Primerica 2010 Annual Report - Direct Selling News

unable to corroborate independent brokerquotes with observable market data. Therewere no significant transfers between Level 1and Level 2 or between Level 1 and Level 3during 2010.Fair Value OptionWe elected the fair value option of accountingfor certain equity investments that were not inthe Russell 3000 Index. Changes in the fairvalue of such investments are recorded in netinvestment income. The fair value of equitysecurities selected for fair value accountingwas as follows:Year endedDecember 31,2010 2009(In thousands)Fair value, beginning ofperiod $7,693 $4,579Fair value, end of period — 7,693In connection with our corporatereorganization, in the first quarter of 2010, wetransferred to Citi or sold to third parties all ofthe securities that had previously beenaccounted for using the fair value option. Fairvalue gains included in net investment incomewere as follows:Year ended December 31,2010 2009 2008(In thousands)Fair value gains(losses) included innet investmentincome $667 $3,101 $(5,397)The aggregate notional balance and fair valueof our derivatives was as follows:December 31,2010 2009(In thousands)Aggregate notionalbalance of derivatives $ 5,878 $21,689Aggregate fair value ofderivatives (2,228) (2,707)The change in fair value of these derivatives, asincluded in realized investment gains (losses)was as follows:Year ended December 31,2010 2009 2008(In thousands)Change in fair value $635 $(41) $155We have a deferred loss related to closedforward contracts that were used to mitigateour exposure to foreign currency exchangerates that resulted from the net investment inour Canadian operations. The amount ofdeferred loss included in accumulated othercomprehensive income was as follows:December 31,2010 2009(In thousands)Deferred loss related toclosed forwardcontracts $26,385 $26,385While we have no current intention to do so,these deferred losses will not be recognizeduntil such time as we sell or substantiallyliquidate our Canadian operations.DerivativesWe use foreign currency swaps to reduce ourforeign exchange risk due to direct investmentin foreign currency-denominated debtsecurities. At December 31, 2009, we also hadforward foreign currency contracts to reduceour exposure to foreign currency exchangerates that resulted from direct investment inforeign currency denominated debt securities.We had no forward currency contracts atDecember 31, 2010.136 Freedom Lives Here