Thursday, July 23, 2009

The good will overcome evil

I was thinking to myself and was wondering why is Primerica not affected by certain circumstances such as the recession while many other companies are taking a hard hit? The answer is simple, Primerica does the right thing for their clients. "When you do the right things, events don't overtake you. You overtake events."

For example, lets take a look at the mortgage industry. Many mortgage companies got involved in selling exotic mortgages such as Adjustable Rate Mortgages in the past few years. While it generate lots of profits for those companies for a short period of time, many of those companies are now gone or have been bail out by the government. Guess what? They are partly to blame for the economic mess that the world is in right now. At Primerica, they stood by one type of loan and that's a fixed rate loan. Of all the clients in Primerica who own Primerica's SMART loan (which stands for Save Money And Reduce Taxes) during the past 10 years, less than 0.7% of them ever foreclosed their home. Primerica's SMART loan business continues to grow while many other companies doing mortgages continue to struggle to survive.

Some of you are asking what about Citigroup? Yes they received government bailout money, but there's no connection between Primerica and Citigroup. The only connection between these two companies is that Citigroup takes some of Primerica's profits. Citigroup doesn't pay for any Primerica's expenses or any other companies that are part of Citigroup. Think of Citigroup as one big financial supermarket. A supermarket sells all kinds of stuff. But does the supermarket pay for the expenses of making those products or pay those employees or expenses of those companies? No. They earn money by selling those products. To me, its kind of a sucky deal to be part of Citigroup. There's been lots of chatter about Citi trying to sell Primerica and I hope someday that day will come true. But in a shaky economy we are in right now, I don't think any company is willing to pay about $7.5 billion to buy Primerica right now. Believe me, there's lots of companies out there that is interested in Primerica, just that its not the right time.

Now, lets take a look at the life insurance industry. Primerica is member of the "Insurance Marketplace Standards Association, a self-policing compliance group established by life insureres. In January 2000, there were 241 members. In May 2009, there were only 88 companies. It proves one thing that Primerica continues to do what is right for their consumers. Primerica lowered their rates in the year 2007 and many companies did the same. But when the going get tough and companies need to generate more money, they need to raise their rates or reduce the number of agents. At Primerica, they kept their rates the same and the sales force continues to grow. There's no company out there that can compete against Primerica.

The bottom line of my message. Good companies that do the right thing will strive and get stronger and companies that takes advantage of people will fall or be affected by economic conditions. Primerica been in business for over 30 years and the company continues to get bigger and stronger, even during rough economic times.

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