Primerica 2010 Annual Report - Direct Selling News

The amortized cost and fair value ofavailable-for-sale fixed-maturity securities indefault were as follows:December 31,2010AmortizedcostFairvalueDecember 31,2009AmortizedcostFairvalue(In thousands)Fixed-maturity securities in default $970 $1,558 $5,807 $9,807Impairment charges recognized in earnings onavailable-for-sale securities were as follows:Year ended December 31,2010 2009 2008(In thousands)Impairments on fixed-maturity securities indefault $ 39 $20,275 $ 37,837Impairments on fixed-maturity securities notin default 11,855 38,765 66,528Impairments on equity securities 264 2,354 9,657Net impairment losses recognized inearnings $12,158 $ 61,394 $114,022The bonds noted above were considered to beother-than-temporarily impaired due to adversecredit events, such as news of an impendingfiling for bankruptcy; analyses of the issuer’smost recent financial statements or otherinformation in which liquidity deficiencies,significant losses and large declines incapitalization were evident; and analyses ofrating agency information for issuances withsevere ratings downgrades that indicated asignificant increase in the possibility of default.Additionally, various mortgage- and assetbackedsecurities were impaired due tochanges in expected cash flows for theunderlying collateral loans. The changes weredriven primarily by revised forecasts usingupdated assumptions for delinquency rates,default rates, prepayment rates, loss severitiesand remaining credit subordination. Theserevisions were factored into updated cash flowprojections where applicable using eitherpublicly available or proprietary models.Regardless of their default status, individualsecurities were impaired if updated cash flowprojections indicated an adverse change.Due to deterioration across the forecastedassumptions for these securities, we recognizeda charge against net income for impairments onPrimerica 2010 Annual Report 131