By Maria Aspan and Clare Baldwin
NEW YORK (Reuters) - Shares of Citigroup Inc's
The shares opened at $19.15 and rose as high as $19.94 on the New York Stock Exchange early Thursday afternoon.
The IPO's strong reception was also the latest glimmer of positive news for the third-largest U.S. bank, which was forced to seek various government rescues in 2008 and 2009. Citi shares, up 2.5 percent at $4.15, were the top gainers among large banks.
The strong market debut followed a strong pricing on Wednesday that led underwriters to raise the size of the offering by 19 percent to 21.36 million shares. The shares were priced at $15 each, above the expected range of $12 to $14.
But the IPO still sold at a price-to-book value discount to Ameriprise Financial
The relatively low valuation, plus signs of confidence in a gradually rebounding economy, both contributed to the share's gains, analysts said.
"Life insurance has been hammered by the recession like everything else has, but there has been an uptick over the past year in applications for issuance of traditional bread-and-butter life insurance," said Clark Troy, a senior analyst at Aite Group LLC. "Insurers have been looking to bulk up their sales forces, and Primerica has one."
Citi, which accepted $45 billion worth of U.S. government bailout funds, is seeking to divest assets that are not part of its core banking business.
The bank tried to sell Primerica last year, but failed to find a buyer willing to pay a high enough price. Citi has taken nearly $1 billion in dividends out of the company since 2007 and will take another $622 million before the end of the IPO process.
Citi will take all of the proceeds from the offering and most of Primerica's existing accounts. Primerica will keep its new policies.
With a door-to-door sales force topping 100,000, Primerica sells life insurance to lower-middle- and middle-income families.
In the lead-up to the IPO, analysts said Primerica would not be able to invest the proceeds in its growth and instead would rely on its sales force to increase its business.
Co-Chief Executives John Addison and Rick Williams told CNBC they planned to bulk up that sales force to increase Primerica's sales.
"We're going to be a smaller, faster-growing company going forward," Williams said. "When we grow the sales force, the underlying sales grow."
After the IPO and a separate deal with private equity investor Warburg Pincus LLC
Citi was the sole bookrunner on the IPO. If the company and the other underwriters purchase their full overallotment of 3.2 million shares, Citi's stake in Primerica will be reduced to 39 percent.
The IPO and private deal with Warburg should reduce Citi's GAAP assets by about $5 billion during the second quarter, the bank said in a statement.
Michael Holland, chairman of Holland & Co in New York, said that Primerica's successful offering was a good sign for Citi, "but I wouldn't overstate the significance. It's something they had to do and they did it well."
Holland said the offering could provide some momentum for banks trying to rid themselves of bad assets. The Primerica offering was a good way to "go out there and test the marketplace," he said.
That precedent will be especially important for Citi, which is trying to shed itself of many assets assembled by Chief Executives Sanford Weill and his successor Charles Prince.
The life insurance portion of Primerica was founded in 1977, but the company also has roots in American Can Co, a food packaging business that Gerry Tsai built into a financial conglomerate.
Sandy Weill's Commercial Credit bought Primerica in the late 1980s; the combined companies, together with other acquisitions, became Citigroup.
(Reporting by Clare Baldwin and Maria Aspan; Editing by Maureen Bavdek and Richard Chang)
