Primerica 2010 Annual Report - Direct Selling News

PRIMERICA, INC. ANDSUBSIDIARIESNotes to Consolidated and CombinedFinancial Statements(1) Summary of SignificantAccounting PoliciesDescription of Business. Primerica, Inc. (theParent Company) together with its subsidiaries(collectively, the Company) is a leadingdistributor of financial products to middleincome households in North America. TheCompany assists its clients in meeting theirneeds for term life insurance, which itunderwrites, and mutual funds, variableannuities and other financial products, which itdistributes primarily on behalf of third parties.Our primary subsidiaries include the followingentities: Primerica Financial Services, Inc., ageneral agency and marketing company;Primerica Life Insurance Company (PrimericaLife), our principal life insurance company;Primerica Financial Services (Canada) Ltd., aholding company for our Canadian operations,which includes Primerica Life InsuranceCompany of Canada (Primerica Life Canada);and PFS Investments, Inc., an investmentproducts company and broker-dealer. PrimericaLife, domiciled in Massachusetts, owns a NewYork life insurance company, National BenefitLife Insurance Company (NBLIC). Each of theseentities was indirectly wholly owned byCitigroup Inc. (together with its non-Primericaaffiliates, Citi) through March 31, 2010.On March 31, 2010, Primerica Life, PrimericaLife Canada and NBLIC entered into significantcoinsurance transactions with PrimeReinsurance Company, Inc. (Prime Re) and twoaffiliates of Citi (collectively, the Citireinsurers). In April 2010, Citi transferred thelegal entities that comprise our business to usand we completed a series of transactionsincluding the distribution of Prime Re to Citiand an initial public offering of our commonstock by Citi pursuant to the Securities Act of1933 (the Offering). See Note 2 for additionalinformation.Basis of Presentation. We prepare ourfinancial statements in accordance with U.S.generally accepted accounting principles(GAAP). These principles are establishedprimarily by the Financial AccountingStandards Board (FASB). The preparation offinancial statements in conformity with GAAPrequires us to make estimates and assumptionsthat affect financial statement balances,revenues and expenses and cash flows as wellas the disclosure of contingent assets andliabilities. Management considers availablefacts and knowledge of existing circumstanceswhen establishing the estimates included in ourfinancial statements.The most significant items that involve agreater degree of accounting estimates andactuarial determinations subject to change inthe future are the valuation of investments,deferred policy acquisition costs (DAC), andliabilities for future policy benefits and unpaidpolicy claims. Estimates for these and otheritems are subject to change and are reassessedby management in accordance with GAAP.Actual results could differ from thoseestimates.The accompanying consolidated and combinedfinancial statements include the accounts of theCompany and those entities required to beconsolidated or combined under applicableaccounting standards. All material intercompanyprofits, transactions, and balances among theconsolidated or combined entities have beeneliminated. Financial statements for 2010 havebeen consolidated and include those assets,liabilities, revenues, and expenses directlyattributable to the Company’s operations.Financial statements for 2009 and 2008 havebeen combined and include those assets,liabilities, revenues, and expenses directlyattributable to the Company’s operations.Reclassifications. Certain reclassificationshave been made to prior-period amounts toconform to current-period reportingclassifications. These reclassifications had noimpact on net income or total stockholders’equity.Immaterial Error Correction. During the yearended December 31, 2010, we corrected a priorperiod immaterial error relating to oursecurities lending program. The adjustmentreflects our obligation to return the cashportion of the securities lending collateral,112 Freedom Lives Here