Primerica 2010 Annual Report - Direct Selling News

currently available and amounts expected toemerge over the life of the business. As aresult, the values for assets, liabilities andequity reflected in financial statementsprepared in accordance with GAAP may bedifferent from those reflected in financialstatements prepared under SAP. We cannotpredict whether or when regulatory actionsmay be taken that could adversely affect ourcompany or the operations of our insurancesubsidiaries. Interpretations of regulations byregulators may change and statutes,regulations and interpretations may be appliedwith retroactive effect, particularly in areassuch as accounting or reserve requirements.Canadian law requires the use of CanadianGAAP in the preparation of the financialstatements of our Canadian insurancesubsidiary.State Insurance Guaranty Funds Laws. Undermost state insurance guaranty fund laws,insurance companies doing business thereincan be assessed up to prescribed limits forpolicyholder losses incurred by insolventcompanies. Although we cannot predict withcertainty the amount of any futureassessments, most insurance guaranty fundlaws currently provide that an assessment maybe excused or deferred if it would threaten aninsurer’s own financial strength. In addition,assessments may be partially offset by creditsagainst future state premium taxes. Ourinsurance subsidiaries were assessedimmaterial amounts in each of 2010, 2009 and2008.Additional Oversight in Canada. TheFinancial Consumer Agency of Canada(“FCAC”) is a Canadian federal regulatory body.It is responsible for ensuring that federallyregulated financial institutions, which includePrimerica Life Canada, comply with federalconsumer protection laws and regulations,voluntary codes of conduct and their ownpublic commitments. The FinancialTransactions and Reports Analysis Centre ofCanada (“FINTRAC”) is Canada’s financialintelligence unit. Its mandate includes ensuringthat entities subject to the Proceeds of Crime(Money Laundering) and Terrorist FinancingAct, which includes Primerica Life Canada,comply with reporting, recordkeeping and otherobligations under that act. Our Canadianinsurance subsidiary is also subject to privacylaws under the jurisdiction of federal andprovincial privacy commissioners, anti-moneylaundering laws enforced by the FINTRAC andOSFI, and the consumer complaints provisionsof federal insurance laws under the mandate ofthe FCAC, which requires insurers to belong toa complaints ombud-service and file a copy oftheir complaints handling policy with the FCAC.In connection with the Offering and theTransactions, we entered into an undertakingagreement with OSFI pursuant to which we aresubject to ongoing obligations to provide OSFIwith certain information. In particular, weagreed to provide OSFI with advance notice, ifpracticable, of (i) future debt issuances by usthat are in an amount greater than 20% of ourmarket capitalization (other than refinancingthe $300.0 million Citi note), (ii) any finaldecision by our board of directors that couldresult in a material shift of our primary focuson regulated financial services and (iii) anychange in ownership made by a beneficialowner of more than 5% of our common stock inthe event that our senior managementbecomes aware of that fact. We are alsorequired to provide OSFI with copies of ourSecurities and Exchange Commission (“SEC”)filings, material press releases and access toour senior officers and auditors to discuss anyprudential concerns OSFI may have concerningPrimerica Life Canada. The following items areexempt from the advance notice commitment:(a) matters subject to confidentiality anddisclosure restrictions imposed bygovernmental authorities and (b) matters thatmanagement, acting in good faith, deems wouldhave an adverse effect on us. The term of theundertaking agreement is two years, subject toan obligation of OSFI and us to negotiate ingood faith sixty days prior to expiration either arenewal or a decision not to renew based on thefinancial condition of Primerica Life Canada atthe time of such negotiation.The Minister of Finance (Canada) under theInsurance Companies Act (Canada) approvedour indirect acquisition of Primerica LifeCanada. The Minister expects that a personcontrolling a federal insurance company willprovide ongoing financial, managerial or32 Freedom Lives Here