esponsible for and shall indemnify and hold theCompany harmless from and against anyconsolidated, combined, affiliated, unitary orsimilar federal, state or local income tax liabilitywith respect to the Company for any taxableperiod ending on or before April 7, <strong>2010</strong>, theclosing date of the Offering.The private sale. In February <strong>2010</strong>, Citientered into a securities purchase agreementwith Warburg Pincus and us pursuant to which,in mid-April <strong>2010</strong>, Citi sold to Warburg Pincus16,412,440 shares of our common stock andwarrants to purchase from us 4,103,110additional shares of our common stock. Thewarrants have a seven-year term and anexercise price of $18.00 per share.Period-over-period comparability. Due to thetiming of these transactions and their impact onour financial position and results of operations,period-over-period comparisons of our financialposition and results of operations will reflectsignificant non-comparable accountingtransactions and account balances. The mostsignificant accounting transaction was thereinsurance transactions described above, whichaffected both the size and composition of ourbalance sheet and statement of income.Additionally, the corporate reorganization andthe concurrent transactions had a significantimpact on the composition of our balance sheet.As a result, our December 31, <strong>2010</strong> balance sheetwas significantly smaller than our December 31,2009 balance sheet and our statement ofincome for the year ended December 31, <strong>2010</strong>presents income that is significantly lower thanin 2009 and 2008.From a balance sheet perspective, theTransactions impacted investments, cash andcash equivalents, accrued investment income,premiums and other receivables, due fromreinsurers, due from affiliates, deferred policyacquisition costs (DAC), deferred tax assets,note payable, deferred tax liabilities, otherliabilities, common stock, paid-in capital,retained earnings and accumulated othercomprehensive income.From a statement of income perspective, theTransactions impacted ceded premiums, netpremiums, net investment income, benefits andclaims, amortization of DAC, insurancecommissions, insurance expenses, interestexpense and income taxes. Actual results forperiods ended prior to April 1, <strong>2010</strong> will not beindicative of or comparable to future actualresults. Furthermore, actual results for the yearended December 31, <strong>2010</strong> will not becomparable to results in future years as theyare affected by the inclusion of three months ofoperations prior to the Transactions. Actualresults for the years ended December 31, 2009and 2008, will not be comparable to results infuture years as they reflect operations prior tothe Transactions.BUSINESS TRENDS ANDCONDITIONSThe relative strength and stability of financialmarkets and economies in the United Statesand Canada affect our growth and profitability.Our business is, and we expect will continue tobe, influenced by a number of industry-wideand product-specific trends and conditions.Economic conditions, including highunemployment levels and low levels ofconsumer confidence, influence investment andspending decisions by middle incomeconsumers, who are generally our primaryclients. These conditions and factors alsoimpact prospective recruits’ perceptions of thebusiness opportunity that becoming a<strong>Primerica</strong> sales representative offers, whichcan drive or dampen recruiting. Consumerspending and borrowing levels remain underpressure, as consumers take a moreconservative financial posture includingreevaluating their savings and debtmanagement plans. As overall market andeconomic conditions have improved from thelows experienced during the recent economicdownturn, sales and the value of consumerinvestment products across a wide spectrum ofasset classes have improved. The effects ofthese trends and conditions on our <strong>2010</strong>operations are summarized below.Recruiting and Sales RepresentativesFor the year ended December 31, <strong>2010</strong>,recruiting increased to 231,390 new recruitsfrom 221,920 in 2009, largely due to the70 Freedom Lives Here
ecruiting boost we experienced in the secondquarter of <strong>2010</strong> 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, <strong>2010</strong> 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 <strong>2010</strong>, 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, <strong>2010</strong>, 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 <strong>2010</strong>,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 <strong>2010</strong>, 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 <strong>2010</strong> 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 <strong>2010</strong>.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, <strong>2010</strong>, 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 <strong>2010</strong>was 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 <strong>2010</strong>, 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 in<strong>2010</strong>, from $118.3 in 2009 largely due to a lowerinterest rate environment in <strong>2010</strong> (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 the<strong>Primerica</strong> <strong>2010</strong> <strong>Annual</strong> <strong>Report</strong> 71
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Freedom Lives Here 2010 Annual Repo
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A Main Street Company for Main Stre
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North America’s vastmiddle-income
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More than 50 percent of U.S. househ
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We are PrimericaPrimerica is a Main
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Primerica helps familiescreate a fi
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René Turner wasalways told growing
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We teach people how money works.We
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UNITED STATESSECURITIES AND EXCHANG
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CAUTIONARY STATEMENT CONCERNING FOR
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PART IITEM 1.BUSINESSOverviewPrimer
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them reduce and ultimately pay off
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With the support of our home office
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ecognized with the sales representa
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force. We also profile successful s
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• bonuses and other compensation,
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originators (and in some states as
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We organize and manage our business
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- Page 133 and 134: which we are able to reinvest at ou
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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