.46 percent after the March 18 announcement of the plan to buy long-term government debt. The gap in yields between the notes and 10-year Treasury Inflation Protected Securities, a gauge of the inflation rate expected by investors, hit a seven-month high of 1.64 percentage points last week.
The Standard & Poor’s 500 Stock Index closed at 908.35 yesterday in New York, up 21 percent from two months before. Crude-oil futures reached $60.08 yesterday, the highest level since November.
Fed policy makers committed to buy as much as $300 billion of Treasuries over a six-month period in their March 18 Open Market Committee statement. The aim was “to help improve conditions in private credit markets,” the FOMC said.
“The statement is pretty clear,” Richmond Fed President Jeffrey Lacker, who was the first FOMC member to vote for buying Treasuries this year, told reporters May 8. “It doesn’t say anything about a U.S. Treasury yield” as a target, he said after a Washington speech. “I would urge people to take it at face value.”
Fed’s Campaign
The Fed has bought $101.7 billion under the initiative so far, part of its campaign to cut borrowing costs by purchasing assets with the benchmark interest rate near zero. Policy makers in March also decided to boost purchases of mortgage securities this year to $1.25 trillion from $500 billion and buy $200 billion, double the previous amount, of federal agency debt.
Stuart Spodek, BlackRock’s co-head of U.S. bonds in New York, said in an interview last week the Fed “needs to consider increasing its purchases of Treasuries” to “stabilize” long-term yields. He told Bloomberg Television May 11 officials may announce an increase as soon as the June 23-24 meeting. Spokeswoman Melissa Garville declined to comment further.
Another fund manager, James Platz of Mountain View, California-based American Century Investments, expects the Fed to announce further purchases “at some point.”
Read more here
It’s too early to judge the effectiveness of the Fed’s $300 billion plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government- bond rates.
The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month.
“It would be very different if the economy still appeared to be in freefall and yields were backing up, but it’s not,” said John Ryding, founder of RDQ Economics LLC in New York and a former Fed researcher. Increasing Treasury purchases would “fight against what is in my opinion a recovery signal, or a signal that the recession is drawing to a close.”
Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. The Treasuries market, along with stocks and some commodities, have reflected those shifts.
Inflation Expectations
Ten-year note yields closed at 3.18 percent late yesterday, up from as low as 2.46 percent after the March 18 announcement of the plan to buy long-term government debt. The gap in yields between the notes and 10-year Treasury Inflation Protected Securities, a gauge of the inflation rate expected by investors, hit a seven-month high of 1.64 percentage points last week.
The Standard & Poor’s 500 Stock Index closed at 908.35 yesterday in New York, up 21 percent from two months before. Crude-oil futures reached $60.08 yesterday, the highest level since November.
Fed policy makers committed to buy as much as $300 billion of Treasuries over a six-month period in their March 18 Open Market Committee statement. The aim was “to help improve conditions in private credit markets,” the FOMC said.
“The statement is pretty clear,” Richmond Fed President Jeffrey Lacker, who was the first FOMC member to vote for buying Treasuries this year, told reporters May 8. “It doesn’t say anything about a U.S. Treasury yield” as a target, he said after a Washington speech. “I would urge people to take it at face value.”
Fed’s Campaign
The Fed has bought $101.7 billion under the initiative so far, part of its campaign to cut borrowing costs by purchasing assets with the benchmark interest rate near zero. Policy makers in March also decided to boost purchases of mortgage securities this year to $1.25 trillion from $500 billion and buy $200 billion, double the previous amount, of federal agency debt.
Stuart Spodek, BlackRock’s co-head of U.S. bonds in New York, said in an interview last week the Fed “needs to consider increasing its purchases of Treasuries” to “stabilize” long-term yields. He told Bloomberg Television May 11 officials may announce an increase as soon as the June 23-24 meeting. Spokeswoman Melissa Garville declined to comment further.
Another fund manager, James Platz of Mountain View, California-based American Century Investments, expects the Fed to announce further purchases “at some point.”
Read more here
China’s Factory Output Grows Less-Than-Estimated 7.3%
(Bloomberg) -- China’s industrial production grew less than economists estimated in April as electricity output fell and exports tumbled. Retail sales climbed.
Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.
The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while an export slump deepened in April, reports showed yesterday.
“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,’’ a senior economist at BNP Paribas SA in Beijing.
Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.
The Shanghai Composite Index rose 0.7 percent as of 10:53 a.m. local time. The yuan traded at 6.8224 against the dollar, from 6.8226 before the data was released.
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Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.
The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while an export slump deepened in April, reports showed yesterday.
“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,’’ a senior economist at BNP Paribas SA in Beijing.
Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.
The Shanghai Composite Index rose 0.7 percent as of 10:53 a.m. local time. The yuan traded at 6.8224 against the dollar, from 6.8226 before the data was released.
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