Primerica 2010 Annual Report - Direct Selling News

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Message to StockholdersDear Stockholders:Since 1977, Primerica has helped millions of middle-income families with their financial needs by providingthem with a strategy and means to gain financial independence. In 2010, we took an important step in ourcompany’s independence and financial future. Our historic initial public offering (IPO) on April 1, 2010 reinforcedPrimerica’s entrepreneurial spirit and instilled a great deal of pride among our sales force and employees.For these reasons, the IPO represented a new beginning—the re-founding of our company. We believe theconcept of a re-founding is appropriate because it not only signals a fresh start, but pays homage to our proud34-year history and track record. Our IPO gave us the opportunity to fold our years of experience, expertiseand innovation into an organization with a more streamlined balance sheet. More importantly, the IPO hasallowed us to focus on building Primerica for the long term.Today, having successfully completed our re-founding, we are an independent company with a capitalstructure that positions us to pursue opportunities to grow our existing businesses, while also seeking additionalopportunities that we believe will build shareholder value over time. We are especially proud of what wehave been able to accomplish in an environment where millions of underserved middle-income families arefacing unprecedented financial challenges. We have made great strides in our first year as a public company,and we continue to be optimistic and excited about the future of our business.WHO WE AREBeginning in 1977, Primerica transformed the life insurance industry with a philosophy that has encouragedfamilies to purchase affordable term life insurance and have more money to invest in their family’sfuture. “Buy Term and Invest the Difference” is the cornerstone of the financial game plan of millions ofNorth American families that we have served over the years. Even as we expand our products and services, thisconcept remains a foundation of our philosophy, enabling us to deliver over $939 million of death claims tofamilies in 2010.Primerica representativesassist clients in meeting theirneeds for term life insurance,mutual funds, variable annuities,loans and other financialproducts. We insure morethan 4.3 million lives andmore than 2 million clientsmaintain their investmentaccounts with us, making us aleading distributor of financialproducts to middle-incomehouseholds in North America.
North America’s vastmiddle-income market haslong been underserved bytraditional financial servicesfirms. Our unique educationalapproach and face-to-facedistribution model allow usto meet the needs of middleincomefamilies in a costeffectivemanner. Our uniqueapproach has proven itself inboth favorable and challengingeconomic environments,as evidenced by our resultsthis past year.In addition, Primericaprovides an entrepreneurialbusiness opportunity for individuals seeking to distribute our financial products. Low entry costs and theability to begin on a part-time basis allow our recruits to supplement their existing income by starting anindependent business without leaving their current jobs.OUR SALES FORCE IS VITAL TO OUR SUCCESSOur ability to successfully navigate a challenging economic environment is a testament to the skill,professionalism and longevity of our sales force. More than 20,000 of our field leaders have been withPrimerica for at least 10 years and 7,000 have been with the Company for at least 20 years.Becoming a public company provided us with an opportunity to align the interests of our sales force,stockholders and the Company. Our key field leaders—our Regional Vice Presidents—were so enthusiasticabout owning Primerica stock that our IPO-directed share program was more than two times oversubscribed.Providing a significant equity stake for our sales force has created a unique ownership structurein the financial services industry. We are proud of our equity incentive programs, which help build bothshort- and long-term alignment for all of our stakeholders.Most importantly for our business, the sales force’s reaction to becoming a public company exceededour expectations. The IPO removed uncertainty about our future and helped reinforce our position as astable, trusted advisor to middle-income families.Ultimately, our capacity to grow Primerica rests on our ability to constantly improve the opportunity forour independent sales representatives. Whether it is through new innovative incentives or improved productofferings, we recognize the need to continually improve our opportunity. We believe that being re-foundedas the largest independent financial services distribution company in North America opens new vistas for us.We are committed to using this freedom to continually improve our business opportunity.
Page 1 and 2: Freedom Lives Here 2010 Annual Repo
Page 3: A Main Street Company for Main Stre
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 and 44: assistance, has developed a series
Page 45 and 46: SEC, FINRA and with respect to 529
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
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Privacy of Consumer Information. U.
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media. This negative commentary can
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with such laws and regulations, inc
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and disrupt the economy. Although w
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Our financial strength and credit r
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There are certain risks and uncerta
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26). The update revises the definit
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conduct standards prescribed by FIN
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licensing requirements have caused,
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Terrorist Financing Act and its acc
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educing dividends or other amounts
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housed at our Duluth and Roswell, G
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• for dates as of or periods endi
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to and subject to the limitations o
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Field Audit Department from 1993 to
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Securities Authorized for Issuanceu
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ITEM 6.SELECTED FINANCIAL DATA.The
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pursuant to which we issued to a wh
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ecruiting boost we experienced in t
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• Mortality. We use historical ex
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• sales of a higher proportion of
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on quality rating, average life and
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Deferred Policy Acquisition Costs(D
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life insurance processing responsib
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einsurance agreements impacted the
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Notes to the Pro Forma Statement of
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Term Life Insurance Segment ProForm
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Investments and Savings ProductsSeg
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We believe that the pro forma resul
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ecognized in 2008. Excluding the ef
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amortize the higher DAC balance res
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Corporate and Other DistributedProd
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The composition of our invested ass
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LIQUIDITY AND CAPITALRESOURCESDivid
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surplus notes, hybrid securities or
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ITEM 7A. QUANTITATIVE ANDQUALITATIV
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AssetsPRIMERICA, INC. AND SUBSIDIAR
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PRIMERICA, INC. AND SUBSIDIARIESCon
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PRIMERICA, INC. AND SUBSIDIARIESCon
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which we are able to reinvest at ou
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with reinsured policies. Ceded poli
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indemnify and hold the Company harm
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New Accounting PrinciplesScope Exce
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immediately contributed back to us
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The Investment and Savings Products
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(4) InvestmentsOn March 31, 2010, w
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The following tables summarize, for
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The net effect on stockholders’ e
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The amortized cost and fair value o
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The roll-forward of credit-related
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having similar tenors (e.g., sector
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(5) Financial InstrumentsThe carryi
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Due from reinsurers includes ceded
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(8) Intangible Assets and GoodwillT
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(11) Note PayableIn April 2010, we
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Income tax expense (benefit) attrib
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above, plus an additional 7,098 com
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Non-Employee Share-BasedTransaction
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We had arrangements with Citi in re
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Contingent LiabilitiesThe Company i
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ITEM 9. CHANGES IN ANDDISAGREEMENTS
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Members of Our Board of DirectorsTh
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finance, and risk and asset managem
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PART IVITEM 15. EXHIBITS AND FINANC
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10.4 Long-Term Services Agreement d
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10.29 Employment Agreement, dated a
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Schedule ISummary of Investments
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Schedule IICondensed Financial Info
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Schedule IICondensed Financial Info
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101% of the outstanding principal a
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GrossamountSchedule IVReinsurancePR
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Annual MeetingThe annual meeting of
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