variety of income payment options over aguaranteed period of time and may include theowner(s) lifetime. Finally, we are offering alongevity income guarantee annuity thatguarantees a fixed amount of monthly incomethat starts in the future and lasts as long as theowner(s) live(s). We believe these fixed annuityproducts give our representatives more waysto assist our clients with their retirementplanning needs.Managed Accounts. In 2011, PFS Investmentsintends to become a registered investmentadvisor in the United States and introduce amanaged account program. Initially the offeringis expected to consist of a mutual fund advisoryprogram with a $25,000 minimum initialinvestment. Subsequent managed accountofferings are also being contemplated. Weanticipate contracting with an independentinvestment advisor that will assist in the designand administration of the program including theinvestment of client assets on a discretionarybasis into one or more asset allocationportfolios. In contrast to our existing mutualfund and annuity business, in an advisory feeprogram, clients do not pay an upfrontcommission. Rather, they pay an annual feebased on the value of the assets in theiraccount. Sales representatives that qualify tooffer this program will receive a portion of theannual fee as compensation for as long as weretain the account.Revenue and Sales Force Compensation.In the United States, we earn revenue from ourinvestment and savings products business inthree ways: commissions earned on the sale ofsuch products; fees earned based upon clientasset values; and account-based revenue. Onthe sale of mutual funds and annuities, we earna dealer reallowance or commission on thedollar amount of new purchases as well as trailcommissions on the assets held in our clients’accounts. On mutual fund and annuity sales, wepay our sales representatives a percentage ofthe dealer reallowance and trail commissionswe receive. We also receive marketing andsupport fees from most of our fund providers.These payments are typically a percentage ofsales or a percentage of the total clients’ assetvalues, or a combination of both.With respect to several of the fund companiesoffered in the United States, we receivecustodial fees for services performed as anon-bank custodian for certain of our clients’retirement plan accounts, and earn revenue forperforming account-based recordkeepingservices. We also receive fees for the financingof advance commissions paid to our salesrepresentatives for the sale of certain LeggMason funds. The total amount of theseaccount-based fees fluctuates with the numberof such accounts. Consequently, the closing ofaccounts can adversely impact our revenues.From time to time, the fund companies withwhom we deal request that accounts with smallbalances be closed.We perform recordkeeping services on behalfof several of our select U.S. fund companies.We receive compensation on a per accountbasis for these services. To assist us inperforming these recordkeeping services, wehave engaged third parties, including a Citiaffiliate, to perform certain back-office transferagent functions and a portion of the client andagent telephone servicing. We also maintain anoperations and phone service center at ourDuluth, Georgia offices to support ourrecordkeeping platform.In Canada, we earn revenue from the sales ofour investment and savings products in twoways: commissions on mutual fund sales andfees paid based upon clients’ asset values(mutual fund trail commissions, and assetmanagement fees from segregated funds andConcert Series funds). On the sale of mutualfunds, we earn a dealer reallowance orcommission as well as trail commissions on theassets held in our clients’ accounts. We pay apercentage of the dealer reallowance and trailcommissions we receive with respect to mutualfund sales as compensation to our Canadiansales representatives. On the sale ofsegregated funds, we earn a fee based on thetotal asset value of these assets. Forsegregated funds, we pay as compensation toour sales representatives a sales commissionon segregated fund sales and a fee paidquarterly based on clients’ asset values.PFS Investments is a broker-dealer registeredwith FINRA and is subject to regulation by the24 Freedom Lives Here
SEC, FINRA and with respect to 529 plans only,the Municipal Securities Rulemaking Board (the“MSRB”), as well as by state securitiesagencies. PFS Investments operates as anintroducing broker-dealer. As such, it performsthe suitability review of investmentrecommendations in accordance with FINRArequirements, but it does not hold clientaccounts. PFSL Investments Canada is a mutualfund dealer registered with the Mutual FundDealers Association of Canada (the “MFDA”),the national self-regulatory organization for thedistribution side for the Canadian mutual fundindustry, and is also registered with provincialsecurities commissions throughout Canada. Asa registered mutual fund dealer, it performs thesuitability review of mutual fund investmentrecommendations, but like our U.S. brokerdealer,it does not hold client accounts. Our U.S.and Canadian broker-dealers do not hold anyclient funds; rather, client funds are held by themutual fund in which such client funds areinvested or by MetLife in the case of variableannuities sold in the United States. As notedabove, our Canadian segregated fund productis an insurance contract underwritten by<strong>Primerica</strong> Life Canada. While the assets andcorresponding liability (reserves) arerecognized on our balance sheet, the assets areheld in trust for the benefit of the segregatedfund contract owners.Other Distributed ProductsWe also offer debt consolidation/refinance andpurchase money mortgage loans, a <strong>Primerica</strong>DebtWatchers product that allows clients tocreate a plan for paying off debt, long-termcare insurance, prepaid legal services and auto/home insurance. While many of these productsare <strong>Primerica</strong>-branded, all of them areunderwritten or otherwise provided by a thirdparty. We also offer mail-order student life andshort-term disability benefit insurance, whichwe underwrite through our New York insurancesubsidiary, NBLIC.Loan Products. Managing debt continues tobe a major challenge for our middle incomeclients and prospects. The decline in homevalues and the tightening of the credit marketsgenerally have exacerbated the problem. Wehelp our clients manage their debt through theuse of a debt consolidation loan, which providesthem with the means to consolidate andaccelerate the repayment of existing debt. Wealso offer a purchase money product throughCiticorp Trust Bank, fsb (“CTB”), a subsidiary ofCiti. Our loan product sales process is designedto be straightforward, low pressure andeducational.<strong>Primerica</strong> Mortgages is a loan broker, not alender, and our loan products are currentlyprovided in the United States by CTB. Allunderwriting, processing of loan applicationsand credit decisions are made by CTB. As a loanbroker in the United States, we receive abrokerage commission based on a fixedpercentage of the closed loan amount.Historically, we have offered fixed rate, fixedterm and fully amortizing loans appropriate fora middle income client and have sold loanproducts exclusively for lenders that areaffiliates of Citi, except in Puerto Rico where wepreviously sold loan products of a third-partylender, and in Canada, where we now referloans through a third party lender, AGF TrustCompany. In March <strong>2010</strong>, <strong>Primerica</strong> Mortgagesentered into a loan brokerage agreement withCTB and CitiMortgage, Inc. (“CMI”) thatprovided for <strong>Primerica</strong> Mortgages to offerconforming fixed rate, fixed term, fullyamortizing refinancing loans of CTB. As aconforming loan product saleable togovernment sponsored entities such as FannieMae and Freddie Mac, the loan product hasstricter underwriting criteria than the mortgageproducts we had sold previously and provides<strong>Primerica</strong> Mortgages and our sales force withreduced compensation for the origination ofmortgage loan products in the United States. InNovember <strong>2010</strong>, the March <strong>2010</strong> agreementwas amended to add Citibank, N.A. as a partyand to provide CTB or CMI with theright to transition all of the processing,underwriting and funding of loans to itsaffiliate, Citibank, N.A. The Agreement providesthat CTB, CMI and Citibank, N.A. will be theexclusive providers of our mortgage loanproducts in the United States throughMarch 2012, at which time either we or thelenders may terminate the Agreement.<strong>Primerica</strong> <strong>2010</strong> <strong>Annual</strong> <strong>Report</strong> 25
- Page 1 and 2: Freedom Lives Here 2010 Annual Repo
- Page 3 and 4: A Main Street Company for Main Stre
- Page 5 and 6: North America’s vastmiddle-income
- Page 7 and 8: More than 50 percent of U.S. househ
- Page 9 and 10: We are PrimericaPrimerica is a Main
- Page 11 and 12: Primerica helps familiescreate a fi
- Page 13 and 14: René Turner wasalways told growing
- Page 15 and 16: We teach people how money works.We
- Page 19 and 20: UNITED STATESSECURITIES AND EXCHANG
- Page 21 and 22: CAUTIONARY STATEMENT CONCERNING FOR
- Page 23 and 24: PART IITEM 1.BUSINESSOverviewPrimer
- Page 25 and 26: them reduce and ultimately pay off
- Page 27 and 28: With the support of our home office
- Page 29 and 30: ecognized with the sales representa
- Page 31 and 32: force. We also profile successful s
- Page 33 and 34: • bonuses and other compensation,
- Page 35 and 36: originators (and in some states as
- Page 37 and 38: We organize and manage our business
- Page 39 and 40: premiums that are less per person p
- Page 41 and 42: insurance policies that we underwri
- Page 43: assistance, has developed a series
- Page 47 and 48: they sell insurance policies. Our C
- Page 49 and 50: preceding 12 months, exceed this st
- Page 51 and 52: interest rate risk and business ris
- Page 53 and 54: operational support to its subsidia
- Page 55 and 56: Privacy of Consumer Information. U.
- Page 57 and 58: media. This negative commentary can
- Page 59 and 60: with such laws and regulations, inc
- Page 61 and 62: and disrupt the economy. Although w
- Page 63 and 64: Our financial strength and credit r
- Page 65 and 66: There are certain risks and uncerta
- Page 67 and 68: 26). The update revises the definit
- Page 69 and 70: conduct standards prescribed by FIN
- Page 71 and 72: licensing requirements have caused,
- Page 73 and 74: Terrorist Financing Act and its acc
- Page 75 and 76: educing dividends or other amounts
- Page 77 and 78: housed at our Duluth and Roswell, G
- Page 79 and 80: • for dates as of or periods endi
- Page 81 and 82: to and subject to the limitations o
- Page 83 and 84: Field Audit Department from 1993 to
- Page 85 and 86: Securities Authorized for Issuanceu
- Page 87 and 88: ITEM 6.SELECTED FINANCIAL DATA.The
- Page 89 and 90: pursuant to which we issued to a wh
- Page 91 and 92: ecruiting boost we experienced in t
- Page 93 and 94: • Mortality. We use historical ex
- Page 95 and 96:
• sales of a higher proportion of
- Page 97 and 98:
on quality rating, average life and
- Page 99 and 100:
Deferred Policy Acquisition Costs(D
- Page 101 and 102:
life insurance processing responsib
- Page 103 and 104:
einsurance agreements impacted the
- Page 105 and 106:
Notes to the Pro Forma Statement of
- Page 107 and 108:
Term Life Insurance Segment ProForm
- Page 109 and 110:
Investments and Savings ProductsSeg
- Page 111 and 112:
We believe that the pro forma resul
- Page 113 and 114:
ecognized in 2008. Excluding the ef
- Page 115 and 116:
amortize the higher DAC balance res
- Page 117 and 118:
Corporate and Other DistributedProd
- Page 119 and 120:
The composition of our invested ass
- Page 121 and 122:
LIQUIDITY AND CAPITALRESOURCESDivid
- Page 123 and 124:
surplus notes, hybrid securities or
- Page 125 and 126:
ITEM 7A. QUANTITATIVE ANDQUALITATIV
- Page 127 and 128:
AssetsPRIMERICA, INC. AND SUBSIDIAR
- Page 129 and 130:
PRIMERICA, INC. AND SUBSIDIARIESCon
- Page 131 and 132:
PRIMERICA, INC. AND SUBSIDIARIESCon
- Page 133 and 134:
which we are able to reinvest at ou
- Page 135 and 136:
with reinsured policies. Ceded poli
- Page 137 and 138:
indemnify and hold the Company harm
- Page 139 and 140:
New Accounting PrinciplesScope Exce
- Page 141 and 142:
immediately contributed back to us
- Page 143 and 144:
The Investment and Savings Products
- Page 145 and 146:
(4) InvestmentsOn March 31, 2010, w
- Page 147 and 148:
The following tables summarize, for
- Page 149 and 150:
The net effect on stockholders’ e
- Page 151 and 152:
The amortized cost and fair value o
- Page 153 and 154:
The roll-forward of credit-related
- Page 155 and 156:
having similar tenors (e.g., sector
- Page 157 and 158:
(5) Financial InstrumentsThe carryi
- Page 159 and 160:
Due from reinsurers includes ceded
- Page 161 and 162:
(8) Intangible Assets and GoodwillT
- Page 163 and 164:
(11) Note PayableIn April 2010, we
- Page 165 and 166:
Income tax expense (benefit) attrib
- Page 167 and 168:
above, plus an additional 7,098 com
- Page 169 and 170:
Non-Employee Share-BasedTransaction
- Page 171 and 172:
We had arrangements with Citi in re
- Page 173 and 174:
Contingent LiabilitiesThe Company i
- Page 175 and 176:
ITEM 9. CHANGES IN ANDDISAGREEMENTS
- Page 177 and 178:
Members of Our Board of DirectorsTh
- Page 179 and 180:
finance, and risk and asset managem
- Page 181 and 182:
PART IVITEM 15. EXHIBITS AND FINANC
- Page 183 and 184:
10.4 Long-Term Services Agreement d
- Page 185 and 186:
10.29 Employment Agreement, dated a
- Page 187 and 188:
Schedule ISummary of Investments
- Page 189 and 190:
Schedule IICondensed Financial Info
- Page 191 and 192:
Schedule IICondensed Financial Info
- Page 193 and 194:
101% of the outstanding principal a
- Page 195 and 196:
GrossamountSchedule IVReinsurancePR
- Page 197 and 198:
Annual MeetingThe annual meeting of