Fitch Affirms Citigroup & Primerica; Lowers Travelers After Announced Divestiture

Business Wire, Jan 31, 2005

CHICAGO -- Fitch Ratings affirms the long- and short-term debt ratings of Citigroup Inc. (Citigroup) 'AA /F1 ' and the insurer financial strength rating (IFS) of Primerica Life Insurance Company (PLIC) at 'AA ' following the announced divestiture of Travelers Insurance Company (TIC). Fitch also downgrades TIC and its wholly-owned subsidiary, Travelers Life and Annuity's (Travelers) IFS ratings to 'AA'. The Rating Outlook is Stable. Outstanding long-term debt of Citigroup Inc. is approximately $95 billion and commercial paper $7 billion at year-end 2004. A list of ratings is included at the bottom of this release.

The ratings of TIC and Travelers' reflect the proposed acquisition by MetLife, Inc (rated 'AA' by Fitch). The acquisition joins Travelers with one of the world's leading insurance companies. The transaction, which encompasses Traveler's U.S. business and its international operations (excluding Primerica and Mexico), is expected to expand MetLife's distribution network and significantly grow its international operations.

The sale is notable for Citigroup as the life insurance business fails to provide the growth synergies Citigroup sought from the original merger between Citicorp and TIC. The strength of the merger stemmed from the consolidation of the corporate commercial business with trading and investment banking, and the scale of its consumer finance business. Traveler's contributed 6% of consolidated net income in 2004 and did not hold significant promise for growth.

The cross sell of life insurance to retail consumers confounds virtually all banks. Not surprising, PLIC and its distribution channel Primerica Financial Services (Primerica) will be retained and represents the best of the cross sell distribution vehicles Citigroup has developed. Primerica continues to generate about $1 billion in consumer finance loans in an average quarter, in addition to its sales of mutual funds, unit investment trusts and annuity products.

Citigroup has made no statement as regards the proceeds of the sale. Funds may be reinvested, returned to shareholders or perhaps a combination of both. Management remains committed to maintaining excess regulatory capital -- a clear support for its long-term ratings.

Beyond this, Fitch's ratings for Citigroup incorporate an expectation of strong financial performance that demonstrates a high level of stability. The sustainability of this performance is dependent on many factors, including market share expansion in global consumer and investment banking, the maintenance of good asset quality, efficient operations, and accretive acquisitions. The breadth of Citigroup's products and its disciplined credit and market risk management are also integral to the ratings.

Headline risk is expected to continue and may result in negative press. Fitch expects Citigroup management to remain diligent in responding to these issues by continuing to emphasize a longer term view for business performance. Material litigation reserves have been set aside to address potential future settlements. While ultimate settlements may exceed current reserves, Citigroup's earnings generation capacity provides Fitch with sufficient comfort to maintain a Stable Rating Outlook.

PLIC's rating reflects Fitch's view that it remains core to Citigroup and is rated on a group basis. PLIC's key strengths include a lead market position in the term life insurance market, strong profit margins driven by a variable cost distribution channel and strict pricing discipline, a strong balance sheet and low product risk exposure. These strengths are somewhat offset by the company's narrow product focus.

The following ratings have been downgraded by Fitch:

Entity/Issue/Type                       Action        Rating/Outlook

Travelers Insurance Company

  -- Insurer financial strength        Downgrade       'AA'/Stable.

Travelers Life and Annuity Company

  -- Insurer financial strength        Downgrade       'AA'/Stable.

The following ratings have been affirmed by Fitch:

Citigroup Inc.

-- Senior unsecured 'AA ';

-- Subordinated debt 'AA';

-- Preferred stock 'AA';

-- Short-term rating 'F1 ';

-- Individual 'A';

-- Support '5';

-- Rating Outlook Stable.

Primerica Life Insurance Company

-- Insurer financial strength 'AA ';

-- Rating Outlook Stable.

Citigroup Capital Trust II through X

-- Preferred stock 'AA'.

Citicorp Capital Trusts I through III

-- Preferred stock 'AA'.