Primerica 2010 Annual Report - Direct Selling News

All of our mortgage- and asset-backedsecurities represent variable interests invariable interest entities (VIEs). We are not theprimary beneficiary of these VIEs, because wedo not have the power to directthe activities that mostsignificantly impact the entities’economic performance. Themaximum exposure to loss as aresult of our involvement inthese VIEs equals the carrying value of thesecurities.As required by law, we haveinvestments on deposit withgovernmental authorities andbanks for the protection ofpolicyholders. The fair values ofinvestments on deposits wereas follows:December 31,2010 2009(In thousands)Fair value of investments on deposit withgovernmental authorities $18,984 $18,573We participate in securities lendingtransactions with broker-dealers and otherfinancial institutions to increase investmentincome with minimal risk. We require minimumcollateral on securities loaned equal to 102% ofthe fair value of the loaned securities. Weaccept collateral in the form of securities, whichwe are not able to sell or encumber, and to theextent it declines in value below 100%, werequire additional collateral from theborrower. Any securities collateral received isnot reflected on our Balance Sheet. We alsoaccept collateral in the form of cash, all ofwhich we reinvest. We primarily invest the cashcollateral in short-term, highly ratedsecurities. The cash collateral received isreflected as a payable under securities lendingon our consolidated and combined balancesheet with an offsetting other asset on ourconsolidated and combined balance sheet. Cashcollateral received and reinvested was asfollows:December 31,2010 2009(In thousands)Securities lending collateral $181,726 $510,101126 Freedom Lives Here We also maintain a portfolio of fixed-maturitysecurities that are classified as tradingsecurities. The carrying value of thesesecurities was as follows:December 31,2010 2009(In thousands)Fixed-maturity securities classified as trading,carried at fair value $22,767 $16,996Investments in fixed-maturity and equitysecurities with a cost basis in excess of theirfair values were as follows:December 31,2010 2009(In thousands)Fixed-maturity and equity security investmentswith cost basis in excess of fair value $258,947 $1,522,454