Primerica 2010 Annual Report - Direct Selling News

(5) Financial InstrumentsThe carrying values and estimated fair values of ourfinancial instruments were as follows:December 31, 2010 December 31, 2009CarryingvalueEstimatedfair valueCarryingvalueEstimatedfair value(In thousands)Assets:Fixed-maturity securities $ 2,081,361 $ 2,081,361 $ 6,378,179 $ 6,378,179Equity securities 23,213 23,213 49,326 49,326Trading securities 22,767 22,767 16,996 16,996Policy loans and other invested assets 26,229 26,229 26,921 26,921Other invested assets 14 14 26 26Deposit asset underlying 10% reinsuranceagreement 50,099 50,099 — —Separate accounts 2,446,786 2,446,786 2,093,342 2,093,342Liabilities:Note payable $ 300,000 $ 323,670 $ — $ —Currency swaps and forwards 2,228 2,228 2,707 2,707Separate accounts 2,446,786 2,446,786 2,093,342 2,093,342The fair values of financial instrumentspresented above are estimates of the fairvalues at a specific point in time using varioussources and methods, including marketquotations and a complex matrix system thattakes into account issuer sector, quality, andspreads in the current marketplace.Estimated fair values of investments in fixedmaturitysecurities are principally a function ofcurrent spreads and interest rates that areprimarily provided by a third-party vendor.Therefore, the fair values presented areindicative of amounts we could realize or settleat the respective balance sheet date. We do notnecessarily intend to dispose of or liquidatesuch instruments prior to maturity. Tradingsecurities, which primarily consist of fixedmaturitysecurities, are carried at fair value.Equity securities, including common andnon-redeemable preferred stocks, are carriedat fair value. The carrying value of policy loansand other invested assets approximates fairvalue. The fair value of our note payable isbased on prevailing interest rates and anestimated spread based on notes ofcomparable issuers and maturity. Derivativeinstruments are stated at fair value based onmarket prices. Segregated funds in separateaccounts are carried at the underlying value ofthe variable insurance contracts, which is fairvalue.The carrying amounts for cash and cashequivalents, receivables, accrued investmentincome, accounts payable, cash collateral andpayables for security transactionsapproximated their fair values due to the shorttermnature of these instruments.Consequently, such instruments are notincluded in the above table. The preceding tablealso excludes future policy benefits and unpaidpolicy claims as these items are not subject tofinancial instrument disclosures.Primerica 2010 Annual Report 137