Primerica 2010 Annual Report - Direct Selling News

ecruiting boost we experienced in the secondquarter of 2010 as a result of enthusiasmgenerated by our initial public offering. The sizeof our life-licensed sales force declined to94,850 sales representatives as ofDecember 31, 2010 from 99,785 salesrepresentatives at December 31, 2009 aslicensing and non-renewals experienceddownward pressure in the difficult economicenvironment.Term Life Insurance Product SalesSales of our term life insurance products havedeclined in line with term life insurance industrytrends and with the year-over-year decline inthe size of our sales force noted above. Weissued 223,514 new policies in 2010, comparedwith 233,837 new policies in 2009.Term Life Insurance Face Amount InForceTotal face amount in force increased to $656.79billion as of December 31, 2010, compared with$650.20 billion a year ago. Persistency hasimproved versus prior years, but is still belowhistorical norms. The average face amount fornewly issued policies was $267,000 in 2010,compared with $282,100 in 2009. The increasein total face in force was largely due to thestronger Canadian dollar and improvedpersistency. These drivers were partially offsetby a decline in the average face amount of ournewly issued policies.Investment and Savings ProductSalesInvestment and savings products sales werehigher in 2010, totaling $3.62 billion, comparedwith $3.01 billion in 2009. We believe theincrease in sales reflects the demand for ourproducts as a result of improving financialmarket conditions.Asset Values in Client AccountsThe assets in our clients’ accounts are investedin diversified funds comprised mainly of U.S.and Canadian equity and fixed-incomesecurities. The average value of assets in clientaccounts in 2010 increased to $31.91 billion,from $26.85 billion in 2009 primarily as aresult of general market conditions, which havecontinued to improve since the second half of2009, and client demand for our productsduring 2010.Invested Asset Portfolio Size andYieldsOur portfolio continues to reflect strong marketvalue gains as interest rates and spreadscontinue to remain below recent historicallevels. As of December 31, 2010, our investedassets, excluding policy loans and cash, had acost or amortized cost basis of $1.95 billion anda net unrealized gain of $157.4 million,compared with $6.20 billion at cost oramortized cost and net unrealized gain of$243.5 million at December 31, 2009. Ourportfolio during the last nine months of 2010was substantially smaller than our December 31,2009 portfolio and was composed of a differentmix of invested assets primarily due to ourcorporate reorganization (see The Transactionssection above, the Investments section includedin the Financial Condition discussion below andNote 4 to our consolidated and combinedfinancial statements). Net investment incomewas $165.1 million in 2010, compared with$351.3 million in 2009. On a pro forma basis,after giving effect to the Transactions, netinvestment income declined to $110.4 million in2010, from $118.3 in 2009 largely due to a lowerinterest rate environment in 2010 (see the ProForma Results section in the Results ofOperations discussion below).FACTORS AFFECTING OURRESULTSTerm Life Insurance SegmentOur Term Life Insurance segment results areprimarily driven by sales, accuracy of ourpricing assumptions, reinsurance, investmentincome and expenses.Sales and policies in force. Sales of newterm policies and the size and characteristics ofour in-force book of policies are vital to ourresults over the long term. Premium revenue isrecognized as it is earned over the term of thePrimerica 2010 Annual Report 71